England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		9 October 2009

Introduction	1
The Claimants' claims	6
Alleged wrongful early termination of the EDA	7
The Overcharging Claim	14
Steni's Counterclaim	15
The Issues	19
Novation/Assignment	20
Liability issue 1	42
Service of the Default Notice	50
Steni's alleged motive	51
Liability issue 1A	54
The Claimants' submissions	55
The Court's determination in relation liability issue 1A	59
Factual Matrix	59
Effectiveness of the Default Notice	64
Construction of the Default Notice	67
Was Holdings in breach of its "all reasonable endeavours" obligation?	69
Declining Sales Figures	70
Steni's entitlement to rely on points set out in its closing submissions in relation to Holdings' endeavours to market and promote the sale of Steni products	76
The evidence relating to Holdings' endeavours to market and promote the sale of Steni products	77
Lack of an adequately structured, and directed, sales and marketing organisation within Holdings/Claddings	78
Inadequate systems within Holdings/Claddings for the preparation of (a) rolling forecasts and (b) logs of specifications and quotations for the supply of Steni Products	84
Failure to cooperate with Steni	85
The pricing of Steni Colour and Bauclad	88
Use of Steni's literature and marketing materials	89
Attendance at trade fairs and seminars	91
Failure to obtain certificates and approvals	94
Reasons for the decline in sales put forward by the Claimants	95
Lead Times	97
Uncompetitive Price Increases	98
Loss of sales in the system build market	101
Conclusion	102
Liability issue 1B: Holdings' breach of clause 3.4 of the EDA (in failing to pay for products ordered by Claddings and supplied in relation to the Aberfeldy project and other related issues)	103
Introduction	103
Factual Summary	107
The Parties' Submissions	126
The court's conclusion in relation to the Aberfeldy project	130
Liability issue 2: did Steni breach clause 3.2 of the EDA by overcharging Claddings?	138
The court's determination in relation to the overcharging claim	144
Issue iv): Quantum of the Claimants' claim - what loss has Claddings or Holdings suffered as a result of Steni's repudiation of the EDA in March 2005	161
Issue v): Steni's counterclaim against Claddings	168
Issue i): quantum of Steni's counterclaim against Holdings	170
Conclusion	176

Mrs Justice Gloster, DBE:

Introduction
 


1. In this action the Claimants, CEP Holdings Limited ("Holdings") and CEP Claddings Limited ("Claddings") (whom I shall refer to collectively as "the Claimants", where there is no need to distinguish between them), claim damages against the Defendant, Steni AS ("Steni" or "the Defendant"), in respect of two alleged breaches of an exclusive distributor agreement made on 26 February 1999 between Steni of the one part and Holdings of the other part ("the EDA"), whereby Steni appointed Holdings as its exclusive distributor in the United Kingdom, the Channel Islands, the Isle of Man and Eire, defined in the EDA as "the Territory", of certain products manufactured by Steni. These products were defined in the EDA as "Product(s)" and described as being

"… boards of a Steni Nature, Steni Colour and Strata type and any products derived from these products which are manufactured by STENI or any subsidiary, according [sic] the technical descriptions and specifications given in Appendix I".

2. Clause 2.2 of the EDA provided that the appointment of Holdings as distributor would be:

"… effective from [26 February 1999] for a period of 20 - twenty years - and subject as herein otherwise provided will continue automatically thereafter unless terminated by written notice from either party in accordance with the procedures set out in article 7 below."

3. Steni is a company incorporated under the laws of Norway, which was established in 1965. Its business is the manufacture and sale of exterior and interior cladding panels for use in most types of building construction. At the relevant time, it conducted business in Scandinavia, United States, France, Poland, Iceland and Canada. It has associated and subsidiary companies which sell and distribute its products. At the relevant time, Steni traded through its subsidiaries, Steni Norden AS ("Steni Norden") (which was the manufacturing unit in Norway) and, for certain of the time, through Steni Façade SA, a French company ("Steni Façade"), as well as on its own account. By a Merger Agreement dated 30 June 2004, Steni Norden merged with its parent company, Steni. By that agreement, and by operation of Norwegian law, Steni took over all the debts due to Steni Norden as well as the obligations owed by Steni Norden to its creditors.
4. Holdings is an English company which was incorporated in September 1996. It was the main vehicle through which its principal owners and directors, Stephen Austin Ross ("Mr. Ross") and Michael Patrick Barton ("Mr. Barton"), achieved a management buyout of the claddings and other building materials businesses formerly operated by Cape PLC ("Cape"). Holdings owned various UK and other subsidiaries at various times ("the CEP group"). One early subsidiary company was CEP Claddings Limited, incorporated in 1996 under company number 3244260 ("Old Claddings") and which subsequently, on 11 February 2000, changed its name to CEP Architectural Facades Ltd ("Architectural Facades"). The second Claimant, Claddings, is also a subsidiary of Holdings but was incorporated on 20 April 2001 under company number 42062997. At the relevant time for the purposes of these proceedings the CEP group of companies was engaged in the business of supplying claddings and other materials to the building and construction trade. Until about April 1997 it had a claddings manufacturing facility at a factory in Blackburn, but the factory closed at around that time.
5. Mr. David Casement QC and Miss Lisa Walmisley, instructed by Hill Dickinson LLP, appeared for the Claimants. Mr. Charles Graham QC and Miss Anna Boase (instructed by Payne Hicks Beach) appeared for Steni. I am grateful to the respective legal teams for their detailed and helpful submissions, both oral and written.

The Claimants' claims

6. The Claimants claim that Steni is liable to them in respect of two alleged breaches of the EDA.

Alleged wrongful early termination of the EDA

7. The first alleged breach is said to have been Steni's early termination of the EDA in March 2005. The brief background to this first alleged breach of contract is as follows.
8. In the EDA, Holdings was referred to as "CEP" and/or "DISTRIBUTOR". On 21 December 2004 Steni sent by fax to "CEP/Mike Barton/Dave Allen" a written notice ("the Default Notice") purportedly pursuant to clause 7.2 of the EDA citing various alleged breaches of contract on the part of "CEP", namely

i) an alleged breach of clause 2.3 of the EDA constituted by "CEP's" failure to use all reasonable endeavours to promote and sell Steni's Products in the Territory;

ii) alleged breaches in relation to certain cladding panels supplied by Steni for a building project known as the Aberfeldy Project; these were:

a) an alleged breach of clause 3.4 of the EDA constituted by "CEP's" failure to pay the sum of €18,508 due on various invoices on the grounds that Steni owed it this sum by reason of purported shortcomings in the quality;

b) an alleged breach of clause 4.6 constituted by the Claimants' failure to deliver a claim report detailing the customer's complaint;

c) an alleged breach of clause 4.7 in entering into a settlement under which the Claimants granted the customer a reduction in price of €18,508 thereby giving the customer terms which were more favourable than those contained in Appendix 3 to the EDA.

9. Pursuant to clause 7.2 of the EDA the Default Notice gave "CEP" 30 days in which to rectify the breaches of contract referred to.
10. On 10 March 2005 Steni sent a letter ("the Termination Notice") addressed to Holdings, in which Steni stated as follows:

"Reference is made to the [EDA] between Steni AS and CEP Holdings Ltd, our written notice of 21 December 2004 in which we awarded you 30 days to rectify certain contractual breaches, the subsequent correspondence between ourselves, and our meeting of 7 March 2005 in Oslo.

As none of the breaches specified in our letter of 21 December 2004 have been rectified within the 30 days deadline, Steni AS hereby terminates the [EDA] with immediate effect pursuant to Clause 7.2 of the Agreement."

11. By a letter dated 7 April 2005 and expressed to be written on behalf of Holdings, Hill Dickinson, solicitors acting on behalf of Holdings, indicated that Holdings treated the Termination Notice as a repudiatory breach of contract which, by that letter, Holdings accepted. On any view, therefore, the EDA came to an end in March or April 2005.
12. Steni claims that it was entitled to send the Default Notice and, consequently, entitled to send the Termination Notice and was accordingly not in breach of contract by sending either document to Holdings.
13. The Claimants contend that, as a result of various assignments, and other matters, referred to below, from May 2001 the EDA had been novated or assigned to Claddings, or, alternatively, that Steni is estopped from denying that novation, alternatively an assignment, took place. Thus their primary case is that Claddings has suffered loss and damage as a result of the wrongful early repudiation of the EDA. In the alternative, if, contrary to their primary case, Holdings remains the party to the EDA, they contend that Holdings has suffered loss as a result of such repudiation.

The Overcharging Claim

14. The second alleged breach of contract relied on by the Claimants is Steni's alleged breach of clause 3.2 of the EDA. This was a claim brought by Claddings alone as purchaser of Steni Products, although, in the course of closing submissions, the Claimants contended that, in relation to the post-termination period, even if there had been no novation/assignment of the EDA, Holdings could claim damages on the basis of what it intended should be the readjusted prices. Holdings claims that Steni overcharged it for Products ordered under the EDA in the period 2002 to 2005. This claim depends upon the meaning and effect of clause 3.2 of the EDA, which provides for annual price revisions in relation to Products supplied by Steni.

Steni's Counterclaim

15. Steni's counterclaim sub-divides into a claim against Holdings and a claim against Claddings.
16. The claim against Holdings is a claim for damages for an alleged breach of clause 2.3 of the EDA on the grounds that it failed to use all reasonable endeavours to promote the marketing and sale of the Products in the Territory.
17. The claim against Claddings is principally a claim in debt for the sum of €216,900 odd, plus interest, allegedly owed by Claddings pursuant to 35 unpaid invoices issued by Steni to Claddings in the period 3 February to 22 April 2005, particulars of the sums and invoices in question being set out in Schedule A to the Defence and Counterclaim. This claim is admitted by Claddings, subject to a claim to a right of set off.
18. The claim against Claddings also includes a claim for payment of the €18,508, plus interest, allegedly due in respect of supplies of Steni Product made by Steni to Claddings in respect of the Aberfeldy Project.

The Issues

19. Accordingly the issues which arise for the court's determination are as follows:

i) Novation/Assignment: Was the EDA novated or assigned to Claddings, and/or is Steni estopped from denying that such novation/assignment took place?

ii) Liability issue 1: Was Steni in repudiatory breach of the EDA when it purported to terminate the EDA by its Termination Notice dated 10 March 2005, or was it entitled to terminate the EDA on that date by reason of:

a) Holdings' and/or Claddings' alleged breach of clause 2.3 of the EDA (in failing to use all reasonable endeavours to promote and sell the Products in the Territory) (Liability issue 1A); and/or

b) Holdings' and/or Claddings' alleged breach of clause 3.4 and other clauses of the EDA (in failing to pay for products ordered and made in relation to the Aberfeldy project and other aspects of their conduct in relation to such products) (Liability issue 1B)

which entitled Steni to send its Default Notice and thereafter its Termination Notice?

iii) Liability issue 2: Did Steni breach clause 3.2 of the EDA by overcharging Claddings?

iv) Quantum of the Claimants' claim: What loss has Claddings or Holdings suffered as a result of Steni's repudiation of the EDA in March 2005? (It was agreed that the quantum issues which arose in relation to Claddings' "overcharging" claim would not be explored at trial, or determined by the court at this stage, not least because of time constraints; and that they would be determined in due course at a separate hearing, if the Court were to decide that Steni was in breach of clause 3.2 in the manner pleaded by Claddings.)

v) Steni's counterclaim against Claddings: Is Claddings liable to Steni in respect of the €18,508, plus interest, allegedly due in respect of supplies of by Steni to Claddings in respect of the Aberfeldy Project? This issue will be determined by the outcome of Liability issue 1 B.

vi) Quantum of Steni's counterclaim against Holdings: What loss has Steni suffered as a result of any failure by Holdings to use all reasonable endeavours to promote the marketing and sale of the Products in the Territory?

Novation/Assignment

20. The issue which I have to determine is whether the EDA was novated or assigned to Claddings, or whether Steni is now estopped from denying that such novation/assignment took place.
21. The relevance of these issues is twofold.
22. First, Steni contends that, if Holdings remained throughout the party entitled to sue for breach of the EDA, then there is a difference in the quantum between the damages for wrongful repudiation which can be claimed by Holdings as opposed to Claddings.
23. Second, Steni contends that, in such circumstances, Holdings has suffered no loss arising out of the supposed overcharging by Steni (and has certainly pleaded none). Furthermore, Steni contends that, if there was no novation or assignment, or no estoppel, then Claddings was not a party to the EDA and thus had no basis for any entitlement to claim damages from Steni in respect of any alleged breach of the annual price review provisions of clause 3.2 of that agreement.
24. Holdings and Claddings, on the other hand, contend that even if there was no novation/assignment/estoppel, and Holdings remained the contracting party, Claddings still had a claim for overcharging in respect of the contractual period because the EDA was an "umbrella" agreement. In relation to the post-termination period, they contend that Holdings' damages should be calculated on the basis that it would have been entitled to have the prices reversed downwards for the period after 2005.
25. The salient facts relating to this issue, as I find them to be, may be summarised as follows:

i) Clause 7.4 of the EDA provided as follows:

"None of the parties hereto will be entitled to assign, transfer or otherwise dispose of this Distributor Agreement in whole or in part, to any individual or company without the prior written consent of the other party. Such consent not to be unreasonably withheld."

ii) Clause 9 of the EDA provided as follows:

"Any notices required to be given hereunder shall be considered properly given if sent by registered letter or by telefax to the address of the relevant party indicated in the recitals of this Distributor Agreement, or to such other address as the addressee shall have furnished in writing to the addressor."

iii) The recitals gave the address of Steni as its registered office at "Berganmoen, 3283 STEINSHOLT, Norway".

iv) Throughout the term of the EDA, both parties operated the agreement on the basis that, from time to time, the trading contracts under which Products would be supplied and sold, would be entered into as between a Steni subsidiary on the one hand and a Holdings subsidiary on the other. Thus, from time to time Products would be supplied by Steni subsidiaries, such as Steni Norden and Steni Façade, and purchased by a Holdings' subsidiary. The detail does not matter, but, from about March 1999, until about February 2000, the relevant CEP purchasing company was usually Old Claddings, under its former name of CEP Claddings Limited; from about February 2000 (when Old Claddings changed its name to CEP Architectural Facades Limited) until about March 2002, the relevant CEP purchasing company was also usually Old Claddings, but under its new name of CEP Architectural Facades Limited; and from about April 2002 onwards, i.e. some 9 months after the alleged notice of assignment, the relevant CEP purchasing company, that was invoiced, was usually Claddings.

v) Each time an order was placed, a contract for the supply of the requested products was formed between the relevant trading companies.

vi) In May 2001 there was a reorganisation within the CEP group. On 16 May 2001 Holdings entered into an agreement with a subsidiary CEP Architectural Panels Ltd ("Panels"), whereby Holdings agreed to sell to Panels all Holdings' business of the manufacture and sale of building cladding products (defined as "the Claddings Products Business"), including

"… the benefit of all subsisting contracts and engagements of [Holdings] relating to be Claddings Products Business."

Such wording was clearly apt to include the benefit of the EDA.

vii) On the same date, Panels entered into an agreement in writing for the transfer of its "Claddings Products Business" to Claddings. Likewise that included the benefit of all subsisting contract and engagements of Panels relating to its Claddings Products Business. I likewise find that such wording was clearly apt to include the benefit of the EDA.

viii) The fact of such reorganisation was not known to Steni at the time

ix) By a standard circular letter dated 4 June 2001 ("the June circular letter"), sent by Claddings to numerous suppliers, one of whom was alleged to have been Steni Norden AS, at its address at "3283 Steinsholt, Norway", Mr. Ross, on behalf of Claddings, wrote as follows:

"We are writing to inform you that the Cladding Products business of CEP previously operated by CEP Architectural Facades Limited [i.e. Old Claddings] has been transferred to a new company, CEP Claddings Ltd (Registration Number 4202997, VAT number 770567411) with effect from 17 May 2001 ...

You should continue to send your invoices and statements to the address used previously but address them to CEP Claddings Limited."

x) No evidence was called to the effect that the June circular letter was posted either to Steni or to Steni Norden, or as to the instructions that had been given to ensure that all addressees received the letter. However Steni Norden (but not Steni itself) appears from one of the contemporaneous documents to have appeared on a database of addressees to whom the circular letter was sent and a copy of the actual letter said to have been sent to Steni Norden was included in the trial bundles. On the balance of probabilities I am not satisfied that the letter was received by, or brought to the attention of, Mr. Karl Jonny Gundersen ("Mr. Gundersen"), the managing director of Steni at the relevant time, or anyone else on behalf of Steni. By this date the parties were already in dispute about the late payment of invoices, which might have been a reason why Holdings would not have wished to have raised any issue about the assignment of the EDA with Steni itself, or to have rocked the boat by suggesting that another company should become a party to the EDA.

xi) In his evidence, Mr. Gundersen stated that if the June circular letter had been received at Steni's offices, it would have come to him, but that he had not seen it at the time. This suggests to me that the letter was never even received by Steni Norden and I so find. He also said that he would not have understood that the letter was notifying him of an assignment of the EDA. In cross-examination he fairly said that he could not dismiss the possibility that he might have seen it at the time. I accept his evidence that he had not seen the circular letter before the date of his preparation for his witness statement. I find that, given the generalised nature of the circular letter (which on its face appeared to refer to nothing except operational details), it is highly unlikely that, even if, (contrary to my finding) the June circular letter was indeed received by Steni Norden, it was ever brought to his attention in his capacity as an officer of Steni itself.

xii) In cross-examination, he accepted that, if he had read the June circular letter, he would have understood that, as far as Holdings and Claddings were concerned, "the EDA belonged to the new company" and that, after the letter was received, he "would be dealing with the new company in every respect instead of [Holdings]".

26. In my judgment the evidence does not go anywhere near to establishing that the EDA was novated in favour of Claddings or that any new agreement was entered into between Claddings and Steni, even if I were wrong in my finding that the June circular letter had not been received by Steni, and the actual position was that Mr. Gundersen had indeed read it at the time.
27. The Claimants' contention is that there was an agreement to novate evidenced by conduct. It is said that the EDA was novated in favour of Claddings and a new agreement was entered into between Claddings and Steni. The Claimants contend that Steni was given notice of a transfer of business from CEP to Claddings by means of the June circular letter and that Steni thereafter accepted orders from Claddings, invoiced Claddings and accepted payment from Claddings; and that, from this conduct the court can infer the necessary agreement to novate.
28. Novation, which involves the extinguishing of the original contract and the creation of a new contract between different parties, requires the consent of all parties; see Chitty on Contracts (2008) paragraph 19-086. The evidence does not establish that there was any consensual agreement by Steni, Holdings and Claddings to such a course.
29. As Mr. Charles Graham QC, on behalf of Steni, submitted, even if the June circular letter had been received:

i) there was nothing in it that could conceivably amount to an offer, or construed as an offer, from Holdings and Claddings jointly to Steni to novate the EDA;

ii) the EDA was not even mentioned; the letter was merely a circular from Claddings to all suppliers, asking them to re-direct their invoices owing to an internal group re-organisation;

iii) there was no express or obvious reference to Holdings at all;

iv) the letter was not even addressed to Steni, but to Steni's then subsidiary Steni Norden AS;

v) moreover, the letter was somewhat ambiguous as to whether what was being transferred to Claddings was

a) the role of operating the Claddings Products business (i.e. the role which the letter indicated had previously been taken by "CEP Architectural Facades Limited"- Old Claddings); or

b) ownership of that business (which was being transferred from some unidentified member of the CEP group referred to only as CEP).

30. Prior to June 2001 Steni had become used to accepting orders under the umbrella of the EDA from CEP Architectural Façades Limited (i.e. Old Claddings). I accept Steni's submissions that, if the letter had been received and read by Steni, the letter was far more likely to have been read as notice that the role of operating the business had been transferred and not as a notice that Holdings had transferred ownership of that business, let alone that it had assigned the benefit of the EDA to Claddings. It certainly would not have been understood as an offer to novate the EDA to Claddings. I place no reliance on the oral evidence of Mr. Gundersen as to what the letter would have conveyed to him, in this respect, if he had received it. The evidence in his written statement, as I have said, was that he did not understand that the letter was informing him of an assignment of the EDA. At the time he gave his evidence by means of video link, he was no longer employed by Steni, and, when he gave his answers in cross-examination, in relation to this particular point he had become impatient and was clearly irritated by the whole cross-examination process. What, objectively, the letter would have conveyed to a recipient is a matter for the court.
31. Given that, in my judgment, the letter did not constitute an offer to novate the EDA, Steni's subsequent conduct was not capable of giving rise to an acceptance of any such offer.
32. In any event, in my judgment, Steni's subsequent conduct cannot be characterised as conduct amounting to any acceptance of a contractual offer to novate.
33. First of all it was only in April 2002 that, for the first time, Steni Norden invoices went to Claddings. There is nothing in the evidence which suggests that this had anything to do with the purported notice of assignment of the EDA. Second, the contemporaneous documentary evidence shows that certainly Mr. Barton considered that, in his dealings with Steni in relation to the EDA, he was still acting on behalf of Holdings. For example, in his response to a default notice sent by the chairman of Steni to Holdings, he replied on Holdings' headed fax paper dated 28 May 2001, just 12 days after the company re-organisation of 16 May 2001. He did not mention that there had been a reorganisation of the CEP group, let alone that the benefit of the EDA had been assigned to Claddings. Third, during the course of a long meeting between the parties on 11/12 June 2001 (a week after the letter which Holdings now claims to be the notice of assignment was sent) there was no mention by the CEP personnel of the company reorganisation that had taken place four weeks earlier (mid-May 2001) or its implications for the EDA, let alone any mention of an assignment or novation. Fourth, when Hill Dickinson wrote their letter to Steni on 7 April 2005, nearly a month after the Termination Notice, they did so expressly on behalf of Holdings. The letter was headed "Our Client: CEP Holdings Limited." and referred throughout to their "client" in the singular. Again, there was no suggestion that the EDA had been assigned, let alone novated.
34. For similar reasons to those which I set out above in relation to the allegation of novation, the evidence does not support a case that there was any legal assignment by Holdings of the benefit of the EDA to Claddings (via Panels). That is because, as I find as a fact, no written notice as required by section 136 of the Law of Property Act 1925 was ever sent by Holdings or Claddings. The June circular letter did not satisfy the requirements of that section even if, contrary to my finding, Steni ever received the letter.
35. Moreover, contrary to the requirements of clause 7.4 of the EDA, Steni's prior written consent to be assignment was not sought or obtained. Nor, contrary to the requirements of clause 9 of the EDA, was the letter sent by registered post or by telefax; nor was it sent to the "relevant party" to the EDA (i.e. Steni, as opposed to its subsidiary, Steni Norden); nor was it sent to Steni's registered office, i.e. to the address indicated in the recitals at the beginning of the EDA, although if this point had stood on its own I would have dismissed it as de minimis. But, taken with the other points, it shows a lack of formality that one would not expect with the service of a notice of assignment. The contemporaneous documents show that Holdings was capable of producing a formal notice of assignment, when it wanted to assign the benefit of a contract to an associated company. No equivalent document was produced in May/June 2001, even though the Claimants had the benefit of legal advice.
36. The Claimants' alternative case on assignment/novation is that, even if written notice was not given, the assignment took effect as an equitable assignment and that, by its conduct, Steni waived the requirements of clause 7.4 of the EDA or is estopped from relying on that clause. Further they contend that the assignment is effective since clause 7.4 provided that consent was not to be unreasonably withheld and it would have been unreasonable for Steni to have withheld consent. Further they contend that there existed an estoppel by convention or by representation, which precluded Steni from denying the novation, alternatively the assignment, of the EDA.
37. In my judgment there is nothing in the evidence which supports either a waiver of the requirements of clause 7.4, or any estoppel which precludes Steni from denying the alleged novation and assignment. As Mr. Graham submitted, the conduct of Steni in continuing, through its subsidiaries, to trade with an apparent subsidiary of Holdings is wholly inadequate, in the circumstances, to give rise to a waiver or estoppel. Moreover, clause 7.4 of the EDA requires the clear consent of Holdings. Its effect cannot be avoided by mere vague assertions of estoppel. An attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights, see per Lord Browne-Wilkinson in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 108F. Where an assignment of contractual rights is prohibited without the prior written consent of the other contracting party, such consent not to be unreasonably refused, then there can be no valid assignment until written consent has been granted or the court has declared that the consent has been unnecessarily refused. It is irrelevant whether consent could in fact have been refused; see per a majority of the Court of Appeal (Henry LJ and Millett LJ) in Hendry v Chartsearch Ltd [1998] CLC 1382 at 1393-1394.
38. To establish an estoppel by convention, the Claimants would need to show that the parties acted on a common assumption as to a particular set of facts; i.e. here, novation or assignment of the EDA. But there is nothing in the evidence to suggest that, even on their side, the Claimants considered, or were working on the assumption, that the EDA had been novated or assigned to Claddings. Still less is there any evidence to show that Steni, for its part, was working on that assumption. Steni's dealings with Claddings under the trading contracts show no more than a continuation of the status quo. As mentioned above, Steni had customarily dealt with various "CEP" companies in the context of the trading contracts entered into under the umbrella of the EDA. It entered into such trading contracts before, during and after the events of May and June 2001. There was no "step change" around that time. There nothing in the evidence to support the Claimants' case of an estoppel by convention.
39. To establish an estoppel by representation, the Claimants would need to plead and prove an unequivocal promise or assurance by Steni which was intended to affect the legal relationship between the parties and which indicated that Steni would not insist, as against Holdings, upon its strict legal rights arising out of the relationship (namely its right to treat Holdings as its counterparty under the EDA). Such a promise or assurance could be by conduct but not by mere inactivity; see Chitty on Contracts (2008) paragraph 3-092. In this respect, the Claimants plead only that

"By its conduct specified above Steni represented to the Claimants that it agreed to trade with Claddings on the terms of the EDA as if Claddings were CEP": see paragraph 26 of the Particulars of Claim.

40. As I have already concluded, the trading through subsidiaries shows no more than that the parties accepted vicarious performance of their trading obligations under the EDA (and did so before, during and after May/June 2001). This falls far short of establishing any unequivocal promise of the sort needed to found an estoppel by representation.
41. Accordingly, in my judgment there is no basis for holding that the EDA was novated or assigned to Claddings, or that Steni should be estopped from denying the fact of any alleged or actual novation or assignment. As between Steni and Holdings, the parties to the EDA at all times remained Steni and Holdings. I deal below with the effect of this conclusion in relation to the various claims by Holdings and Claddings for damages.

Liability issue 1: Was Steni in repudiatory breach of the EDA when it purported to terminate the EDA by its Termination Notice dated 10 March 2005, or was it entitled to terminate the EDA on that date on the grounds of Holdings' alleged breaches of contract?

42. I deal with this issue in separate parts: first in relation to the allegation that Holdings failed to use all reasonable endeavours to promote and sell the Products (Liability issue 1A); and second in relation to the allegation that Holdings was in breach of clause 3.4 of the EDA, in failing to pay for products ordered and made in relation to the Aberfeldy project, (Liability issue 1B).
43. Before doing so, I set out the events relating to the Default and Termination Notices which are common to both issues and address a point which likewise arises in both contexts.
44. By clause of 2.3 the EDA Steni undertook "… to use all reasonable endeavours to promote the marketing and sale of Products in the Territory". By clause 3.4, payment terms were to be 30 days from the end of the month of shipment. By clauses 4.6 and 4.7, Holdings undertook:

"4.6 To issue a claim-report according to the format given by STENI on any and all instances of claims raised by customers within the Territory within reasonable time from the time when CEP got aware of the occurrence of such claim.

4.7 To make sure that customers within the Territory shall not be given commercial conditions of trade from CEP as regards guarantees, more favourable than those that prevail in Appendix III hereto."

45. In the Default Notice, Steni alleged that Holdings had, in breach of clause 2.3 of the EDA, "failed to use all reasonable endeavours to promote and sell Steni Products in the Territory, to ensure a stabile [sic] and positive growth". It further claimed that:

"During the past 3 years the historical sales in UK has been as follows:

Sales 2001:	59.744 m2
Sales 2002:	53.250 m2
Sales 2003:	43.042 m2
Sales 2004:	22.731 m2 (Order income as of 19.12.04)

Steni … cannot accept the above development in, historically, one of the most important markets of Steni in the past. Referring to the general market development in UK, the development of CEP sales of steni products do not correspond with the general trends. From 2001 to 2004, there is a reduction of 62% !! in the total CEP sales of steni products.

Steni has also asked for budget figures for 2005, with 2 reminders, without receiving any information or response back."

46. As regards the Aberfeldy project, Steni made three complaints against Holdings:

i) failure to pay a sum of €18,508 in relation to panels supplied by Steni for the project, in alleged breach of clause 3.4;

ii) failure to deliver a claim report detailing the customer's complaint about the panels supplied for the project in alleged breach of clause 4.6;

iii) entering into a settlement with the customer the effect of which was to grant the customer a price reduction of €18,508, in alleged breach of clause 4.7.

47. Mr. Barton, on behalf of Claddings, responded to the Default Notice in a letter dated 11 January 2005. He asserted that only the breach of obligations set out in clause 4 of the EDA (under the heading "Duties and Obligations of CEP") could be grounds for termination under clause 7.2 and that only Steni's complaint of failure to deliver a claim report fell into this category. He sent Steni a claim report to rectify this. Mr. Barton went on to assert that alleged breaches of clauses other than clause 4 (including all of Steni's other complaints) could not be grounds for termination and were to be resolved by arbitration under clause 8. He went on to say:

"We are as disappointed as Steni with the decline in the level of sales, particularly that over the last year. It remains a fact that CEP are competing in the home market of Stoneflex and that in 2003 the management of that company passed to John Dominy, formerly a senior sales executive with Eternit. Since that time Stoneflex have successfully attacked our traditional markets, taking a direct line to our customers previously serviced through Eternit via distributors.

On a more positive note, Steni are already aware that CEP have secured contracts for c 7000 m² of Steni Nature Coarse for delivery in the first half of 2005. This alone gives us some confidence that in 2005 we will experience a reversal of the decline in sales of Steni experienced in recent years.

We remain open to any suggestions as to how we can improve our sales and marketing of Steni and have been trying to arrange a visit from your Marketing Director for some months as well as arrange for Steni to provide technical training for our new sales personnel.

I believe that the best way to resolve the issues between CEP and Steni is by face-to-face meetings and not by the issue of pseudo legal documents just prior to the Christmas break".

48. Mr. Barton then made specific proposals to meet face to face in a further letter of 20 January 2005. On 27 January 2005, Mr. Tom Rønning, Managing Director of Steni, responded to Mr. Barton's letters. Mr. Rønning noted that the 30 day period had lapsed and that the sum of €18,508 remained outstanding. He disagreed with Mr. Barton's limited interpretation of clause 7.2 and maintained that Holdings had breached the EDA in the ways set out in the Default Notice, entitling Steni to terminate the EDA. Nevertheless, he agreed to have a meeting and proposed dates in early March.
49. On 7 March 2005, the parties met in Norway. Mr. Rønning explained to Mr. Barton and Mr. Ross the various ways in which Holdings had, in Steni's view, breached the EDA. Nothing was said at the meeting which changed Steni's views. Accordingly, on 10 March 2005, Olav Kjell Holtan, the Chairman of Steni, sent the Termination Notice to Holdings purporting to terminate the EDA with immediate effect.

Service of the Default Notice

50. As a riposte to Mr. Graham's submissions in relation to the address to which the alleged notice of assignment was sent, Mr. Casement argued that the Default Notice had not been sent to Holdings' registered office at King Street, Manchester. This was not a point that could assist Holdings. There was no dispute that the Default Notice had indeed been received by Holdings at the time. Clause 9 of the EDA does no more than to state that notices served thereunder "shall be considered properly given" if sent to the address in the recitals. Moreover, clause 9 also envisaged that notices might be sent to such other addresses "as the addressee shall have furnished in writing to the addressor". The Hastings fax number to which the default notice had been sent was such an address.

Steni's alleged motive

51. Mr. Casement sought to suggest that Steni personnel had for some period prior to the Default Notice been determined, for their own commercial reasons, to break the contractual terms of the EDA and end Steni's relationship with Holdings. He sought to rely on what he suggested was Steni's improper motive in this respect and to suggest that the court should view Steni's complaints about Holdings' performance as cynically coloured by Steni's intention to bring the EDA to an end at all costs, even if the purported exercise of Steni's termination rights was not contractually justified.
52. I reject this allegation. The evidence of the Steni witnesses and the contemporaneous documents clearly demonstrated that Steni was genuinely dissatisfied with Holdings' performance as exclusive distributor under the EDA and, in particular, was frustrated at Holdings' refusal or reluctance to provide information about its proposed marketing/promotional plans to Steni. Although Steni clearly wanted to terminate the EDA for its own commercial reasons, there was no evidence whatsoever to suggest that it deliberately and knowingly embarked on a course wrongly to bring the contract to an end, in circumstances where it knew that it had no contractual entitlement to do so.
53. At the end of the day, it is for the court to decide, on the basis of the entirety of the evidence before it, whether Holdings had failed, at the date of the Default Notice, to use all reasonable endeavours to promote the marketing and sale of Products in the Territory, or was otherwise in breach of the contractual obligations specified in the Default Notice, and, if so, whether it had rectified those breaches during the 30 day period thereafter, or at any rate prior to the date of the Termination Notice. If Holdings had so failed, then Steni was entitled to terminate the EDA; if not, Steni was not entitled to do so.

Liability issue 1A

54. The sub-issues which arise under this head were not limited to the issue as to whether Holdings was actually in breach of its obligation "to use all reasonable endeavours to promote the marketing and sale of Products in the Territory". They include issues raised by Holdings as to the validity of the Default Notice, the matters upon which Steni can rely in support of its allegation that Holdings was in breach of clause 2.3, given the terms of the actual notice, and the ambit and extent of Holdings' "all reasonable endeavours" obligation.

The Claimants' submissions

55. I accept Mr. Casement's submission, based on Chitty on Contracts, 13^th Edition, 2008, Volume I, paragraph 22-050, that the legal burden of proof lies on Steni, as the party seeking to terminate the contract, to prove the existence of the facts which justify the exercise of its contractual right to terminate; see also PJ Van der Zijden Wildhandel NV v Tucker [1975] 2 LLR 240, which is cited in Chitty, as authority for the proposition that a party seeking to be discharged from contractual performance, based upon the terms of the agreement, carries the burden of proving the facts necessary for such discharge. However, as pointed out by Mr. Graham, the evidential burden of proof may shift from time to time.
56. Mr. Casement, on behalf of Holdings, submitted that the factual matrix of the EDA was critical to the determination of the various issues that arose under this head and as to whether Holdings was in breach of its obligations thereunder. In this context, he submitted that the Court should have regard in particular to the following matters:

i) the fact that, on 10 October 1996, Steni and Holdings had entered into a joint venture agreement ("the JVA") with the purpose of acquiring and operating on a 50/50 basis, through a joint venture vehicle, Steni Façade SA ("Steni Facade"), the production facilities previously operated by Cape plc located at Longwy, France and to produce, market and sell architectural boards of different categories;

ii) the fact that, in April 1997, as part of the operation of the joint venture agreement, Holdings closed its factory in Blackburn;

iii) the fact that the circumstances in which Holdings came to enter the EDA included Holdings transferring its 50% interest in Steni Façade to Steni and thereby ending Holdings' last remaining interest in a factory to produce Steni Nature, a particular Steni product; and that the transfer of its interest in Façade was part of the consideration for the EDA;

iv) the fact that, after the transfer of its interest in Façade, Holdings was entirely dependent upon Steni for supply of the Steni products under a specially negotiated agreement, i.e. the EDA, designed to deal with life after the end of the joint venture; and that when Steni closed the factory in France, Holdings became entirely dependent upon Steni supplying it with its products from Norway.

57. Thus, Mr. Casement submitted as follows:

i) The EDA provided a number of entitlements and protections for Holdings; given that Holdings was giving up a substantial amount of security in the form of its joint venture agreement, it needed to ensure that it would be supplied by Steni going forward and that it would be supplied on the preferential terms set out in the Agreement. The first objective intention was to provide Holdings with security of supply for a very long period, namely 20 years, and thereafter, subject to termination for breach, an indefinite term; although this term was unusual, it reflected the background to the EDA, which was the joint venture background; however the EDA represented the culmination of substantial investment and sacrifice on the part of Holdings whereby, for the first time, it became entirely dependent upon Steni for its supplies of the main Steni cladding product.

ii) Another objective intention of the EDA was to preserve Holdings' status as the exclusive distributor for the Territory (as per clauses 2.1 and 5.7). This would prevent Steni from appointing anyone else to distribute Steni products in the Territory and it would also prevent Steni from supplying or acquiring a subsidiary to supply products into the Territory other than through Holdings.

iii) Another objective intention was to create a methodology and forum for communication and the exchange of ideas and information which suited both Holdings and Steni; this was reflected in Holdings' undertaking "to meet with Steni at least twice a year when the commercial management of both parties shall discuss and update each other in respect of all commercial aspects of their business" (see clause 4.5). This, therefore, was the contractually agreed methodology of communicating and discussing relevant matters. There was thus no obligation imposed upon Holdings to provide Steni with budgets or marketing plans or other information about the manner in which the former intended to promote and sell Steni products. Furthermore, Steni was bound by the agreed method and forum for communication and discussion and was not entitled to insist upon pre-conditions or alternatives, let alone assert that a failure to use some alternative methodology amounted to a breach to use all reasonable endeavours.

iv) The factual matrix evidence also showed that:

a) it was the clear understanding of both parties that Holdings was not willing to agree to provide marketing plans, forecasts or budgets and was not prepared to agree to such a provision in the EDA;

b) Holdings was a company with two owners, who were the only directors, namely Mr. Ross and Mr. Barton, who had worked together since 1990 and was therefore likely to conduct themselves in a more informal manner than a larger company would;

c) the background to the EDA was unique and the relationship with Holdings was also a special relationship in that, apart from anything else, it was a former joint venture partner and part of the consideration for the EDA was Holdings' release of its interest in the joint venture company.

v) There was thus no justification for Steni to seek to expand Holdings' obligations, by recourse to the phrase "all reasonable endeavours", so as to include an obligation beyond or different to the expressly chosen method of communication and discussion. To do so, would unfairly impose a more onerous obligation namely that of providing marketing plans, budgets and forecasts to Steni, in circumstances:

a) where such a provision was expressly rejected in the course of negotiation of the EDA,

b) where the EDA itself records the agreed methodology between the parties in this respect, and

c) there were good commercial reasons for not providing a supplier with such plans.

58. Accordingly, in the light of what he contended was the correct construction of the EDA, Mr. Casement submitted as follows:

i) The purported Default Notice that was served by Steni on 21 December 2004, pursuant to clause 7.2 of the EDA was invalid in respect of the allegation that Holdings failed to use all reasonable endeavours. That was because clause 7.2 required the identification of the particular failure, so as to put the recipient on notice of what he has to do to avoid termination. Merely referring to a general obligation, such as failure to use all reasonable endeavours, was hopelessly inadequate. Such an allegation was so vague as to make it impossible for Holdings to know precisely what it had failed to do and what it had to do within the following 30 day default period so as to avoid termination. The vague allegation contained in the Default Notice was solely based upon the decline in the overall level of sales in the Territory. On a true and proper construction of clause 7.2 of the EDA, the Default Notice should have properly particularised the breach or failures alleged so as to notify the recipient of what it is that it had to do in order to avoid termination. Given the potential breadth of the allegation of failure to use "all reasonable endeavours", merely to allege a breach of the obligation, without particularising the breach, was similar to a notice that said "you have breached the Agreement and you have 30 days in which to remedy". Such a notice was entirely contrary to the objective intention of the parties.

ii) Alternatively, on a proper construction of the Default Notice, the allegation of failure to use all reasonable endeavours was limited to the implied allegation that such failure could be inferred from the falling sales figures set out in the Default Notice, and nothing else. In other words, Steni should be held to the extent of the particularity identified in the Default Notice; that meant that only if an inference could be drawn solely from the declining sales figures set out in the Notice, that Holdings was in breach of its "all reasonable endeavours" obligation, could Steni succeed; it was not entitled to supplement this alleged factual inference with further facts or allegations of failure.

iii) But no such inference could be drawn solely from the sales figures set out in the Default Notice, since Steni had not provided any independent and objective benchmark against which those figures could be assessed. There might have been many other potential factors that could have caused a fall in sales, notwithstanding that Holdings had indeed used all reasonable endeavours to promote the marketing and sale of Products in the Territory.

iv) Because of the point made at ii) above, it was not legitimate for Steni to seek to rely on the numerous additional matters identified (a) in its defence and/or (b) in its written opening or closing submissions, to support the allegation that Steni was in breach of its "all reasonable endeavours" obligation. Any such attempt by Steni to expand upon the alleged failure of CEP to use all reasonable endeavours, whether in the Defence or in the course of the trial, was wrong in principle. It was only those matters identified in the Default Notice that could found the basis of the termination of the EDA. Any further allegations were not relevant to the question of failure to use all reasonable endeavours, because they were not identified as breaches in the Default Notice. If Steni had wished to rely upon those matters, it should have given Holdings specific notice of those failings with proper particularisation within the Default Notice itself.

v) In any event, the Claimants' evidence as to the endeavours made by Holdings (in particular the evidence of Mr. Barton), was largely unchallenged and should be accepted. That evidence showed that the common intention was to allow Holdings a generous margin of appreciation or discretion in which to decide how to promote Steni products in the Territory. Within the margin of appreciation there was clearly room for disagreement and room for differing approaches to marketing and promotion. That was implicit within the term "reasonable endeavours". Steni had not established that Holdings fell outside of that margin or had fallen below the minimum level of endeavours required by the EDA. Accordingly, Steni had not established that there had been any breach of Holdings' "all reasonable endeavours" obligation.

The Court's determination in relation liability issue 1A

Factual Matrix

59. I accept that the EDA was commercially unusual, in that it was to provide Holdings with security of supply for a very long period, namely 20 years, and that such an arrangement, no doubt, had its origins in the long standing commercial relations between the parties. However I reject the notion, as submitted by Mr. Casement, that the EDA

"… represented the culmination of substantial investment and sacrifice on the part of Holdings whereby, for the first time, it became entirely dependent upon Steni for its supplies of the main Steni cladding product".

There were other similar products in the market (even if such products were not perceived to be as good), that Holdings could and did supply to its clients. It was not in any real commercial sense "entirely [or, indeed, partially] dependent upon Steni" for any sort of commercial survival, as was clear from the evidence which I heard.

60. Moreover, on the other side of the coin, Steni was committing to a 20 year term, which, on any objective commercial view, was extremely long. During that period, Steni agreed to give Holdings the exclusive right to sell its products in the UK and Ireland, with the result that UK and Irish customers would have no other means of access to its products. Holdings was not required, by any other clause of the EDA, to reach particular sales targets or to achieve a particular sales performance. It is against this background that I have to consider what the parties must, upon entering into the EDA, have intended and understood by Holdings' undertaking in clause 2.3. The evidence showed that the market in the Territory was extremely important to Steni for the sale of its Products.
61. First of all, although it was, I believe, only faintly argued by Mr. Casement, I do not accept that, on the construction of clauses 2.2 and 7.2 of the EDA, Steni's entitlement to terminate for breach only arose after the expiry of the first 20 years of the term. In my judgment, on the construction of clauses 2.2 and 7.2 of the EDA, the right to terminate on the grounds of breach arose at any time, including during the first 20 years of the term.
62. Second, I accept Mr. Graham's submission that, by "all reasonable endeavours" in this context, the parties must have intended and understood that Holdings should do everything that a reasonably competent and energetic distributor would do to promote the marketing and sales of the supplier's products in the relevant territory, knowing that the supplier was entirely dependent upon his, the distributor's, efforts to achieve sales in that territory over a period of many years. This test would, of course, include affording Holdings a reasonable margin of appreciation or discretion in deciding how best to market and promote the sale of Steni's Products in the Territory.
63. Third, whilst I accept Mr. Casement's submission that, given the commercial background to the EDA, it could not be terminated by Steni for lightweight reasons, nonetheless, given the importance to Steni of its exclusive agent's performance, there is no reason to construe the criterion of Holdings' "all reasonable endeavours" obligation, in any particularly generous light to Holdings, or, for that matter, to Steni.

Effectiveness of the Default Notice

64. I reject Mr. Casement's submission that the Default Notice which was served by Steni on 21 December 2004 was invalid in relation to the allegation that Holdings failed to use all reasonable endeavours. All that clause 7.2 required was the identification by one party of the particular failure on the part of the other party to fulfil a particular obligation under the EDA. In my judgment, the Default Notice adequately identified that there had, as alleged by Steni, been a failure on the part of Holdings, or breach of its contractual promise, to fulfil its obligation "to use all reasonable endeavours to promote the marketing and sale of Products in the Territory". There was, in my judgment, no requirement on the part of Steni to identify in the Default Notice the particular respects in which Holdings had failed to use all reasonable endeavours to promote the marketing and sale of Products in the Territory (e.g. not enough promotion of Steni products at trade fairs), let alone to spell out what Steni contended Holdings had to do to put matters right. That was particularly so in circumstances where Steni, as the supplier, had no contractual entitlement under the EDA to insist on the provision of marketing plans or specific or identified information regarding Holdings' promotion or sales performance or endeavours and had, as a matter of fact, been provided by Holdings with very little of such information. I see no reason why Steni should not, as it did, have referred to the only information which it did have, namely the volume and value of its sales to Holdings, as justifying a belief on its part that Holdings was failing to use all reasonable endeavours to promote the sales of the Products in the Territory and thus acting in breach of its clause 2.3 obligation. In reality, the EDA left no other avenue open to Steni as a means of protecting its commercial interests under the contract. This approach is supported, by analogy, by the authorities in relation to notices under section 146 of the Law of Property Act 1925.
65. Moreover it would have been perfectly obvious to Holdings from the Default Notice, which identified the alleged breach, that, in order to prevent the service of a Termination Notice, Holdings, as the exclusive distributor, would, need, during the 30 day term allowed by clause 7.2, either

i) to persuade Steni that Holdings had, in fact, been using all reasonable endeavours to promote the marketing and sale of Steni Products in the Territory, so that there had in fact been no failure entitling Steni to issue a clause 7.2 notice; or

ii) if Holdings had not been using all reasonable endeavours to promote the marketing and sale of Steni Products in the Territory, to inform Steni as to what steps Holdings had taken, and was planning to take, to rectify that failure before the end of the 30 day period referred in clause 7.2.

66. However, I do not accept Mr. Graham's submission that the mere failure on Holdings' part to provide an account, explanation, or information of the type indicated at subparagraphs i) and ii) above, would have entitled Steni without more to terminate the EDA or to regard Holdings' conduct as a repudiatory breach. If in fact the Holdings had been discharging all its reasonable endeavours obligations adequately, the mere fact that Holdings did not adequately inform Steni of its contractual compliance would not in my judgment have justified Steni's attempt at termination.

Construction of the Default Notice

67. Secondly, I reject Mr. Casement's submission that the allegation of failure to use all reasonable endeavours was limited to the implied allegation that such failure could be inferred from the falling sales figures set out in the Default Notice, and nothing else. There is nothing in the wording of clause 7 of the EDA, or otherwise, that suggests or requires such a result. For the purposes of a clause 7.2 notice, Steni obviously had to identify the obligation which it alleged that Holdings had failed to fulfil, and to give Holdings a 30 day period in which to attempt to rectify the failure, but nothing more was required. Here Steni did just that. It was not required to provide instances or examples of the particular ways in which Holdings had failed to use all reasonable endeavours to promote sales of Steni's Products within the Territory. Indeed, given the absence of any contractual obligation on Holdings' part to provide Steni with information about the manner in which the former was promoting, or intending to promote, the sales of Steni Products, and in the absence of any voluntary production by Holdings of such information (as was the case), it is difficult to see what else Steni was meant to do but point to what it regarded as disappointing sales figures. Moreover, whilst I accept that Steni could not subsequently rely upon the breach of a different contractual obligation to justify its contractual termination pursuant to clause 7.2 (since the clause required a 30 day opportunity for rectification), I see no reason, subject to Steni having given Holdings adequate notification in its defence of the case it was running (as opposed to pleading evidence), why Steni should not be entitled to rely on the evidence which emerged at trial to support its allegation that Holdings was in breach of its "all reasonable endeavours" obligation. That was particularly so in circumstances where, as I find as a fact, Holdings, by Mr. Barton and Mr. Ross, was extremely reluctant during the currency of the EDA to provide Steni with any detailed information about what it had been doing to market and promote the sale of Steni Products. The fact that there was no contractual obligation upon Holdings to do so was beside the point.
68. It was not surprising, in my view, that Steni became increasingly dissatisfied with Holdings' performance when the former was not being provided with any budgets, promotional plans or other such detailed information.

Was Holdings in breach of its "all reasonable endeavours" obligation?

69. In my judgment, looked at cumulatively, the evidence clearly shows that Holdings failed to use all reasonable endeavours to the marketing and sale of Steni Products in the Territory. I come to that conclusion having afforded Holdings a generous margin of appreciation in the exercise of its own business discretion and having taken into account the difficulties which would have faced any distributor. I have taken into account the evidence given by Mr. Barton and Mr. Ross, both in their witness statements and orally, as to the steps which the Claimants took in relation to the marketing and sale of the Products. I summarise below the aspects of the evidence upon which I have relied to reach my conclusion. Although it might be said that no one particular aspect is conclusive, taken together they provide, in my judgment, ample evidence of a failure on Holdings' part to discharge its all reasonable endeavours obligations.

Declining Sales Figures

70. As Steni stated in its Default Notice:

"Referring to the general market development in UK, the development of CEP sales of steni products do not correspond with the general trends. From 2001 to 2004, there is a reduction of 62% !! in the total CEP sales of steni products."

In his letter of 11 January 2005, already referred to, Mr. Barton accepted that there had been a disappointing decline in the level of sales of Steni Products, in particular during 2004. The issue for the court is whether it can conclude that the fall in sales is evidence of a failure on the part of Holdings to use all reasonable endeavours. In my judgment, on a proper analysis of the expert evidence, the decline in sales does indeed support Steni's case that Holdings had failed to use all reasonable endeavours to promote and market the sale of Steni products. On its own, the decline in sales factor is not determinative. But it raises the question as to why, when the rest of the comparable UK claddings market was experiencing substantial growth over the period 2002-2004, Holdings/Claddings sales of Steni products were declining. Of course, as Steni's expert, Mrs. Antoinette Pincott fairly accepted, a decline in sales volumes can be attributed to many causes other than a failure on the part of the distributor adequately to market and promote the product. But the general trends in the UK claddings market, as compared with Holdings' sales of Steni products, nonetheless provide some sort of benchmark against which Holdings' performance can be evaluated.

71. At section 5 of her report, Steni's expert, Mrs Pincott, examined and compared (i) the Claimants' sales performance over the life of the EDA and (ii) the performance of the claddings market in the UK. Her evidence indicated that from 2002 to 2008 the UK claddings market had enjoyed steady growth in terms of volume of sales (up 31%) and value of sales (up 26.6%). More particularly, Table 18 of a report entitled "the UK Cladding Market Development 2006", researched and published in September 2006, by Market & Business Development ("the MBD Report^"), to which Mrs Pincott referred, demonstrated that sales volumes in the UK Market for external wall claddings grew as follows between the beginning of 2002 and the end of 2004:

Year	Volume (000 m²)	% Change
2002	27,910	+7%
2003	29,333	+5%
2004	31,181	+6%

In commenting on the Table Highlights, the authors of the MBD Report stated as follows:

"The UK market for external wall cladding has demonstrated growth in each year since 2002, with annual growth levels fluctuating between 5% and 7% during most years reviewed. .. Overall UK demand for cladding has followed a similar trend to construction output, which was particularly buoyant between 2002 and 2004."

72. These figures demonstrate that there was cumulative growth in sales volumes in the relevant UK market between the beginning of 2002 and the end of 2004 of +18%. In contrast, over the same period, the sales volumes of Steni's Products achieved by Holdings/Claddings fell by -62%.
73. Mr. Barton's evidence was that the percentage fall in the Claimants' sales over the period was 55%. It makes little difference which of the two figures is taken when one compares the decline in the Claimants' sale as against the market trend, whether one takes the market generally or limited to the "Plastic panel sector", to which Mr. Ross, in his evidence, referred. He made the point that Steni products were part of the Plastic panels' market, which in turn, he contended, was a very small fraction of the overall claddings market. He referred to the fact that, although the MBD report stated that the composite panel sector grew by 20% between 2002 and 2004, more pertinently the Plastic panels sector grew during that period by 13%. However, the figures showed that the growth in the small plastic sector was slightly greater from 2002 to 2004 than the growth in the UK external wall claddings market overall. I accept Steni's case that the overall growth of the UK external wall claddings market is probably the most apposite for analysing the growth of the relevant UK market, but, even if I were wrong in this view, and the more limited market sector referred to in the 2006 MBD Report as "Plastics" is the more apposite, nonetheless the rate of growth in that sector is not appreciably different from that experienced by the relevant market as a whole. What the figures produced by Mrs Pincott (based on the MBD Report) did show were the following:

i) the buoyant growth in the output value of the UK construction industry over the period 2002-2004;

ii) the growth in the value of the sales made in the UK external wall cladding industry over the same period and beyond;

iii) the dramatic fall in the value of sales made by Claddings over the same period, 2002 to 2004, at a time when the relevant market was booming; the figures, which are taken from Claddings' management accounts, show the fall in Claddings' sales of all products overall and not just Steni's products. (The 62% fall in sales volumes referred to in Steni's Default Notice relates to sales of Steni's products alone);

iv) that there would be a similar discrepancy, as between Claddings' figures and the market figures, if the growth figures from the Plastics sector were used in place of the growth in the UK External Wall Claddings market as a whole.

74. In my judgment, the empirical evidence relating to sales and general market growth in the UK demonstrates that it was not surprising that Steni came to the provisional conclusion, on the basis of the figures set out in its Default Notice, that Holdings had not been using all reasonable endeavours to promote sales of Steni's Products in the UK. I turn therefore to consider whether the rest of the evidence supports what at least, at first sight, appears to an historic sales position suggesting a breach of Holdings' all reasonable endeavours obligation.
75. Before doing so I should mention that I accept Mr. Graham's submission that the growth or reduction of sales volumes of its Products achieved by Steni in different territories, such as Norway, Sweden, Denmark, Finland, Iceland and France is likely to have been irrelevant. Each will depend on a number of factors particular to that territory. Without an understanding of those factors, based on credible evidence, no conclusion can safely be drawn from, for example, the volume development figures which were presented in evidence. There is nothing to explain or suggest why the growth in the UK market should - or should not - have resembled the growth in the Swedish market, for example, or the Norwegian market. Such evidence as was given demonstrated that it would be very difficult to draw any sound conclusions from the sales figures achieved by distributors in other countries, as so much depended on the size (and the potential size) of the market and the degree of market penetration already achieved.

Steni's entitlement to rely on points set out in its closing submissions in relation to Holdings' endeavours to market and promote the sale of Steni products

76. Contrary to Mr. Casement's submissions, I am satisfied that Steni's amended defence and counterclaim, and its replies to the request made by the Claimants for further information, adequately indicated the nature of the case which Steni was making as to the alleged inadequacy of Holdings' endeavours, as developed by Mr. Graham, upon the basis of the evidence at trial. In particular, the further information provided by Steni repeatedly pointed to the paucity of the Claimants' disclosure relating to Holdings attempts to market Steni products and the absence of documentation, such as marketing plans. The fact was that, at that time it issued its Default Notice on 21 December 2004 and its Termination Notice on 10 March 2005, Steni was necessarily - given Holdings refusal or reluctance to provide information - unaware of what endeavours had (and had not) been used by Holdings/Claddings as regards the promotion and sale of Steni's products in the territory over the period 2003 to 2004.

The evidence relating to Holdings' endeavours to market and promote the sale of Steni products

77. In my judgment the evidence (leaving aside the evidence relating to the Claimants' historic sales figures, compared with the growth in the value of sales in the UK external wall cladding industry over the same period) conclusively showed that Holdings/Claddings had indeed failed to use all reasonable endeavours to promote Steni products in the period 2002 to 2004. I summarise my findings under the following headings.

Lack of an adequately structured, and directed, sales and marketing organisation within Holdings/Claddings

78. In my judgment, one of the reasons for what Holdings recognised to have been its disappointing sales performance of Steni products was the lack of an adequately structured, and directed, sales and marketing organisation, within Holdings/Claddings. At all material times in that period 2002 to 2004, Mr. David Allen was the Claimants' National Sales Manager. He had effective day-to-day responsibility for promoting the marketing and sale of Steni's products. To a large extent, whether Holdings used or failed to use "all reasonable endeavours" in that connection, depended on what Mr. Allen did do or did not do when faced with the challenge of the undisputed falling sales of Steni products. However, Mr. Allen was not called as a witness for the Claimants, despite the fact that he is apparently fit and well and is still working for them in the capacity of "Technical and Major Projects Manager", having been replaced as National Sales Manager by a Mr. Steve Hough, in 2005 after the termination of the EDA. No satisfactory reason was given for the fact that Mr. Allen was not called as a witness.
79. The evidence which Mr. Barton and Mr. Ross did give in relation to his performance as National Sales Manager leads me to conclude that:

i) much too much of the responsibility for promoting the sales of Steni's products during this period was left to Mr. Allen, including the responsibility of maintaining and recording specifications and quotations;

ii) it was difficult, if not impossible, for him to provide adequate leadership or direction to the rest of the sales force, since he himself was out on the road three days a week as a travelling salesman, when he was very difficult to communicate with;

iii) he was overburdened with minor decisions that should have been taken by other members of the sales force;

iv) although he had strengths as a salesman, both Mr. Ross and Mr. Barton recognised that he was a poor National Sales manager, in that he was prone to be over-optimistic about achieving sales and tended to make promises which he could not keep; he was disorganised in coping with administration, paper management and following matters through; he was a poor man manager; and inefficient in matters such as project checking, updating key sales data and maintaining a specifications log;

v) in the summer of 2005, after termination of the EDA, Holdings recruited a larger, better and fully staffed sales team, that operated in a very much more disciplined and organised way under the management of Mr. Hough as National Sales Manager;

vi) in the light of the above matters, had Mr. Allen been called as a witness, it is unlikely that his evidence would have supported Holdings' case.

80. Moreover, it was notable that no internal communications, notes, emails or other documents were disclosed relating to any discussions which Mr. Barton or Mr. Ross might have had with Mr. Allen (or which Mr. Allen might have had with members of his sales team) as regards the steps to be taken, or endeavours to be used, in promoting the sales of Steni's products. The evidence suggested that communication within the Holdings/Claddings sales organisation was conducted orally, in an unstructured and informal fashion, and that, in the period 2002 to 2004, there were no written marketing or sales plan to inform Mr. Allen (as National Sales Manager) or his sales team as to what they should be trying to achieve, in terms of promotion or sales, in a given month or quarter. Nor was there any means by which the board of Holdings/Claddings (i.e. Mr. Barton and Mr. Ross) could monitor the sales team's performance against targets, plans or budgets.
81. The fact that Holdings was not obliged under the EDA to provide a specific written marketing or promotional plan to Steni is irrelevant to the issue whether, in the circumstances, Holdings was in fact using all reasonable endeavours to promote the marketing and sale of Steni's products in the Territory. In my judgment, based on the evidence, not only from the Steni witnesses, Mr. Tom Rønning and Mr. Gundersen, but also from Mr. Ross and Mr. Barton in relation to the procedures which they put in place after termination, a reasonably competent and energetic distributor would have prepared and utilised a detailed written marketing or promotional plan to assist in its sales and promotion of Steni products. Even if there had been no need for such a plan prior to 2001, once the Holdings Board of Directors had identified in January 2002 that a poor sales performance had led to a significant under-achievement in 2001 in terms of forecast sales of Steni Colour, a reasonably competent distributor operating in this market would have directed its mind to the production of a specific marketing or promotional plan. As Mr. Graham submitted, such a plan would have had many uses. For example, amongst other things:

i) it could have been used as a point of reference and source of guidance for the National Sales Manager, the Area Sales Managers and also for all those involved directly or indirectly in the work of promoting the marketing and sales of the Products;

ii) it would have enabled Mr. Allen and his team to understand what targets they had to meet (e.g. in terms of contacting architects, housing associations and other potential customers, the number and nature of the seminars they should be carrying out) and how that part of their work linked in with Holdings' goals for marketing and selling Steni's products in the Territory;

iii) it could have enabled those responsible for setting the prices at which Holdings/Claddings sold Steni's products to see that those products were correctly priced, in the sense of not being priced so high as to lose a competitive edge but not priced so low as to run the risk of being positioned in the wrong segment of the market;

iv) it could have provided guidance, particularly for Area Sales Managers, as to what points might be made to a potential customer in a particular field (e.g. a local authority) as regards the virtues of one or more of the products in question;

v) it could have indicated to members of the Holdings' sales team what resources for promoting the marketing and sales of the product were available to them via the sales administration department/personnel at Holdings' offices in Hastings, and how best to make effective use of those resources;

vi) it could have ensured that the PR and other publicity work undertaken by Holdings in the Territory was properly targeted, so as to help Holdings meet the goals as regards the marketing and sale of the products identified elsewhere in the plan;

vii) it could have enabled Holdings and Steni better to co-operate with one another and to have discussions as to how best to reverse any negative trend in sales which were better structured and more productive

82. The evidence demonstrates that Holdings never produced or gave to its sales organisation a structured marketing plan along the lines set out above. It is not surprising, in my judgment, that, in such circumstances, the sales force was not adequately directed and motivated in relation to the sale and promotion of Steni products.
83. I also conclude that during the period 2002 to 2004 Holdings' management failed to address the problems caused by the lack of structure, guidance and direction given to the Holdings' sales team. Apart from the matters referred to above and below, the board minutes suggest not merely an inadequate supervision of the promotion and sales of Steni Products by the sales organisation, but also demonstrate an appreciation by Mr. Barton and Mr. Ross, in their capacity as directors of Holdings/Claddings, of the inadequacies of Holdings/Claddings' sales performance of Steni products. They show the difficulties which Holdings in itself was experiencing, not merely in the summer of 2002 because of the disruption caused by the move of its works from Accrington to Hastings (which had a considerable impact on the quality of sales administration and customer relationships, and consequently resulted in a fall in sales), but also by June 2003, because of the dramatic down turn in sales. The evidence suggests that Holdings' management did not take any, or any significant, action to improve the quality of its sales team until 2005, after the termination of the EDA.

Inadequate systems within Holdings/Claddings for the preparation of (a) rolling forecasts and (b) logs of specifications and quotations for the supply of Steni Products

84. The evidence demonstrated that the internal systems within Holdings/Claddings for the preparation of: (a) rolling forecasts; and (b) logs of specifications and quotations for the supply of Steni Products were haphazard and poorly maintained. This meant that in the period 2003 to 2004 the Holdings board was only intermittently and inadequately informed as to the potential and development for sales of Steni products. In my judgment, a reasonably organised exclusive distributor, using all reasonable endeavours, would have had far better systems in place in relation to information flows and procedures for forecasting future sales.

Failure to cooperate with Steni

85. In my judgment, the evidence clearly demonstrated that Mr. Barton and Mr. Ross were unwilling to cooperate with Steni in the sharing of information as to the manner in which Holdings/Claddings were engaging, or intending to engage, in the promotion and sales of Steni Products in the Territory. The commercial reason for this appears to have been, not merely that Mr. Barton was determined that Holdings should not engage in any activity that it was not expressly and specifically required to do under the terms of the EDA, but also the concern that any review by Steni of the procedures in fact being adopted by Holdings, would reveal the hopeless inadequacy of Holdings' internal reporting, sales forecasting and administrative systems, and its inability to keep track of specifications and quotes.
86. For example, in April 2002, Steni pressed Holdings for the production of a marketing plan as a means of identifying "the resources and measures ... required both from [Holdings] and Steni" to achieve a reversal of the negative sales trend. Although Mr. Allen, by letter dated 27 May 2002, in response to such request, promised an informative report on a regular six weeks basis, detailing: (i) current specifications; (ii) orders expected in; (iii) forecasts; and (iv) relevant information as regards the activities of competitors, no such report was ever in fact produced. The reason for this appears to have been both Mr. Allen's incompetence and lack of follow-through, and also Mr. Barton's reluctance for Holdings to take on a commitment that he regarded as unnecessary and not something that Holdings would normally be doing for itself. Thus, although, from about August 2002, certain information as regards quotations and forecasts was being generated and reported internally within Holdings, none of that information was ever forwarded to Steni. I find as a fact that Holdings was concerned that any sharing of information with Steni would have revealed to the latter the inefficiencies and inadequacies in Holdings' system for quotations and internal forecasting, and indeed in its general sales administration.
87. In my judgment, a reasonably competent exclusive distributor, using all reasonable endeavours, would have engaged in a far more positive dialogue with its supplier, Steni, than Holdings actually did, in order to maximise the promotion and sales of Steni products in the Territory. The evidence clearly demonstrated that Holdings' responses to Steni's enquiries about prospective marketing and sales performance were habitually negative. Having read the correspondence, and heard the evidence of the participants on both sides, I am not surprised that Steni became increasingly frustrated with what it regarded as Holdings' stalling tactics. I have little doubt that the reluctance on Holdings' part to share information arose out of a wish to conceal what it must have appreciated was its inadequate performance as a distributor of Steni products.

The pricing of Steni Colour and Bauclad

88. Steni submitted that a reasonably competent and energetic distributor of Steni Colour, who was obliged to use "all reasonable endeavours" to promote sales of that product, would have ensured that it was priced below that of its principal competitor, Bauclad. I am not satisfied on the evidence relating to this topic that Holdings failed to exercise all reasonable endeavours in this respect, although it was certainly the case that the Claimants could have reduced their margins in relation to Steni Colour to have made it more competitive with Bauclad. But within its margin of appreciation, this was a commercial decision for Holdings.

Use of Steni's literature and marketing materials

89. I accept Mr. Graham's submission that the obligation contained in clause 2.3 of the EDA to use all reasonable endeavours to promote the marketing of the Products would have included a requirement on Holdings to produce and disseminate appropriate marketing literature about the Products, both in hard copy and on line. Such an obligation was consistent with Holdings' obligation, as contained in clause 4.4 of the EDA, to market and sell the Products under Steni's registered trade mark, which Holdings was granted the exclusive right to use in the Territory. The Steni logo was registered as a trade mark in the UK in 1990. In 2003 Steni produced detailed guidelines for the use of its logo and brand name by distributors. Steni sent the guidelines to Holdings and referred to them in correspondence. In my judgment the evidence demonstrated that Holdings and Claddings prioritised the promotion of their own "CEP house style" in relation to all of the products (both Steni and non-Steni). Thus, by way of example, the evidence showed that:

i) Claddings argued vigorously for the removal of the Steni logo from a brochure which was being printed for it in Norway. The colour proof displayed the Steni logo, which Claddings wanted to replace with the "CEP" logo.

ii) In the period February to May 2003, the parties exchanged extensive correspondence on the subject. Finally, on 26 March 2004, Claddings agreed to accept the brochures with the Steni logo but ultimately did not take delivery of or pay for the 5,000 brochures printed on that basis.

iii) On a print out of the "CEP Claddings" website on 4 February 2005 (which was how the website appeared during the currency of the EDA) the Steni logo does not appear. Further, "Steni Colour" and "Steni Nature" were listed alongside non-Steni products using the same font and layout. There was no attempt to distinguish Steni products from those of other suppliers, and no attempt to promote Steni (as opposed to CEP/Claddings) as a brand.

iv) In cross examination, Mr. Barton was asked about Holdings' use of the Steni trademark on various marketing materials. He admitted that, as regards the brochure which was the subject of the dispute in February to May 2003 (referred to above), Holdings reproduced an old brochure which did not bear the Steni trade mark, instead of using the disputed brochure with the Steni trade mark on the front. He also admitted that the website did not include the trademark registered by Steni.

90. Again, this, in my judgment, is indicative of a failure on the part of Holdings to use all reasonable endeavours to promote the marketing and sale of Steni Products.

Attendance at trade fairs and seminars

91. To a certain extent it was common ground that one means by which Steni products could be marketed to potential customers in the construction industry was for distributors to attend trade fairs and exhibitions to promote the brand. The evidence of Ian Anderson, the UK Managing Director of Steni UK Ltd, a wholly-owned subsidiary of Steni (which operated only after the termination of the EDA), who only joined the Steni organisation after termination of the EDA, was to the effect that it would have been useful for Holdings to have attended trade fairs, for example the Welsh Housing Exhibition, in order to promote the sale of Steni products. Mr. Barton admitted that Holdings did not attend this exhibition, but referred to the fact that it did attend a few others. His evidence was to the effect that such events were not cost effective, that their attendee lists were unfocussed, and did not result in significant sales.
92. Another means of promoting cladding products was by means of a UK distributor giving seminars under the aegis of RIBA, ostensibly to educate its members. Although there were apparently limits on the number of times a product could be referred to in the seminar, a brand name and logo could be used on the "PowerPoint" presentation without limitation. Mr. Anderson's evidence was to the effect that these were valuable marketing opportunities; his former company, Trespa (in a similar field), used to arrange about 250 seminars per year and he gave evidence that Steni UK intended to run 60 to 100 per year. Mr. Barton accepted in his evidence that Holdings gave no RIBA seminars and only 10-20 other seminars per year, although no disclosure was given in relation to the seminars which were attended by Holdings in this regard. However the Holdings/Claddings "UK Sales Review" dated 16 September 2003, identified as a "concern" the fact that Area Sales Managers were:

"still not visiting enough new architects. RIBA lists not being actioned and Housing Associations not being contacted."

93. In my judgment this is another area in which the performance of Holdings/Claddings' Area Sales Managers, during the period 2002 to 2004, was unsatisfactory, as recognised by the board of directors. In my judgment this is another example of Holdings' failure to use all reasonable endeavours to promote the sale of Steni products, against a continued fall in sales over the period. It demonstrates a lack of endeavour on the part of management of Holdings to reverse the negative sales trend and to ensure that Claddings' sales force was properly motivated and directed.

Failure to obtain certificates and approvals

94. I am not satisfied that the evidence relating to the decision taken by Holdings in April 2004 not to renew the BRE/WIMLAS certification for Steni Nature and Steni Colour, at a cost of renewal of some £7,000, demonstrates that there was any failure on Holdings' part to use all reasonable endeavour towards promoting the marketing and sales of those Products. The evidence showed that there were commercial factors each way supporting or opposing a decision to renew BRE/WIMLAS certification. Moreover although a draft default notice referred to the topic, the issue did not feature in the final Default Notice actually served by Steni. However the evidence relating to this matter, which showed that Steni was not consulted by Holdings before the latter took the decision not to apply to renew the Wimlas certification in respect of Steni Colour and Steni Nature, I consider to have been another example of Holdings' failure adequately to communicate with Steni.

Reasons for the decline in sales put forward by the Claimants

95. In their Reply, the Claimants contended that there were three reasons which caused the decline in sales of Steni products in the Territory, all three of which were said to be the fault of Steni. It was the Claimants' case that, accordingly, the decline did not reflect any failure on their part to use all reasonable endeavours. The three reasons given were:

i) Steni's closure of the factory in France, without prior consultation with Holdings which the Claimants contended resulted in a substantial increase in the lead times for the supply of Steni Strata and Steni Nature, which gave a further competitive advantage to a competitor, Stoneflex;

ii) the effective loss of the system build market (into which market Steni Strata alone was sold) as a result of price increases imposed by Steni and the inability of Steni to meet the lead times expected of that market following the closure of the factory in France;

iii) price increases imposed by Steni amounting to up to 40% in a period when competitor products were not being increased in price.

96. Having carefully considered the evidence relating to these issues, I am not satisfied that these problems to any, or to any significant, extent, caused or contributed to the decline in the Claimants' sales of Steni Products, particularly not in 2003 and 2004 - years in which sales were considerably worse than they had been in 2001 and 2002. Nor am I satisfied that such problems as existed in practice impacted upon Holdings' ability to promote the marketing and sale of Steni products.

Lead Times

97. The various complaints about lead times made by the Claimants related principally to aggregate boards manufactured by Steni, which were the boards whose production had been transferred from France to Norway. The production of smooth board had always been in Norway and, despite the relative lack of complaint about lead times for Steni colour, sales of this latter type of board were similarly poor. The evidence showed that the Claimants made numerous complaints about lead times during 2001 and 2002, to which Steni fully responded by making various suggestions as to how lead times might be improved, including the possibility of pre-ordering and the delivery to Steni of sales forecasts so that it would know how many and what type of orders were expected in the coming weeks or months. Steni also provided the Claimants with financial assistance in relation to the holding of stock at the Claimants' premises in the UK. After November 2002 there appear to be no further complaints from the Claimants about this issue. Although there were problems about lead times in 2001 and 2002, I am not satisfied that they were the reason for, or any significant contributing factor to, the decline in sales in these years or that they rendered Steni aggregate board products commercially uncompetitive. As I said, by 2003, the problem appears to have disappeared as a topic for discussions between the parties, and therefore cannot be responsible for the decline in sales in 2003 in 2004.

Uncompetitive Price Increases

98. The Claimants' allegation under this head is that the prices which Steni charged to the Claimants were so high that the latter were obliged to sell into the UK market at un-commercially high levels. On proper analysis, the evidence does not support this allegation. My conclusions in relation to this issue are:

i) When Steni and the Claimants discussed pricing levels and structure, Steni put forward certain proposals about greater flexibility in pricing, which were based on a neutral analysis as to how the total margin from factory production to end customer was being distributed as between Steni and the Claimants. This was described by Mr. Gundersen as an "open book" proposal which would have involved both Steni and the Claimants being frank about the margins they were respectively making. However, the Claimants, who were frequently pressing Steni to absorb increasing costs without increasing prices, were reluctant either to disclose their own margins or to reduce them.

ii) Although Steni put forward proposals to achieve greater flexibility in relation to pricing, dependent upon increased volumes of Product sold by the Claimants, or some other mechanism of volume-based pricing, the Claimants do not appear to have responded to this suggestion.

iii) On occasions the Claimants requested special discounts for special projects or large orders, but these requests were not numerous. I find that they were largely acceded to by Steni.

iv) As explained by Mr. Anderson and Mr. Tom Rønning, the normal, or expected, mark-up by a distributor in the cladding industry was a margin of something between 10% and 20% on top of suppliers' prices. However Mrs Pincott's evidence, which I accept, was that the range of percentage gross margins made by Claddings on each of the Steni products (excluding high rise sales between Claddings and Old Claddings which were distorted by internal pricing ) was as follows:

Year ended 31 December	1999 %	2000 %	2001 %	2002 %	2003 %	2004 %
Strata	39.5	40.8	35.6	36.9	29.0	23.7
Steni Nature	53.6	53.7	51.9	48.1	44.0	50.7
Steni Colour	42.9	42.4	46.9	46.9	37.2	23.8
Bauclad (a competitor in the smooth board market)	39.5	39.8	35.6	30.7	38.8	34.6

99. I agree with her conclusion that the margins achieved by the Claimants suggests that they may not have done enough to maintain or improve their sales volumes and market share of Steni products, by reducing prices and accepting a lower margin percentage, which in turn, could have led to overall improved total gross margin received. The evidence based upon sales trends suggested that reductions in margin did lead to increased sales. Moreover, the Claimants had the option to price Steni Colour below the price of Bauclad, a competitor product. They also had an ability to reduce their margin on their sales of Steni Nature, so as to make it more competitive than Stoneflex (a competitor product to Steni Nature) in terms of price.
100. In the circumstances I cannot accept the Claimants' contention that the price increases invoked by Steni from year to year made its prices uncompetitive.

Loss of sales in the system build market

101. I do not accept that the fluctuating sales figures relating to the Claimants' system build sales show either that Claddings lost its system build customers or that Steni's pricing or lead times were responsible for such fluctuations. The evidence showed that they were factors internal to the Claimants which contributed to its variable sales figures in this niche of the market.

Conclusion

102. Accordingly, in my judgment, on the balance of probabilities, Steni has discharged both the legal and evidential burden of establishing that Holdings had indeed failed to use all reasonable endeavours to promote the marketing and sale of Steni Products in the Territory. It thus follows that Steni was entitled to terminate the EDA on this ground, there being no suggestion that Holdings had rectified its breach during the 30 day period after service of the Default Notice.

Liability issue 1B: Holdings' breach of clause 3.4 of the EDA (in failing to pay for products ordered by Claddings and supplied in relation to the Aberfeldy project and other related issues)

Introduction

103. I should say that, correctly, given the trading arrangements as between the respective subsidiaries, Claddings and Steni Norden, no point was taken by the Claimants that, because Claddings had been the party responsible under the particular supply contract entered into pursuant to the "umbrella" agreement of the EDA, there could not, in any event, have been any breach on the part of Holdings of its obligations under clauses 3.4 or 4.7.
104. However, Mr. Casement contended that the only live issue stated in the List of Issues in relation to the Aberfeldy project was whether the products supplied by Steni were outside the relevant contractual specification, and that, accordingly, if the court was satisfied that the panels supplied were outside such specification, it should find for the Claimants that there had been no breach on their part which justified service of the Default Notice or Termination Notice. He also complained that the point taken by Steni based upon the construction of clauses 6.4 to 6.6 was not pleaded by Steni or raised for trial. However, he did not seek an adjournment to deal with this particular issue, since it appeared that all relevant documents had been disclosed and that the Claimants' witnesses had addressed, or were able to address, the relevant issues in their evidence. In my judgment, whether Holdings was in breach in at least two, of the three respects alleged in the Default Notice in relation to the Aberfeldy project remained in issue, even if the specification sub issue were determined in favour of the Claimants; see paragraph 9 of the Agreed List of Issues and paragraphs 36 to 48 of the Defence. Implicitly this raised certain issues of construction of the EDA. Since the relevant points were points of construction of the EDA, I did not consider that their determination, together with the determination of the consequential issues that arose as a result, would, in all the circumstances, be unfairly prejudicial to the Claimants.
105. The second alleged breach as asserted in the Default Notice was whether Holdings had issued a claim report in accordance with its obligations under clause 4.6. In my judgment, as was indeed admitted in the defence, a claim report was indeed supplied during the 30 day period following the Default Notice, under cover of Claddings' letter dated 11 January 2005. In supplemental submissions dated 14 June 2009, Steni submitted that the breach of clause 4.6 was a non-remediable breach, because the requirement to provide a claim report had to be fulfilled within a reasonable time. It contended that, if Steni had received a claim report immediately after 9 July, it would have had the opportunity to prove that the panels were fit for purpose as regards scratch resistance before the Claimants had agreed to replace some of them. Accordingly Steni submitted that, in those circumstances, the loss flowing from the precipitate removal of the panels would never have occurred and the grounds for withholding the €18,508 never have arisen.
106. I disagree. To a limited extent, Steni was informed about the dispute and the negotiations with Joyners and Countryside. Steni could have insisted on a claim report at a much earlier date. In my view, it would have made no difference to the outcome, even if it had been supplied with such a report at an earlier stage. In fact, the Claimants did not involve Steni in the final deal with Joyners, and, as will be seen below, because Steni was not asked by Holdings to agree with the compromise agreement, and for other reasons, I conclude that it was not liable to credit Holdings/Claddings with all elements of Holdings/Claddings' compromise agreement with Joyners. I do not see that, in the circumstances, Steni suffered any irremediable loss merely as a result of the technical failure to serve a claim notice prior to the Default Notice. Accordingly, in so far as the Termination Notice sought to rely on this ground, it was, in my judgment, incorrect.

Factual Summary

107. The relevant facts, as I find them, relating to the Aberfeldy project were as follows.
108. The project was the construction of an apartment block on a housing estate owned by Tower Hamlets Borough Council at Aberfeldy, in Docklands, East London. The contractor was Countryside Properties Plc ("Countryside") and the subcontractor was Joyners PA Limited ("Joyners"). Joyners purchased materials from various suppliers, including Claddings.
109. On about 18 February 2003 Claddings entered into a contract with Steni Norden for the supply of approximately 2,000 m² of Steni Colour Type 8 White, and approximately 132.64 m² of Steni Colour Grey for the Aberfeldy project. The total price of the Steni Colour ordered by Claddings was €58,188.42.
110. Clause 3.5 of the EDA provides:

"STENI guarantees that the Products supplied will conform to the agreed technical specifications (ref. Appendix I hereto) and undertakes full responsibility according to clause no. 6 of the General Conditions of Sale as per Appendix III hereto, with the following additions:

The factory of Steni Façade SA shall be added in clause 6.1.

There is a guaranteed 15 years UV colour stability for Steni Colour added in clause 6.2."

111. Clause 6 of those General Conditions of Sale, contained in Appendix III, and headed "Guarantee" was in the following terms:

"6.1 Steni AS/Steni Norden AS guarantees that the products Steni, Stenex and Steni Colour, delivered from their factor in Norway, to be up to standard pursuant to the technical and qualitative product specifications given at any time.

6.2 A 25 – twenty-five – years' warranty applies for the normal functioning of the panels. Natural exterior circumstances taken into consideration, there is a guarantee of normal similarity of colour for 10 – ten – years relative to panels being mounted simultaneously and within the same order specification. As for the Stenex panels a certain loss of lustre over time has to be taken into consideration. The duration of the guarantee is estimated from delivery dated and for normal European weather conditions.

6.3 The duration of the above stated guarantee is only valid on the condition that the stocking and mounting of the panels have been carried out by skilled workers, according to our directions for mounting at any given time, made available for the purchaser. Defaults beyond our control, for example the underlying support for static constructions, are compositions that eliminate our guarantee for the functioning of the panels.

6.4 If at any time undisputable faults of manufacture become visible after mounting, and it be obvious that these defects could not have been detected at an earlier stage, Steni AS/Steni Norden AS shall replace defective panels free of cost to the customer.

6.5 Under all circumstances, Steni AS/Steni Norden AS' liability is limited to the cost related to the redelivery and mounting of new panels as replacements for panels that, according to documented evidence, do not satisfy product specifications for the delivery in question. Under no circumstances shall Steni AS/Steni Norden AS assume responsibility for consequential loss and damage.

6.6 Purchaser undertakes to inspect deliveries upon receipt and shall immediately upon discovery of eventual defects given a written notification to Steni AS/Steni Norden AS."

112. Steni Colour came in various grades; "Type 6" was cheaper and thinner than "Type 7", which was cheaper and thinner than "Type 8". There were two other factors which distinguish the types. First, panels were normally fixed to wooden beams. The beams had to be not more than 400mm apart for the fixing of type 6 (to prevent the thin panel from flexing); whereas types 7 and 8 could be fixed to wooden beams 600mm apart. Secondly, at the time, type 8 alone carried a particular level of fire certification ("Class 0").
113. Steni Norden as manufacturer also gave a direct guarantee to Countryside as contractor. It was dated 26 February 2003, referred to Steni Norden's General Sales and Delivery Conditions, gave a colour guarantee of 15 years and a function guarantee of 25 years and set out the following terms:

"The above guarantee is conditional upon the panels having been installed according to the installation instructions valid at any time, and being used for the intended purpose, as façade cladding.

Panels which, within the above specified guarantee period, are declared defective will, in accordance with the guarantee, be replaced by new ones. Consequential costs, for instance for dismounting, reinstallation, transportation etc will not be covered.

In the possible case of quality defects appearing only after installation, and if detection of the quality defects before installation is considered as having been impossible or difficult, the panels in question will be replaced by new ones.

Our responsibility under this guarantee is, under any circumstances, limited to the costs related to redelivery with the purpose of replacing panels and accessories which, according to substantiated evidence, are not corresponding to the product specifications in force for the delivery in question."

114. The technical data sheet for type 8 specified: "Thickness Apprx. 7.5 +/- 0.8mm", so the thinnest acceptable panel, which complied with the specification, would be 6.7mm. Steni Colour panels were represented as having excellent scratch resistance. Countryside was sent a sample of Steni Colour to illustrate this.
115. Steni Colour panels are traditionally fixed onto a building using wooden beams and screws, but on this occasion the decision was taken to use a system of gluing the panels onto the building, using a product supplied by Sika Limited ("Sika").
116. The Steni Colour panels delivered to the Aberfeldy project were alleged to be defective in two ways. First it was alleged that they were less scratch resistant than the sample provided. Secondly, it was later alleged that the white panels were, in places, thinner than specified. There was no such allegation in relation to the grey panels
117. As to the first of the alleged defects, scratch resistance, the panels were found by Steni's internal testing, on about 6 August 2003, and by an external testing body, PPG, (the results being received by Steni on about 20 August 2003) not to be defective in this respect. The contemporaneous documents suggest that Mr. Allen took the view that the reason why the Steni Colour appeared to be insufficiently scratch resistant was because it had been poorly handled by Joyners. My finding, based on the evidence which I heard and the contemporaneous documentation, is that the Steni panels supplied were not in breach of the contractual scratch resistance specifications.
118. So far as the alleged issue of thickness was concerned, the evidence showed that some of the white panels tapered at the edges and so were slightly thinner at that point, than required by the specification for Steni Colour type 8. Mr. Barton gave evidence to the effect that 14 boards were measured on the Aberfeldy site on or about 24 July 2003 and found to be below tolerance. Subsequently, on or about 31 July 2003, Mr. Jean-Pierre Lebrun, Steni's Marketing Manager for Western Europe, measured a further five panels at the site. The amount by which they were below tolerance was at most 0.2.mm (measuring 6.5mm, rather than the minimum of 6.7mm). Accordingly, I find as a fact that there was indeed a breach of clause 6.1 of the guarantee set out at Appendix III to the EDA, as the boards were outside the thickness specification. The fact that, as I also find, the defect did not make the boards unfit for their purpose in any way, or in any way unsightly (because the tapering at the edges was relatively minimal, did not affect the manner in which the boards could be affixed, nor give rise to safety or visual issues), did not prevent the boards from being non-compliant with the specification. Subject to the terms of the contract, the Claimants were entitled to reject them.
119. The salient facts, so far as I need to refer to them, relating to this issue may be summarised as follows. By July 2003, Claddings had supplied Joyners with in excess of 980 m² of the White Steni Colour which had been ordered, and had cut approximately 265 m² to size on the instructions of Joyners, but had not yet dispatched the cut panels from Claddings' premises in Hastings. The evidence demonstrated that Claddings had not inspected the Steni Colour panels, to ensure that they satisfied the thickness specifications, prior to their dispatch to Joyners. It also demonstrated that it would have been perfectly practicable for Claddings to have measured the panels to check their compliance with the thickness specification at any time prior to their leaving Claddings' premises.
120. In early July 2003, Joyners notified Claddings that there was a problem with the white Steni Colour supplied for the project on the grounds that the panels appeared to be less scratch resistant than the original samples supplied. There also appeared to be potential issues in relation to the Sika fixing system and an apparent proposal from Countryside to replace the Steni Colour panels with Bauclad panels in areas susceptible to surface damage. On 14 July 2003, Joyners wrote to Claddings to say that the latter's outstanding invoices would not be paid as the Steni Colour panels supplied were "not fit for use" due to poor scratch resistance. Mr. Allen collected samples of Steni Colour from the site and these were sent to Steni Norden in Norway on 15 July, pursuant to arrangements for the testing of the panels for scratch resistance. On 21 July 2003 Joyners sent various faxes to Claddings in which the former indicated that they would not pay Claddings' outstanding account until all issues in relation to the project were resolved. Joyners also attached a copy of a letter from Countryside to Joyners of the same date stating that Claddings must make a sensible offer in relation to the board not used. The letter also stated that some of the boards had been fixed and found not to be acceptable and that Joyners must pay the cost of the removal. At this stage Claddings had not committed to resolve the problem with Joyners, as the former had not had the opportunity to discuss the matter with Steni Norden. On 24 July Mr. Ross sent an e-mail to Mr. Gundersen setting out the problems Claddings was encountering on the Aberfeldy project and explained that, consequently, the sum that was being withheld from Claddings by Joyners would, in turn be withheld from Steni Norden. On 25 July 2003 Mr. Allen wrote to Joyners again to explain that he had concerns about the way in which the Steni Colour panels had been stored on site and that this could have contributed to their being scratched.
121. A site meeting was arranged for 31 July 2003 which was attended by representatives of Countryside, Joyners, Mr. Allen and another from Claddings, and Mr. Lebrun on behalf of Steni Norden. At that time the meeting took place, Steni Norden's factory in Norway was closed for the summer holidays and Claddings had not received a response in relation to the samples that had been sent for scratch resistance testing. At the meeting, for the first time, Countryside raised the problem about the fact that 14 white boards had been found to be below the thickness tolerance level set out in Steni Norden's specification. As I have already mentioned, Mr. Lebrun's measurements supported or demonstrated that the thickness was outside specification. After the meeting, Mr. Allen sent his written comments to Steni Norden. He referred to the fact that the initial claims in relation to scratch resistance had yet to be resolved and requested that Steni Norden should carry out its tests as soon as possible. He referred the Steni Colour promotional literature, which claimed "excellent scratch resistance" and raised his concerns as to whether this was the case and whether Steni Colour should be used on walkways and internal balconies. Mr. Allen stated that the solution put forward by the parties was to retain Steni Colour on 75% of the project and replace Steni Colour with Bauclad for the other 25%. Any uncut panels of Steni Colour could be sold by Claddings in future, and therefore ultimately Steni Norden would only bear the cost of the panels that had already been cut but had not yet been dispatched, and of replacing the installed panels, which had been removed from the walkways. Mr. Allen further explained that the situation had escalated because Countryside, the main contractor, had discovered that some panels were below the minimum tolerance on thickness and this gave Countryside more reason to reject all of the Steni Colour panels on the project. In conclusion Mr. Allen stated that he would be having further meetings on the matter on 6 and 7 August, and requested Steni Norden to get in touch with him to discuss matters as soon as possible. On 5 August 2003, Holdings received a letter from Countryside which, apart from referring to the issues in relation to Sika and scratch resistance, went on to refer to the new issue in relation to the thickness specification. The letter stated that the various issues

"… potentially lead to the removal of all of the cladding and re-fixing. This will lead to significant cost which again I firmly believe should not be borne by Countryside ..., our client or indeed Joyners."

The letter went on to say that, whilst Tower Hamlets, the client, had agreed to pay the cost of the replacement Bauclad "there remains a significant cost, in the order of £25,000 for the changes" and that such cost should not be borne by either Countryside or Tower Hamlets.

122. On 6 August Steni Norden reopened after the summer break. Mr. Gundersen sent an e-mail to Mr. Ross to say that the Steni Norden considered that the claims in relation to Aberfeldy were unjustified, and demanded payment of Steni Norden's account. A telephone conference took place in which Mr. Barton and Mr. Allen explained the issues which had arisen in relation to both scratch resistance and thickness tolerance. It was agreed that the issue of scratch resistance appeared to be less of a problem than initially thought due to Steni Norden's tests. The Claimants pointed out that Countryside required the issue to be resolved at a meeting the next day. Mr. Barton explained that if all parties proceeded the next day on the basis of a split of the outstanding liability of £25,000, Steni Norden's overall liability in relation to the project would be approximately £10,000. Although Mr. Barton's note of the teleconference indicated that "[Mr. Barton and Mr. Allen] think we have a broad agreement from Steni in how we are progressing this claim", I am satisfied that during the course of a telephone conversation there was no agreement on the part of Steni to this approach. The next day, 7 August, Mr. Gundersen sent an e-mail to the Claimants saying that Steni did not accept the Aberfeldy claim. However the meeting took place as between the Claimants, Joyners, Sika and Countryside.
123. Following the meeting, on 8 August Mr. Barton sent a fax to Steni explaining that the Claimants were satisfied that Countryside would not remove all of the Steni Colour from the project as they had initially threatened. On 2 September, Joyners wrote to the Claimants to advise them that the overall costs in relation to the defective Steni Colour panels were £23,141.25 and asked the Claimants to bear all of these costs. A further conference call took place between the Claimants and Steni on 4 September 2003 in which Steni informed the Claimants that the independent tests on scratch resistance were favourable. Mr. Barton explained that it could be argued that, given the problems about thickness tolerance, it might be reasonable for the contractor, given its concerns about scratch resistance, to insist on different cladding on the walkways and balconies, where the panels were particularly vulnerable. Mr. Barton explained the cladding had not been paid for, and yet again suggested splitting the liability three ways between Steni, the Claimants and Joyners. Mr. Gundersen resisted this proposal. Subsequently, Steni maintained that even though the boards were outside thickness specification for Type 8, nonetheless they were still within tolerance for Type 7. In my judgment that was an irrelevant consideration, since the contract had been for Type 8, irrespective of the fact that Type 7 might have been satisfactory. Steni insisted on payment of all outstanding sums.
124. On 23 October the Claimants had a meeting with Joyners at which their respective claims were compromised. Steni was not invited to attend the meeting, and did not so do. At the meeting, Claddings agreed:

i) to credit Joyner's account immediately with the amount of the additional costs referable to the panels of Steni Colour which had been wasted – i.e. taken down from the site (£7,540 plus VAT = £8,859.50); and

ii) to allow Joyners to recover the remainder of the additional costs (in particular the labour and miscellaneous costs involved in removing the Steni panels and putting up the Bauclad ones that Joyners would incur in the first instance) through forward trading, i.e. by offering Joyners discounts on that future trading until such time as Joyners had received a benefit equivalent to the remainder of those additional costs;

Joyners agreed to release to Claddings the sums it owed Claddings under the contract between them, of which the sum of £16,300 odd was to be released immediately.

125. As a result Claddings withheld €18,508 from Steni, as pleaded in paragraph 34(5) of the Particulars of Claim. Mr. Ross broke down that figure as follows:

i) the credit note issued to Joyners for £7,540 (excluding VAT), being €10,970.70;

ii) the cost of the cut white Steni Colour panels left at the Claimants' premises of €6,137.96;

iii) the cost of the uncut grey Steni Colour panels bought for that contract and remaining in stock of €1,401.88.

This was a total of €18,510.54, of which Claddings withheld €18,508 from Steni.

The Parties' Submissions

126. Mr. Casement submitted that each element of the €18,508 withheld by Cladding from Steni Norden was a consequence of the breach of contract committed by Steni Norden in supplying a substantial amount of Steni Colour Type 8 that was outside of tolerance; that the credit note of £7,540 given to Joyners was a reasonable settlement in circumstances where a failure to settle could have had far greater implications; that without the settlement that was in fact achieved it was clear that:

i) There was a threat to remove all of the Steni Colour from the site with the refixing of other cladding. Given that this was the first project in the UK where Colour was being fixed with Sika this was potentially damaging for both Holdings and Steni.

ii) There would be substantial potential liability upon Holdings if it did not reach a compromise. That was because, as explained by Mr. Barton, the cost of taking down that part of the Steni Colour that was being removed and the refixing of the Bauclad (for which the client was paying), was in the order of £25,000. Although the overall potential liability if the decision had been taken to remove all of the Steni Colour was not in evidence, it was reasonable to assume that it would have been several times that figure.

iii) The relationship with Joyners would have been damaged and therefore Holdings would have incurred yet further loss in addition to the financial liability.

iv) In the circumstances, the settlement in fact reached with Joyners was a reasonable settlement and the other items that make up the claim, namely the cost of those panels that could not be used on the project were properly recoverable as a result of the breach by Steni.

127. Accordingly, Mr. Casement submitted there was no basis for Steni alleging that there had been a breach by Holdings in respect of the Aberfeldy project. So far as the withholding of the €18,508 was concerned, Claddings was entitled to withhold this sum from Steni (or Steni Norden which was supplying the products), as Steni had acted in breach of its obligations by supplying products that were below bottom tolerance so far as thickness was concerned, thereby exposing Claddings to potential liability to its contractor. So far as the breach of clause 4.6 was concerned, I have already dealt with this point. But Mr. Casement submitted that the alleged breach of clause 4.7 (in reaching a compromise agreement in respect of the Aberfeldy project) was wholly misconceived. He submitted that that provision had not been breached, since the provision related solely to guarantees and no guarantee whatsoever had been provided by Claddings to Joyners in the settlement. No commercial conditions of trade whatsoever were being provided by Claddings in the settlement. What happened was the settlement of a potentially large claim against Claddings for a relatively modest amount of money. Thereafter Claddings justifiably withheld from Steni that amount together with the costs of the panels.
128. Mr. Graham, on behalf of Steni, submitted that there was no justification in the Claimants' retaining sum of €18,508 from Steni on the grounds of the admitted breach of the thickness specification requirements. He contended that the breach was merely a "technical" one and that the Steni Colour boards were nonetheless fit for their intended purpose because:

i) they could still be fixed at 600mm intervals (rather than at 400mm intervals);

ii) they had "Class 0" fire certification;

iii) they met the technical specifications for Steni Colour Type 7 (which was sufficient for the contractor's purposes); and

iv) there was no problem with the appearance of the panels when fitted to the building in question.

129. In such circumstances, Mr. Graham, on behalf of Steni, contended that:

i) On a proper interpretation of clause 6 of Appendix III to the EDA, neither Steni nor Steni Norden was potentially liable to compensate Claddings for the loss Claddings claimed to have suffered by reason of the specification breach.

ii) Even on the assumption that Steni or Steni Norden could be so liable to Claddings, Claddings did not in fact suffer any loss as a result of that technical breach.

iii) Even if that loss was caused by that breach, it was consequential loss for which Steni/Steni Norden had excluded liability pursuant to the second sentence of clause 6.5 of Appendix III to the EDA.

iv) Even if that loss was caused by that breach it was, in any event, too remote a loss to be recoverable and/or a loss of a type for which, on a proper interpretation of the relevant contract, Steni Norden did not assume responsibility in the event that the panels were below the minimum tolerance for thickness.

v) Even if Steni or Steni Norden was found to be liable to Claddings in respect of such loss, Claddings was not entitled to set off the amount of that loss against its account with Steni/Steni Norden, prior to that liability being established by a court of competent jurisdiction (or an arbitrator appointed pursuant to the arbitration agreement incorporated at clause 8.2 of the EDA).

The court's conclusion in relation to the Aberfeldy project

130. In the light of my conclusions in relation to Holdings' breach of clause 2.3 of the EDA, as set out above, the Court's determination in relation to this issue is not strictly necessary. However, given the time which was spent in arguing the matter, it is appropriate that I should express my decision in relation to it.
131. On the evidence I find that it was clear that, by the time that Holdings/Claddings agreed its compromise deal with Joyners (on 23 October 2003), the thickness issue had all but disappeared. Indeed, complaints about non-compliance with the minimum tolerance for the thickness specification, whether by Countryside or by Joyners, had disappeared by 7 August 2003. Thus, by that date, the ultimate customer, Countryside:

i) was content to keep and use on the Aberfeldy building all those Steni Colour panels which had not been taken down from the building earlier, as a result of a mistaken belief on the part of Countryside and/or its architect that the Steni Colour panels were inferior, in terms of their scratch resistance, to the sample panels which they had been sent prior to Steni Colour being specified as the cladding panels to be used on the project; and

ii) was not seeking any payment or compensation from Claddings or the contractor, Joyners, by reason of the fact that the panels were below the minimum tolerance for thickness.

132. The reality therefore was that, if Steni had been involved in the negotiations, it would have put forward the argument that its liability was limited, both under its guarantee for the ultimate customer, and clause 6 of Appendix III to the EDA. It would have contended that:

i) Holdings/Claddings and the ultimate customer should have inspected the panels upon receipt for compliance with the thickness specification;

ii) that such defect in manufacture was clearly visible upon receipt of the panels by Holdings, since Holdings could have carried out a simple measurement to ascertain whether the panels were outside the thickness tolerance;

iii) that, accordingly, its liability was limited to the redelivery of panels that had not been mounted.

133. In my judgment, the Claimants deliberately decided not to involve Steni in the negotiations with Joyners or in the former's decision not to claim the additional costs of approximately £25,000 from Countryside. Accordingly, they have only themselves to blame if what was, no doubt, viewed as a reasonable compromise on their part so far as their commercial relations with Joyners were concerned, has turned out not to be recoverable against Steni. The Claimants did not communicate to Steni that the thickness issue had, for all practical purposes, resolved itself, nor did they offer Steni a realistic possibility of participating in the negotiations with Joyners. They simply presented it as a concluded deal. In my judgment, Steni was entitled to say that the Claimants, and the ultimate customer, should have inspected the panels on delivery in order to check compliance with the thickness specification, and, in the event of their failure to do so, Steni's liability was limited, under the terms of clause 6.5 of Appendix III, to replacement and delivery of the unmounted panels which had not satisfied the product specification in relation to thickness and which had been rejected.
134. In the absence of the Claimants securing Steni's agreement to the compromise, I conclude that, save to the extent that the agreement with Joyners reflected the Claimants', and accordingly Steni's, liability to replace panels that could have been measured on receipt and shown to have been defective in thickness specification terms, the Claimants had no contractual entitlement to recover costs of their compromise agreement with Joyners from Steni. The fact that Countryside, or Joyners, might have made a more extravagant claim based on the thickness specification failure in relation to all panels, both mounted and not, is irrelevant to Steni's liability. The fact that the Claimants' compromise with Joyners might have been a reasonable settlement, so far as the Claimants were concerned, of a potentially larger claim against the Claimants, and in circumstances where the Claimants wished to preserve their commercial relationship with Joyners, again is irrelevant in circumstances where Steni had not agreed to the compromise, and where, under the terms of the EDA and Appendix III, Steni was entitled to rely on the limited recourse conditions of its guarantee and the terms of its supply to the Claimants.
135. It was not altogether clear on the evidence precisely to what elements the credit note of €10,907 related. It would appear that this sum related to the site costs of fixing, and then removing, 275 m² of Steni Colour panels from corridors on the site, where Countryside had had concerns about scratch resistance; see Mr. Barton's letter to Mr. Gundersen of Steni dated 31 October 2003. I am not satisfied on the balance of probabilities that Steni had any contractual liability under the terms of the EDA, or its guarantee to the client, to pay such costs of fixing and removal, in circumstances where, as I find as a fact: (i) the defect in thickness was visible and detectable prior to mounting; (ii) Holdings had failed to comply with its obligations to inspect deliveries upon receipt; and (iii) where, in any event, Steni had never been asked to replace or mount new panels, in place of the defective ones. Even if I were wrong on that point, there was no suggestion that the uncut grey boards were defective so far as the thickness specification was concerned. This point on its own would mean that the Claimants had no justification for withholding the sum of €1,401.88 in respect of the grey Steni colour panels which had been bought for the Aberfeldy contract and which remained in stock. So far as the white panels are concerned, Steni's contractual obligation was in my judgment limited to supply new white panels which satisfied the specification. That obligation may have been discharged in circumstances where the Claimants failed to inspect the boards for compliance with the thickness specification on delivery, and cut the panels prior to requesting replacements from Steni, but I do not need to decide that point at this stage. On any basis, I find that the Claimants had an obligation under the relevant terms and conditions, to pay for these panels, notwithstanding that Steni may have been obliged, if requested, to replace and deliver the replacement panels free of charge. This, of course, it was never asked to do.
136. Accordingly I conclude, in relation to this issue, that Holdings was in breach of clause 3.4 of the EDA, in failing to pay for products ordered by Claddings and supplied in relation to the Aberfeldy project, and that, accordingly, Steni was entitled to serve the Default Notice in relation to this breach.
137. Finally, I do not accept that Holdings was in breach of clause 4.7 of the EDA. The compromise agreement with Joyners was not the giving of "commercial conditions of trade … as regards guarantees" more favourable than those set out in Appendix III to the EDA. It was a compromise of a dispute that had arisen in respect of a particular contract.

Liability issue 2: did Steni breach clause 3.2 of the EDA by overcharging Claddings?

138. Irrespective of the fact that I have found against the Claimants in relation to the novation/assignment issue, and notwithstanding that the only claim pursued by the Claimants under this head in relation to the period of the agreement was by Claddings, in my judgment Holdings would have a claim either for damages for breach of clause 3.2 of the EDA, or alternatively to require Steni to give an appropriate credit to Claddings, in circumstances where Steni/Steni Norden had wrongly overcharged Claddings under the individual supply contracts. Mr. Casement submitted that, even if I were against him in relation to the novation/assignment issue, nonetheless Claddings had a contractual entitlement under its individual supply agreements with Steni/Steni Norden to have the prices regulated by reference to the terms of the EDA. In my view that is probably not the correct analysis, since the individual supply contracts did not, as such, incorporate the general terms of the EDA, and the fact that the latter agreement was regarded as an "umbrella agreement" did not confer upon Claddings direct rights thereunder to enforce its terms. However in my view the point does not matter, and I do not need to decide it, since, as I have said, if indeed there had been overcharging, then Holdings would have had an entitlement to require Steni to give the appropriate credit to Claddings or itself to claim damages. The fact that there was no claim in the Particulars of Claim as such by Holdings would not prevent an amendment being made even at this late stage to make such a claim and I would have allowed any such amendment, had the need arisen to do so.
139. Clause 3.1 of the EDA set out, by reference to Appendix II, the prices at which products were to be delivered by Steni to Holdings ex-works. These were the 1999 prices, as they applied at the commencement of the EDA. Clause 3.2 of the EDA provided a mechanism for the revision of prices charged by Steni for its products. It was in the following terms:

"These prices are to be revised annually by mutual agreement with reference only to the movement in total cost of production at STENI and the movement in the cost of raw materials.

In addition STENI may increase prices at any time to recover increases of 5% or more in the total cost of raw materials with regard to the relevant Product by giving CEP a minimum of 30 days written notice. In no event is the percentage increase to exceed the lower of the increases applied to the distributor in Norway and the increase in general in the French market.

Outstanding orders and quotations at the date of the written notice of price increase are to be supplied at the price prevailing before the implementation of the price increase, provided, however, such order is confirmed by STENI or the order or quotation in question is for delivery within 3 months from the date of the written notice. In certain occasions, the parties may agree to fix prices for longer periods, for instance where a delivery in a project is estimated to run over a period exceeding 12 months."

For convenience I shall number each of the three sub-paragraphs of clause 3.2 as (i), (ii) and (iii) respectively.

140. It was common ground that, on its true construction, the EDA provided for two ways in which prices could be changed. The first, pursuant to subparagraph (i), was by means of a compulsory annual review, "by mutual agreement", which was stated to be "with reference only to the movement in total cost of production at Steni and the movement in the cost of raw materials". This envisaged the possibility, at least, that the result of the agreed revision, may have been to have reduced ex-works prices. The second, pursuant to subparagraph (ii), was an ad hoc increase which could be imposed by Steni at any time on 30 days notice "to recover increases of 5% or more in the total cost of raw materials with regard to the relevant Product", but, in the event of such unilateral increase, the percentage increase was not to exceed "the lower of the increases applied to the distributor in Norway and the increase in general in the French market."
141. Mr. Casement submitted that the objective intention of the price revision provisions of the EDA was to preserve the 1999 margin earned by Steni. I accept that proposition, so far as it goes, but, in my judgment, it does not inform the construction of the relevant provisions in any particular way. Both parties were bound by the provisions relating to price revision.
142. In paragraphs 40 to 42 of the Particulars of Claim, the Claimants pleaded as follows:

"41. In breach of clause 3 Steni gave notice of increases in the prices of the Products on 5 January 2000, 23 June 2000, 1 December 2000, 19 November 2001, 4 November 2002 and 23 December 2003, each time providing an assurance that the prices only reflected an increase in the costs of production and/or the movement in the costs of raw materials. The Claimants are now aware that the prices exceeded any increase permissible under clause 3 thereby causing Claddings to sustain financial loss. Steni had contended that, during the period from the commencement of the Distributor Agreement until the date of termination, the cost of raw materials had increased by 32.9%. On the best information available to Claddings, prior to disclosure of Steni's internal documentation, the increase in the cost of raw materials over the said period was in fact in the order of 2.9%. Claddings was therefore overcharged by Steni for Products by approximately 15%.

42. Claddings is entitled to recover the excess amount paid to Steni as a result of Steni's breach of contract in charging prices over and above those permitted in the Distributor Agreement."

143. However at trial the claim was put somewhat differently by the Claimants. Mr. Casement's submissions may be summarised as follows:

i) No claim was advanced by the Claimants in misrepresentation to the effect that Steni had misrepresented the costs of production or the movement in the cost of raw materials; indeed Mr. Casement expressly disavowed any such claim.

ii) All the price increases were in fact "unilateral" price increases imposed by Steni, because Holdings at no time was provided with a breakdown of actual costs. Mr. Casement contended that, in the absence of Holdings being fully informed as to the actual costs, there was no mutual agreement for the purposes of the EDA. He submitted that, put another way, since at no time was Holdings provided with information as to the actual costs incurred by Steni, there was no opportunity to reach the mutual agreement that is provided for at clause 3.2. The mere payment of invoices was not an unequivocal agreement on the part of Holdings to the price rises proposed by Steni.

iii) Even if, in relation to the years 2002 to 2004 inclusive, there was an apparent mutual agreement in relation to price rises, each such agreement, as may have been conditionally reached, was in any event subject to subsequent review, either:

a) because, in circumstances where the Claimants had not been provided with full or accurate information, there was an implied term that both parties were entitled to revisit and review the prices of invoices that had actually been paid; and/or

b) because, in an e-mail dated 21 December 2001, Mr. Ross imposed a reservation that any agreement as to increases was subject to the Claimants' right retrospectively to review the issue of cost increases at a later date.

iv) Accordingly the Claimants were entitled to review the prices that they had been charged from the beginning of 2002 until the termination of the EDA, so as to ascertain that the cumulative increase in prices for each of the relevant years did not exceed the cumulative movement in the total costs of production and raw materials since the commencement of the agreement in 1999. In the event that there had been any inappropriate increase, the Claimants were entitled to be paid the difference.

The court's determination in relation to the overcharging claim

144. Although it does not appear to be relevant to anything which I have to decide in relation to liability, I conclude that the cap or proviso in the last sentence of subparagraph (ii) of clause 3.2 only applies to the unilateral ad hoc price increase addressed in that subparagraph. That is clear from the context and the reference to percentage increase.
145. I find as a fact that, with the exception of one unilateral ad hoc price notification, given by Steni on 23 June 2000, in relation to a price increase of 2.5% for Steni Colour, effective from 1 August 2000, pursuant to subparagraph (ii) of clause 3.2, all the remaining price revisions, in respect of the years 2000, 2001, 2002, 2003 and 2004, were the subject of mutual agreement pursuant to subparagraph (i) of clause 3.2. What happened in practice was that, in respect of each year of the EDA, Steni carried out research and made a forecast of production costs and raw materials based upon that research. In each year it wrote a detailed letter to the Claimants explaining what movements were being taken into account and how they operated to generate the price increase which Steni proposed. There then followed a period of negotiation, in which the Claimants sought further information or sought to persuade Steni that a lower increase should be applied for commercial reasons. In each year the parties reached agreement on the price increases to be implemented. Those increases were often lower than the increases which had originally been proposed by Steni.
146. I find that, on the evidence, not only was the unilateral price increase in June 2000 in relation to Steni Colour agreed to by the Claimants, but also that it was compliant with the cap provisions contained in subparagraph (ii) of clause 3.2.
147. I reject the Claimants' contention that no mutual agreements could have been reached in the absence of Holdings being fully informed as to the actual "total cost of production at Steni and the movement in the cost of raw materials". The mechanism of the clause envisaged negotiation followed by mutual agreement. The only factors "with reference" to which prices could be revised were the stated factors of "total cost of production at Steni and the movement in the cost of raw materials". If mutual agreement was not forthcoming (for example, because the Claimants were concerned that they were being given inaccurate or insufficient information about Steni's total production costs), then the ICC arbitration provisions of clause 8 could have been invoked at the time to settle any dispute relating to what the price revision should be by reference to the relevant factors. No doubt evidence could have been called, or sought, by means of disclosure or otherwise, during the course of such arbitration proceedings, to ascertain Steni's actual total production costs. Each respective party had the choice whether to reach an agreement, after negotiation, based on the information or arguments which the other side was proffering, and its own researches, or to refuse to reach agreement and refer the matter to arbitration. It is wholly uncommercial to suggest that, notwithstanding an apparent mutual agreement as to revised prices, there was in fact no such agreement, because, in retrospect, the Claimants consider that there was further information which they should have been given at the time as to Steni's production costs, or that they were not given correct information at the time. Absent a claim for misrepresentation, such an agreement must stand, otherwise the ongoing operation of the supply agreement is commercially unworkable, as neither party can be certain as to the price at which it is supplying or purchasing Products.
148. For similar reasons, I reject the Claimants' alternative argument that, even if, in relation to the years 2002 to 2004 inclusive, there had been an apparent mutual agreement in relation to the price rises, each such agreement was only conditional and subject to subsequent review, on the grounds that there was an implied term that both parties would be entitled to revisit and review the prices of invoices that had actually been paid over the previous years. This argument was put forward on the basis that such an implied term was necessary, in circumstances where, for example, the Claimants had not been provided with full or accurate information, or if the actual total costs of production or the movement in the cost of raw materials turned out to be greater or less than that which had been forecast at the time when the revision was mutually agreed.
149. There is no justification in the language of the clause, or in the rest of the EDA, for the implication of any such term. What the agreement envisaged by the terms of clause 3.2 was an annual revision by means of an annual mutually binding agreement. There is no suggestion in the stipulated mechanism that at a future annual review date, let alone at some unspecified date in the future, previous annual agreements could be set aside so as retrospectively to readjust prices for goods previously supplied and paid for, perhaps years earlier, whether with the effect of making the Claimants pay more, or of clawing back monies that they had already paid. Again, it is commercially unrealistic to suppose that, in the absence of clear terms to that particular effect, businessmen would have wished to have based their dealings on such an uncertain basis. Of course it was open to either party, at the time of the annual price review negotiations, to contend that, in the light of the fact that the actual production costs and/or movement in the cost of raw materials over the past year had turned out to be greater than, or less than, that predicted and upon the basis of which the past year's price revision had been agreed, there should be an upward or downward revision in the current year. But that is quite different.
150. I turn now to consider the Claimants' second argument, namely that the annual price revisions agreed in 2002, 2003, and 2004 were only conditional agreements and subject to a right on the part of the Claimants (but not, apparently, Steni) retrospectively to review "the issue of cost increases at a later date" because of what was stated in an e-mail dated 21 December 2001 from Mr. Ross.
151. I find the relevant facts to be as follows. In relation to the year 2000, a price increase of 4% had been mutually agreed. In relation to the year 2001, a price increase of 6.5% had been mutually agreed. In an e-mail from Mr. Gundersen to Mr. Barton dated 19 November 2001, Steni proposed a price increase of 4% for all products. The e-mail sent out an outline of the basis for the revision. The proposal was rejected by the Claimants in an email from Mr. Barton dated 28 November 2001. In that email Mr.  Barton wrote:

"Can I ask that you please refer to our agreement in particular item 3.2 and work with CEP to reach a mutual agreement on prices for 2002. Please be clear that CEP have not yet reached agreement with Steni for 2002."

He remarked that major raw material prices were stable or falling and said:

"The movements in cost will be a matter of fact and I think are best reviewed and agreed between yourself and Steven Ross.""

152. Steni prepared a justification for its proposed price increase. This appeared in an undated draft for an email or letter to CEP. I find on the balance of probabilities that the substance of this justification was communicated by an email dated 4 December 2001 from Mr. Gundersen to Mr. Barton, although such e-mail was missing from the trial bundle. The justification referred to the cost of labour, electricity and various raw materials. The draft introduces the justification for the proposed price increase in the following way:

"Of course it is impossible to predict with 100% precision the cost movement for the coming year. With the exception of those raw materials for which we have made yearly contracts, we have to make assumptions, and this is what we have done also this year."

153. Mr. Gundersen chased for a response and received a reply from Mr. Ross on 21 December 2001. Mr. Ross' response queried the level of the price increase on the grounds that he thought that an earlier price increase had been based on the increasing price of oil but the price of oil had since fallen. He wrote as follows:

"Sorry to take so long to get back to you regarding the price movements for 2002. We are still struggling to come to terms with the sort of cost increases which you are intimating. Looking back raw material cost increases were blamed on the increasing price of oil in 2000 and this is cheaper now than it was then.

However in order to avoid the situation that we had last year we will accept the 4% increase subject to the right to retrospectively review the issue of cost increases at a later date".

154. On 3 January 2002 Mr. Gundersen wrote and explained to Mr. Ross that the cost of the majority (approximately 2/3) of the raw materials were independent of the price of crude oil. There is no suggestion in either the subsequent correspondence or the witness statements that the Claimants in fact sought any review of the issue of cost increases, or referred to their so-called entitlement to do so, either during the year 2002, or at the dates when the parties were subsequently agreeing the revisions to prices in respect of the years 2003 and 2004. Invoices which were submitted during the year 2002, based on the increase of 4%, were paid without demur. Similarly, invoices in the subsequent 2003 and 2004 years, based upon the mutually agreed price revisions in those years, were paid without any reservation. The over-charging issue was only raised by the Claimants for the first time post termination. Mr. Ross accepted in cross-examination that the Claimants never asked Steni for further information to provide the Claimants with material to carry out a review of the increases and that invoices based on the agreed increases were in fact paid.
155. Mr. Casement submitted that the so-called condition set out in Mr. Ross' e-mail of 21 December 2001, on its proper construction, was not merely a condition that applied to the increase for 2002, but one which applied for the years thereafter; thus, he submitted, it was unnecessary to repeat the condition each year because:

"(1) each year any price rise would be cumulative and would be on top of the previous years' price rises;

(2) in order to preserve the 1999 margin, it would be necessary to review previous years in order to calculate what the rise/decrease in price for 2002 and thereafter should be when compared to the cumulative movement in the relevant costs;

(3) the express language of the email was that [Holdings] was concerned about all price rises since commencement of the [EDA] and thus the condition applied to 'the right to retrospectively review the issue of cost increases at a later date'. The use of the plural 'increases' was clearly a reference to all increases throughout the agreement. That is consistent with the tone and nature of the email sent by Mr. Ross."

156. As a result, he contended, the Claimants, even after termination, were entitled to review the prices that they had been charged, from the beginning of 2002 until the termination of the EDA, so that the cumulative increase in prices for each of those years did not exceed the actual cumulative movement in the total costs of production and raw materials since the commencement of the EDA in 1999. In that way, he submitted, the 1999 margin would be applied to the period 2002 until the end of the Agreement and the objective intention of preserving the 1999 margin would be achieved.
157. Having considered the communications between the parties in the years 2002 to 2004, I regard these submissions as commercially fanciful. The reality was that Claimants, as part of their negotiating position vis-a-vis Steni, wanted to present a position that the price increases, proposed by Steni in 2002, were too high. Nonetheless, they subsequently duly paid each and every invoice submitted in accordance with that increase. When it came to negotiations about the price revisions in 2003 and 2004, no attempt was made to reopen the issue as to the 2002 increase, or to threaten, let alone refer matters to, arbitration. In my judgment, the correct contractual analysis is that Steni did not accept the counter-offer represented by the Claimants' conditional acceptance of Steni's 4% increase, and, by subsequently presenting its invoices based on such 4% increase, maintained its previous offer, which was in fact accepted by the Claimants' requesting, and paying for, supplies of Steni Products at those prices. Alternatively, I conclude that, by paying the invoices relating to the 2002 supplies, and/or failing to renew the complaint at the time of the 2003 and 2004 price revision negotiations, the Claimants waived, or abandoned, any right, which they might have reserved, to challenge the 2002 4% increase.
158. On any basis, the vague reservation which Mr. Ross may have sought to impose in the 2001 e-mail, could not on its true construction have extended so far as to permit the Claimants to challenge the 2002 price increase after the 2003 price revision agreement, let alone to challenge the 2003 and 2004 price increases subsequently agreed between the parties. Moreover, no such reservation of right was suggested by the Claimants in connection with, or in response to, Steni's proposals for the 2003 or 2004 price increases.
159. In the circumstances it is not necessary for me to determine such issues of construction, if any, as may be raised by the wording of sub-paragraph (i) of clause 3.2 and referred to in paragraphs 344-347 of Steni's closing submissions. The fact is that the parties reached mutual agreement in the relevant years as to price revisions. Such agreements were the outcome of their negotiations, which took into account anticipated movements in the relevant costs, and, on occasions, considerations as to actual past movement in costs, and no doubt other factors. In such circumstances, given that mutual agreement was indeed reached, there is no justification for the court to re-examine whether either party maintained a stance in negotiations that was not justified by the precise wording of the clause.
160. Accordingly, in my judgment, the Claimants' overcharging claim fails.

Issue iv): Quantum of the Claimants' claim - what loss has Claddings or Holdings suffered as a result of Steni's repudiation of the EDA in March 2005

161. In the light of my decision in relation to liability issues 1A and 1B, this issue does not arise for determination.
162. I have given careful consideration as to whether, in case this matter goes further, and the Court of Appeal were to reverse my decision on liability, I should decide the quantum of the Claimants' claim in any event on a hypothetical basis. I have decided that it would be inappropriate to do so. My reasons are as follows.
163. First of all, this was clearly a case where case management considerations should have led to the quantum of the Claimants' claim being determined, if and when liability issues had been decided in their favour. The initial estimate for the trial was six to seven days. Shortly before trial, this estimate was increased to ten days. This proved to be wholly insufficient for quantum issues to be adequately ventilated and the expert evidence was necessarily curtailed. Likewise, closing submissions in relation to quantum were compressed.
164. Second, on 3 June 2009, after the conclusion of the evidence, Steni lodged and served supplemental calculations on quantum in the form of Tables A to G ("the Tables") contained within its Quantum Summaries Bundle. In a letter dated 15 June 2009, sent after the conclusion of final oral submissions, and pursuant to the express leave of the court, the Claimants contend that the Tables are for the most part wholly new and did not form any part of Steni's initial expert report prepared by Mrs. Pincott. They say that, through the supplemental tables, Steni has sought to introduce what is in effect a new alternative case. They further contend that the Tables are not in evidence as they have not been confirmed by Mrs. Pincott with the relevant expert's declaration, nor has she confirmed their accuracy by giving oral evidence. They assert that the manner in which the Tables had been produced has meant that the Claimants have not been able to cross examine Mrs. Pincott on any of the matters she now raises and that this is prejudicial to them. The Claimants, however, by their response, make various additional comments in relation to the Tables. In my judgment, it would be unsatisfactory, and potentially unfairly prejudicial to the Claimants, to decide the quantum issues arising on the Claimants' claim, without giving the Claimants the opportunity of further cross-examining Mrs. Pincott on the revised Tables, and making further submissions to the court in relation thereto at a further hearing.
165. Third, with a few exceptions, the quantum issues are not dependent upon my findings as to the credibility of the factual witnesses. Accordingly, in the event of a successful appeal against liability, there would be no difficulty in the court reaching its conclusions on the quantum issues.
166. Fourth, the respective arguments in relation to the quantum of the Claimants' claim, both in relation to the pre-trial period, and post-trial, raise a considerable number of individual and relatively sophisticated issues, which would require the court to set out its detailed reasoning in some length. I do not consider that this would be a proportionate use of judicial time, in circumstances where the exercise would, at least at present, be purely hypothetical and, in any event, would require a further hearing because of the second point referred to above.
167. Fifth, the only findings of fact which it is necessary for me to make for present purposes, in relation to quantum issues arising on the Claimants' claim, are the following:

i) In the period following termination of the EDA, up until trial, I conclude, based on the evidence of Mr. Tom Rønning, and that of Mr. Barton as to what actually happened, that Steni would, if requested by the Claimants, have been prepared to supply all Steni products to the Claimants on a non-exclusive basis, notwithstanding that, from March 2007, it had appointed Almura Products Ltd as its non-exclusive distributor, and that, in October 2007, Steni had acquired its competitor, Stoneflex Ltd, whose name was subsequently changed to Steni UK. (Indeed, in relation to certain products, Steni UK did continue to supply the Claimants.) I conclude that Steni would have imposed such mark-up, if any, on its prices to the Claimants, as it would have considered commercial to ensure and encourage sales, and would have insisted upon payment terms that would not have permitted the Claimants to make any retention in respect of their alleged claims against Steni. I have little doubt that Steni would have adopted this course, on the basis of legal advice, in order to support its arguments in relation to mitigation.

ii) Based on similar evidence, I conclude that, after the final determination of these proceedings, Steni will act solely in what it considers to be its best commercial interests in deciding whether it should continue to supply the Claimants on a non-exclusive basis with Steni products, or whether it should attempt to stifle any such competition, as may be represented by the Claimants in the UK, by denying the Claimants any access to Steni products, whether through Steni UK or otherwise. I have no doubt that Steni's decision will depend upon economic factors in the claddings market and its own commercial considerations at that time, in relation to none of which this court can usefully express any conclusion. I reject the Claimants' submission that Steni will be motivated by considerations of "revenge". On the other hand, I have no doubt that, if Steni considers that it is in its best commercial interests to do so, it will act in such a way as to attempt to minimise or remove any competitive threat presented by the Claimants in the Territory. Accordingly, any calculation of the Claimants' loss as a result of wrongful termination of the EDA would have to take account of the real possibility that they might not have access to Steni products in the post-trial period, and that, even if the Claimants were to have such access, they would necessarily be facing aggressive competition from Steni UK in the Territory.

iii) I reject Steni's submissions that there would be no causal linkage between wrongful early termination of the EDA and any refusal to supply the Claimants with Steni Products. I also reject Steni's submissions that any causal linkage between any wrongful early termination, and losses arising as a result of any refusal to supply the Claimants with Steni Products, would have been broken by Steni's decision to buy Stoneflex, or that such of refusal would not have been in the reasonable contemplation of the parties as a possible head of loss in February 1999. Given the circumstances in which the parties entered into the EDA, both sides would have appreciated the importance to Holdings of a secure source of supply of Steni Products for the length of the contractual term.

Issue v): Steni's counterclaim against Claddings

168. My decision in relation to Liability issue 1B, necessarily means that Claddings is liable to Steni in respect of the €18,508, plus interest, due in respect of supplies of by Steni to Claddings in respect of the Aberfeldy Project
169. Steni has a counterclaim against Claddings for unpaid invoices in the sum of €216,900.52 plus interest. Claddings admits liability for this claim, subject to set off in respect of its claim. In the light of my rejection of the Claimants' claim for wrongful termination, Claddings is liable to pay this amount.

Issue vi): quantum of Steni's counterclaim against Holdings

170. Steni counterclaims against Holdings for damages for its failure to use all reasonable endeavours to promote and sell Steni Products in the Territory. Steni relies upon Mrs. Pincott's assessment of Steni's losses by reference to what sales a business in the position of Claddings could reasonably have achieved in the relevant market at the time. She considered three scenarios:

i) First Scenario: this assumes that Claddings' sales achieved a growth in volumes across all Steni products which mirrored the growth in the market for external wall cladding sales in the UK for the period 2002- March 2005. On this basis, Mrs. Pincott calculates that Steni's total lost profits would be in the region of £314,000.

ii) Second Scenario: this assumes that Claddings would have achieved growth in sales volumes of Steni Colour as set out in the First Scenario whilst maintaining an aggregate board UK market share of 40% in respect of sales of Steni aggregate board (on the basis that this was a more mature market). On this basis, Mrs. Pincott calculates that Steni's total lost profits would be in the region of £84,000.

iii) Third Scenario: this assumes that Claddings would have achieved growth in sales volumes of Steni Colour as set out in the First Scenario, whilst raising its aggregate board UK market share from 38% (the 2001 level) to 50% (which would still represent an 11% drop on the level achieved in 2000). On this basis, Mrs. Pincott calculates that Steni's total lost profits would be in the region of £160,000.

171. Her alternative calculations based on the plastics sector, rather than the overall claddings market, made no material difference to the bottom-line figures for each of the three scenarios.
172. Mr. Graham accepted that any method of assessing Steni's loss was necessarily an approximate one. He submitted that Mrs. Pincott's three scenarios offered realistic reflections of what extra profits Steni ought to have been able to expect if its exclusive distributor in the UK and Ireland had acted with real energy and determination (i.e. if it had used all reasonable endeavours to promote the marketing and sales of the Products). He contended that, of the three scenarios described by Mrs. Pincott, Scenario 3 was the most appropriate, because:

i) It assumed, that as a result of Holdings's reasonable endeavours it would have been possible for Holdings to hold its market share at 50%, which it was it was in 2001. He submitted that it was appropriate to use 2001 as the reference point here because the evidence showed that it was in 2002 to 2004 that Holdings failed to use all reasonable endeavours.

ii) It was also appropriate in that, unlike Scenario 1, it took proper account of the fact that the market for Steni Nature (i.e. aggregate boards) was mature.

iii) It also produced a fall in sales volumes for Steni Nature for 2002 (from their 2001 levels) of 9% which is worse than, but relatively close to, what was actually achieved (a 2% fall). It could be argued therefore that even Scenario 3 is too pessimistic.

iv) Scenario 2 would produce a 27% fall in sales volume for Steni Nature: this was according to the analysis of Claimants' expert, Mr. Alex Marsden, as set out in his Second Supplemental Report. That was so much worse than that which actually happened as to indicate that it would make a poor measure of the level of sales that Steni would have achieved if Holdings had carried out its contractual obligations properly.

v) Scenarios 1 and 2 were relevant as producing outlying numbers, which give an idea as to the reasonableness of using Scenario 3 as the relevant hypothesis and the sensitivity of the numbers to a change or changes in hypothesis.

173. Mr. Marsden's evidence in his Second Supplemental Report was that Scenario 2 was the correct Scenario to adopt, because it was nearest to what actually happened. His figure for the losses under this scenario was £66,294. In particular, he excluded any losses in relation to the sales of Steni Strata, and reduced Mrs. Pincott's figures in relation to the expected sales of Steni Nature, whilst agreeing that her calculation in respect of Steni Colour sales was reasonable. However his approach, as he indicated in cross-examination, was largely based on his instructions that the Claimants' performance was not contractually inadequate. But given my conclusion that Holdings did fail to use all reasonable endeavours to promote the marketing and sale of Steni's Products, then it does not follow the estimated figure for sales that Steni would have achieved, but for that breach, will be particularly close to what actually happened. As Mr. Graham submitted, the question is how much better than what actually happened would the sales figures have been.
174. The method of assessing Steni's loss as a result of Holdings' failure to use all reasonable endeavours is necessarily approximate. In my judgment, the most likely estimate is somewhere between the figures produced using Scenario 2 and the figures produced using Scenario 3, although, for the reasons given by Mr. Graham, I accept that Scenario 3 is probably the most appropriate. But in my judgment, given the fact that the calculations of both experts were necessarily estimates based on varying and uncertain hypotheses, I consider it appropriate to discount Mrs. Pincott's Scenario 3 figure to a figure of £125,000 which is roughly halfway between her figures for the two different scenarios, and which reflects some of the comments which Mr. Marsden made in his report about her calculation. Necessarily my conclusion as to quantum on this issue is somewhat rough and ready.
175. Accordingly, I find that Holdings is liable to pay the sum of £125,000 to Steni in respect of Steni's counterclaim in respect of Holdings' breach of its obligations under clause 2.3 of the EDA.

Conclusion

176. Accordingly, I dismiss the Claimants' claim and find for Steni in respect of its counterclaim.