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Albion Stone Quarries v. Natural Stone Quarries [2001] EWHC Technology 20 (5th February, 2001)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

BEFORE: HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.

BETWEEN:

ALBION STONE QUARRIES LIMITED

Claimant

and

NATURAL STONE QUARRIES LIMITED

Defendant

Case number: HT - 00 - 128

Dates of Trial: 22, 23, 24, 25 and 30 January 2001

Date of Judgment: 5 February 2001

Christopher Smyth for the claimant (Attersolls, Solicitors )

Louise Randall for the defendant (DLA, Solicitors )

JUDGMENT
I direct that no further note or transcript be made of this judgment.

The text of the Judgment of His Honour Judge Richard Seymour Q.C. is as follows:

JUDGMENT

Introduction

As revised by Mr. Christopher Smyth, who appeared as Counsel on its behalf, in his closing submissions, in this action the Claimant, Albion Stone Quarries Ltd. ("Albion"), claims against the Defendant, Natural Stone Quarries Ltd. ("Natural"), the sum of Ł71,492.78 which is alleged to be due as the price of Portland Stone sold by Albion to Natural. Albion further claimed, originally, against Natural interest on the alleged price of the Portland Stone at a rate of 3% per annum above the base rate of National Westminster Bank Plc ("Nat West") from time to time, calculated on a daily basis, pursuant to the terms of Albion's "Standard Conditions for Sale of Goods" ("Albion's Conditions"), but in his closing submissions Mr. Smyth accepted that Albion was not in fact able to rely upon Albion's Conditions, so it must follow that the claim to interest pursuant to Albion's
Conditions has been abandoned. It is accepted on behalf of Natural that, subject to Natural's counterclaim, to which I shall refer in more detail later in this judgment, there is due to Albion in respect of the claim in this action the sum of Ł60,962.58. On the pleadings the sum which was accepted on behalf of Natural was Ł60,435.33, but in her closing submissions on behalf of Natural, Miss Louise Randall, who appeared as Natural's Counsel, accepted that one of Albion's invoices the amount of which is claimed in this action and which had until then been challenged, could not properly be contested. However, Natural seeks to set off against its otherwise admitted liability to pay the sum of Ł60, 962.58 damages quantified at Ł247,567.48 which it is alleged that Natural sustained as a result of the alleged breach by Albion of the contract which it is contended had been made between Albion and Natural, which alleged breach consisted in the supply of Portland Stone which was not of the quality required by the contract.

2. There was at the outset of this trial a vigorous dispute between the parties as to the precise nature and terms of the contractual relations into which they had entered. This dispute potentially impacted upon the ability of Albion to recover interest on any sum which I found that it was entitled to be paid by Natural, for, as I have indicated, Albion claimed to be entitled to interest under the terms of Albion's Conditions, and it was not accepted by Miss Randall that Albion's Conditions were incorporated into the single contract which Miss Randall contended had been made between the parties. Mr. Smyth originally sought also to rely on Albion' s Conditions by way of answer to Natural's counterclaim. Mr. Smyth submitted that the evidence supported the analysis that a series of separate contracts was made between Albion and Natural, and he contended that Albion's Conditions were incorporated into each of the contracts which he submitted I should find. I address the issue of the contractual arrangements between the parties later in this judgment, as even in the light of the concession made by Mr. Smyth in his closing submissions I think that what precisely the contractual arrangements between the parties were is of some significance.

3. The sum claimed on behalf of Albion in this action was originally Ł76,933.26 and was the aggregate total of some eleven invoices as follows:

Invoice number

Date

Amount (Ł)

F6565

11 October 1999

4,253.56

F6603

26 October 1999

4,970.57

F6616

31 October 1999

8,129.52

F6617

31 October 1999

4,042.07

F6628

31 October 1999

3,798.21

F6675

16 November 1999

3,710.87

F6676

16 November 1999

11,804.30

F6678

19 November 1999

7,789.23

F6679

19 November 1999

19,575.64

F6756

30 November 1999

5,930.25

F6757

30 November 1999

2,085.04

The sums now claimed in respect of the latter two invoices are respectively Ł4,330.27 and Ł529.28, and in his closing submissions Mr. Smyth accepted that the sum which it was appropriate for Albion to recover in respect of the invoice numbered F6676 was the sum accepted on behalf of Natural, namely Ł10,363.56. A Scott Schedule was prepared in order to set out the grounds upon which Natural disputed liability to pay these various invoices. From the Re-revised version of that Schedule it appeared that in fact there was no dispute about the amount of, or the liability of Natural, subject to its counterclaim, to pay, the invoices respectively numbered F6565, F6603, F6628, F6675 or F6678. Of those invoices, F6565, F6603 and F6678 related to blocks of stone supplied by Albion to Natural, and the other two related to stone supplied in slab form. The dispute about invoices F6756 and F6757 was simply that, as was common ground, Natural had not collected the stone to which those invoices respectively related, and it was contended that in those circumstances Natural was not liable to pay for the stone in question. As I understand it, the sums claimed in respect of those two invoices have been reduced since the action was commenced because some of the stone the subject of the invoices has been sold elsewhere. In relation to the invoice numbered F6616, which concerned stone supplied in block form, Natural accepted an obligation to pay a total of Ł5,533.21. The case set forth in the Re-revised Scott Schedule in respect of that invoice was that various of the stones the subject of that invoice had been inaccurately measured by Albion which, since the agreed method of charging for stone supplied was by volume, was, in consequence, seeking to charge too much for them, and three blocks of stone, numbered, respectively, 60133, 60890 and 61144 were rejected "due to shells causing 100% wastage", so that Natural should not have to pay for them at all. In her closing submissions Miss Randall accepted that Natural was not in a position to contest the amount of invoice F6617, which again related to stone supplied in block form. Natural accepted a liability to pay Ł10,363.56 in respect of the invoice numbered F6676, and, as I have said, in his closing submissions Mr. Smyth accepted that that was the appropriate sum for Albion to recover in respect of that invoice. The accuracy of the measurements upon which the invoice was based was also one of the issues in relation to the invoice numbered F6679, which related to stone supplied in block form and in respect of which Natural accepted an obligation to pay a total of Ł16,501.30. Some, but not all of the measurements of the stones which were the subject of this invoice were disputed by Natural. In addition, of the blocks of stone the price of which was claimed in the invoice numbered F6679, it was contended that Natural had rejected five, being those respectively numbered 61616, 62234, 63473, 63588 and 63593. The main focus of the defence of Natural to Albion's claims as such was, therefore, the question of the accuracy of the measurements of volume made by Albion, but the question of whether the stone supplied was of the quality required under the contractual arrangements made between the parties arose in relation to eight of the 79 blocks of stone which, on the evidence of Mr. Michael Poultney, Managing Director of Albion, which I accept on this point, were delivered by Albion to Natural during the months of October and November 1999. There was no allegation that any of the stone supplied in slab form the price of which was claimed in this action was not of the quality required.

Portland Stone

Portland Stone is a limestone. It is a naturally occurring material found on the island of Portland in Dorset. Portland Stone exists in various types. On the evidence given before me, which was not in dispute between the parties, Portland Stone is classified by reference to the quarry from which it comes and the bed within the particular quarry from which it has been extracted. There are now only two companies which quarry stone on the island of Portland, namely Albion and a company called Hanson Bath and Portland ("Hanson"). Albion operates, and operated at the times with which I am concerned for the purposes of this action, two quarries, namely the Bowers Quarry and the Independent Quarry. One of the beds in the Bowers Quarry is called the Whitbed. On the evidence of Mr. Poultney and that of Mr. Bryan Adams, Production Director of Albion, which I accept on this issue, until about February 1998 Albion did not differentiate between different sorts of Bowers Whitbed stone, but it was the fact that, depending upon the precise point in the Bowers Quarry from which stone was extracted, and whether the particular stone was quarried from the top, middle or bottom of the Whitbed stratum, the stone might possess a greater or lesser proportion of natural inclusions. Those inclusions could comprise shell, flint, and calcite bar. Further, features of Bowers Whitbed stone included that it contained natural fissures, called vents, and, on occasion, pock marks, the size and concentration of which could vary. Also, the stone could vary in colour and texture and in the degree of veining and white spotting present. By about February 1998, according to Mr. Poultney and Mr. Adams, it had become apparent that stone from the upper part of the Whitbed fairly consistently contained considerably more shell than stone from the lower part of the Whitbed and was of a fairly consistently more coarse-grained texture. Accordingly, it was decided to divide the previously homogeneous classification of "Bowers Whitbed" into two categories, namely "Bowers Lynham Whitbed" ("BLW"), which described the stone typically derived from the lower part of the Whitbed which contained less shell and was of a finer grain, by and large, and "Bowers Saunders Whitbed" ("BSW"), which described the stone which was of a coarser texture and contained more shell. Mr. Adams told me, and I accept, that Albion used a system of numbering blocks extracted from the Whitbed stratum of the Bowers Quarry in the 60000 range so as to be able to identify what had been produced. I have already referred to some blocks identified in this way in the Re-revised Scott Schedule. Mr. Adams' evidence was that the differentiation between BLW and BSW began with the block numbered 61160. Mr. Poultney and Mr. Adams gave evidence, which I accept, that at the time the new differentiation was introduced, all existing quarried stone from the Whitbed stratum of the Bowers Quarry was designated by Albion for the purposes of its computerised stock records as BSW in order to avoid the need to go through the existing stockpile and segregate it between BLW and BSW. Mr. Adams also explained to me that it is possible to tell from the outside of a quarried block whether it is good quality BLW or poor quality BSW but that it is difficult to assess from an uncut quarried block whether it is borderline BLW or borderline BSW. The distinction between BLW and BSW does not depend, other than in general terms, upon where a particular block has been quarried, but rather upon the texture of the block and the proportion of shell contained within it. Mr. Poultney and Mr. Adams each told me, and I accept, that after the introduction of the differentiation between BLW and BSW Albion kept at the Bowers Quarry what were called Quarry Control Samples ("QCS"). These were numbered from BLW1 to BLW5 initially, although later a further sample, BLW6, was added. Photographs of these QCS taken by Mr. Poultney were put in evidence. Mr. Poultney explained that the QCS were not supposed to show what a typical slab of BLW would look like, but rather the characteristics which could be included in a slab of BLW in any proportion or concentration. The making of the decision whether a particular block should be classified as BLW or BSW depends, Mr. Adams said, and I accept, upon an exercise of judgment based upon a visual inspection. Consequently, two people may legitimately hold different views as to the appropriate categorisation of a particular block. That analysis was supported by the evidence of Mr. Bruno Miglio, an engineering geologist jointly instructed by the parties to this action as an expert witness.

5. One of the strata in the Independent Quarry was called the Basebed. Some material from this stratum was supplied by Albion to Natural, but there is no claim in this action that the Independent Basebed so supplied was in any way unsatisfactory.

6. The Coombefield Quarry was, at the times with which I am concerned in this action, and is still, as I understand it, operated by Hanson. One of the strata in the Coombefield Quarry is a Whitbed. On the evidence of Mr. Stewart Drummond, an associate with the architectural practice of Rolfe Judd who was called as a witness on behalf of Natural, and whose evidence I unhesitatingly accept, from an architectural point of view the visual qualities of Coombefield Whitbed stone are very similar to those of BLW.

7. It appeared to be common ground between the parties, and it was certainly the evidence of Mr. Miglio and of Mr. Gerry Begley, the Manager of the factory of Natural at Alloa in Scotland at which the production of finished stone for fixing as part of the construction process is undertaken, that the fact that rough hewn blocks of stone can be of irregular shape, the fact that the outside surfaces of any rough hewn block had to be removed before the block could be cut into usable pieces and the fact that the number of finished pieces which could be obtained from a rough hewn block depended upon the dimensions of the desired finished pieces meant that in practice one would expect to find that the process of converting a block of rough hewn BLW into usable slabs or other usable stone components would result in a degree of wastage. Mr. Miglio told me that he would expect the level of wastage to be about 30%, although it could be as much as 40%, or even 50%, although he considered the latter figure to be on the high side. Mr. Miglio, of course, gave evidence from the perspective of an engineering geologist, rather than that of someone with day to day experience of the conversion of rough hewn blocks of stone into usable pieces of masonry. Mr. Begley, who did have experience of practical stone conversion, told me that he had been told by Mr. Adams that BLW would yield about 50% wastage: in other words, for every cubic metre of rough hewn stone brought into the factory as raw material for the production of finished stone, about half a cubic metre of usable finished stone would be produced, and that that reflected his experience. One would expect Mr. Adams, as Production Director of Albion, to be well-informed about the wastage rates experienced using BLW. Mr. Adams was not himself asked about rates of wastage, but I have no doubt that he did tell Mr. Begley what Mr. Begley said he did, and in the light of that and the fact that Mr. Begley told me, and I accept, that wastage of 50% reflected his experience in practice, I find that the rate of wastage to be expected using BLW was of the order of 50%.

The Contractual Arrangements

Natural, according to the evidence of Mr. Henry Turnbull, known as Harry, the Chairman of Natural and of its parent company, The Stirling Stone Group Plc ("the Holding Company"), is, and was at all times with which I am concerned, a member of a group of nine operating limited companies. Other companies in the group include Stirling Stone Management Ltd. ("SSM") and Stone Design Ltd. ("Stone Design"). Mr. Turnbull told me, and I accept, that the way in which these companies operate together is that Stone Design undertakes the design of stonework for the construction of buildings, Natural manufactures the stone for fixing as part of a construction process, and SSM fixes the stone. On the evidence of Mr Howard Cotterill, the Managing Director of Natural, Mr. Andrew McMillan, one of the two Joint Managing Directors of SSM, and Mr. Begley, who was previously, and perhaps still is, responsible for purchasing stone on behalf of the group, companies within the group co-operate together in a very informal way in any project in which any of them become involved. Certainly no contractual documents of any sort as between any of Stone Design, SSM or Natural were put in evidence. Mr. Ronald McIntyre, London Regional Manager of SSM and a director of Natural, said in terms in his cross-examination by Mr. Smyth on behalf of Albion that SSM and Natural did not as between themselves enter into contractual arrangements. To do so, as he put it, would be to create "a wasteful paper trail".

It was common ground between Mr. Turnbull and Mr. Poultney that the first contact between them or the companies with which they respectively were involved occurred at a trade fair in about March 1998. Following that initial contact Mr. Poultney and Albion's Technical Sales Manager, Mr. Robert Bruce, visited Mr. Turnbull in Scotland. In anticipation of future business Albion sought to, and did, arrange credit insurance on the Holding Company. The arranging of that insurance seems to have been the result of a misunderstanding on the part of Mr. Poultney as to the way in which the Stirling Stone Group was organised, for, according to the evidence of Mr. Turnbull, which I accept on this point, the Holding Company was not a trading company. Subsequently, in June 1998, Albion sought and obtained credit insurance on SSM. However, as I have explained, SSM was a company the business of which consisted in the fixing of finished stone produced by Natural, so the most likely customer of Albion, if any business did result from the contact to which I have referred, was Natural. That said, Albion did itself produce stone cut into slabs, which as I understand it only required polishing in order to be able to be used in the construction process, and also finished stone.

10.The first project in relation to which Albion supplied any stone to any company in the Stirling Stone Group concerned a building under construction at 100, Wood Street in the City of London. I shall refer to that project in this judgment as "Wood Street". In respect of Wood Street Mr. Poultney sent to Mr. McIntyre at "Stirling Stone" a facsimile transmission dated 12 November 1998 which was in the following terms:-

"We thank you for your enquiry in respect of the above, and have pleasure in quoting for material supplied as per the attached.

"Further to your fax dated 1/12/98, the price for approximately 700m2 of 65mm thick Bowers or Independent Basebed, sawn six sides, is Ł1,450.00 per m3 (excluding working, delivery & VAT). I have attached a copy of our basic price list and can offer a 10% discount on the rates included therein (based on block sales of approximately 500m3 per annum, or equivalent sales of slab or finished stone).

"All subject to the attached terms and conditions, which take precedence over all others, i.e. this estimate is for the supply of material only, therefore JCT, subcontract or other conditions do not apply and in particular NO allowance has been made for 2.5% contractors discount or retention.

"The above estimate will remain open for a period of 3 months, after which it will be subject to revision.

"It has been assumed that any metal fixings and the holes therefor will be provided by others, unless specifically noted otherwise in the attached Estimate.

"Delivery period will be approximately TBA weeks from receipt of all requisite design information, based upon our current production programme. When placing an order you will be required to provide working drawings, cutting schedules and full size templates. (We can recommend suitable stonework design specialists, should you need assistance with this.)

"Sample panels and individual contract testing can be arranged at an additional charge.

"Tolerances are as per British Standard BS 8298, unless stated otherwise on the Estimate Summary Sheet.

"Please note that stone varies in colour shade, shell content, texture and veining. It is very important, therefore, to ensure that the correct bed of stone is specified when placing an order.

"We trust we have interpreted your requirements correctly, and look forward to your further instructions."

A further estimate, dated 6 January 1999, was sent by Albion to Mr. McIntyre at "Stirling Stone" by facsimile transmission in relation to Wood Street, but that related to only Ł14,875 worth of stone. This estimate was in identical terms to that dated12 November 1998 save for the second paragraph. The form of estimate therefore seems to have been a standard computer generated document in which only the second paragraph was specific to the particular enquiry.

11.The contract for which Miss Randall contended on behalf of Natural as the only contract ever concluded between Albion and Natural and as governing all dealings between them, was based upon the alleged acceptance by Natural of an alleged offer contained in a letter dated 20 January 1999 written by Irene Evans of Albion to Mr. Craig Thomson, who does not otherwise feature in the events which have led up to this action, at "The Stirling Stone Group plc". That letter was in these terms:-

"You will note from our recent estimate for the National Gallery in Dublin, that the rates included are our most competitive. Following discussions with Michael Poultney and Robert Bruce regarding the development of a closer working relationship in the future, we would like to offer you the following rates, on a preferential customer basis.

"A) Block 10% discount on standard prices.

"B) Slab/Scant (Sawn two sides) any size or thickness Ł650.00/m3

"C) Sawn Six Sides Only Ł1,300.00/m3

"D) Ashlar/Paver (repeat sizes) Ł1,300.00/m3

"E) Worked Stone: Stone Ł1,400.00/m3

Plaining Ł48.00/hr

Sawing Ł48.00/hr

Masons Ł25.00/hr

"This is all based on a minimum of 500m3 of block, or the equivalent thereof, supplied per annum and all invoices settled within 30 days.

"I trust this will give you the necessary commercial advantage to continue promoting Albion Stone Quarries' Portland Stone and we look forward to working with you in the future.

"Should you require any clarification of the pricing structure, please do not hesitate to contact either Kevin Poultney at Portland or myself."

While it is possible to construe the letter as an offer to supply stone at the prices set out in return for binding promises on the part of the Holding Company to purchase at least 500 cubic metres of stone in each year and to pay for stone supplied within 30 days of any invoice relating thereto, it seems to me that it is more natural to construe the letter simply as an indication of the prices at which Albion was prepared to supply stone against an expectation that the Holding Company or its subsidiaries would in the next year acquire a minimum of 500 cubic metres of stone, without there being any binding commitment on either side. In other words, the Holding Company was not to be contractually committed to purchasing 500 cubic metres of stone and Albion was not to be contractually committed to the prices indicated. If, contrary to my interpretation of the letter, it did contain an offer capable of acceptance so as to bring into existence a binding contract, it is plain, as it seems to me, that the offer was addressed to the Holding Company, and not to Natural, so that only the Holding Company and not Natural could accept it. Further, it is quite clear, in my judgment, on the documentary material put before me that neither the Holding Company nor Natural ever did accept any such offer. Neither the Holding Company nor Natural ever committed itself to purchasing a minimum of 500 cubic metres of stone from Albion over any period, still less over a year.

12. In a letter dated 22 February 1999 Mr. Poultney wrote to Mr. McIntyre at "Stirling Stone Group" as follows:-

"I am writing to confirm that we will reduce the block price by 15% for the Cleveland House project. This is based on the stone being Lynham Whitbed as per the Quarry Control Samples and for a quantity of 460m3.

"Once you have details of the project can you forward them to me. I am assuming that this project will start spring/summer 1999 and complete around the end of the year."

Cleveland House was a building which it was intended to construct on a site in St. James Square in London. In this judgment I shall refer to the project to construct that building as "Cleveland House". An estimate in the standard form to which I have referred already in this judgment, dated 28 February 1999, was sent by Albion to Mr. McIntyre at "Stirling Stone" in relation to Cleveland House in the sum of Ł483,261.18 for stone of the types and sizes set out in an attachment to the estimate. No single order was ever placed for the quantities and types of stone set out in that attachment.

13. Mr. McIntyre wrote a letter dated 2 March 1999 to Albion on the printed stationery of SSM in relation to Wood Street which was in the following terms:-

"Please accept this notification as your authority to supply only INDEPENDENT BASEBED PORTLAND LIMESTONE all as per the undernoted, viz

"Price

Stone for this project will be procured in the form of block, slab or finished masonry depending upon the current commitments of our respective companies, and based upon the undernoted rating structure and the present estimation of the quantity of finished material being in the region of 50m3.

"1.Block – Standard price list less 10% discount.

2.Slab/Scant (any thickness) - Ł650.00/m3

3.Sawn Six Sides - Ł1300.00/m3

4 Worked stone

Stone Ł1400.00/m3

Planing Ł48.00/hr

Sawing Ł48.00/hr

Masons Ł25.00/hr

"Programme

We will furnish you with relevant information on a sequential basis, based on a current estimated commencement date on site of 28 June 1999.

"Acceptance

Please indicate your acceptance of this order by signing and returning one copy."

It does not appear that Albion ever did sign or return a copy of the document which I have quoted. What Albion did do was to send to SSM a document in its standard form of Acknowledgment of Order dated 9 March 1999. That document did not on its face refer to Albion's Conditions. It was completed so as to indicate that the estimated delivery date was in accordance with a programme to be agreed. Under the heading "DESCRIPTION OF CONTRACT" on the document appeared the words:-

"SUPPLY PORTLAND STONE FOR INTERNAL PACKAGE

PLEASE ALLOW 4 WORKING WEEKS FROM RECEIPT OF INFORMATION TO DELIVERY DATES"

Mr. Smyth told me, no doubt on instructions, that Albion's Conditions were printed on the reverse of Albion's standard form of Acknowledgment of Order. However, no witness told me that and no copy of an original form of Acknowledgment of Order was produced for my inspection.

14. Mr. McIntyre produced a document entitled "CALL OFF 1" dated 16 April 1999 in relation to some Independent Basebed required for Wood Street. The document seems to have related to two slabs only and it is not clear why the document was produced or what purpose it was thought might be served by it. Mr. McIntyre was asked about the document in cross-examination but all he really said about it was that he produced the document because Mr. Adams was pressing him for an order. Mr. McIntyre told me that he had never produced such a document before and that in his experience if one wanted stone from a quarry all one had to do was to telephone the quarry to say what one wanted, and then send a lorry to collect it.

15. On the material put before me, the first order placed by Natural with Albion was numbered N99078/5405/A2, dated 21 April 1999 and related to a project with which I am not concerned in this action called Eliza Blues in Dublin. This order purported to be for the supply of 40 tonnes of Independent Basebed at a price to be agreed with Mr. Turnbull. It asked for blocks to be supplied in multiples of a standard course height of 843mm and for contact to be made with Mr. Begley when block was available for collection. The order was on a standard printed form in which blanks were completed. The form had printed upon it the words "SEE REVERSE FOR TERMS & CONDITIONS OF ORDER". As I shall relate, other orders were placed by Natural on this form of document, but the evidence was that all were placed by facsimile transmission, that only the front of the order form was transmitted, and that no copy of Natural's conditions was ever provided to Albion. Nothing turns on the non-provision of any copy of Natural's conditions, for no reliance was sought to be placed upon them by Miss Randall on behalf of Natural. Mr. Poultney responded to the order to which I have referred in a facsimile transmission dated 22 April 1999 to Mr. Begley, whose name had appeared at the end of the printed form as "Chief Buyer". In that transmission Mr. Poultney wrote:-

"Further to your purchase order, No. N99078/5405/A2 I would like to confirm that the prices have been previously agreed. This being a 10% discount except on Cleveland House which has a 15% discount due to the ARC specification.

"I trust this is in order, however should you need any further clarification please do not hesitate to contact me."

16. Apart from the projects which I have so far mentioned, orders were placed by Natural with Albion for supplies of stone in connection with the construction of a building called Atlantic House to be erected in Holborn Viaduct in London, and for supplies of stone in connection with the construction of the Novotel near the Tower of London. In this judgment I shall call the first of these projects "Atlantic House" and the second "Novotel". The first order in relation to Atlantic House was numbered N99083/5427/A1 and dated 27 April 1999. That order was for 20 tonnes of Independent Basebed at a price of Ł100 per tonne. The next day Mr. Begley sent to Mr. Mark Godden, Albion's Quarry Manager at the Bowers Quarry, a facsimile transmission which indicated, at very least, a lack of liaison within Natural. Mr. Begley wrote:-

"Further to our telecon on the above date as discussed to ensure accuracy of pricing at order stage we would be obliged if you would forward to the undersigned a copy of the block rates as agreed with Mr. Turnbull/Mr. Poultney.

"Can you also confirm the description of the Whitbed which you are supplying for the Atlantic House contract.

"We thank you for loading yesterday's vehicle and would confirm that an accurate order for the material uplifted shall be forwarded to you ASAP."

The facsimile transmission appears to refer to an occasion, of which Mr. Poultney said in evidence there were many, upon which a lorry despatched to Albion on behalf of Natural arrived unannounced and Natural apparently expected Albion just to load it with some stone. What was described as a confirmation order, numbered N99083/5442/A1 and dated 2 May 1999, was in due course placed by Natural on the standard form of order to which I have referred for 20 tonnes of BLW at a price of Ł360 per tonne. Another order, numbered N99083/5443/A1 and also dated 2 May 1999, was placed on Natural's standard form for 40 tonnes of Independent Basebed and 20 tonnes of BLW, both at prices of Ł360 per tonne, required for Atlantic House. All this stone, when delivered, was invoiced and paid for not at a rate per tonne but at a rate per cubic metre.

17. Regardless of whether stone had in fact been supplied to Natural or to SSM, Albion initially adopted the practice of addressing its invoices to the Holding Company. Also, with an eye on Albion's Conditions, Albion declined to supply stone at times when it considered that it had not been paid in accordance with the provisions for payment in those conditions. From the evidence of Mr. Turnbull both of these matters caused considerable irritation to him and to others at SSM and Natural. They are important background circumstances in explaining the eventual deterioration in relations between Natural and SSM, on the one hand, and Albion, on the other. However, the counterclaim of Natural in this action is based exclusively on the allegation that what should have been BLW supplied was not of the quality which it should have been. There is no claim based upon alleged delay in delivery.

The next order placed for stone required for Atlantic House was numbered N99083/5489/A1 and dated 9 May 1999. All the orders placed by Natural for stone for Atlantic House, save one, and all of the three orders placed for stone for Cleveland House, were placed on the standard form of order used by Natural to which I have referred, and none of those for material for Atlantic House placed on Natural's standard form of order, and none of those for material for Cleveland House, was the subject of any formal acknowledgment from Albion. What seems to have happened is that lorries operated by hauliers engaged by Natural simply went to the Bowers Quarry and collected stone. The orders placed by Natural on its standard form of order after that numbered N99083/5489/A1 for stone required for either Atlantic House or Cleveland House were all, save the last one for Cleveland House, for material said to be priced at Ł360 per unit. The numbers of those for material required for Atlantic House all began with the prefix "N99083" and all concluded with the suffix "A1". The dates and numbers of the orders for material required for Atlantic House, and the types and quantities of material to which they, respectively, related, were:-

Date

Order Number

Material
Quantity

(tonnes)

24 May 1999

N99083/5559/A1

Independent Basebed

BLW

120

80

13 June 1999

N99083/5650/A1

Independent Basebed

100

13 June 1999

N99083/5652/A1

Independent Basebed

100

5 July 1999

N99083/5731/A1

BLW

50

4 October 1999

N99083/5973/A1

Independent Basebed

40

Although the unit of measure stated on the face of each of the last two orders was cubic metres, the fact that the price per unit was stated as Ł360 indicated that the quantities ordered were in fact stated in tonnes. In a letter dated 13 October 1999 written by Mr. McIntyre on the stationery of SSM to Albion Mr. McIntyre said this:-

"ATLANTIC HOUSE – GATEHOUSE

We confirm that the Architect has approved the use of Bowers Basebed in lieu of Independent Basebed for the manufacture of the following items, viz.

The statue

Coat of Arms

Greek Gods

Lintols

"We confirm your advice to us that the quarrying has been completed and request that you proceed to cut same to sawn six sides, all as per the dimensions forwarded to you by Howard Cotterill. Sawn six side masonry will be invoiced to Natural Stone. Quarries Limited at the rate of Ł1300.00 per cubic metre."

By an acknowledgment of order in the standard form used by Albion dated 21 October 1999 and addressed to "Stirling Stone" Albion acknowledged instructions dated 13 October 1999 to:-

"Supply only Portland Stone as details supplied and our estimate summary enclosed."

The estimate summary referred to set out details of a number of different blocks of stone of different dimensions all priced on a cubic metre basis. Under the heading "Basis of Estimate" item 1 was :-

"All subject to the attached terms & conditions, which take precedence over all others, ie this estimate is for the supply of materials only, therefore JCT, subcontract or other conditions do not apply and in particular NO allowance has been made for 2.5% contractors discount or retention."

This order, as I find, covered the stone which was the subject matter of Albion's invoices numbered, respectively, F6756 and F6757.

The three orders which were placed by Natural for stone required for Cleveland House were, respectively, that numbered N99105/5815/A1 dated 23 July 1999 for 50 cubic metres, the order stated, but the rate per unit was still Ł360, so presumably tonnes was intended, of BLW, that numbered N99105/5826/A1 dated 27 July 1999 for 100 cubic metres of BLW at a price of Ł360 per unit, and that numbered N99105/5936/A1 dated 4 October 1999 for 200 cubic metres of BLW at a rate of Ł340 per unit. The first of these orders bore upon it the words:-

"Block supplied to match control samples relative to this project. First load required to be uplifted 26.7.99. Balance as soon as possible thereafter."

The second order contained nothing in addition to identifying the stone required as BLW, while the third stated that the stone the subject thereof was to be:-

"All per sample submitted free from shell and holes 150M3 to suit modular sizes 900 x 900 50m3 block to be in excess of 2.3M. The long block is urgently required."

On one of the copies of the order numbered N99105/5815/A1 put before me were endorsed the words:-

"Howard Cotterill to select blocks on Tuesday. These should be ready by the end of the week. Please don't send any lorries until then."

From the terms of a facsimile transmission dated 25 July 1999 sent by Mr. Begley to Mr. Mark Gordon[sic – in fact Godden] of Albion it appears that the words which I have just set out were written on a copy of the order which was then sent back to Natural as a sort of acknowledgment of the order. According to the evidence of Mr. Cotterill, he went to the Bowers Quarry on 27 July 1999 to select the blocks of stone which Natural wished to receive in fulfilment of the orders which it had placed. The issue which Mr. Cotterill wanted particularly to address was the size and shape of the blocks. It is plain from the documents put in evidence that from quite early on after deliveries of stone had begun to be made by Albion and Albion had begun to invoice for the stone sold by reference to the volume of stone supplied, differences had arisen as to the accuracy of the measurements of stone by Albion. The first query on this subject was raised as early as in a facsimile transmission dated 9 May 1999 from Mr. Begley to Mr. Godden. A further query was raised in a facsimile transmission dated 16 May 1999. The solution to the problem at which the parties arrived was that Mr. Cotterill would go to the Bowers Quarry and himself measure the blocks which Natural wanted, and would agree those measurements on site with Albion's Quarry Manager, Mr. Godden. Mr. Cotterill visited the quarry not only on 27 July 1999, but also in, he thought, September 1999, and again on 26 October 1999. On each occasion, he said, and I find, he measured blocks and agreed the measurements with Mr. Godden. In the result, the dimensions of each and every block delivered by Albion to Natural after 27 July 1999 were agreed between Mr. Cotterill and Albion's Quarry Manager, as Mr. Cotterill said in his evidence and I find.

Whilst Natural was placing orders with Albion for the supply of stone required for Atlantic House, SSM was continuing to place orders for stone required for Wood Street. For reasons which were not explored or explained in evidence, the pattern in relation to orders from SSM in relation to Wood Street was that when an order was placed Albion would issue an Acknowledgment of Order in its standard form. SSM's order numbered C98136/5560/A1 for one tonne of Independent stone dust at a price of Ł100 was acknowledged by an acknowledgment dated 1 June 1999. SSM's order numbered N99061/5553/A1, placed on the standard form of order of Natural, for 11 cubic metres of Independent slab 65mm by 162mm and for 9 cubic metres of Independent slab 90mm by 104mm, all at a price of Ł650 per cubic metre, was acknowledged by Albion's Acknowledgment of Order dated 26 May 1999. Another order placed on the standard form of order of Natural was that numbered N99061/5583/A1 dated 2 May 1999 for a total of 14 cubic metres of Independent slab of varying dimensions at a price of Ł650 per cubic metre. This was acknowledged by an Acknowledgment of Order dated 1 June 1999. The final order in relation to stone required for Wood Street was also placed on the standard form of order used by Natural and was numbered N99061/5702/A1 and dated 2 July 1999. It was for a total of 19 cubic metres of Independent slab of varying dimensions at a price of Ł650 per cubic metre. The order was acknowledged by an Acknowledgment of Order dated 28 June 1999.

21. The question of the stone required for Novotel was dealt with rather differently from the way in which the arrangement of supplies for Atlantic House and Cleveland House was undertaken. Mr. McIntyre wrote a letter dated 9 September 1999 to Albion on the printed stationery of SSM which was in the following terms:-

"We confirm the telecon of today's date between your Mr. Rob Bruce and the writer in respect of the block and stone supply for the above project. We detail hereunder the salient points, viz

You will supply directly to our works in Alloa the original total of 30m3 of random blocks.

We require the following slab quantities:-

75mm slab – 210m3

100mm slab – 50m3

120mm slab – 110m3

We enclose herewith a take off of the mullions, which have a bed height of 1009mm, which will obviously have an effect on the size of slab required.

You will effect immediate delivery of block to Dunhouse Quarry Company Ltd for them to carry out primary sawing. Our Mr. H. Cotterill will inspect the slab at Staindrop and will arrange haulage to transport the acceptable slab to Alloa.

"As you are aware the time restraint in terms of the site start is extremely onerous and we would ask you to take this letter as your authority to proceed, and would urge the utmost expediency in this regard."

Although the terms of the letter seem to indicate that what Mr. McIntyre intended was that Albion should commence work in preparing the stone which Natural would require for Novotel in advance of the receipt of an order, Albion did in fact send to Mr. McIntyre at SSM's London office an Acknowledgment of Order in Albion's standard form in relation to what were described as

"Portland Scants, 75mm,103mm & 123mm as listing"

at a price of Ł650 per cubic metre, indicating that delivery was estimated to commence in the week beginning 25 October. While it is not immediately obvious that the Acknowledgment related to the letter dated 9 September 1999, the Acknowledgment did refer to instructions dated 9 September. In a facsimile transmission dated 22 October 1999 to Albion Mr. Begley, signing his name above that of SSM, set out "our current slab requirements for the above project", which was identified as Novotel. The facsimile transmission was not, apparently intended as an order, for an order, numbered N99124/6005/A1, was raised by Natural on its standard form of order and dated 3 November 1999. That order does not seem to have been formally acknowledged by Albion, but receipt of it was acknowledged by Mr. George of Albion in a facsimile transmission dated 4 November 1999.

Conclusions in relation to the contractual arrangements

22.It does not seem to me that it is seriously arguable that any contract between Albion and Natural was created by, or incorporated the letter dated 20 January 1999, as contended for by Miss Randall on behalf of Natural. As I have already indicated, in my view, although it is possible to construe the letter as an offer which was capable of acceptance, such is not the most likely meaning of the letter and there is no evidence that any offer contained in the letter ever was accepted by the Holding Company, to which it was addressed. In my opinion, the proper analysis of the exchanges between Albion and Natural which I have set out earlier in this judgment is that for which Mr. Smyth contended on behalf of Albion, namely that a series of separate contracts was made in relation to individual quantities of stone the subject of particular orders.

The contracts with which I am concerned are those by which Albion agreed to sell BLW to Natural. Each of those contracts was, in my judgment, a sale by description. It was common ground between Mr. Smyth for Albion and Miss Randall for Natural that the description "Bowers Lynham Whitbed" meant that, first, the stone supplied had to have been quarried from the Whitbed at the Bowers Quarry, and, second, that in terms of visual quality the stone had to be no worse than sample BLW 3 of the QCS. It was also common ground that there were to be implied into any contract or contracts made between Albion and Natural terms that:-

(i)"the stone supplied by the Claimant would be of satisfactory quality;"

(ii) "the stone supplied by the Claimant would be fit for its purpose, namely to be worked by the Defendant and then supplied for use as facing stone and other aesthetic purposes in building works;"

(iii) "the Claimant would carry out its obligations with reasonable care and skill and in a good and workmanlike manner."

Natural's case was that there were also to be implied into any contract or contracts between Albion and Natural terms that:-

"the stone supplied by the Claimant would correspond with the sample supplied by the Claimant in quality;"

"the stone supplied by the Claimant would be free from any defect which would not be apparent on reasonable examination of the sample;"

"the stone would be supplied within the time agreed at the time of the Defendant's request, or if no time was agreed within a reasonable time from the request."

It seems to me that the first two of the terms for which Natural contended which were not accepted on behalf of Albion are covered by the term as to description which, as I have indicated, turned out to be common ground. The term contended for as to time for delivery seems fairly straightforward, but I do not have to decide whether such a term should be implied because, as I have already recorded, no counterclaim was advanced on behalf of Natural which depended upon alleged late delivery.

The result of my consideration of the contractual arrangements between Albion and Natural is, therefore, that it was a term of every contract for the supply of BLW made between Albion and Natural that the stone to be supplied should be no worse in visual quality than the QCS BLW3. One of the grounds of resistance to the claims of Albion put forward on behalf of Natural was, as I have recorded earlier in this judgment, that the quality of BLW supplied, and the price of which Albion claims, was unsatisfactory; that is to say, of a lower visual quality than sample BLW3 of the QCS. If that allegation is made out on the evidence, Natural is, in principle, entitled to recover damages for breach of contract.

The history of the supply of stone

25.The first stone actually delivered by Albion to Natural with which I am concerned was part of that required for Atlantic House and was collected on behalf of Natural on or about 27 April 1999. Almost at once an issue which surfaced was the question of the accuracy of the measurements of the dimensions of blocks. Notwithstanding that, as is apparent from the terms of the various orders which I have set out above, Natural tended to order stone by weight, when invoicing for stone supplied Albion charged on a volume basis. Natural accepted the principle of paying for stone supplied on a volume basis, but queried the actual measurements upon which Albion based its charges. This issue first came to the fore, so far as the documents put before me go, when Mr. Begley sent to Albion a facsimile transmission dated 9 May 1999 querying the measurements of two particular blocks. He returned to the point in a facsimile transmission dated 16 May 1999 in which he asked for confirmation of the sizes of ten blocks. In order to resolve the differences between the parties in relation to questions of measurements Mr. Cotterill, as I have recorded earlier in this judgment, went to the Bowers Quarry on 27 July 1999 and on a number of subsequent occasions, including 26 October 1999 to measure blocks and to agree the measurements with Mr. Godden on behalf of Albion. Mr. Cotterill's evidence was that from the time of the visit which he made to the Bowers Quarry on 27 July 1999 he agreed with Mr. Godden the measurements of all the blocks which were delivered by Albion to Natural. As I have already indicated, in fact Natural arranged for the stone which it purchased from Albion to be collected on its behalf, so delivery actually took place at the Bowers Quarry.

26.The contemporaneous correspondence which was put in evidence does not indicate any particular problems with regard to the quality of the stone supplied by Albion to Natural. In an internal memorandum dated 27 May 1999 to Mr. Turnbull and Mr. Andrew McMillan, one of the Joint Managing Directors of SSM, Mr. Cotterill commented that slab arriving for use on Wood Street had severe circular score marks, some as deep as 4 millimetres, and eliminating such marks meant that each individual slab had to be calibrated, a process which reduced the thickness of the slab. That issue was raised by Mr. Begley with Albion in a facsimile transmission dated 11 June 1999 to Mr. Adams, but in rather mild terms. The relevant part of the facsimile transmission read:-

"Regarding the slab supplied to date as discussed yesterday we have encountered problems with some tapering of the slabs and more importantly severe lash marks on the face of the stone. Obviously when we polish out these marks there is a corresponding reduction in the width of the stone."

Lash marks were only a feature of stone which Albion had cut into slabs. The particular complaint, of course, related to slabs supplied to SSM for use on Wood Street, not to material supplied to Natural.

27.Mr. Cotterill, Mr. Begley and a Mr. Neil Mc Millan visited the Bowers Quarry on 10 June 1999 and there saw Mr. Adams, Mr. George and, for part of the time, Mr. Godden. Mr. Adams made notes of the meeting and those notes were put in evidence. The notes included:-

"Credits to be issued for 1 block with flint band and 1 block with diagonal vent. Stirling to confirm details of block numbers."

So far as the documents put before me are concerned, this was chronologically the first reference to blocks being unsatisfactory or to credit being sought or given. Mr. Adams' notes also recorded a discussion about lash marks in which he apparently said that lash marks occurred on most slabs and could not be avoided. That seems to have been the end of any complaint about lash marks. Mr. Adams sent to Mr. Cotterill and Mr. Begley under cover of a facsimile transmission dated 11 June 1999 a copy of the notes to which I have referred.

28. In a facsimile transmission dated 4 July 1999 Mr. Begley gave details to Mr. Adams of two blocks and three slabs for which credit was required. The blocks were, as one could tell from the sequence of block numbers in which the particular blocks fell, Independent Basebed, not BLW. Mr. Begley told me in evidence that he asked Mr. William Revie, a director of Construction Materials Consultants Ltd., another company in the Stirling Stone Group, to take photographs on 9 July 1999 of stone supplied by Albion which was considered to be of poor quality. Those photographs and others taken at Mr. Begley's request by Mr. Revie on 18 August 1999, 8 October 1999, 19 November 1999 and 16 December 1999 were put in evidence. The purpose for which the photographs were taken was not clearly established, in my judgment. Mr. Begley told me that on each occasion upon which photographs were taken he pointed out to Mr. Revie material, most of it in fact in the form of BLW block which had been cut into slab at Natural's Alloa works, which he considered to be outside the range of quality which was acceptable for BLW. However, certainly so far as the photographs taken on 9 July 1999 was concerned, no complaint seems to have been made to Albion that the quality of the blocks photographed or the quality of the blocks from which the particular slabs photographed had been cut was unacceptable, unless the blocks and slabs photographed were those the subject of the complaints made in July 1999 to which I refer later in this judgment. The purpose of causing the photographs to be taken on 9 July 1999 is thus obscure unless it was to store away evidence which could be used in the event of a dispute arising between Natural and Albion of the type which has given rise to this action. As at 9 July 1999 relations between Albion and Natural were, at least superficially, cordial, and, as I shall set out, Albion was showing itself to be prepared to consider sympathetically requests for credits for material which Natural considered not to meet its requirements. In a facsimile transmission dated 19 July 1999 to Mr. George at Albion Mr. Begley gave details of fifteen slabs delivered for use on Wood Street which had been adversely affected by a heavy black band running through them. Only Independent Basebed slabs were delivered by Albion for use on Wood Street.

29. Towards the end of July 1999 Albion delivered to Natural quantities of BLW which Natural did not find satisfactory. Mr. Cotterill telephoned Mr. Adams about the matter and Mr. Adams replied in a facsimile transmission dated 21 July 1999, so far as is presently material:-

"I refer to our telephone conversation earlier this afternoon. I am sorry that the deliveries of Bowers Lynham Whitbed block that have been despatched in the last few days do not meet your requirements. I am disappointed that you have not received stone as you wanted because Mark Godden has taken particular time and care after discussions with Gerry (as noted on the attached copy of your order) to select the stone block sizes and wire saw a face to show the shell character. It would probably be best for you to select the blocks yourself from the quarry stock as agreed during Pat's visit to your works on the 24/25 June, so that you can get closest to your requirements. I confirm that you can visit next Tuesday to select block. Mark is on holiday but this should not cause any difficulty."

It was following this facsimile transmission that Mr. Cotterill came to the Bowers Quarry on 27 July 1999 and began to select and to measure the blocks which Natural wished to receive. The facsimile transmission was not specific as to why the blocks of BLW were considered by Natural to be unsatisfactory, and it may be, as none of them seem to have been returned for credit, that the problem was not really the visual appearance but the size. That this might be so is suggested by the fact that the facsimile transmission also included:-

"Gerry also mentioned that there are vents in some blocks. These do occur with all Portland stones. As discussed during your last visit to Portland and more recently on the phone it is prudent to allow at least a one-to-one waste factor. If our customers experience considerable venting in a block that reduces the expected yield then we allow a credit. We ask for a photograph for auditing purposes."

30. Mr Poultney flew up to Scotland to visit Mr. Turnbull on 29 July 1999. He made notes after his visit and those notes were put in evidence. Those notes recorded complaints that:-

"Some slabs produced from ASQ [that is, Albion] blocks contained vents.

"Stones outside QCS."

In a column in the notes headed "Proposed Action" appeared the following:-

"Credit requests with photos showing the vent and the stones to be produced from the slab are to be sent to Portland. The block No. and the measurement will need to be stated.

"ASQ will credit all blocks or slabs returned to Portland. Slabs retained by SS will be discounted by ASQ, and can be used on other projects."

31. According to an Albion Customer Complaint Form dated 9 August 1999 which was put in evidence, on or about that date Natural returned to Albion four blocks of BLW for credit. It was decided to allow a credit and a credit note was issued on 25 August 1999.

32. Mr. Adams visited Alloa on 12 and 13 August 1999 for meetings with Mr. Cotterill and Mr. Begley. He made notes of his meetings and those notes were put in evidence. The question of credits was discussed and the relevant part of Mr. Adams' notes recorded:-

"2. Claims for substandard material are to be submitted by the 15^th of the following month so that ASQ can evaluate and issue credits as appropriate by the end of the month for offsetting against the due invoices.

"3. SS accountant will visit Redhill office when he is next in London (possibly end of Aug).

"4. 4 No. blocks returned 27.7.99. Complaint ref 170 raised for A/cs to issue credit to SS (5.213M3)

"5. 3 blocks viewed by BA [that is, Mr. Adams] are substandard. GB will mark vents on IBB [that is, Independent Basebed] and photograph each block (with surveyor's scale rod to show approx.5.25). Also 16 No. slabs of 68mm and 16 No slabs of 90mm had hard bars, excessive curf, or vents that prevented cutting panels 1500 x 880 high."

It would seem that the photographs taken by Mr. Revie on 18 August 1999 were taken in accordance with that proposal, for the photographs are of slabs and most do include in the photograph a surveyor's measuring rod. If that conclusion is correct, Mr. Adams' notes do give an accurate idea of the extent of the material which had been supplied by Albion by the date of his meetings with Mr. Cotterill and Mr. Begley which was considered by Natural at that time to be unsatisfactory and indicate that at that time, at least, the question of the supply of material outside the acceptable range for Independent Basebed or BLW, as the case might be, was not thought by Natural to be a large issue.

33. Following Mr. Adams' visit to Scotland, Mr. Cotterill wrote him a letter dated 18 August 1999, which, of course, was the date of Mr. Revie's second set of photographs. The letter mentioned wastage, and referred to Albion's suggested wastage allowance of 50%, but it did not contain any real complaint about the quality of the stone which Albion had supplied. The main focus of the letter was complaint that Albion was not able to deliver stone which Natural required as fast as Natural wanted it.

34. In a facsimile transmission to Mr. Jim Turnbull of Natural dated 27 August 1999 Mr. Adams referred to a credit note for four blocks returned on 27 July 1999, which, as I have already mentioned, was issued on 25 August 1999, and also to the rejected slabs which he had seen on his visit to Scotland having been returned to Albion for credit. He indicated in the facsimile transmission that credit would be given for those slabs. In a facsimile transmission of the same date to Mr. Cotterill Mr. Adams identified the returned slabs as relating to Wood Street, so that they would have been sold not to Natural, but to SSM, and said of them:-

"Incidentally the reject slabs were not from the last delivery to Alloa but an accumulation over a series of deliveries."

Mr. Adams also sent a facsimile transmission on 27 August 1999 to Mr. Begley. That facsimile transmission referred to one block which had been returned the previous week and to three blocks which Mr. Begley and Mr. Adams had looked at during Mr. Adams' visit to Scotland, which seem, as I have already noted, to have been Independent Basebed, not BLW. Mr. Adams asked that Mr. Begley send details and photographs of those three blocks and said that he would then arrange credit. Enclosed with the facsimile transmission was a list of 25 slabs which had been returned and for which Mr. Adams said that Albion would raise a credit. The promised credit was issued on 31 August 1999.

35. From the contemporaneous documentation to which I have referred and from the photographs taken on 9 July 1999 and 18 August 1999, interpreted in the light of that documentation, it appears that up to the end of August 1999 seven or eight blocks of stone, most, if not all of it Independent Basebed, not BLW, and 25 slabs, all of it Independent Basebed, not BLW, and all supplied not to Natural but to SSM, had been returned for credit. The credit sought had been allowed. The documentary material put before me does not suggest that up to the end of August 1999 either Natural or SSM had sought from Albion any credit for allegedly unsatisfactory stone which had been refused.

36. Mr. Harry Turnbull sent Mr. Poultney a facsimile transmission about Novotel on 13 September 1999 in which he said:-

"I have previously made the point that "wheels were falling off the wagon" but they now really have come off."

The facsimile transmission made no reference to any difficulty about the quality of stone supplied and the problem seems in fact to have been that Albion was not able to deliver stone required for Novotel as fast as Natural needed to receive it if it was to process the stone in time for SSM to perform its contractual obligations to its customer in relation to the fixing of the stone. The contemporaneous correspondence contains no record in September 1999 of any complaint being made about the quality of stone being delivered by Albion to Natural and no requests were made for any credit. The correspondence does, however, indicate that for a period Albion ceased to deliver stone on the ground that it had not been paid for previous deliveries.

37. In a letter to Mr. Jim Turnbull dated 27 September 1999 Mr. John Stroud, Company Secretary of Albion, referred to various meetings which had taken place between representatives of Albion and the Stirling Stone Group and went on:-

"At these meetings it has been continually pointed out that because we are unable to obtain "Credit Insurance" on Natural Stone Quarries Limited, all invoices will be in the name of Stirling Stone Group and we are therefore returning all the August invoices to you and would respectfully remind you that these are due for payment by 1^st October. Should you want all the invoices to [be] sent in the name of Natural Stone Quarries Limited then we would require a deposit of Ł150000, which we will hold for the duration of the Contracts.

"All credits for block and slab have been issued although we understand that Jerry is preparing the paperwork for further credits and once this has been received and verified the necessary credit will be raised."

That letter seems to have incensed Mr. Harry Turnbull, who wrote to Mr. Poultney a letter dated 11 October 1999 in which he said of that letter:-

"I can do without this incongruous correspondence which is time consuming, abortive and completely unnecessary."

The letter went on:-

"I have been in this industry for 37 years and have seen many people come and go. The stone industry has its own way of working and I am not prepared to disrupt this company's long proven, well tried and respected methods of administration to accommodate inexperienced people who clearly have a way of their own formed on experiences in other industries.

"Outwith personnel many of the difficulties being experienced, perhaps 90%+ are down to the ongoing sub-standard quality of material we have received from you. You have witnessed this for yourself in your visit to Alloa.

"When we priced the various Portland contracts we did so on the basis of information provided by your company respective to price and wastage level.

"This company is presently working at a loss in the production of your material as a consequence of the measures we are taking to minimise wastage levels.

"As you are aware, Howard recently visited your works and yet again, clearly determined the quality required and the content of the next load.

"We were informed that you had been slabbing for the Novotel contract for two weeks. However, there was not sufficient quantity of material to make up one full load of slab.

"For the record, our quarrying/production of all sandstone and limestone is conducted by Natural Stone Quarries Limited. This is good enough for the rest of the industry. I am frankly not interested in credit rating. You set forth with me in jointly promoting the use of your materials in the knowledge of the chemistry of our group. If we are not credit worthy, goodness knows who you will find in this industry to work with. I note that John's letter dated 27^th September is addressed to NSQ.

"Consequently all relationships with you will be with NSQ. This includes invoicing and payment. I enclose, again, your invoices for reissue in NSQ's name, on receipt of which we will immediately forward to you the respective payment."

38. Despite the terms of Mr. Stroud's letter dated 27 September 1999 and the suggestion in Mr. Harry Turnbull's letter dated 11 October 1999 that unsatisfactory stone had been delivered by Albion to Natural, in fact no further claims for credit were made which relied upon the allegation that unsatisfactory stone had been supplied. Rather the main concern of Natural seems to have been to obtain further supplies of stone as fast as possible. Although Mr. Revie took more photographs of stone which was not acceptable to Natural on 8 October 1999, no claim of any kind was made at the time in relation to that stone. The photographs taken were of seven blocks and four slabs. Bearing in mind the reference in a recorded delivery letter dated 15 October 1999, to which I refer later in this judgment, to the possibility of Natural obtaining supplies of Portland Stone from an alternative source, it is difficult to resist the conclusion that the photographs were taken with a view to having what could be presented as evidence, if needed, in support of an allegation which it might prove necessary to make to some one or more of SSM's customers as and when Natural wished to substitute Hanson Coombefield stone for the specified Albion stone, that stone supplied by Albion was defective.

39. In a letter dated 14 October 1999 to Mr. Poultney Mr. Harry Turnbull wrote as follows:-

"Further to my letter dated 11^th inst. I have just returned to the office to day to find that we have exhausted all your supplies of Portland for our contracts at Wood Street, Atlantic House, Cleveland House and Novotel.

"You have previously committed to slabbing to Novotel but I understand from Howard today that you only have two loads available for delivery. These have yet to be inspected by Howard and from past experience it is likely that all the material will not be acceptable. Lets hope that this is not the case.

"We start on site at Novotel a week on Monday and as yet very little material has been produced. Site works at Cleveland House commence Monday first and site activities at Wood Street are ongoing.

"I have been informed that you are not releasing any further material for any of the above noted projects. This totally unacceptable position makes matters even worse in the relationships between our companies.

"Can you please release material to us with immediate effect and respond to my letter dated 11^th inst. by return."

It seems that Mr. Poultney did not reply by return. The next day Mr. Harry Turnbull sent a recorded delivery letter to Albion in which he referred to a conversation between Mr. Bruce of Albion and Mr.McIntyre in which Mr. Bruce apparently said that Albion would not release any further stone to Natural unless it was paid for stone already delivered. Mr. Turnbull said in the letter:-

"You leave us with no option but to give you formal notice that unless we receive written confirmation by facsimile today that you will immediately release material in sufficient and ongoing quality and quantity to service the above noted contracts, we will endeavour to make alternative arrangements to service the contracts to completion."

Mr. Harry Turnbull then sent Mr. Poultney a facsimile transmission also dated 15 October 1999 in which he expressed sadness about the state of relationships between Albion and Natural. He did say:-

"I accept that on many occasions the words we hear are good but regrettably your actions fall far short. The quality of material you have provided to us has been substantially substandard. You are well aware of this. Clearly you have difficulty in meeting the requirements of your client base in terms of quantity and quality."

Later in the facsimile transmission he said:-

"If today comes and goes without the requested confirmation of supply from you, there is not likely to be any way back."

In fact that same day, so it appears, Mr. Poultney sent by facsimile transmission resubmitted invoices in the name of Natural, and Mr. Turnbull sent a further facsimile transmission acknowledging receipt.

40. In a facsimile transmission dated 18 October 1999 to Mr. Poultney Mr. Harry Turnbull set out various credits which Natural wished to receive against invoices then due for payment. Subject to receiving the requested credits and to receiving an assurance that if payment were made supplies of stone would be resumed, Mr. Turnbull was prepared to settle outstanding matters between Albion and Natural. After setting out desired credits in respect of the return of what were called A frames, which are a sort of frame for holding upright cut slab during transport, alleged overmeasure of some block, and additional discount in error not allowed in respect of material required for Cleveland House, Mr. Turnbull continued:-

"There are other items of expenditure we have incurred but I am prepared to release our cheque today in this sum pending meeting with you to resolve outstanding matters. This is subject to receiving your written confirmation by return facsimile today that you will immediately release material in sufficient and ongoing quantity to service the above noted contracts."

Mr. Turnbull then set out in the facsimile transmission credits required for September 1999, and went on:-

"To alleviate this situation in the future can you please mark your sizes on the delivery tickets in order we can address immediately. Also at the time of Howard's next visit he will agree sizes on the selected block.

"For your reference I enclose a photograph of block P247 indicating a typical disparity in measurement. As can be seen from the top photograph the net usable area taking account of the bottom left corner is 1 x 1.1m, though your markings include for this corner, therefore when cubed up the net usable is 1.54m3 and not 1.74m3 as claimed."

It is fairly obvious from the terms of the facsimile transmission that the credits which Mr. Turnbull wanted, other than in respect of the agreed additional discount for Cleveland House which had not in fact been allowed, related to alleged overmeasure, and not to alleged deficiencies in the quality of the stone supplied. In a facsimile transmission dated 20 October 1999 Mr. Poultney recorded the effect of various telephone conversations with Mr. Harry Turnbull as being:-

"A compromise has been reached regarding all credits up to the end of September."

The terms of the compromise were then set out, but nothing turns on the precise terms of the compromise, so far as this action is concerned, other than the single sentence which I have quoted. Mr. Turnbull confirmed his agreement to the terms of Mr. Poultney's facsimile transmission in a facsimile transmission also dated 20 October 1999.

41. In an internal memorandum dated 20 October 1999 Mr. Turnbull informed various of his senior managers that:-

"As you are aware, we have had enormous difficulties over the past few weeks with Albion Stone.

"You will note from the recently circulated correspondence that the difficulties have presently been substantially resolved. However we are significantly behind programme in procurement for a considerable number of projects.

"I have today met with Jim, Howard and Gerry to reconfirm that we must not under any circumstances fall into the same traps as previous in our relationships with Albion.

"However, in the dialogue today it is very apparent that it is not only the non availability of Portland Stone that is having an adverse reaction on production levels. It is quite clear that the flow of information is not available in a manner which ensures continuity within the work shops. This is not a criticism. I appreciate everyone is extremely busy at present. It is however a fact. I therefore would ask you all to make your diaries available to meet in my office at 10 am on Monday 1^st November whereby we can thrash out the immediate, intermediate and long term requirements."

Reading that memorandum in the context of the terms of the agreement made with Mr. Poultney, and in particular in the context of the claims for credit communicated before that agreement was made, it seems to me that the enormous difficulties referred to by Mr. Turnbull can only have been difficulties in obtaining supplies of stone, and not difficulties over the quality of the stone supplied.

42. In a letter dated 25 October 1999 to Mr. Harry Turnbull Mr. Poultney notified him of price increases which Albion proposed to implement as from 1 January 2000. That would, no doubt, have been unwelcome news to Mr. Turnbull in so far as he contemplated that further supplies of Albion stone would be needed in the year 2000, unless there was some mechanism in SSM's contracts with its customers for passing on any such price increases.

43. In a letter dated 27 October 1999 to Mr. Adams Mr. Cotterill referred to his visit to the Bowers Quarry on 26 October 1999 and identified as one of the

"Points raised during the same visit that need to be actioned"

"(2) Credits required for faulty materials supplied to N.S.Q. will be forwarded to yourselves within 2 weeks of introducing into production. N.S.Q. to supply A.S.Q. with stock list showing materials not offered to production within the same 2 weeks."

The letter did not refer to any outstanding requests for credit, nor did it make any comment to the effect that there were, or had been, serious problems caused by stone supplied not being satisfactory to Natural.

44. In a facsimile transmission dated 2 November 1999 to Mr. George at Albion Mr.Begley recorded a heavy concentration of shell in a number of slabs which had been delivered by Albion to Natural. He said that such heavy bands of shell were unacceptable to SSM's client. Mr. George replied in a facsimile transmission dated 3 November 1999, saying that he would like to receive photographs of the slabs in question and, if the photographs showed stone outside the range covered by the QCS, the appropriate credits would be issued.

45. In a facsimile transmission dated 8 November 1999 to Mr. Poultney Mr. Harry Turnbull complained that stone selected by Mr. Cotterill during his visit to the Bowers Quarry on 26 October 1999 was apparently not available to Natural. He ended his facsimile transmission:-

"You are well aware that we need material and we need it now. This hand to mouth existence is completely unacceptable."

Mr. Poultney replied in a letter dated 9 November 1999 that:-

"With regards to the projects in general the constraints that you are placing on the supply of Portland stone to yourselves is degenerating into a farce."

Mr. Turnbull in his turn replied in a facsimile transmission dated 12 November 1999, saying, so far as is presently material:-

"As regards your third paragraph, I am not aware of placing any constraints upon you.

"We only seek good quality material which will provide the sizes and quantities we require to service contracts, the scope and content of which you have long been familiar with.

"Regrettably you have failed to fulfil your obligations and consequently site building programmes and our costs are escalating in endeavouring to work with material that is sub-standard/not available to provide continuity of working.

"The situation is one of farce but it is of your own making as you have been and still are unable to comply with the basis of providing a timeous supply of good quality material."

Mr. Poultney responded in a letter dated 16 November 1999 in which he said, amongst other things:-

"I would be grateful if you could provide a clear explanation of how you consider that we have failed in our obligations to your Company, despite our noted constant concerted actions to assist you, which you once again are seeking to bring into dispute."

Mr. Turnbull replied in a facsimile transmission dated 18 November 1999, from which it is not necessary to quote.

46. There was put in evidence a letter dated 16 November 1999 written by a Mr. Raval of Messrs. Trehearne and Norman, architects engaged for the purposes of the construction of Cleveland House. In the letter Mr. Raval indicated that a sample area of the Portland Stone installation was acceptable save for a few minor comments.

47. In a facsimile transmission dated 19 November 1999 Mr. Poultney wrote:-

"I regret to have inform you that I have been unable to secure any Credit Insurance on Natural Stone Quarries Ltd.

"This, coupled with the poor payment record, leaves me with no other option but to cancel the credit arrangements and place the account on a "cash" basis. We are preparing a Statement that will be faxed through later this afternoon.

"I would be grateful if you could settle the account by bank transfer on Monday morning. All future supplies will need to be subject to pro-forma invoices, or drawn against a deposit lodged with ASQ."

While exactly when and how the arrangements were made did not emerge in evidence, in mid-November 1999 Natural negotiated an agreement with Hanson for the supply of Coombefield stone, happily at a price lower than that which it had been paying to Albion for supplies of BLW, as Mr. Harry Turnbull accepted in cross-examination. On 19 November 1999 Mr. Revie took his final set of photographs. This time the object of the exercise can only have been to obtain evidence which could be put to others to seek to persuade them that the BLW supplied by Albion was not satisfactory. Thereafter SSM set about trying to persuade its customers who had specified the use of BLW on their projects to alter the type of stone specified to Coombefield. There was put in evidence a letter dated 23 November 1999 written by Mr. Henry Cairns, one of the Joint Managing Directors of SSM, to Kvaerner Trollope & Colls, the main contractor for Atlantic House. That letter began:-

"We have been experiencing considerable difficulty in obtaining good quality Portland stone supplies from Albion Stone Quarries in the quantities we require to timeously service this project.

"To date we have produced finished material in sufficient quantities to comply with the contract programme. This is after incurring inordinately high levels of selection and wastage. However, the initial reasonable quality material supplied by Albion Stone Quarries has progressively degenerated into a situation where we are unable to obtain satisfactory levels of production. We are not therefore in a position to comply with the balance of the agreed programme unless we supplement our supplies with Portland Stone from another source."

A similar story was put to the customers of SSM on Cleveland House and Novotel. Once an alternative source of supply had been arranged and there seemed to be a reasonable prospect that SSM's customers would be persuaded to accept Coombefield stone in place of BLW, Mr. Harry Turnbull wrote a letter dated 1 December 1999 to Mr. Poultney which was in the following terms:-

"We refer to our orders for block and slab supplies for our projects at Atlantic House, Cleveland House and Novotel. As previously intimated the material supplied by you to us under these orders is defective. The quality is neither satisfactory nor is the material suitable for our uses, which uses were well known to you at the time of our orders.

"As a result of your breaches of contract in supplying substandard materials we have sustained considerable loss and damage including amongst others increased production costs, costs incurred to an alternative supplier, transport costs, and resequencing costs.

"In the circumstances we will be withholding monies claimed by you under your October invoices and are setting off our losses against our claims. Once we have ascertained the full extent of our losses we shall advise you whether there is any balance due between us."

This action was commenced by a claim form dated 5 April 2000.

Findings as to the measurement and quality of BLW supplied

48. As I have indicated, the major plank of the defence of Natural to Albion's claim in this action, apart from the claim to set off its counterclaim against any sum which is otherwise found to be due to Albion, was the contention that some of the blocks of stone the price of which Albion claims in this action had not been correctly measured, with the result that Albion was claiming too much. This seemed an unpromising line of defence in the light of the evidence of Mr. Cotterill that he personally had measured all of the blocks supplied after 27 July 1999. Mr. Cotterill told me, and I accept, that, so far as he knew, although he had not himself checked the relevant Quarry Collection Notes and invoices, all of the stone supplied by Albion after August 1999 had been invoiced on the basis of the measurements which he had agreed. Mr. Poultney in his evidence confirmed that this was so. I accept that evidence also. I found both Mr. Poultney and Mr. Adams to be impressive witnesses and I have no hesitation in accepting the totality of the evidence of each. On the issue of the correctness of the measurements upon the basis of which Albion raised its invoices the evidence that the measurements were, or might be, erroneous, was unsatisfactory. The relevant evidence was that of Mr. McIntyre, who had not himself measured any blocks, but who had analysed records made by a Mr. McDunnach, Natural's yard foreman at Alloa, who had apparently measured the various blocks when they had arrived at Alloa. There was evidence that the measurement of rough hewn blocks of stone is not a very scientific process and that different people, or even the same person on different occasions, may arrive at different conclusions as to the correct measurements. I have no doubt that Albion invoiced for the various blocks of stone in accordance with the measurements made by Mr. Cotterill, which were agreed at the time by Albion's Quarry Manager, Mr. Godden. To have done otherwise would have involved deliberate dishonesty on the part of Albion. I am also confident that in making his measurements Mr. Cotterill would have taken care to ensure that the measurements were as accurate as he could make them. That was the whole purpose of him making the measurements, given the disputes about the accuracy of the measurements which had prompted the introduction of the system of him seeking to agree measurements with Mr. Godden in the first place. Without Mr. McDunnach being called as a witness and being cross-examined as to the reasons for the differences between his measurements and those made by Mr. Cotterill, I think that it is impossible to reach the conclusion that Mr. Cotterill's measurements were not accurate. In the end Miss Randall was reduced to submitting that on the evidence which was put before me Albion had not eliminated the possibility of clerical error in the transposition of the figures agreed between Mr. Cotterill and Mr. Godden onto the relevant invoices. On the totality of the evidence it seems to me that that possibility is fanciful. I therefore find that the accuracy of the measurements upon which the invoices which are the subject matter of the claim are based is proved.

49. It seems to me that the picture presented by an analysis of the contemporaneous documentation to which I have referred earlier in this judgment and by the photographs taken by Mr. Revie, viewed in the context in which those photographs were taken, is that although some of the BLW delivered by Albion to Natural was outside the visual range to be expected of BLW, the quantities involved were very small in proportion to the bulk of the stone delivered by Albion to Natural, and, until relations between Natural and Albion began to deteriorate dramatically from about mid-October 1999, Natural was content to deal with the question of material which was thought to be out of range by seeking the credits which Albion was, in principle, happy to allow. However, the evidence of witnesses of fact presented on behalf of Natural painted an altogether different picture. Mr. Harry Turnbull, at paragraph 14 of his witness statement spoke of the quality of supplies of BLW from Albion degenerating through the months of May and June 1999 from a level which was initially satisfactory. At paragraph 19 he said that in the month of July 1999 the quality of stone supplied deteriorated even further. At paragraph 21 he said that there was no improvement in quality following the visit of Mr. Poultney to Scotland on 29 July 1999, but, as I have indicated, the question of quality does not seem from the contemporaneous documentation to have loomed large at the meeting between Mr. Turnbull and Mr. Poultney at the end of July 1999. At paragraph 23 b) of his witness statement Mr. Turnbull went so far as to say:-

"Quality of material not being satisfactory. This started in May, 1999 and progressively worsened until stone received from July to October was literally useless."

Mr. Cotterill in his witness statement did not say much about the quality of BLW supplied by Albion to Natural. He said that he selected and measured all blocks delivered after 27 July 1999, but made his selection only on the basis of size and shape. He did not, he asserted, make any assessment of the quality of the stone. At paragraph 19 of his witness statement Mr. Cotterill said:-

"As NSQ got further into our contracts supplying SSM, the quality of ASQ's stone was deteriorating very badly and good shaped blocks were becoming very difficult to find."

That passage is capable of being understood as referring not to the visual quality of the stone but to the shape of the blocks supplied. In cross-examination Mr. Cotterill said that he was first aware of problems with the quality of block supplied from August 1999, and that the problem got progressively worse. Mr. Begley, in his witness statement, said:-

"17. We had to reject two or three loads of block and slabs. When we sent this stone back, ASQ agreed that it was of poor quality. We received credit notes. We still have rejected material sitting in our yard at Alloa.

"18. When we initially started receiving stone in about April 1999, we only experienced minor problems with it, relating to vents, hard bars and water marks. After July 1999 the quality of the stone got worse and worse and deteriorated rapidly until the situation became farcical."

50. Quite a large number of witnesses were called on behalf of Natural. Apart from Mr. Harry Turnbull, Mr. Cotterill and Mr. Begley, whom I have just mentioned, Mr. Andrew McMillan and Mr. Henry Cairns, both of the Joint Managing Directors of SSM, were called to testify to the difficulties which SSM had in performing its contracts with its customers in relation to Atlantic House, Cleveland House and Novotel as a result of inadequate supplies of finished stone coming through from Natural. Mr. Cairns' perception was that the quality of stone was satisfactory until about October 1999 on Cleveland House. Mr. Revie was called to testify as to his taking of the photographs to which I have referred. Mr. Revie's contribution on the question of the quality of the BLW supplied by Albion to Natural was at paragraph 14 of his witness statement:-

"When requested by Mr. Begley, I assessed whether the shell, calcite or pitting content of stone delivered by ASQ was acceptable or not, from the descriptions given. It was clear from some of the slab and block deliveries that a proportion of the stone received from ASQ was of unacceptable quality and that this caused problems for NSQ."

Mr. Revie did not indicate what proportion of the stone delivered he considered to be of unacceptable quality. From paragraphs 22 and 27 of the witness statement of Mr. McIntyre, it is plain that he personally has no knowledge of any problems with the quality of BLW supplied by Albion to Natural, but that he was told of problems not by Mr. Cotterill or Mr. Begley, but by Mr. Andrew McMillan and Mr. Cairns.

51. Three witnesses who were independent of the Stirling Stone Group were called to give evidence on behalf of Natural in relation to the alleged problems of obtaining supplies of good quality BLW from Albion. They were Mr. John Birch, who was a Senior Project Manager employed by Kvaerner Trollope & Colls, the main contractor on Cleveland House, Mr. Stewart Drummond, who was employed by Messrs. Rolfe Judd, the architects for Atlantic House, as contract administrator on that project, and Mr. Maurice Swain, a liaison officer employed by the Corporation of London who was involved in Atlantic House. Although I have no doubt that each of these gentlemen was doing his best to help me in his evidence, in the end I did not find the evidence of any of them of much assistance because each was really only able to tell me how SSM had presented its case for a change from the specified BLW to Hanson Coombefield stone on Cleveland House and Atlantic House, respectively. None of them spoke of himself having any serious concern about the quality of the stone fixed at Cleveland House or Atlantic House.

52. I have already mentioned Mr. Miglio, who was called as a joint expert on behalf of both parties. Mr. Miglio told me that he had visited Natural's works at Alloa on 4 December 2000 and been shown BLW which Natural asserted was outside the range of what was acceptable for BLW. That stone was photographed and the photographs were put in evidence. Mr. Miglio told me that his assessment was that something between 50% and 80% of what he was shown was outside the range of what was acceptable for BLW. Mr. Poultney in his evidence in chief told me that he had been present on the occasion of Mr. Miglio's inspection at Alloa. He testified as to the accuracy of Schedules A, B and C to the Amended Reply and Defence to Counterclaim. Schedule A Part 2 to that statement of case included an indication of the total number of blocks and slabs supplied by Albion to Natural over the period April to November 1999. The total number of blocks was 310, of which 79 were supplied during the months of October and November 1999. The total number of slabs was 784, of which 252 were delivered in the months of October and November 1999. Schedule B Part 1 set out details of 20 blocks which Mr. Poultney saw at Alloa, 14 of which had been delivered before the end of September 1999. Of the other six he considered that four were completely outside the range of what was acceptable for BLW, while credits of 75% and 20%, respectively, were appropriate for the other two. In Schedule B Part 2 Mr. Poultney identified four slabs which he considered merited 100% credit, four which merited 50% credit and one which merited 25% credit. Mr. Miglio told me that he was unable to say to what extent, if at all, stone supplied by Albion to Natural other than that which he inspected at Alloa on 4 December 2000 was outside the range of what was acceptable for BLW.

53. During the course of Mr. Miglio's investigations for the purpose of preparing himself to give evidence at this trial, he requested from Albion a listing of the blocks of stone supplied by Albion to Natural. The listing provided was annexed to Mr. Miglio's report. It had been produced from Albion's computerised stock records. It showed that, of the blocks delivered by Albion to Natural, 21 had originally been classified as BSW. Of those 21, seven were numbered earlier than 61160, which was the number, according to the evidence of Mr. Adams, which I accept, of the first block numbered after the decision to divide stone coming from the Whitbed at the Bowers Quarry between BLW and BSW. Mr. Adams' evidence was that all the blocks listed in the document provided to Mr. Miglio as BSW had been reclassified as BLW before delivery to Natural. Miss Randall submitted that I should not accept that evidence because it defied belief that, if there had been in truth a reclassification, Albion's computer records would not have been altered. The explanation which Mr. Poultney gave as to why the computer records had not been altered was that there was no point in doing so, from Albion's perspective, once the blocks had been sold, as the record was simply a stock record. I accept that evidence. If it were not correct, the conclusions which one would have to draw would be, first, that Albion deliberately and dishonestly supplied stone which was known not to meet the contract description, and, second, that having done so, Albion's management was so incompetent that it provided to Mr.Miglio the evidence of such dishonesty.

54. The stock listing which Albion produced to Mr. Miglio showed that the total quantity of stone supplied by Albion to Natural, whether BLW, BSW or Independent Basebed, was 509.885 cubic metres. Of that 181.14 cubic metres was Independent Basebed, leaving 328.745 cubic metres, according to Albion's computerised stock records, as what was supplied as BLW. Mr. Begley testified to an exercise which he had undertaken to compare deliveries of stone from Albion and Hanson against production of finished stone achieved. He calculated the total deliveries of stone from Albion at 415.909 cubic metres and the total deliveries of stone from Hanson at 623.163 cubic metres, making an overall total of 1039.072 cubic metres. His exercise showed total production of 503.957 cubic metres, but for some reason, although Mr. Begley told me that there was production in the months of April, May, June, July and November 1999, no figures for production in those months were included in his exercise. If Mr. Begley's figures are accurate, as to which there is obviously doubt because of the difference between his figures for the total of stone acquired from Albion and Albion's computerised records, on an average basis, including all types of stone obtained by Natural from either Albion or Hanson, the rate of wastage was not greater than 51.5%. I say "not greater than" because one cannot know what the missing production figures are and by how much they would, if available, reduce the rate of wastage.

55. It seems to me that the contemporaneous documentary evidence and, for what it is worth, such indications as there are of the amount of wastage experienced in working the stone supplied by Albion, are so far at variance from the evidence of the witnesses of fact called on behalf of Natural as to the quality of the BLW delivered by Albion that the evidence of Mr. Harry Turnbull, Mr. Cotterill and Mr. Begley just cannot be accepted. It may be that there were problems for SSM in obtaining from Natural the supplies of finished stone which SSM needed for fixing on site. It may be that Mr. McMillan and Mr. Cairns were given, falsely, as I find, the impression at the time any such difficulties were experienced that the cause of the production problems was the poor quality of the stone supplied. It may be that Mr. McIntyre and Mr. Revie were given that impression also. However, I find that Mr. Turnbull, Mr. Cotterill and Mr. Begley know very well that the suggestion that any significant quantity of BLW supplied was outside the range of what was acceptable for BLW is incorrect.

56. Mr. Harry Turnbull gave evidence as the first witness for Natural although his direct knowledge of matters relevant to the quality of the BLW supplied by Albion was limited. He was anxious that I should understand that he felt "betrayed", as he put it, by Albion. That did seem to me to be a somewhat intemperate reaction to a commercial dispute about the quality of stone. Mr. Turnbull was plainly, in my judgment, a man of forceful personality who is accustomed to have his opinions accorded the highest respect by those employed within the group of companies of which he is Chairman. His correspondence indicated to me that he is also accustomed in his commercial dealings to have his wishes complied with regardless of whether any relevant contract had been made, and, if so, regardless of the terms of such contract. Mr. Turnbull remained in court throughout the hearing, and so was present to see and to hear the witnesses on Natural's side give their evidence. Whether it was his conscious aim or not, the effect of his presence seemed to me to be very unsettling upon Mr. Cotterill and Mr. Begley. I formed the view that each of these gentlemen had been persuaded in his witness statement to sign up to the party line desired by Mr. Turnbull, although each knew that that party line was based upon an incorrect version of the facts as he understood them. Mr. Cotterill's evidence in cross-examination tended to be vague and evasive. Mr. Begley by his physical reactions demonstrated to me his extreme nervousness at giving evidence. He was shaking throughout his evidence and drank large quantities of water. While the giving of evidence in court can be a nerve-wracking experience for any witness, I formed the clear impression that it was not a coincidence that both Mr. Cotterill and Mr. Begley seemed very unhappy in the witness box and that the unsatisfactory manner in which both Mr. Cotterill and Mr. Begley gave their evidence was attributable to their knowledge that Mr. Turnbull had certain expectations of their evidence and was watching them.

57. There was no direct evidence that the blocks numbered 60133, 60890 and 61144, the price of which was claimed within Albion's invoice numbered F6616, were outside the range acceptable for BLW. Mr. McIntyre gave evidence that he had seen a document, which was produced in evidence, and which had apparently been prepared by Mr. McDunnach, Natural's yard foreman, on which these blocks, which seem to have been delivered on 26 October 1999, had been listed as 100% waste. The blocks were not, it appears, available for inspection by Mr. Miglio or Mr. Poultney, and they do not appear to have been photographed. Confusingly, the record which is relied upon as indicating Mr. McDunnach's opinion of the quality of these blocks also included a note beside each of block 60133 and 61144 that it had been used on 3 November 1999. On the evidence I am wholly unpersuaded that any of these three blocks was outside the range of what was acceptable for BLW.

58. There was simply no evidence at all that any of blocks 61616, 62234, 63473, 63588 or 63593, the price of which was included within Albion's invoice numbered F6679, was outside the range of what was acceptable for BLW.

59. In the result, subject to the setting off of any sum which I find to be due to Natural in respect of its counterclaim, I hold that there is due and owing by Natural to Albion the sum of Ł71,492.78.

The Counterclaim

60. Although in the light of my findings set out earlier in this judgment concerning the quality of the stone supplied by Albion to Natural it is plain that Natural's case has been grossly exaggerated, the fact remains that on Mr. Poultney's own evidence he saw at Alloa on 4 December 2000 BLW supplied by Albion which was outside the range of what was acceptable for BLW. The supply of that stone amounted, in my judgment, to breaches of contract in respect of which Natural is entitled to damages.

61. The counterclaim pleaded on behalf of Natural contained eight elements. The first two were, respectively, the alleged extra cost to SSM, as compared with what it is alleged it would have had to pay Natural, of obtaining from Farleigh Masonry Ltd. some finished Portland Stone required for Cleveland House, which supply was the subject of an invoice rendered by Farleigh Masonry Ltd. to SSM dated 31 March 2000 and apparently related to stone supplied in the month of March 2000, and the alleged extra cost to SSM of obtaining from Ketton Architectural Stone & Masonry some finished stone required for Novotel, which was the subject of an invoice dated 5 May 2000 rendered by Ketton Architectural & Masonry to SSM. The obtaining of supplies in each case was said to have been necessary as a result of the delay to the production of finished stone from BLW supplied by Albion as a consequence of the poor quality of that stone. I do not consider that the supply by Albion of the very small quantity of BLW which I have found was supplied which was out of the range which was acceptable for BLW had any effect upon the rate of production of finished stone by Natural, so for that reason these elements of the counterclaim fail. However, it is right to say that I have great difficulty with the proposition that the supply of defective stone to Natural in a period which ended in November 1999, at which time supplies of rough hewn stone were obtained by Natural from an alternative source, caused the need for SSM to obtain extra supplies of finished stone three months or more later. Further, as I have indicated, there were no contractual arrangements between SSM and Natural for the supply of finished stone by Natural to SSM. It must follow that Natural could not be in breach of contract in supplying stone at a later date than SSM might have wished. There was no evidence that Natural had in fact reimbursed SSM the sums which are the subject of these two elements of Natural's counterclaim, and so I should have held in any event that these elements of the counterclaim failed for want of proof.

62. Having persuaded SSM's various customers to agree to a change from BLW to Hanson Coombefield stone, Natural was, it seems, left with a stock of finished BLW for which it had no use. The value of that stone was put at Ł56,855.91 and it formed the subject of a part of Natural's counterclaim. The stone was not, in itself, in any way defective. In my judgment, Natural's reasons for changing its source of supply of Portland Stone from Albion to Hanson were purely commercial, motivated in part, perhaps, by Mr. Turnbull's reluctance to have any further dealings with Albion, but probably by a desire to obtain the benefit of the lower price at which Hanson was prepared to supply, coupled with the credit terms apparently available and the ready availability of stone in the quantities which Natural urgently required. In no way, therefore, in my judgment, was the fact that Natural was left with a quantity of perfectly good BLW for which it had no need a consequence of any breach of contract on the part of Albion. This element of the counterclaim therefore also fails.

63. There was a claim for Ł13,299.34 for allegedly defective slabs which Natural had manufactured but which it could not use. What exactly these slabs were was not proved. No evidence was led which would have enabled anyone to ascertain from which block or blocks these slabs came. This was an important deficiency in the evidence because, in my judgment, the effect of the agreement reached between Mr. Turnbull and Mr. Poultney on or about 20 October 1999 was that Natural agreed to compromise all claims in relation to stone supplied which was the subject of invoices raised by Albion up to the end of September 1999. Without proof that the slabs the subject of this element of counterclaim were manufactured from block delivered after block covered by the settlement agreement, it seems to me that this part of Natural's counterclaim, as formulated, must fail. However, as I have said, Mr. Poultney did accept that some BLW had been delivered which was outside the range of what was acceptable for BLW, on the evidence that stone had been paid for as if it were good stone, and thus Natural has certainly suffered loss to the extent that it has paid for that for which it should not have paid. No evidence was led on behalf of Natural as to what sum had been paid which should not have been paid. Natural's counterclaim was focussed on altogether more ambitious potential recoveries. However, by concession in Mr. Smyth's closing submissions I was provided with some figures which Albion would accept were an appropriate basis for assessing a refund. In Schedule B Part 1 to the Amended Reply and Defence to Counterclaim Mr. Poultney identified, as I have already recorded, four blocks delivered after the end of September 1999 as meriting a 100% credit, namely those numbered 62146, 62758, 63050 and 63181. From Schedule E to Mr. Smyth's closing submissions the value which can be put upon these blocks is a total of Ł4,415.11. In addition, as I have also already mentioned, Mr. Poultney accepted that block 63440, the value of which according to Schedule E was Ł292, merited a credit of 75%, that is to say Ł215, and block 61214, for which no value was shown on Schedule E, merited a credit of 20%. Since I am only in a position to award Natural anything at all in respect of damages for the supply of BLW which was outside the range of what was acceptable as a result of a concession on the part of Albion, all I can award is what Albion is prepared to concede, which, for the reasons I have given, is a total of Ł4,630.11.

64. Two further elements in Natural's counterclaim were for damages for alleged reduction in production at Natural's Alloa factory and for loss of profit on production at that factory. For the reasons which I have given in relation to the claims for the alleged extra costs of obtaining supplies of finished stone from Farleigh Masonry Ltd. and Ketton Architectural Stone & Masonry, it does not seem to me that the supply of the small quantity of stone which I have found was outside the range of what was acceptable for BLW could have had any effect upon the production of the factory at Alloa. These elements of claim therefore fail.

65. The last two elements of Natural's counterclaim comprise the alleged cost to SSM of employing Sovereign Masonry Ltd. to "spin", that is to say, to polish the outside of, Novotel and Cleveland House, respectively, allegedly to remove blemishes in the stone supplied by Albion. These elements of claim, like those for the sums allegedly paid to Farleigh Masonry Ltd. and to Ketton Architectural Stone & Masonry, are vulnerable to the objections that as there was no contract between Natural and SSM, that Natural was and is not liable to reimburse SSM for its alleged expenditure, and that there is no evidence that Natural has in fact reimbursed SSM. In any event, I am not satisfied that any need to "spin" either Novotel or Cleveland House arose out of any deficiency in the quality of BLW supplied by Albion to Natural.

Conclusion

66. For the reasons set out in this judgment, there will be judgment for Albion in the sum of Ł66,862.67, being the revised sum claimed of Ł71,492.78 less the amount which I have awarded as damages on the counterclaim of Ł4,630.11.