England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
TECHNOLOGY & CONSTRUCTION COURT

		15/05/2015

 


A: Introduction

1. The various persons involved

This case concerns the initial manufacture of laminated sheets, and their subsequent bonding onto MDF substrate to form bonded panels.

2. There is a long chain of interested parties, only two of whom are parties to these proceedings. The laminate sheets are manufactured by Polyrey in France. The claimant ("IDS") carries on business as a distributor of those laminate sheets, among other products. Polyrey has two distributors of their products in the UK: the other being BGN (page C/142). IDS is the larger, accounting to some 75%^[1] of sales of Polyrey's laminate sheets in the UK.
3. The end-user of the bonded panels in this case was Primark which, with effect from around 2006 (page C/150), was engaged in a programme of fitting out some of its stores in the UK and Ireland. Primark engaged architects and other professionals to provide appropriate services in connection with that fitting out programme. Primark also had an in-house project manager who worked on the fitting out programme (Gerard O'Sullivan: cross-examination; transcript 2/117/19 - 21). In addition, Primark engaged Railston Design, who carried on business as shop-fitters, to carry out the shop-fitting.
4. Railston Design placed orders for bonded panels with the defendant ("Hillmead") for use in various of Primark's stores. In order to manufacture bonded panels, Hillmead purchased laminate sheets from IDS. While Hillmead had the capacity to manufacture some bonded panels, it subcontracted almost all of such work to other fabricators, primarily Arnold Laver. In turn, while it fabricated a substantial number of bonded panels itself, Arnold Laver also sub-subcontracted some of that work to other fabricators e.g. J A Rose Ltd and Premier Post Forming Panels Ltd (see paragraph 11 of Darren Selman's first witness statement at page C/3)
5. The claim and counterclaim

IDS commenced these proceedings by claiming the price of various goods sold and delivered. That claim was met by Hillmead's counterclaim. The claim is admitted, with the consequence that the trial was effectively the trial of Hillmead's counterclaim. The counterclaim relates to different products from those which are the subject matter of the claim.

6. The sales alleged in the counterclaim

These are set out in schedule 1 to the defence and counterclaim (page 1/23). At trial Darren Selman of Hillmead's parent company^[2], accepted that the ninth invoice was sent to, and paid by, MWC Fittings Ltd (transcript: Day 1/109/12-15): I therefore find that the ninth invoice does not form part of Hillmead's counterclaim. The dates of the sales are from 15 February 2008 to 12 June 2008.

7. Rejections

In paragraph 14 of his first witness statement, Darren Selman (although employed by Hillmead's parent company was also working as Hillmead's sales office manager) stated (page C/4) that Mark Shepherd (now deceased) of Railston Design had informed Ellis Greenhill, who was also employed by Hillmead's parent company, "... that there was a problem with the panels supplied to the Ealing Primark store, and that Primark had rejected these panels. This was the first of a series of rejections." He stated there were subsequent rejections between May and July 2008.

8. The complaint

In paragraph 15 of his first witness statement, Darren Selman stated (page C/4-5) that "... I was aware that Primark and Railston Design were complaining that the panels were unsatisfactory as the surface finish of the panels was inconsistent, and had a mottled effect, and that ripples were evident across the surface of the panels". Although he referred to the fact of complaints in paragraph 6 of his witness statement, Gerard O Sullivan, a director of Railston Design, did not state what the substance of the complaint was; that may well have been because that aspect of the matter was dealt with at Railston Design by his late colleague Mark Shepherd.

9. The initial discussions

Hillmead's belief (not disputed by IDS) was that "Primark's interior design contractors or in-house designers had discussions with Polyrey about the type of laminate to be used in the stores", as Darren Selman put it in paragraph 7 of his first witness statement. However, neither party called any witness at the trial from either Polyrey or Primark, its architects or any of the professional team engaged by Primark in connection with the fitting out programme. Hillmead did call Gerard O'Sullivan of Railston Design as a witness at trial, but as indicated above he did not give direct evidence about the substance of the complaint.

10. The respective values of the goods sold, and Hillmead's counterclaim

The value of the first eight invoices listed in schedule 1 to the counterclaim is £13,019.27. Hillmead's counterclaim is stated to amount to £367,408.69. In round figures, £46,000 of that total is alleged by way of "diversion of staff time" (item 12); and £254,000 of that total is alleged by way of "loss of business" over a six year period^[3].

B: The issues in the case

11. Although the parties have agreed a detailed list of issues, the principal issues fall into the following categories:

(1) What were the terms of the contract between IDS and Hillmead? In particular (a) were IDS' standard terms and conditions incorporated into the contract; and/or (b) did the contract have the usual implied terms as to satisfactory quality and/or fitness for purpose as Hillmead alleges?

(2) If IDS' standard terms and conditions were incorporated into the contract, did they (whether all or individually) satisfy the statutory test of reasonableness?

(3) Was IDS in breach of contract? This will involve an assessment of the expert opinion evidence in the case.

(4) Was the loss alleged by Hillmead caused by any breach of contract, or did other factors cause or contribute to the incidence of such loss? In particular, did Hillmead have the opportunity to inspect either the laminate sheets or the bonded panels for defects?

(5) What is Hillmead's measure of loss and damage? In particular, is any of the claimed loss of business too remote?

C: The terms of the contract between IDS and Hillmead

12. Hillmead's case is that IDS' terms and conditions were not incorporated into the contract between Hillmead and IDS. The reason for Hillmead taking that position is stated in paragraph 3 of its rejoinder^[4] where Hillmead stated (page A/44): "the terms and conditions were not annexed to the application for credit facilities signed by Mr Bowers..., and Mr Bowers made no representation that future sales would be governed by the terms and conditions (whether by the declaration or at all)".
13. In his cross-examination (transcript day 3/42/10 - day 3/48/21) Mr Bowers explained that his "accounts lady" had taken a photo copy of the application for credit facilities (page I/54/111-114), but the copy which she filed did not include the terms and conditions of sale which are printed on the fourth page of the original document. In February 2012 the claimant's solicitors sent the defendant's solicitor a certified copy of the original document which contains the terms and conditions printed on the fourth page of the application for credit facilities i.e. on the reverse face of the second page. Mr Bowers did not think he was ever shown a copy of the original document, which he had signed.
14. In the event, in the course of his cross-examination, Mr Bowers was shown the original document, and he accepted (transcript day 3/44/3) that the terms and conditions formed part of the original document. That is indeed apparent from perusal of the original, which comprises a document of four sides of A4 size paper; the paper being rather thicker than standard paper used for ordinary word-processing and photocopying purposes; the text being printed on each side of the paper, the first sheet being apparently joined to the second by a perforated edge.
15. Paragraph 12 of the application form, under the heading in capitals "declaration", provides:

"I/we the undersigned applied to the Company for Credit facilities and declare that the information given is correct.

I/we have read the 'Terms and Conditions' and should Credit facilities be granted agree to trade solely under these terms. The Company reserves the right to terminate this Agreement forthwith by notice upon a breach by the customer of any Conditions and all amounts then outstanding will become due forthwith ..."

In paragraph 13 of his written opening submissions Mr Cutting submitted that "... it is D's position that the mere reference to the T&Cs at paragraph 12 is not "reasonably sufficient" to render D liable to the T&Cs without a clearer notification of the T&Cs". That point was not specifically stated in Hillmead's rejoinder: the point taken there was merely that the T&Cs were not annexed to the application form, and accordingly Mr Bowers did not make the representation that future sales would be governed by the T&Cs. In my judgement the point which Mr Cutting sought to make in paragraph 13 of his written opening submissions goes rather beyond Hillmead's stated case, and strictly the point is not open for Hillmead to take at trial. Nevertheless I shall consider it.

16. In my judgement the answer to the point is to be derived from (a) the language of paragraph 12 of the application form containing the declaration, and (b) the surrounding circumstances. Hillmead was applying for credit facilities; IDS was prepared to provide credit facilities, but only on terms that its terms and conditions would apply to any subsequent sales. IDS did provide credit facilities to Hillmead following Hillmead's application for credit. There was evidence (which I accept) that this is a highly competitive industry; and further evidence (which I also accept) that the provision of credit facilities was a material commercial advantage to a company in Hillmead's position. The text of the second paragraph of the declaration is to be read in that context.
17. Mr Bowers accepted in cross-examination (transcript day 3/54/9-16) that he was under a duty (in my judgement owed both to Hillmead and to IDS) to check the text of the declaration which he signed, and to ensure that he understood its content. At the very least Mr Bowers was under a duty to both Hillmead and IDS to check -- when he signed the application form -- that he knew what the terms and conditions were, pursuant to which such credit facilities would be granted.
18. In those circumstances, I find that IDS drew its terms and conditions sufficiently to Hillmead's notice when Mr Bowers signed the application for credit. For all those reasons I find that IDS' standard terms and conditions were incorporated into the various contracts between Hillmead and IDS which ensued, and which are the subject matter of the counterclaim.
19. I also accept Mr Sheehan's submission that, in the circumstances of this case, Hillmead is estopped from denying that IDS' terms and conditions were incorporated as terms of the various contracts between Hillmead and IDS. All the necessary ingredients to establish a valid or effective estoppel are present: a representation; reliance thereon; and detriment to the party relying.

D: The factual background

20. It is first necessary to set out the relevant factual background before considering whether IDS' standard terms and conditions (whether collectively or individually) satisfy the statutory test of reasonableness. I shall first consider the way in which the laminate sheets came to be specified. Hillmead's case (in the context of its assertion that there was an implied term as the fitness of purpose) is stated in paragraph 7 of its defence in counterclaim as follows (page A/16):

"In order to purchase the goods at a specific price which had been agreed between Polyrey and Primark when planning the specific projects ... (Hillmead) made (IDS) aware, before 15 February 2008, that the laminate was to be used as a decorative surface on panels in specific locations within Primark premises, by notifying it that purchases were intended for use in those projects."

That point is then developed in paragraph 8.1 as follows:

"It was in the contemplation of the parties when the above mentioned terms ... were agreed that ...

The goods would only be used in manufacturing laminated panels which would be sold to a specific end user, Primark, who would require a good quality of surface finish on such panels."

21. IDS' denies that it "... was informed that the product was to be used in specific locations within Primark stores", and avers that it "... was not given any information about how the product was to be used within Primark stores"; and states further that "... any discussion concerning the suitability of the product for Primark's purposes took place between Primark and/or its agents or contractors and Polyrey": see paragraphs 19.3 - 19.5 of its reply (page A/33).
22. In paragraph 8 of his witness statement Stephen Hopkins (IDS' sales representative) stated that "I did not know how the laminate was to be used in Primark stores", and in paragraph 9 "... I expect that Primark and/or its designers/architects specified the laminate that was to be used in its stores. I anticipate that it will have worked directly with Polyrey to specify the products to be used." (Page B/2). In his cross-examination he stated (transcript day 4/40/15-23):

"Q: .. Do you have any knowledge of what goes on between the negotiations between Polyrey and a large customer like Primark as to how we get to the specification of particular products in particular prices?

A: … no. All we find out is when it has actually been specified. We are not involved in any negotiation with the companies."

23. In paragraph 13 of his first witness statement, Stephen Rickers (formerly IDS' supply chain director) stated (page B/23):

"A large proportion of IDS' business relates to sales to fitters. Much of this distribution is in relation to large-scale projects including shop fit outs. IDS' involvement in shop fit outs is varied. Often with small scale projects a fitter will approach IDS for advice on specific products that may be suitable for the contract which they are undertaking. However, in most projects, the product has already been agreed between a representative of a product manufacturer and the architect or designer of the project."

In paragraph 14 he stated:

"I understand that in the Primark contract ... a Polyrey representative known as a "specification representative" met with an agent of the end user, Primark, or its instructed architect or contractor in order to ascertain the requirements of the laminate surface and to discuss suitable products ..."

In paragraph 17 he stated:

"IDS is very rarely, if ever, involved in the discussions that take place between the specification representatives and the end users/contractors the project to which a product is to be agreed. IDS was not privy to the discussions relating to specification for the Primark contract ... or to any other communications between Polyrey, Primark, its main contractors and Hillmead that resulted in the product being chosen. Hillmead first contacted IDS once a product specification and price had been agreed to ascertain whether IDS would be in a position to supply the required level of products."

In paragraph 19 he stated:

"Once an agreement had been reached between (Primark) and Polyrey as to the product, there would have been discussions between the contractors and the specification representative in relation to the price of that product. Product manufacturers often agree special reduced prices with contractors where there are large-scale projects. In such circumstances, if IDS agreed to supply the product of the contractor, it would be required to supply the product at the price agreed between the supplier and contractor ..."

In paragraph 20 he stated:

"As the price was pre-agreed, IDS then had to balance out any adjustment in price with Polyrey directly. This is known as a contract support price and is industry standard ..."

24. In his cross-examination Stephen Rickers stated (transcript 5/37/8-13):

"Q: Do you also accept that, in a large supplier like yourselves, or like IDS, that information about the products and the price is disseminated within IDS to your sales teams so that they know that this could be coming?

A; That's correct

He further stated (transcript 5/44/23 to 5/45/3):

"A: If there was a specification and we were supplying, our project tracking team would have known about it because they would have been able to advise the branches of the level of price support, which is the primary reason for the contact."

25. I accept that evidence, and make the following findings of fact:

(1) That all the discussions about specification and use of the laminate sheets (in particular when fabricated into bonded panels) occurred between Polyrey's specification representative and Primark's architect or other appointed representative; and that IDS took no part in such discussions; and that Hillmead did not give IDS any information at any time about the "specific locations within Primark premises" in which the bonded panels were to be used.

(2) Instead, what IDS did know was:

(a) what the product was, which had been previously agreed between Polyrey's specification representative and Primark's architect or other appointed representative; and

(b) the likely quantity of the product that would be required by the end user, here Primark; and

(c) what the price of the product was, which had been agreed between Polyrey and Primark (probably shortly after the initial discussions between Polyrey's specification representative and Primark's architect or other appointed representative).

(3) A further matter which IDS knew about was the level of price support, which was a matter discussed and agreed directly between IDS and Polyrey; this related to the difference in price of the product between that which IDS would normally be able to charge its customers, and the price which Polyrey had agreed with the end user would apply to sales of the product in this instance.

26. I also make the following findings of fact as regards the issues of inspection and rejection:

(1) Following Hillmead placing an order, IDS delivered sheets of laminate to Hillmead's premises.

(2) Those sheets of laminate were covered with a thin transparent film which Darren Selman agreed was in the nature of, but rather stickier than, cling-film: see his cross-examination: transcript 1/113/10 to 1/114/21; and Exhibit 3.

(3) Those sheets of laminate were delivered in stacks, and placed on pallets: see paragraph 13 of Darren Selman's first witness statement (page C/4).

(4) Until June 2008, i.e. after some of the bonded panels had been rejected, Hillmead did not carry out any inspection of laminate sheets delivered to its premises: see paragraph 3 of Darren Selman's third witness statement (page C/146) and paragraph 8 of David Bowers third witness statement (page D/5).

(5) Hillmead then sent the laminate sheets onward to fabricators (primarily Arnold Laver) to be used in the fabrication process to manufacture bonded panels.

(6) The fabricators then delivered the bonded panels back to Hillmead. The top surface of such bonded panels comprised the laminate sheets, still covered by the same transparent film.

(7) Hillmead did not carry out any inspection of the bonded panels upon their delivery back to Hillmead's premises: see Darren Selman's cross-examination: transcript 1/123/6 to 1/126/9.

(8) Hillmead then delivered the bonded panels to the various Primark locations as directed by Railston Design.

(9) Upon their arrival at the various Primark locations, the bonded panels were not inspected by Primark's architects and other engaged professionals, or by Primark's in-house project manager.

(10) Instead, the bonded panels were then installed at the various Primark locations. It was only after several days after such installation (initially at Ealing) that someone on behalf of Primark complained about the appearance of some of the bonded panels: see paragraph 5 of the witness statement of the late Mark Shepherd of Railston Design (page C/158).

(11) Only a proportion of the bonded panels were rejected: 246 out of a total of 392. The fact that some bonded panels were rejected, but others were not, was a matter that caused a deal of confusion for Hillmead in its subsequent investigations.

27. Whether it was possible or practicable for Hillmead to remove the protective film in order to inspect the laminate sheets for visual defects upon their initial delivery to Hillmead's premises was a matter of significant dispute between the parties. Hillmead described the film as a 'protective' film. Being extremely thin, I find that the film could only protect against scratching or the like of the surface of the laminated sheet, either on its own, or when fabricated into a bonded panel, rather than protect against any more substantial damage. There was no evidence, expert or otherwise, on the issue of whether it was possible to see through the transparent film so as to observe visual defects. Instead the thrust of Hillmead's case on this issue was that it was simply impossible and/or impractical to remove the transparent film, so as to inspect the surface of the laminate sheet for visual defects: see paragraph 13 of Darren Selman's first witness statement (page C/4). IDS' case was the direct opposite: namely that it was possible and or practicable to remove the transparent film so as to inspect the surface of the laminate sheet for visual defects.
28. I find that it is, from a practical point of view, quite possible to remove the transparent film from the laminate sheet. The point is rather one of practicability: if, as is implicit in Hillmead's case, it was impossible and/or impractical to remove the transparent film because it would thereafter be difficult, if not impossible, to replace the transparent film on the laminate sheet, then in those circumstances Hillmead could and/or should have instigated a system of inspection of laminate sheets on a sample basis. It did not do so. It was specifically put to Darren Selman that inspection of samples of laminate sheets could have been done, and that Hillmead did not do so: he agreed that inspection of the laminate sheets by sample could have been done, but that Hillmead and did not do so (by implication in 2008): see his cross-examination, in particular transcript at 1/125/24 to 1/126/9. The following year (2009) Hillmead did instigate a system of inspecting both laminate sheets when delivered into Hillmead's premises, and then the first 3 bonded panels (referred to as "boards" in Ellis Greenhill's e-mail dated 25 September 2009 at page J/127) specifically "to inspect the first 3 boards off the run". Although Darren Selman stated that inspection of the laminated sheets was restricted to "checking for splits, cracks into the surface laminate before they went away for bonding" (transcript 1/122/4-6), he agreed that the purpose of checking the fabricated bonded panels on their subsequent delivery back to Hillmead was "... to check that you are satisfied with the condition of the fabricated boards prior to the mass fabrication taking place" (transcript 1/123/11-15). I accept that evidence, and therefore reject Hillmead's assertion in paragraph 8.2 of its defence (page A/16) that "any defect in the surface finish of the goods would not or would be unlikely to be detected on delivery or in the process of manufacturing laminated panels (as the surface finish of the goods would not be observable until the panels … were fitted into their final locations in the relevant stores, the protective coating removed, and subjected to store lighting)".

E: Did IDS' standard terms and conditions (whether collectively or individually) satisfy the statutory test of reasonableness?

29. IDS rely on the following of its standard terms and conditions:

(1) clause 5.8, which provides:

"The customer is under a duty wherever possible to inspect the goods on delivery or collection failing which the carrier's note or such other note as appropriate shall be marked 'not examined'."

(2) clause 6, which provides:

"If the terms of this clause are not complied with, the company shall be under no liability for any shortages, goods damaged in transit or visual defects either in quality and/or written description given in accordance with clause 8 (hereinafter referred to as "visual defects") that would be apparent on careful inspection and, in any event, will be under no liability unless a written complaint is delivered to the company within 3 working days of delivery or collection detailing the alleged damage, shortage or visual defect."

(3) clause 6.1, which provides:

"In all cases where damage, shortages or visual defects are complained of by the customer the company shall be under no liability in respect thereof unless a reasonable opportunity to inspect the consignment in which the goods complained of are contained ... is provided to the company before any use is made of the goods or any alterations or modifications are made thereto by the customer."

(4) clause 6.2, which provides:

"Subject to the foregoing the company shall make good any shortages in the goods and where possible collect the goods damaged in transit or with visual defects and replace the same as soon as it is reasonably able to do so but otherwise shall be under no liability whatsoever or howsoever arising for such shortage, damage or visual defect."

(5) clause 8.9, which provides:

"Save as set out in the foregoing sub-clauses no other terms, whether conditions warranties or innominate terms, express or implied, statutory or otherwise shall form part of this contract (except where the customer deals as a consumer with in section 12 of the Unfair Contract Terms Act 1977 ...)."

(6) clause 8.10, which provides:

"The company shall not be liable for any loss of profit, loss of business, loss of goodwill, loss of savings, increased costs, claims by third parties, punitive damages, indirect loss or consequential loss whatsoever and howsoever caused ... suffered by the customer or any third party in relation to this contract ..."

(7) clause 8.11, which provides:

"Except for death or personal injury directly attributable to the negligence of the company or in the case of fraudulent misrepresentation in no circumstances whatsoever shall the company's liability (in contract, tort or otherwise) to the customer arising under, out of or in connection with this contract or the goods supplied hereunder exceed the invoice price of the particular goods concerned."

30. The collective effect of IDS' terms and conditions is thus, putting issues of inspection and notification to one side, that the seller's liability would be confined either to an obligation to replace goods, whether as a result of shortage, damage in transit or visual defect, or to make financial compensation in an amount limited to the invoice price of the goods.
31. It is convenient to consider IDS' terms and conditions in the following four stages:

(1) whether it is reasonable to exclude implied terms as to satisfactory quality and/or fitness for purpose, as provided for in clause 8.9;

(2) whether it is reasonable to exclude any liability on the part of the seller if the buyer does not inspect the goods on delivery and/or report complaints of damage, shortage or visual defects so as to provide the seller with a reasonable opportunity to inspect the goods before any use is made of them; this is the combined effect of clauses 5. 8 and 6.1;

(3) whether it is reasonable to confine any remedy to replacement of the goods, alternatively to limit financial liability to the invoice price of the goods, as provided for in clauses 6.2 and 8.11;

(4) whether it is reasonable to exclude any liability for consequential loss etc, as provided for in clause 8.10.

32. As both Mr Sheehan and Mr Cutting submitted in their written submissions on this issue, while specific regard is to be given to schedule 2 to the 1977 Act as regards exclusion of implied terms under section 14 of the Sale of Goods Act 1979, that is not specifically required as regards the assessment of reasonableness in relation to the other terms. However, it is not only permissible, but appropriate, for the court to have regard to schedule 2 when carrying out such an assessment.
33. I therefore turn to consider schedule 2, and each of the matters there described:

(1) The strength of the parties' bargaining positions.

IDS submit that the parties were of equal bargaining strength. However, in paragraph 39 of his written submissions Mr Cutting points to the contrast in the amounts of the parties' respective turnovers: that for IDS being of £111 million in 2012 (page B/42), whereas that for Hillmead being £2 million. As regards negotiation, in paragraph 12 of his witness statement, Paul Davies (the in-house solicitor employed by IDS' parent company) stated that "... it is simply not practical to allow the terms to be individually negotiated every time an order is placed." (page B/45); although in his cross-examination he stated that "... we do accept some negotiation" (transcript: 5/151/4-8). There was however no evidence of there having been any attempt to negotiate the terms and conditions in this particular case, or of the nature of the alteration to its terms and conditions which IDS had agreed on other occasions. I generally accept Mr Cutting's submissions on this matter, and find that IDS was in a significantly stronger bargaining position then was Hillmead.

(2) Inducement.

I do not regard the provision of credit facilities as being an inducement to agree IDS' terms and conditions. Absent negotiation, IDS' terms and conditions would have been in place irrespective of whether IDS afforded its customer credit facilities. This point is thus neutral on this issue.

(3) Knowledge of the terms and conditions.

In my judgement the fact that Mr Bowers signed a declaration stating that he had read IDS' terms and conditions is decisive of this issue, and accordingly I find that Hillmead either knew of IDS' terms and conditions, or is estopped from denying that it did.

(4) Whether it was practicable for the buyer to comply with a relevant term.

This is of particular relevance to clauses 5.8 and 6.1 dealing with inspection, and notification of damage, shortage or visual defects. In my judgement it was practicable for Hillmead to inspect the laminate sheets on a sample basis.

(5) Whether goods were manufactured to a special order.

There was no evidence that the laminate sheets had been manufactured to a special order.

34. I now consider whether clause 8.9 satisfies the statutory test of reasonableness, and thus whether it is reasonable to exclude implied terms as to satisfactory quality and/or fitness for purpose.
35. In Air Transworld Ltd v Bombardier Inc [2012] EWHC 243 (Comm) Cooke J summarised the essential dispute between the parties in that case "... as being a battle in which the claimant alleged that the aircraft did not respond with description, was not of satisfactory quality and was unfit for purpose within the meaning of sections 13 and 14 of the Sale of Goods Act 1979 ... the defendant relied upon the terms of the APA (aircraft purchase agreement) as excluding such liability under statute, and replacing it with the warranties set out in the APA." Clause 15 of the APA provided as follows:

"Seller warrants to buyer that at delivery time and for the warranty periods set forth below, the aircraft shall be free from (i) defects in material, (ii) defects in manufacture and (iii) defects in design, having regard to the state-of-the-art as at the time of design of the aircraft ..."

No such alternative or other warranty as to quality or fitness for purpose was inserted in IDS' terms and conditions in place of the terms as to quality and fitness for purpose implied by the 1979 Act. That point was reinforced when Cooke J came to consider the test of reasonableness in the section of his judgement beginning at paragraph 123. He held in paragraph 133:

"In truth therefore, the real issue of reasonableness ... depends upon a comparison of the Sale of Goods Act obligations under sections 13 and 14, as compared with article 4 and the warranty in appendix A. ... In circumstances where the parties were of equal bargaining power, where the excluding terms of article 4 are set out in capitals and where the terms of the warranty were specifically drawn to the purchaser's lawyer's attention, it is hard to see why the court should conclude that the terms are unreasonable ..."

Cooke J also held in paragraph 127:

"The reasonableness of this term has to be considered in the light of the APA as a whole, including its provision for pre-delivery inspection. ... Purchasers of aircraft such as this almost invariably engage technical experts to examine the documentary records of the manufacturer and the aircraft itself ... the purchaser therefore has ... the opportunity to examine the defects and discrepancies ..."

36. It is thus immediately apparent that the circumstances of the case were materially different to those in the present case. In particular:

(a) there, but not here, an alternative warranty was expressly included within the relevant terms and conditions;

(b) there, but not here, the parties were of equal bargaining power; and

(c) there, but not here, the buyer had an express contractual right to inspect the goods pre-delivery.

37. Also different to the circumstances of the present case are those which HHJ Wilcox had to consider in Edmund Murray Ltd v BSP International Foundations Ltd (1992) 33 Con LR 1. As Neill LJ held on appeal at the bottom of page 12/16 of the printed version of the report: "... the rig was manufactured to the special order of EML.. ". He continued at page 13/16 to hold that the relevant circumstances of the case included the following:

"(a) the fact that the rig was specially ordered;

(b) the fact that the specification contained precise details of the technical standards which the rig was required to meet; and

(c) the fact that EML made known to BSP the purpose for which they were ordering the rig."

The circumstances of Edmund Murray were thus also materially different to those in the present case.

38. It thus appears that the decisions in both those cases derive, as is almost inevitable in such cases, from the specific facts of the respective cases. They are however of considerable assistance in identifying matters of general principle or application which judges have found to be of assistance in informing the outcome of the enquiry. In particular the absence in the present case of the circumstances which Neill LJ found to obtain in Edmund Murray is a matter of particular relevance to the assessment of the issue in the present case.
39. In my judgement, the circumstances of the present case, in particular:

(a) where the exclusion of statutory implied terms was not replaced by any other term or warranty as to quality or fitness for purpose within the terms and conditions sought to be relied on;

(b) where the parties were not of equal bargaining power;

(c) where goods were not manufactured to the special order of the buyer;

(d) where there was no agreed specification of the goods (save a general understanding that they would comply with the relevant BS, as to which see below);

(e) where Hillmead did not make known to IDS the purposes for which the goods were intended as alleged by Hillmead (as to which see below);

such as to lead to the conclusion that the terms of clause 8.9 of IDS' terms and conditions do not satisfy the statutory test of reasonableness.

40. I now consider whether clauses 5.8 and 6.1, in particular the latter, satisfy the statutory test of reasonableness, and thus whether it is reasonable to exclude any liability on the part of the seller for a failure by the buyer to inspect the goods and/or report.
41. Sterling Hydraulics Ltd v Dichtomatik Ltd [2006] EWHC 2004 was a case concerning the sale of seals which were to be fitted into pin valves, which in turn were to be incorporated within custom manifold blocks; it thus shares one characteristic of the present case, namely that the goods in question were to be incorporated into another product after the relevant sales. In Sterling Hydraulics the relevant clause 5 provided as follows:

" .. We shall be liable for defects including failure to achieve guaranteed quality standards as provided hereunder:

(a) The customer has to inspect the goods immediately after arrival at the place of destination. Claims on account of deficiencies and defects apparent on inspection can be recognised by us when they are reported to us by letter or fax immediately after arrival of the goods at the place of destination but within two weeks of arrival at the latest. Hidden defects are to be reported to us immediately, but within one week at the latest after being found out. Complaints are excluded after processing or incorporation of goods unless the defect became only recognisable by the processing or the incorporation."

42. HHJ Havelock-Allan QC held as follows at paragraph 28 of his judgement:

"… there was little evidence as to whether the time limits specified in clause 5 (2) (a) were or were not practicable. I have my doubts on that score so far as hidden defects are concerned, especially in goods which have been processed or incorporated into other goods and sold on. In my judgement a period of one week from the time when the defect is found out (even if this runs only from the moment the purchase is informed of the defect by his sub-buyer) is too short and is unreasonable."

Here, there has been a good deal of evidence as to whether it was possible to inspect the laminate sheets on delivery to Hillmead. Clause 6.1 does not impose a specific time limit for reporting damage, shortages or visual defects (rather than hidden defects, which was the focus of HHJ Havelock-Allan QC's judgement in the passage cited above), so as thereafter to afford IDS the opportunity to inspect.

43. Knight Machinery (Holdings) Ltd v Rennie [1984] SC 338 concerned the sale of a printing machine which failed to work satisfactorily some months after delivery. The relevant clause imposed a seven-day period from delivery within which the purchaser could give notice of rejection, failing which "the goods shall be conclusively presumed to be complete, in accordance with their description, in good order and condition and fit for the purpose for which they were acquired. An Extra Division of the Court of Session found that the clause in question "has no clear business sense", and for that reason " ... it would not be reasonable at the time of the contract to expect that it would be practicable for the buyer to send a written notice to the sellers within seven days of delivery of the machine in circumstances such as could reasonably expected to obtain in this type of contract in relation to this type of machine."
44. In my judgement the key issue in considering whether clause 6.1 in particular satisfies the statutory test of reasonableness is the fact that it purports to exclude all liability (my emphasis) in the event of a failure by the buyer to comply with its requirements, in particular to inspect goods for visual defects before use is made of them. To my mind this is too draconian a consequence to flow from such a default, and the clause accordingly does not satisfy the statutory test of reasonableness. The initial fault is that of the seller in selling goods with such a visual defect, which I find the seller equally could have observed before delivery. A provision which transfers all the risk of liability to the buyer who subsequently fails to inspect and report precisely that which the seller could and should previously have observed for itself does not satisfy the statutory test of reasonableness.
45. I now consider whether clauses 6.2 and 8.11 satisfy the statutory test of reasonableness, and thus whether it is reasonable to confine any remedy to the replacement of goods; alternatively to limit financial liability to the invoice price of the goods.
46. In my judgement the key issue in considering whether these clauses satisfy the statutory test of reasonableness is the fact, as I find, that at the time the contracts were made it was in the contemplation of the parties that any direct loss to the buyer would be greater than merely the cost of replacing the goods. That is because at all material times IDS knew that the laminate sheets were going to be fabricated into bonded panels, and thus if there was a defect in the laminate sheets, it was highly likely and/or probable that Hillmead would incur direct loss referable to the cost of replacing not just the laminate sheets, but also the bonded panels.
47. Furthermore, in this case as I have already found, the parties were not of equal bargaining power, and thus the circumstances of this case are materially different to those for example which the court had to consider in Sterling Hydraulics. It is revealing that in Sterling Hydraulics there was evidence before HHJ Havelock-Allan QC about (a) what might have been an appropriate limit of financial liability; and (b) the possibility of either party obtaining insurance cover to such a stated amount. Neither of those circumstances obtained in the present case. Nor was there any evidence before me about the terms and conditions of sale of bonded panels from Hillmead to Railston Design.
48. For all those reasons I have come to the conclusion that clauses 6.2 and 8.11 do not satisfy the statutory test of reasonableness.
49. I now consider whether clause 8.10 satisfies the statutory test of reasonableness, and thus whether it is reasonable to exclude any liability for consequential loss.
50. In Bacardi Martini Beverages Ltd v Thomas Hardy Packaging Ltd [2002] EWCA Civ 549 in paragraph 3 of his judgement Mance LJ summarised the facts in that case as follows:

"Terra manufactured the carbon dioxide at its Severnside, Bristol chemical plant, and the cause of contamination was a leak, which enabled benzene to bypass the reforming section of the plant where the benzene would normally have been removed. Terra supplied Messer, which re-sold to various customers. After some period during which the contamination went undetected, its discovery led to extensive recalling and destruction of finished drinks supplied to wholesalers and others."

The relevant limitation of liability clause 12 provided as follows:

"12.1 Subject to any other limitation or exclusion of liability ... the liability of Messer ... in respect of personal injury or direct physical damage to property (and losses costs and expenses directly arising from such injury or damage), whether through negligence or otherwise, shall be limited to £500,000 in respect of any one incident ...

12.2 Messer ... shall have no liability whatsoever in respect of losses, costs or expenses of a purely financial or economic nature (including, but not limited to, loss of profits, loss of use or other consequential loss), or any other loss or damage not covered in clause 12.1, unless such loss, cost, expense or damage be caused by Messer supplying gas that is not of the purity warranted or by failure to deliver or by late delivery ... in which case Messer's liability shall be limited to the value of the quantity of gas concerned ..."

51. Mance LJ held at paragraph 25:

"Mr Prynne (submits) ... that since no one foresaw other contamination, a clause which does not foresee it or therefore allow any claim in respect of it should be regarded as reasonable. He submits that cause 12.2 does attempt to deal ... with matters which could be foreseen, such as a failure to comply with BS 4105, a failure to do deliver or late delivery. These submissions must be rejected in my judgement for reasons paralleling those which we expressed in the course of our judgement in the Britvic appeal. The fact that no one could have conceived of other contamination by some entirely extraneous elements ... is because all concerned would have assumed that Terrra's manufacturing process (and ... Messer's delivery service) would have been operated efficiently in such a way to make it impossible. Far from justifying an exclusion of responsibility if extraneous contamination occurred, this to my mind demonstrates the unreasonableness of any clause purporting to exempt Messer from liability in respect of such contamination."

26. In the circumstances, the judge's conclusion that clause 12 was unreasonable is unassailable in my judgement. It is unassailable in relation to the very situation which has arisen."

St Albans City v International Computers Ltd [1995] FSR 686, Kingsway Hall Hotel Ltd v Red Sky IT (Hounslow) Ltd [2010] EWHC 965 and Rasbora Ltd v JCL Marine Ltd [1977] 1 Ll Rep 645 are all decisions that essentially turn on their specific facts, and the consequential assessment of whether the relevant terms met the statutory test of reasonableness.

52. In Britvic Soft Drinks Ltd v Messer UK Ltd [2002] EWCA Civ 548 (the associated case with Bacardi Martini), at paragraph 22 of his judgement Mance LJ referred to the decision in Watford Electronics Ltd v Sanderson CFL Ltd to which the court had been referred, and held:

"Thus in ... Watford Electronics ... the judge found as a relevant factor ... that the buyer ... was "aware of the existence of the term, only first learned of its existence towards the end of the pre-contract discussions, attempted unsuccessfully to have it substantially amended, only succeeded in achieving a makeweight amendment and learned from Sanderson (the supplier) that a term excluding liability was standard software industry practice."

He then held at paragraph 23 as follows:

"… in the present case the commercial and contractual background were significantly different. The manufacture of carbon dioxide so as to exclude benzene does not compare with the provision of software (and exercise notoriously liable to give rise to problems). No one would have contemplated that the manufacturing process would allow benzene in, or ... would test the benzene, or indeed the compliance with BS 4105, which Messer anyway warranted. The parties did not discuss and negotiate with regard to the specific provisions of the contract, clauses 11.1 and 11.2 in particular."

The commercial and contractual background in the present case is significantly different to that which obtained in Bacardi Martini and Britvic Soft Drinks. However, the point that Mance LJ went on to make in paragraph 26 of his judgement has a particular resonance to the circumstances of the present case:

"… the judge was entirely justified in rejecting Messer's submission that it was reasonable for it as a supplier (and not a manufacturer) to limit its liability to compliance of the carbon dioxide supplied with BS 4105 ... if one asks whether it was reasonable to limit Messer's liability to compliance with BS 4105, the answer seems to me, therefore, to be that it ought to have been appreciated that compliance with BS 4105 would not, by itself, necessarily mean that the carbon dioxide supplied was suitable for use."

53. In my judgement the key issues in considering whether this clause satisfies the statutory test of reasonableness are the following:

(a) the parties were not of equal bargaining power;

(b) the term was not negotiated;

(c) the term seeks to exclude all liability for consequential loss, rather than seeks to limit such liability;

(d) if the provision with less serious consequences to the buyer (namely the combined effect of clauses 6.2 and 8.11) does not satisfy the statutory test of reasonableness, that is a strong indication that the clause with more serious consequences to the buyer (namely the effect of clause 8.10) also does not satisfy the statutory test of reasonableness; and

(e) as with the analysis of clauses 6.2 and 8.11: it was in the contemplation of the parties that any direct loss to the buyer would be greater than merely the cost of replacing the goods.

54. For all those reasons I have come to the conclusion that clause 8.10 does not satisfy the statutory test of reasonableness.
55. I pause to observe that I have carried out the above analysis by reference to Hillmead's pleaded case that various of IDS' terms and conditions did not satisfy the statutory test of reasonableness under UCTA. In paragraph 46 of his written closing submissions Mr Sheehan submitted that "... in its opening Hillmead sought to introduce an additional objection to clause 8.9, namely that it was an 'unusual or onerous' term", and that such an allegation had not been pleaded. I accept that submission, and accordingly have not considered the wider point of objection to clause 8.9 which Mr Cutting sought to develop in both his opening and closing submissions.

F: Satisfactory quality and/or fitness for purpose

56. Given the conclusions reached in section E of this judgement, it follows that there was an implied term of the contracts which are the subject matter of the counterclaim that the laminate sheets would be of satisfactory quality. Section 14 (2A) of the 1979 act provides:

"For the purposes of this Act, goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances."

Section 14 (2B) provides:

"For the purposes of this Act, the quality of the goods includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of goods:

(a) fitness for all the purposes for which goods of the kind in question are commonly supplied,

(b) appearance and finish,

(c) freedom from minor defects,

(d) safety, and

(e) durability.

It is immediately apparent that the matters stated in paragraphs (c), (d) and (e) of subsection 2B are not engaged in the circumstances of the present case.

57. In paragraph 6 of its defence, Hillmead alleges that it was an implied term of each sale contract that the laminate sheets would be of satisfactory quality. In paragraph 7 of its defence Hillmead alleges that it was an implied term of each such contract that the laminate sheets would be "fit to be used as a decorative surface in specific locations within the premises mentioned in paragraph 4 above". Then in paragraph 8 Hillmead alleges:

"It was in the contemplation of the parties when the above-mentioned terms (and each of them) were agreed that:

8.1 the goods would only be used in manufacturing laminated panels which would be sold to a specific end-user, Primark, who would require a good quality of surface finish on such panels;"

There is an obvious inconsistency and/or tension in Hillmead's stated case that on the one hand there were implied terms of the relevant contracts, and on the other hand that such terms were "agreed". If by that assertion Hillmead submits that the parties expressly agreed the terms which are alleged in paragraphs 6 and 7 of the defence, then I reject such a submission. Further, although I construe paragraph 8 of the defence as relating primarily to the allegation that there was an implied term of fitness for purpose, it is to be noted that the text of paragraph 8.1 of the defence relates to quality.

58. In paragraph 47 of his written opening submissions Mr Sheehan submitted that:

"... a contemplation at the time that the contract is entered into that a third party would require a good quality surface finish does not, without establishing more, assist in determining the standard required. Good quality will always be a relative concept and the descriptor simply begs the question of what is meant by 'good quality' in any relevant circumstance."

59. The notes to Halsbury's Statutes volume 39 (1) (2008 revision) provide a helpful commentary:

"According to the English and Scottish Law Commission ... Report on the Sale and Supply of Goods ... this test is an objective one because it turns on what is acceptable to a reasonable person. The goods in question may not be acceptable to the actual buyer, but this will not be sufficient to justify a claim for breach of contract ... This basic principle asks the question: would the reasonable person regard the quality of the goods as meeting an acceptable standard in the circumstances? The question does not, of course, lay down an objectively ascertainable standard of quality, but it is a question which has a meaning, and one which it is possible to answer."

The Report (at paragraphs 3.23 to 3.26) made three points by way of amplification. First, the test moves away from extreme reliance on "fitness for purpose". With this shift of emphasis, the "reasonable person" would not, in general, find the standard of goods to be "satisfactory" if they had minor defects, but this test would permit a lower standard where only a lower standard could be reasonably demanded .... Secondly an objective comparison is required of the state of the goods (including unseen defects at the time of sale) with the standard which a reasonable person would find acceptable. Thirdly, goods meeting that standard will conform to the reasonable buyers' expectations about the quality, rather than the actual buyers' expectations."

60. In paragraph 43-086 of 'Chitty on Contracts' 31st edition (2012) the authors write as follows:

" ... It has been said that the provision is "to establish a general standard of quality which goods are required to reach" and that it is "primarily directed towards a substandard goods". There is as yet a modest amount of case law on the application of this new definition although there are numerous cases on 'merchantable quality' in the previous legislation. These are however unlikely to be of direct assistance in interpreting the current definition. The reference to a 'reasonable person' suggests an objective standard, but presumably must take into account the position of the individual buyer and must necessarily presuppose that the reasonable person is fully acquainted with the condition of the goods (including any hidden defects) and would with that knowledge regard them as being a satisfactory standard. In determining the appropriate standard, it will obviously be relevant to take account of any description given of the goods .... The price may also be relevant in that the buyer may reasonably expect the standard of quality that is not grossly out of line with the price that he has paid. But all other relevant circumstances may be taken into account."

61. In his cross-examination, Stephen Hopkins (IDS' sales representative) stated that IDS gave its customers a copy of the Polyrey binder entitled "2007 Collection 2012", which contains a brochure entitled "the guide" (Exhibit 5). The binder is divided into a number of sections, each describing a different range of Polyrey product; the range in this case being 'Papago'. The various sheets in the binder contain small samples of the different types of laminate which are available within each range of product. The guide contains both general and specific information about Polyrey products. At internal page 5 (page I/48/7) under the heading "Our uniqueness: complementarity" the text of the guide states:

"Since decorative laminate surfaces are the ideal and most durable surfaces for your interior fitting projects, we have made HPL, Compact and laminate bonded board available across the breadth of our decorative offer.

This combination of products is further enriched by the availability of a selection of decors in HPL, melamine faced chipboard, MDF and plasterboard (new).

It is therefore possible for you to find the most economic and technically suitable solution for your projects."

62. It is thus clearly apparent from the text of the guide that Polyrey manufactures a wide range of products, which have varying characteristics. Internal page 40 of the guide is headed "Polyrey HPL, high-pressure laminate" and states under the heading "Get more from Polyrey" that "Polyrey HPL is available in 250 decors and in 4 new contemporary surface finishes". Four finishes are then described, the first of which is the one in question, namely "BRIHG", which is described as "high-gloss lacquered effect, intense and hard wearing". The opposite page (internal page 41) is headed "technical characteristics"; for post-forming grade and for the Papago range, the thickness is shown as being 0.8mm. On internal page 40 (page I/48/39) under the heading "Product offer on request" the text states that other thicknesses are available, citing 7 different thicknesses ranging from 1.0mm to 4.0mm.
63. In his witness statement, Stephen Rickers (formerly IDS supply chain director) stated as follows (page B/26):

"23. The general use of the product is in shop fittings. It is used for decorative cabinetry, displays and wall counters. It is also used in the transport industry on buses, ships and aeroplanes as well as in what are referred to as 'clean areas' such as kitchens and hospitals ... It is a highly sought after product because of its cost, availability and universal use. The product can also be easily fabricated for specific uses.

24. The level of gloss in this type of product is not specified and there is no standard way of measuring it. This is largely because the appearance of gloss is dependent on the product's use and application. As this product is a paper resin based laminate with a depth of only 0.7mm, there is a limit to the depth of gloss effect that can be achieved. The way in which the level of gloss is created is through the surface of the press used during production. Generally, the greater depth of gloss, the greater the price. For example, some manufacturers create mirrored glass laminates; however these are significantly more expensive than the product."

In his cross-examination Stephen Rickers stated (transcript 5/61/9-11):

"With any laminate of that thickness it is a low cost product with a certain level of gloss relating to that cost."

I generally accept his evidence, and do not find his reference to a thickness of 0.7mm (rather than to 0.8mm) to be material.

64. In my judgement the requirement that the laminate sheets were to be of satisfactory quality is to be construed as follows:

(1) the quality of the laminate sheets is to be assessed objectively; it is not to be a subjective assessment by Hillmead as buyer, or indeed by its customers further down its contractual chain;

(2) it is an assessment which is to take into account all relevant circumstances, including the way in which Polyrey products were described in the guide, the price of the product, and the general use of the product;

(3) subsection (2B) (a) is not of direct application to the facts of this case, because "goods of the kind in question" are not "commonly supplied"; the laminate sheets in question were supplied for a specific commercial application; and

(4) subsection (2B) (b) is of direct application to the facts of this case; I will consider matters relating to appearance and finish of the laminate sheets below.

65. I now turn to consider whether there was an implied term of fitness for purpose. As already noted, in paragraph 7 of its defence Hillmead alleges that it was a term that "… the laminate supplied … would be fit to be used as a decorative surface in specific locations within the premises mentioned in paragraph 4 above", those being Newbridge, Galway, Ealing (there referred to simply as London) and Newcastle. IDS denies that such a particular purpose was made known to it by Hillmead, either expressly or by implication. In paragraph 19.3 of its reply IDS states:

"It is denied ... that IDS was informed that the product was to be used in specific locations within Primark stores and averred that IDS was not given any information about how the product was to be used within Primark stores."

Then in paragraph 22.1 of its reply IDS stated similarly that:

"IDS had no knowledge of the nature and quality of surface required by Primark. IDS was aware that the product had been specified for use by Primark and/or its agents/contractors and that negotiated rates applied to the supply of the product the ultimate use in Primark stores."

66. Given the findings of fact I have already made in paragraph 25 above, I reject Hillmead's case that it expressly made known to IDS the particular purpose alleged in paragraph 7 of Hillmead's defence. It remains to consider whether such particular purpose was made known by implication.
67. The essence of Hillmead's case is that from (a) the fact of prior discussions between Polyrey and Primark, (b) the assumption that such conversations included details of the specific locations within Primark stores where Primark intended to use the bonded panels, and (c) the fact that IDS is the leading distributor of Polyrey products within the UK, the following facts are to be assumed and or inferred, namely that (d) IDS was aware in general terms of the nature and/or content of the prior discussions between Polyrey and Primark; and furthermore that (e) IDS was also aware in specific terms of the specific locations within Primark stores where Primark intended to use the bonded panels. See paragraph 36 of Mr Cutting's written closing submissions.
68. I have already set out the evidence upon which I made the findings of fact and stated at paragraph 25 above. Given that the extent of IDS' knowledge about the laminate sheets, and their subsequent incorporation into bonded panels, was confined to (a) knowledge of the type of laminate sheet which Polyrey and Primark had agreed would be used in the subsequent fabrication of bonded panels, (b) the likely quantity of such laminate sheets which would be required, and (c) the price would have been agreed Primark would pay for such laminate sheets, together with any relevant details relating to price support, those are not facts from which it is appropriate to draw the inference that IDS would have known details of the specific locations within Primark stores where Primark intended to use the bonded panels. The one simply does not follow from the other. Hillmead did not adduce any evidence to establish why it would be necessary for IDS to have such knowledge in order to carry on its business as a distributor of laminate sheets. I do not find that, simply by reason of being the principal distributor of Polyrey products within the UK, IDS became aware (absent specific knowledge) of the specific locations within Primark stores where it was intended the bonded panels would be used. I therefore conclude that Hillmead did not by implication make known to IDS the particular purpose alleged in paragraph 7 of Hillmead's defence.

G: Was IDS in breach of contract? Analysis of the expert opinion evidence.

69. The allegations of breach of the implied term of satisfactory quality are set out in paragraph 9 of Hillmead's defence. Hillmead complains that:

(1) the laminate sheets "exhibited a marked inconsistency of appearance and finish": see the first sentence in paragraph 9.1;

(2) either in amplification of the allegation of inconsistency of appearance and finish, or as an independent point, the laminate sheets "had a mottled effect and ripples were clearly evident": see the second sentence in paragraph 9.1, which goes on to allege that "the usual appearance and finish of high-gloss laminate is uniform, smooth, clear and reflective"; and

(3) the surface finish of (the laminate sheets) did not conform to BS EN 438 and/or BS 4965": see paragraph 9.2. It is now common ground and/or accepted by Hillmead that BS 4965 is not engaged in these proceedings.

70. At paragraph 89 of his written closing submissions Mr Sheehan submitted that:

"… it is suggested that the principal expert evidence issues which need to be resolved ... are:

1. What is the inherent/usual condition of the product? This issue breaks down to whether the product has a characteristic mottled/orange peel effect and/or whether it is usually "uniform smooth clear and reflective"?

2. Did the surface of some/any of the laminate supplied by IDS exhibit inconsistency of appearance and finish beyond any inherent mottled/original effect, and if so, did it do so to the degree that would render it is not a satisfactory quality?

3. What are the surface finish requirements of BS 438?

4. Were those requirements breached in respect of any of the laminate supplied by IDS?

While there are a number of other points to be considered, I accept the submission that these are the essential issues on the topic of breach which call for decision.

71. Background to the expert opinion evidence

On 19 January 2009 Darren Selman (Hillmead's sales office manager) sent a sheet of laminate (batch number 4081600379) to FIRA^[5] to be tested for compliance with BS 438: see paragraph 27 of Darren Selman's witness statement (page C/7). Ms Susan Calver of FIRA carried out that test, and her report of the outcome of that test is set out in her first report dated 19 March 2009, which she exhibits to her main report dated 4 July 2013 (page G/23).

72. In or about May 2013 (see paragraph 2.2 of the order made on 9 January 2014 at page A/66) Darren Selman selected two sheets of laminate which he described respectively as "good" and "bad"; he cut each sheet in half, and made one half of each sheet available to each expert then instructed by the parties, IDS then instructing Mr Larry St Croix, and Hillmead instructing Ms Calver (see transcript at 1/175/9-10, and 8/3/18 - 8/5/20). Mr David Hitchcock, who was instructed by IDS in place of Mr St Croix in or about August 2013, recorded the batch numbers as 4080600013 for "good", and S111200918 for "bad".
73. Mr Hitchcock then cut three samples from each of the two half sheets provided to him; he kept one sample from each sheet in its original state as samples of un-bonded laminate sheet, which he labelled 1A and 1B respectively, and which are exhibits 1 & 2 in these proceedings; he then bonded the other two samples from each sheet onto MDF substrate, using two different types of adhesive, to make bonded panels: see section 3.1 of his report dated 13 August 2013 (page G/2-3). Mr Hitchcock then cut three samples from another sheet of laminate which he had in stock (batch number 4110100082) and did the same with them as before i.e. he kept one sample of a sample of un-bonded laminate sheet; and he then bonded the two remaining samples on to MDF substrate, again using different types of adhesive in each instance. Mr Hitchcock thus produced 9 different samples in all.
74. In paragraph 1 of the order made on 5 November 2013 (page A/64) I directed that Hillmead was to make available two sheets of laminate for testing, one which it considered to be of satisfactory quality, and the other which it considered to be of unsatisfactory quality. Such testing was carried out by 4ward Testing: its report is dated 20 March 2014 (page G/73). Leslie Komatsu, the author of the report, records the two sheets as having the same batch number, namely 4081600379. Coincidentally the samples on which FIRA carried out its earlier test back in 2009 were taken from a laminate sheet which had the same batch number.
75. In their main joint statement Mr Hitchcock and Ms Calver record which of them had seen samples of laminate sheets having which batch numbers (page G/56). It is immediately apparent from that summary that each expert has examined different samples from those examined by the other expert, and did so at different times from the other expert.
76. It is also important to bear in mind the distinction between evidence about the laminate sheets (to which Hillmead's allegations or breach relate), and evidence about the bonded panels (to which Hillmead's evidence of breach do not relate, or do not do so specifically or directly). One of the difficulties Hillmead has had to deal with in this case is the fact that it was the bonded panels that were rejected by Primark, and not the laminate sheets themselves. It was only after Primark rejected some of the bonded panels between May and June 2008 (see the 'Hillmead spreadsheet' at page D/21) that Hillmead began to inspect laminate sheets delivered to it by IDS: see paragraph 8 of David Bowers' witness statement at page D/5.
77. The expert evidence about the inherent or usual condition of the laminate sheets

In paragraph 3.2.4.1 of his report Mr Hitchcock stated as regards his sample 1A (Exhibit 1):

"The mottling (orange peel) pattern which is a characteristic of the Polyrey G028 laminate was slightly more prominent in places of the bonded panel but not all over when being compared with the loose laminate A4 sample."

He went on to state:

"… the change in the effect to the mottle pattern is being caused by uneven bonding of the laminate to the core material, and that the reflective surface is exaggerating the distortion. This is a common industry fault if bonding of the laminate of the core material is not carried out correctly, for example if the adhesive is unevenly applied and/or the press/roller pressure is too low when pressing the components together to form the finished bonded panel ... this fault is more commonly the case when using a spray applied adhesive ...

He expressed himself in similar terms in his report as regards his samples 2A (exhibit 2) and 3A (Exhibit 6).

78. In his cross-examination he stated (transcript 7/39/15-21):

"I looked at the surface area over the face of the laminate and the mottle, orange peel ... was consistent across the sheet face. The reflectiveness of the sheet was also uniform across its surface. And I could not see an inconsistency in its appearance."

This part of Mr Hitchcock's evidence thus derived from his examination of the samples which he had taken from three laminate sheets, one which Hillmead regarded as of satisfactory quality, and the other which Hillmead regarded as of unsatisfactory quality, and the third being one taken from his own stock.

79. Mr Hitchcock also referred to the Polyrey binder at paragraph 3.1.15 of his report, where he stated:

"The Polyrey ... binder … clearly shows the G028 laminate with a mottle (orange peel) pattern characteristic, this binder is the first port of call when selecting a laminate for use by clients, designers, specifiers and manufacturers."

In his evidence in chief Mr Hitchcock corrected the reference to the small sample of grey (gris flannelle) G028 laminate shown in the binder in FA SOFT finish, to the small sample shown immediately below on the same page in the binder of black (noir) N005 laminate in BRIHG finish, which is a gloss or shiny finish. He stated (transcript 7/10/3-8):

"A: It was the effect of the N005, which was the black, which has the gloss finish, which I was stating had got mottle finish and was visible, more with the BRIHG finish.

Q: With the gloss finish?

A: The gloss finish, yes."

Mr Hitchcock's evidence was thus that he also discerned a mottle effect in the small sample of N005 laminate in BRIHG finish shown in the Polyrey binder.

80. Ms Calver considered this issue in section 4 of her report. It contains one line of text, in which she stated:

"The image below shows how the usual finish of G028 is uniform, smooth clear and reflective."

The image below is a photograph which Ms Calver took of a large sheet of un-bonded laminate apparently laid horizontally on a table or workbench at Hillmead's premises. A poor photo-copy of that photograph is at page G/15, and a much clearer printed copy is at page G/15A. In her cross-examination she accepted that the reflected lines shown in the surface of this sheet of laminate were wiggly and distorted, but she stated that this was because the laminate sheet was unsupported. She stated (transcript 6/110/19):

"Q: Is it not correct ... that actually if you look at the photograph ... what you see is undoubtedly a shiny surface but one that has obvious distortions of the images which it reflects in its shiny surface ...

A: These materials are extremely difficult to photograph.

…

She continued a little later (transcript 6/112/1-11):

"Q … if you look for instance at the wall in the background has straight lines coming down it. When you see the reflection of those lines in the gloss finish of the panel none of them are straight, they are all wiggly and distorted.

A: I understand what you mean. It is because it is a sheet laminate that we are looking at and not a bonded panel. It is not self-supporting and would need to be bonded for it to lay flat."

…

She further stated (transcript 6/120/4- 6/121/6):

"A: The un-bonded laminate's surface appearance certainly appears to vary and I have ... samples here that show that it is not perfect but is a reasonably good, smooth, reflective surface. And other samples that show that there are clear undulations, orange peel effect is perhaps a common expression for it, in the surface ...

81. However, Ms Calver then conceded that a good sample of G028 laminate would display a degree of surface distortion. She stated (transcript 6/121/7-16):

"Q: … could I ask you … to clarify, even within the example that you have described as having a reasonably good surface, a reasonably good appearance, that mottling effect, the orange peel effect, ... can still be seen under certain lighting conditions and in a certain plane? Would you accept that?

A: A good sample will still show some degree of surface distortion."

She was then asked about the small samples in the Polyrey binder, and stated (transcript 6/122/10 - 6/124/19):

"Q … there is an N005 gloss finish black colour there ... if you could look at that … in a vertical plane ... would you accept that you can see a mottling, an inconsistency of finish or appearance?

…

A: There is a small amount of distortion on the surface of both that one and the blue one that is next door.

Q: And that is consistent with the mottling effect which you have accepted in your answer is visible even in good quality samples?

….

A: …yes."

82. The expert evidence about whether the laminate sheets as supplied exhibited a marked inconsistency of appearance and finish (apart from having a mottled effect) to the extent that they were not of satisfactory quality

In his report Mr Hitchcock considered the samples of unbonded laminate sheet which he had cut from the half sheets selected by Darren Selman as being "good" and "bad", and also the sample of un-bonded laminate sheet which he had cut from a separate sheet he had in stock. His opinion was that both sample 1A (exhibit 1) and sample 2A (exhibit 2) "... did not exhibit a marked inconsistency of appearance and finish" (page G/2). He also compared those two samples with the third sample taken from the stock sheet, and stated:

" I could not find any difference in colour, texture or reflective finish to the main surface of either sheet when comparing one against the other, and as an added check compared these against a sheet of same product ... which we had in stock ... and once again there was no difference."

83. While Ms Calver had received the two half sheets of un-bonded laminate sheet made available by Darren Selman, she made no reference to these in her report (transcript 6/101/7 - 6/104/19). Instead, when considering this issue in section 3 of her report, Ms Calver referred to "the item assessed", which had a batch number 4081600379, and then referred to "the images below", which she described as being the G028 laminate "mounted vertically on site ... to replicate the end use". It is thus apparent that those images are of bonded panels which Hillmead made available for her to inspect, rather than of the laminate sheet alone i.e. in its un-bonded state. She went on to state:

"Without special lighting or enhanced imagery it's easy to see a marked inconsistency of appearance and finish - the dimples and undulations visible in the surface are random, uneven and inconsistent.

The light does not reflect back to the eye in a way that shows a smooth reflective surface.

Similar effects are sometimes seen on vehicle paint and are commonly referred to as 'orange peel'."

84. In their main joint statement, Mr Hitchcock notes that in both the FIRA Technical Services' test report of 19 March 2009, and in the 4ward Testing test report of 20 March 2014, when tested against the criteria of BS 438, no visual defects were recorded as regards appearance. FIRA recorded "no visual defects" in 2009 (page G/24); 4ward Testing reported that (page G/76):

"Neither the 'good' or 'bad' samples of the laminate exhibited any form of defect or damages listed above, within the decorative surfaces."

85. Assessment of the expert evidence in relation to the above two issues

I prefer the evidence of Mr Hitchcock to that of Ms Calver on both these issues. I do so for the following reasons:

(1) Mr Hitchcock has the more relevant experience. He has worked for many years in a whole range of positions in businesses involved in the fields of joinery and the fabrication of laminates, and for nine years until 31 October 2013 when he became self-employed he was managing director of Key Joinery in Derby, whose business was in those fields: see paragraph 1.2 of his report. He thus has direct work experience, gained over many years, of the fabrication of bonded panels using laminate sheets. In contrast, Ms Calver's experience is that of someone working in a testing house (albeit in a well-respected and well-reputed testing house). But she has no direct knowledge or experience of the fabrication of un-bonded laminate sheets, or of bonded panels using such laminate sheets.

(2) Mr Hitchcock's evidence, in particular as set out in his report, was based on his assessment of samples of the laminate sheet in question, and of bonded panels which he made using samples of such laminate sheets. In contrast, Ms Calver's evidence was based on her assessment of the 6 bonded panels which Hillmead made available for her to inspect, and of the large sheet of un-bonded laminate of unknown provenance (no batch number for this laminate sheet being recorded) which had been laid horizontally on a table or workbench at Hillmead's premises.

(3) It was striking that in her assessment in section 3 of her report of whether the laminate sheets as supplied had "a marked inconsistency of appearance and finish", Ms Calver only referred to bonded panels; she carried out no assessment of un-bonded laminate sheets in this section of her report. The batch number captured on internal page 4 of her report (page G/11) was of the sheet of laminate which Hillmead had provided to Ms Calver for inspection: see the first sentence of section 2 of her report (and transcript 6/44/5 - 6/48/18). Although that sheet had been made available to Ms Calver for inspection, she made no further reference to it in her report. Instead it was only in the joint statement (pages G/159-160) that she expressed such an opinion. The fact that she did not consider this issue in her report (a) diminishes her opinion in this regard; and (b) suggests some inexperience in preparing reports for use in litigation, certainly as regards topics which go beyond testing materials at FIRA.

(4) In the course of the trial I had the opportunity to look at Mr Hitchcock's sample 1A (exhibit 1), sample 2A (exhibit 2), and sample 3A (exhibit 6). To my eye it was difficult, if not impossible, to discern a "marked inconsistency of appearance and finish" between those samples. Ms Calver's evidence did not demonstrate how or where such inconsistencies were apparent in those samples.

(5) In the course of the trial I also had the opportunity to look at the small samples of laminate in the Papago range shown in Primark's binder. To my eye it is indeed possible to discern the mottled effect in both the small sample of Gris Flanelle laminate in the FA SOFT finish, and of Noir laminate in the BRIHG finish.

86. Based on the evidence adduced at trial, I make the following findings of fact:

(1) the inherent or usual condition of G028 laminate sheet in BRIHG finish is that it has a mottled effect; in that regard I reject the allegation that "ripples were evident" in the laminate sheets supplied to Hillmead; and

(2) the laminate sheet as supplied did not exhibit a marked inconsistency of appearance and finish, either at all, or to the extent that it was not of satisfactory quality.

87. I am fortified in coming to those conclusions by other parts of the evidence which relate to these issues; in particular:

(1) Mr Hitchcock's evidence that laminate sheet of a thickness of 0.8 mm is more likely to "telegraph" any underlying inconsistency in the substrate to the surface, than would a laminate sheet of a thicker size. In his cross-examination he was asked about the observation made by Ken Dobbin of the BLFA in the short report (page H/45/117) commissioned by Mark Raistrick of Arnold Laver^[6], in which Ken Dobbin observed in the final paragraph that "some degree of telegraphing is inevitable when using this thickness (0.7) laminate ..."; in his cross-examination Mr Hitchcock stated (transcript 7/113/24 - 7/114/25):

"Q: … is this statement ... consistent or inconsistent with the comments that you make in your report about the appearance of bonded panels?

A: It's consistent ... because it is a post-forming grade laminate that has been used which is more flexible than the standard grade laminate, that because it is more flexible the telegraphing of the surface below will telegraph through to the surface of the laminate when it is bonded to a board.

…

A: … if there is an uneven surface below the laminate, when you bond the laminate to it, if there is any undulation or shape form in that, it will transmit through or telegraph through and show on the face of the laminate. Because it's a post-forming grade laminate, it's more flexible."

I accept that evidence.

(2) The evidence that the way adhesive is applied in the course of fabrication of the bonded panels would have an effect on the upper surface of the bonded panel (comprising the laminate sheet) after fabrication: see paragraph 3.2.4.1 of Mr Hitchcock's report. In their main joint statement Ms Calver accepted that such a factor could exacerbate deficiencies in appearance (page G/212).

88. The expert, and other, evidence about whether the surface finish of the laminate sheets as supplied complied with BS 438

It is important to note that Hillmead does not allege compliance with BS 438 as an express (or indeed an implied) term of the contract of sale between it and IDS. Instead Hillmead alleges that in breach of the implied term as a satisfactory quality "... the surface finish of the (laminate sheets) did not conform to BS EN 438 ...": see paragraph 9.2 of the defence.

89. Part 1 of BS 438 (page I/78/418) is entitled 'Introduction and general information'. The first two sub-paragraphs of section 4.1 provide:

"EN 438-2 describes the methods of test that shall be used to determine the performance of HPL products in their various internal and external application fields, e.g. construction, transport, furniture, flooring etc. The test methods have been specially developed for testing HPL.

It should be noted that not all test methods apply to all types of HPL."

HPL is the acronym for high-pressure decorative laminates: see the cover sheet for part 1. The text in section 4.1 continues below:

"…EN 438-3 applies to laminates less than 2 mm thick intended for bonding to supporting substrates to produce HPL composite panels …"

90. Part 2 of BS 438 (page G/81) is entitled 'Determination of properties'. Its contents page at internal page 2 sets out the various sections of Part 2, which includes the following properties:

"4 Assessment of appearance

12 Resistance to immersion in boiling water

14 Resistance to water vapour

15 Resistance to wet conditions (Exterior grade laminates)

16 Resistance to dry heat"

91. The text of section 4 provides:

"4.1 Principle

Laminates shall be inspected the surface appearance under standardised conditions of lighting and viewing.

4.2 Apparatus

4.2.1 Horizontal inspection table, of height approximately 700 mm …

…

4.4 Procedure

Place the laminate, decorative face uppermost, on the inspection table. Wipe it free from any loose contamination with a soft cloth, using a suitable cleaning agent if necessary. Inspect it from the distance required by the relevant part of EN 438 for defects such as smudges, smears, fingerprints, scratches, foreign particles, damage or any other form of blemish evident within the decorative surface.

The inspector shall use normal vision, corrected if necessary.

92. Part 3 of BS 438 (page I/78/428) is entitled 'Classification and specifications for laminates less than 2 mm thick intended for bonding to supporting substrates'. Section 1 entitled 'Scope' provides in its second paragraph:

"High-pressure decorative laminates are characterised by their qualities, durability and a functional performance. HPL sheets are available in a wide variety of colours, patterns and surface finishes; they are resistant to wear, scratching, impact, moisture, heat and staining; and possess good hygienic and anti-static properties, being easy to clean and maintain."

Section 4 describes three different types of material:

"Type S - Standard grade decorative laminates

Type P - Postformable decorative laminates; similar to type S, but can also be formed at elevated temperature

Type F - Decorative laminates with improved fire retardance …"

Section 5.3 provides in alphabetical classification system. The first letter is either H for horizontal grade, or V for vertical grade; the second letter is either G for general purpose or D for heavy duty; the third letter is S for standard grade, or P for postformable grade, or F for flame-retardant grade.

Table 3 then "compares the alternative classification systems and shows how different HPL products relate to some typical applications". The first column is headed 'Performance category' and is set out in three sections, the first dealing with very high resistance to surface work, impact and scratching; the second dealing with high resistance to those matters, and the third to medium resistance to those matters. HGP laminate is shown in the fourth column as coming in the second of those sections; the fifth column gives as an example of its typical application:

"Kitchen and office working surfaces, restaurant and hotel tables, doors and wall coverings in public areas, interior walls of public transport vehicles"

93. Section 6 entitled 'Requirements' provides:

6.1 Compliance

Laminates classified in Table 3 shall meet all appropriate requirements specified in Clauses 6.2, 6.3 6.4^[7]. This applies to both full-size sheets and cut-to-size panels.

6.2 Inspection requirements

6.2.1 General

Inspection shall be carried out in accordance with EN 438-2, Test Method 4 at a distance of 1,5m

…

6.2.3 Surface finish

When inspected at different viewing angles, there shall be no significant difference between the corresponding surface-finish reference sample held by the supplier and the specimen under test.

NOTE where colour and surface finish are critical, it is recommended that sheets be checked for colour and surface finish compatibility before fabrication or installation

…

6.2.5 Visual inspection

…

It shall be noted that only a small percentage of sheets in a batch (the level to be agreed with the customer) shall contain defects of the minimal acceptable level.

6.2.5.1 Surface quality

The following surface defects are permissible:

Dirt, spots and similar surface defects

The admissible size of such defects is based on a maximum contamination area equivalent to 1,0 mm²/m² of laminate and is proportional to the sheet size under inspection.

6.4 Test requirements

6.4.1 General requirements

General requirements specified in Table 5"

94. Table 5 then sets out the various performance levels (see table 1) to be achieved in testing. For resistance to immersion in boiling water (property number 12) HGP laminate in gloss finish is to achieve a performance level of 3; for resistance to dry heat (property number 16) it is also to achieve a performance level of 3; and for resistance to water vapour (property number 14) it is again to achieve a performance level of 3. So far as resistance to wet heat is concerned a similar performance level of 3 is required.
95. The results of the tests which Ms Calver was instructed to carry out in 2009 are set out in the FIRA Technical Services report dated 19 March 2009 (page G/21). In respect of test method 4: Appearance, in relation to the three aspects described at internal page 5, the testers (L Price and V Taylor^[8]) recorded "no defects visible over the surface of the laminate". That was a visual inspection carried out in accordance with section 6 of part 3 of BS 438, and the provisions of test method 4 as set out in part 2 of the BS. As regards the entry for test 4 in the fourth column headed "status" in the table headed 'Performance summary' at internal page 17 (page G/24) of its 2009 report, Ms Calver accepted in her cross-examination (transcript 6/63/2-7) that it would have been more appropriate to record the result of test 4 as a pass rather than as "not specified" as stated. In all, FIRA subjected the laminate to 17 different types of test. The laminate failed in 4 of those: see the performance summary internal page 4 (page G/24); they were: test 12 for resistance to immersion in boiling water; test 14 for resistance to water vapour; test 16 for resistance to dry heat; and test by method EN 12721 for resistance to wet heat. It is to be noted that in respect of each of those tests the criteria is by "appearance rating".
96. The results of the tests carried out by 4ward Testing in 2014 are set out in its report dated 20 March 2014 (page G/73). 4ward Testing only carried out tests on the following: test 4 for assessment of appearance; test 12 for resistance to immersion in boiling water; test 14 for resistance to water vapour; test 15 for resistance to wet conditions; and test 16 for resistance to dry heat. It would appear that 4ward Testing was testing for assessment of appearance, and - with one anomaly - in respect of the tests which the laminate had failed when tested by FIRA back in 2009. It is not clear why 4ward Testing tested for test 15, when the laminate had failed the test for wet heat by method EN 12721 back in 2009 rather than the test 15 for wet conditions. Nevertheless the findings of 4ward Testing were notably different from those obtained by FIRA back in 2009:

(a) for resistance to immersion in boiling water (test 12): it is ironical that the sample from the sheet of laminate which Hillmead had selected as 'bad' passed with a performance level of 3, while the sample from the sheet of laminate which Hillmead had selected as 'good' failed with a performance level of 2;

(b) for resistance to water vapour (test 14): both 'good' and 'bad' samples passed;

(c) for resistance to dry heat (test 16): both 'good' and 'bad' samples passed.

That is a total of 5 passes out of 6 samples.

As regards the assessment of appearance (test 4) the author of the report Leslie Komatsu stated:

"Neither the 'good' or 'bad' samples of the laminate exhibited any form of defect or damage as listed above, within the decorative surfaces."

Such a finding is consistent with that made by FIRA back in 2009.

97. It is to be recalled that the specific matter of which Hillmead complains is that the surface finish of the laminate sheets did not comply with the requirements of BS 438. That allegation engages test 4: Appearance, and as noted above, both the FIRA report in 2009 and the 4ward Testing report in 2014 recorded that the laminate sheets passed test 4.
98. Test 12 contains a requirement to "examine each specimen visually for change in appearance" (Part 2: internal page 16 at page G/98); test 14 contains a requirement to "allow the specimen to recover for 24 h in normal ambient conditions and then examine the central area of the specimen with the naked eye, corrected if necessary, for any change in appearance" (Part 2: internal page 20 at page G/102); test 16 contains a requirement to "... allow the specimen to cool for a period of 45 min. Examine the specimen for surface disturbance, for example blistering, crazing, discolouration or loss in gloss, visible to the naked eye, corrected if necessary, allowing the light to fall on the specimen at various angles of incidence." (Part 2: internal page 24 at page G/106). In her cross-examination Ms Calver accepted that the purpose of these tests was to test the properties of the laminate sheets, not the appearance or finish of the laminate sheets in their normal or usual condition (transcript 6/65/6 - 6/66/10).
99. In carrying out these tests samples are subjected to a variety of testing: in test 12 specimens are placed in a vessel of boiling distilled water (see paragraph 12.4); in test 14 the specimen is placed face down over the mouth of a flask of boiling water (see paragraph 14.4); and in test 16 a vessel containing glycerol tristearate heated to 180°C is placed on the surface of the specimen for 20 minutes, before the specimen is allowed to cool for a further period of 45 minutes (see paragraph 16.5). The tester is then to observe what, if any, change occurs in the appearance of the laminate. Such an analysis is fundamentally different from the analysis carried out in test 4, which is to inspect the laminate "for surface appearance under standardised conditions of lighting and viewing" (see paragraph 4.1), "... for defects such as smudges, smears, fingerprints, scratches, foreign particles, damage or any other form of blemish evident within the decorative surface" (see paragraph 4.4). In my judgement the nouns which follow the words "such as" in paragraph 4.4 are being cited as examples of defects; however defects are not to be construed wholly and only by reference to those matters. The phrase "damage or any other form of blemish" is in my judgement one of wide application. If there was "damage or any other form of blemish" in the surface of the laminate sheets, then both FIRA and 4ward Testing would have been expected to have reported on such. Neither did so.
100. I have thus come to the conclusion that failure to comply with any of tests 12, 14, 16 or EN 12721 does not of itself indicate that the surface of the laminate sheet did not comply with the requirements of BS 438. Test 4 is a test of surface appearance; tests 12, 14, 16 and under EN 12721 are tests of other properties of the laminate sheets.
101. Consistent with such a conclusion is the fact, as I find, that the reason apparently advanced by Hillmead's customer Railston Design and/or Railston Design's customer Primark for rejection either had nothing to do with, or was not primarily concerned with, the performance of the laminate sheet; it was instead to do with the apparent appearance of the laminate sheet. See in this regard paragraph 15 of the witness statement of Darren Selman (page C/4); in his e-mail of 20 June 2008 (page H/45/22) Darren Selman's complaint was of the appearance of the laminate sheet, not its performance.
102. Somewhat in contrast, in his e-mail of 6 August 2008 (page H/45/77) to Ellis Greenhill of Hillmead, the late Mark Shepherd, then contracts department manager of Railston Design complained first of laminate lifting along its long edge, (though that is not a matter which Hillmead alleges in its defence) before going on to make a more general complaint about the appearance of the laminate sheet having a mottled effect etc. The thrust of his complaint is thus about the appearance of the laminate, rather than its performance.
103. At internal page 11 of her report (page G/18), in the concluding paragraph of section 5 Ms Calver states:

" … failure to meet the requirements (of BS 438) if used as an HGP laminate indicates that the laminate may give rise to problems in use and may fail to perform and behave as expected." (My underlining and emphasis).

However, Ms Calver did not carry out any analysis of the laminate sheets to ascertain whether or not any failure to comply with tests 12, 14, 16 and/or EN 12721 had in fact given rise to problems in use and/or of failure in performance or behaviour, and accordingly I do not find her assertion of such a potential consequence has been established on the evidence.

104. The facts of this case thus appear to be a good example of circumstances where compliance with (or is here, non-compliance with) the requirements of a relevant BS is not of itself decisive or indicative of the issue whether the goods in question were of satisfactory quality. This is the point identified by Mance LJ in paragraph 26 of his judgement in Britvic Soft Drinks Ltd v Messer UK Ltd referred to in paragraph 50 above.
105. The expert evidence in the case, as I have found (see in particular the findings of fact at paragraph 86 and 100 above) therefore does not establish that there was a breach of the implied term as to satisfactory quality when assessed against the criteria set out in paragraph 64 above.
106. Other aspects of the evidence as regards breach

Given the expert evidence does not establish that IDS was in breach of the implied term to satisfactory quality, it is necessary to have regard to some of the other evidence in the case. Hillmead's case is that there were problems with the surface finish of the bonded panels, which Darren Selman described as being "inconsistent", having "a mottled effect", and that "ripples were evident across the surface of the panels" (see paragraph 15 of his witness statement at page C/5) when Arnold Laver & co Ltd fabricated bonded panels, either by itself or by putting such work out to its subcontractors J A Rose Ltd and Premier Post Forming Panels Ltd. As a result Hillmead sent other laminate sheets to another fabricator which it had used in the past, namely Saxon Laminates; however Saxon also encountered problems: see paragraph 17 of Darren Selman's witness statement (page C/6).

107. Hillmead invites the court to draw the inference that the cause of the problems which both Arnold Laver and Saxon encountered was a defect in the laminate sheets, rather than any other cause, including in particular (a) any deficiency in the method of fabrication of the bonded panels, and (b) any specific problem with the adhesive which was used by any of those fabricators and/or (c) the thickness of the laminate sheets.
108. However, at trial, Hillmead did not adduce any evidence from any of those fabricators. Nor did Hillmead adduce any expert opinion evidence which analysed or assessed the cause of the problems encountered by those fabricators. While Ms Calver surmised what problems might have been encountered by such fabricators in section 6 of her report, she advanced no positive opinion as to what was, on the balance of probabilities, such a cause.
109. Instead, Hillmead simply sought to rely on certain correspondence that passed between Railston Design and itself (see Mark Shepherd's e-mail to Ellis Greenhill dated 6 August 2008 (page H/45/77), and also between Hillmead and IDS (see Darren Selman's e-mail to Susan Narramore dated 20 June 2008 (page H/45/22), and that was the underlying evidence from which Hillmead invites the court to draw the inference it seeks.
110. In my judgement that is an insufficient evidential basis from which the court can safely draw such an inference. There is a significant lack of any direct, positive evidence about the method of fabrication employed by any of those fabricators which would provide a proper basis upon which such an inference might be drawn.
111. Further, the fact that Primark and/or Railston Design rejected laminate sheets does not, of itself and without further explanation (in particular as regards their criteria for acceptance and rejection) establish that there was a breach of the implied term as to satisfactory quality in the contracts between IDS and Hillmead. In that regard it is relevant to observe that Hillmead did not adduce any evidence at trial about the contractual terms which obtained as between Primark and Railston Design, and/or as between Railston Design and Hillmead itself, including in particular what (if any) performance criteria applied as between those parties in respect of the laminate sheets, or rather - by the time those parties were involved - the bonded panels. Nor did Hillmead adduce any evidence at trial directly from Primark and/or its architects and/or in-house project managers to prove the reason or reasons why they rejected the bonded panels.
112. In addition there was the issue whether the thickness of the laminate purchased by Hillmead (0.8 mm) was itself a cause of "telegraphing" undulations in the substrate to the surface of the bonded panels, comprised of laminate sheet. The point was referred to by Mr Ken Dobbin of the technical committee of the BLFA^[9] in his short one-page report which Mark Raistrick of Arnold Laver commissioned. It is undated, but would appear to have been written on or about 5 August 2008 (see page H/45/113). Ken Dobbin stated:

" … the bonded panel ... using the above mentioned laminate ... shows evidence of slight telegraphing or undulation to the surface, which could be an attribution of standing chatter from (sic) the substrate surface, adhesive coverage, and above all the thickness of the laminate. The thickness of the laminate will, of course, have a pronounced effect on the severity or otherwise (of) (t)elegraphing as thicker laminates are more able to bridge the irregularities of the substrate." (My additions/alterations to the text as it appears on the face of the document.)

However, it appears that neither expert was referred to this document before they prepared their respective reports, and neither considered this issue in their reports. Ms Calver was asked about the document in the course of her cross-examination (transcript 6/90/16 - 6/93/11); she did not express any detailed opinion about the document and/or the views expressed by Ken Dobbin on this issue. Mr Hitchcock was also asked about the document in the course of his cross-examination (transcript 7/31/5 - 7/35/6), and although he did not express any detailed opinion about the document in that part of his evidence, he was asked about the general issue of telegraphing in the course of his re-examination (transcript 7/113/24 -- 7/114/25) to which I have referred to in paragraph 87 above. As already indicated, I accept Mr Hitchcock's evidence on the issue of telegraphing.

113. In paragraph 112 (3) of his closing written submissions, Mr Cutting made the general submission that:

"The laminate was bonded into bonded ... panels by 5 different fabricators all using different fabrication methods and materials. It is inconceivable that the cause of the Defect is the fabrication or bonding process particularly when the same fabricators fabricated darker colour laminated bonded panels for Hillmead with no problems even though they were fitted to feature walls."

In paragraph 20 of his opening written submissions, Mr Sheehan made the general submission that:

"IDS supplied 1,236 sheets of the product to 24 other customers between 5 June 2007 and 18 December 2008, but only Hillmead has made a complaint about the quality of the product will supplied ... even though other customers are likely to have been supplied with parts of the same batches of the product that were supplied to IDS."

Reference to such general points only serves to indicate the necessity for direct evidence on the cause of the matters complained of by Hillmead, whether in the form of direct evidence from the fabricators and/or in the form of opinion evidence from experts. In my judgement the evidence which Hillmead adduced at trial was insufficient to enable the court to draw the inferences and/or conclusions contended for which are implicit in general submissions of this nature.

114. Conclusion on breach

I thus conclude that Hillmead has failed to prove the breaches of contract alleged in paragraphs 9.1, 9.2 9.3 of the defence.

H: Causation of loss

115. Given the above conclusion, it is not strictly necessary to consider this further issue, but I shall do so briefly for sake of completion. If Hillmead had established that IDS was in breach of contract, it would then have been necessary to consider issues of causation. In particular:

(a) the issue of whether Hillmead could and/or should have inspected the laminate sheets before sending them on the fabrication and bonded panels; and

(b) the issue of whether Hillmead could and/or should have ensured that a control or approved sample was made available, so as to provide a touchstone or reference point for comparison purposes.

116. The first of those points was in issue in the proceedings: see paragraph 33.1 of the reply (page A/40). The second was not.
117. Given the findings of fact which I have made at paragraphs 25 - 26 above, I would have found that Hillmead's failure to inspect the laminate sheets before they were sent on for fabrication into bonded panels was a relevant matter to be taken into account when considering the issue of causation of any subsequent loss. A sensible or practical procedure could well have been for Hillmead to inspect say one in every 10 or 20 sheets, but I find that Hillmead's failure to instigate or implement some form of "goods inward" inspection was a material deficiency on its part. Whether Hillmead's failure or deficiency was merely unreasonable (in which case it may not have broken the chain of causation) or reckless (in which case it may have broken the chain of causation)^[10], and the degree of any relevant knowledge on Hillmead's part, were not matters which were explored in any detail at trial, and given the findings I have made on breach of contract, it is now not necessary to do so.
118. Such a procedure is expressly contemplated in Part 3 of BS 438: see the note to paragraph 6.2.3 cited at paragraph 93 above. It would, of course, be a matter of commercial negotiation for Hillmead to ensure that provision was made for it to be able to carry out such inspections, but to adopt a practice whereby it carried out no such inspections (certainly until around September 2009) was a commercial risk which Hillmead took.
119. As to the second point: again it was a matter of commercial risk for Hillmead, being in the position of something of a "middle-man" (i.e. a buyer of laminate sheets, yet seller of bonded panels) to carry on business in such a position without ensuring that all interested parties agreed on the provision and properties of a control sample or samples, against which either laminate sheets and/or bonded panels could be subsequently assessed. However, this point was not directly raised in the statements of case, and it is therefore not necessary to consider the point further.

I: The measure of Hillmead's loss and damage

120. Given the conclusions I have reached on issues relating to liability, it is not strictly necessary to consider issues relating to a loss and damage, but I shall do so for sake of completion.
121. The various heads of loss claimed by Hillmead are set out in schedule 2 to the defence and counterclaim (page A/24), and I will consider each in turn.
122. Item 1: the difference in value of the laminate sheets purchased by Hillmead

The first point is that Hillmead accepts that item 9 in schedule 1 is not recoverable, so the sum claimed for this item reduces to £13,019.27. The second point is that Hillmead accepts that only 246 of the 392 bonded panels were rejected by Railston Design: see the evidence of Darren Selman in cross-examination (transcript 1/172/16-19). That is 62.75% of the total. I would therefore have allowed £8,169.59 in respect of this item.

123. In paragraph 159 of his written closing submissions Mr Sheehan submitted that:

"…Ms Calver's evidence suggested that used in other locations the rejected bonded panels may have been acceptable. In the circumstances at least some of the rejected panels must have continued to have value and a further discount should be made accordingly."

However, the evidence did not indicate the type (if any) of alternative use to which the bonded panels could have been put, and accordingly I would not have reduced the above figure for this reason.

124. Item 2: the cost of bonded panels rejected by Railston Design

The first point is that Mr Bowers does not deal with this item in his first witness statement. The second point is that while Darren Selman stated in paragraph 21 of his first witness statement (page C/6) that:

"I attach at pages 10-43 of exhibit DS1 a copy of the invoices and the spreadsheet detailing the additional costs and expenses that Hillmead incurred as a consequence of the rejection of the panels",

none of those pages in that exhibit relate to this item.

125. In his cross-examination Mr Bowers stated (transcript 3/176/12-24) that the figure of £27,788.16 claimed in respect of this item related to the cost of the bonded panels which Hillmead purchased from Arnold Laver. He was referred to the calculation sheet at page I/77/407 in the sum of £25,641.92, and indeed Mr Cutting was then able to provide page references to where copies of the invoices referred to in the calculation sheet had been placed in the trial bundles. It is to be noted that the total of the sums shown in those 5 invoices comes to £22,512 rather than the total shown in the calculation sheet. However, neither that calculation sheet, nor the underlying invoices, were produced in evidence by either Mr Bowers or Darren Selman. The position was thus that no witness on behalf of Hillmead produced that calculation sheet, or provided any explanation as to how it had been calculated. In particular, neither Mr Bowers nor Darren Selman provided any explanation of how the "average per panel at £112.96 each" had been calculated, or of how there was a difference between the figures of £22,512 on the one hand and £25,641.92 on the other hand.
126. The evidence which Hillmead adduced in support of their claim for item 2 was thus incomplete and lacking in cogency. Had a witness been able to produce the calculation sheet at page I/77/407, and give an explanation as to how the average price per panel had been calculated, it might have been possible for Hillmead to prove either the sum shown on that calculation sheet or some other sum, (ignoring for these purposes the difference between the number of 227 bonded panels referred to in this calculation sheet, and the number of 246 bonded panels claimed in schedule 2, as having been rejected).
127. In paragraph 126 of his closing written submissions Mr Cutting identified 6 other invoices totalling £23,435.45, and submitted that Hillmead should recover that sum in respect of item 2. The very fact that there are different figures advanced in schedule 2, in the calculation sheet, in the total of the invoices identified in the calculation sheet, and now in Mr Cutting's further 6 invoices, all indicate the necessity for a claiming party to adduce complete and cogent evidence to prove such a claim. On the basis of the evidence adduced at trial, I would not have awarded Hillmead any sum in respect of item 2.
128. Items 3 - 6: transport costs

These are claims for alleged additional costs incurred by Hillmead in delivering replacement laminate sheets to Arnold Laver, and then of replacement bonded panels to 3 different sites. The evidence as regards these items was as follows.

129. Item 3: £630.59; replacement laminate sheets to Arnold Laver.

While Mr Bowers accepted in cross-examination that Hillmead could no longer produce an invoice to substantiate this item, he stated that Hillmead had had such an invoice (transcript 3/193/21-25). This item was also claimed in the same sum in the initial calculation of Hillmead's loss which Darren Selman carried out, dated 7 May 2009, and which he produced in exhibit DS1 to his witness statement (page C/20). I accept Mr Bowers' evidence in this regard, and would have awarded £630.59 for item 3.

130. Item 4: £197.06; delivery of replacement bonded panels to Ealing

Mr Bowers stated that the position was the same for item 4 as item 3. A like sum was also identified in the initial calculation of Hillmead's loss. I again accept Mr Bowers' evidence on this point, and would have awarded £197.06 for item 4.

131. Item 5: £2,678.30; delivery of replacement bonded panels to Galway

Mr Sheehan stated that he would deal with this item in closing submission, rather than in cross-examination (transcript 3/194/19-21). In paragraph 165 of his closing written submissions Mr Sheehan identified two invoices which Darren Selman produced in support of this item. They in fact total £250.55, which is the sum originally claimed for van hire to Galway in the initial calculation of Hillmead's loss at page C/20. However, those invoices were addressed to MWC Fittings Ltd and "MWC" respectively.

132. Of the invoices which Mr Cutting identified in paragraph 128 of his closing written submissions, those at pages H/45/192-193 simply duplicate those at pages H/45/159-160, which in turn duplicate those at pages C/51-52 which Darren Selman produced within the exhibit to his witness statement. The two invoices at pages J/81/423-424 are each addressed to "MWC Ltd". Hillmead did not adduce any evidence to show that Hillmead was responsible for an apparent liability of "MWC Ltd". There has been no, or insufficient, evidence of what, if any, inter-company accounting provision which obtained as between Hillmead and either of the MWC companies to enable an award of damages to be made in favour of Hillmead in respect of the sums shown on these two invoices.
133. The minor inconsistency in dates which Mr Sheehan identified would not, in my judgement, have been so serious that I would have rejected this claim on that account. However, Hillmead has not been able to explain the basis of its claim for the sum claimed in respect of item 5, particularly as regards its responsibility if any for any apparent liability of either of the MWC companies, and accordingly I would not have awarded any sum in respect of item 5.
134. Item 6: £2,700.00; delivery of replacement bonded panels to Newbridge

Darren Selman produced one invoice for £1,750 plus VAT which was addressed to Hillmead. £1,750 was the sum claimed in Hillmead's initial calculation of its loss at page C/20. While Mr Bowers referred to another invoice which Hillmead had disclosed as part of some late disclosure in these proceedings, he was not able to identify such an invoice in his oral evidence. The additional invoice which Mr Cutting identified at page J/81/425 was again addressed to MWC Fittings Ltd. As a result, I would have awarded £2,056.25 (i.e. £1,750 plus VAT) to Hillmead in respect of item 6.

135. Items 7-9: costs of refitting bonded panels

These are claims to recover what are described as "Contra charge made by Railston" in respect of refitting bonded panels at three separate sites. The first point which thus arises is that the underlying costs are not Hillmead's, but instead are those of Railston Design.

136. In paragraph 4 of his first witness statement Mr Bowers stated:

"The losses that Hillmead are claiming can be separated into three broad categories. Firstly, there are the costs incurred by Hillmead which relate to the cost of delivering and refitting replacement panels, and the cost of handling and storing the rejected panels. Invoices, receipts and other documentary evidence have already been supplied to the Claimant in respect of this element of the claim."

However, in the remainder of that paragraph, and throughout the following text of that witness statement, Mr Bowers only dealt with the second and third categories of loss which he identified. He did not refer further to the alleged cost of refitting bonded panels in his witness statement.

137. In paragraph 21 of his first witness statement Darren Selman stated in the most general terms:

"I attach at pages 10-43 of exhibit 'DS1' a copy of the invoices and the spreadsheet detailing the additional costs and expenses that Hillmead incurred as a consequence of the rejection of the panels"

However he made no further reference to the subject matter of items 7-9 in that witness statement.

138. In his cross-examination Mr Bowers stated (transcript 3/184/1-12) that the document a page C/50 contained the details of the claim made by Railston Design on Hillmead in respect of the costs which Railston Design had incurred in fitting replacement bonded panels at Galway and Newbridge (i.e. items 8 & 9). He then stated (transcript 3/184/19):

"These are Railston's costs and this is where, against this cost, we gave a credit note of £15,000, which is in a separate document."

That credit note is at page I/74/368.

139. The evidence is thus that Hillmead gave Railston Design a credit of £15,000 (plus VAT) in respect of the costs which Railston Design asserted it had incurred in fitting replacement panels at these two locations. I accept Mr Bowers' evidence that Hillmead gave such a credit in such circumstances. While Hillmead made no attempt to substantiate the underlying costs which Railston Design asserted (e.g. by calling a witness from Railston Design to prove the elements of those costs) I accept Mr Bowers' evidence that Hillmead sustained a loss of £15,000 plus VAT in respect of the sums claimed in items 7-9.
140. Accordingly, I would have awarded Hillmead £15,000 in respect of items 7-9. Hillmead did not adduce any evidence, or advance any explanation, why VAT should be added to that sum, and absent such evidence or explanation I would not have added VAT to the figure of £15,000.
141. Items 10-11: costs of handling and storing rejected bonded panels

Neither Mr Bowers nor Darren Selman referred to these items in their respective witness statements. In his cross-examination Mr Bowers was referred to the calculation at page I/77/404 dated 6 October 2011. However, he did not identify its author.

142. Item 10 is a claim for handling 15 pallets of rejected bonded panels. Mr Bowers accepted in cross-examination (transcript 3/190/16-23) that this was not a cost which Hillmead had actually incurred (in the sense of being specifically calculated), but instead was a notional calculation of the costs which Hillmead would have incurred in handling such bonded panels.
143. Item 11 is a claim for storing three pallets of rejected bonded panels over a three-year period. However, in his cross-examination Mr Bowers accepted that there was no need for Hillmead to store this number of pallets over such a period of time. He stated (transcript 3/189/22 - 3/190/1):

"Q: There was no need to keep as many as three pallets worth of rejected panels for three years before you decided to dispose of them, was there?

A: Probably not, in hindsight."

Mr Bowers also accepted, as with item 10, that these were not costs which Hillmead had actually incurred, again in the sense of being specifically calculated.

144. I accept Mr Cutting's submission in paragraph 131 of his closing written submissions that Hillmead would have incurred a cost in handling the rejected bonded panels, and I accept Mr Bowers evidence that the costs alleged were "... based on calculations we normally do for handling panels for clients" (transcript 3/190/21-22). However, Hillmead has not established that there was any necessity for it to incur storage costs for such a quantity of rejected bonded panels over a three-year (or any) period of time. Accordingly, I would have awarded £549 in respect of item 10, but nothing in respect of item 11.
145. Item 12: diversion of staff time

In paragraph 14 of his first witness statement, at the end of the section headed "diversion of staff time" Mr Bowers stated:

"Throughout 2008, 2009 and 2010 Hillmead staff were engaged initially in dealing with the immediate consequences of the rejection of panels by Railston and rectifying the problems at the various stores. Attention then focused on trying to identify the cause of the problems and seeking to liaise with the claimant to resolve matters. Various Hillmead staff members were engaged throughout this process and attached at pages 15-18 of exhibit DB1 is a schedule detailing the time spent by the various members of staff and how that staff time has been quantified."

The schedule is dated 6 October 2011 and is at page D/22. Mr Bowers stated (transcript 3/111/5-19) that he had done some of the initial calculations in it, and then passed it on to Hillmead's accountants for checking. However, he did not state precisely what calculations he had done, or what revisions to them had been carried out by those accountants. In any event those accountants were not called as witnesses at trial. The schedule lists seven persons, including Mr Bowers, Darren Selman and Ellis Greenhill, all of whom gave evidence at trial. The amount claimed in respect of Darren Selman is stated to be £16,100.

146. The next page (D/23) is dated later: 29 May 2013. It contains a calculation showing how the figure of £70 per hour was derived. The next two pages (D/24-25) are also dated 29 May 2015 and contain a calculation showing how the total of 230 hours was derived. Mr Bowers initially stated that Darren Selman prepared this calculation, but then stated he was not sure who did, though he recalled discussing it with Darren Selman (transcript 3/113/20 - 3/115/8).
147. At the top of page D/23 is the following statement:

"n.b. Darren is employed by MWC Holdings Ltd who are based in Cirencester. His costs are part of an inter-company charge that is made to Hillmead Joinery (Swindon) Ltd who was based in Swindon."

However, Hillmead did not adduce any evidence about such an inter-company charge, or produce any record of resolutions or other decisions by directors of either company, or accounts to show how such an inter-company charge had been put into effect. In his cross-examination Mr Bowers accepted that Hillmead had not produced any evidence about such an inter-company charge (transcript 3/120/6 - 3/121/8, and again at 3/133/15-21). As a result, there is no, or insufficient, evidence to establish that Hillmead had in fact suffered any loss as a result of the time it asserts Darren Selman, as an employee of MWC Holdings Ltd, spent on its behalf in dealing with these matters.

148. In his cross-examination Darren Selman accepted that no contemporaneous record had been kept of the amount of time spent by members of staff dealing with these matters (transcript 1/147/1-25), and so far as the amount of time shown in the calculation, Darren Selman stated (transcript 1/149/6-13):

"Q: … it must have been almost impossible for you to have any kind of accurate recollection about how you spent your time between March 2008 and March 2009 when you were first asked to carry out the task in October 2011. Would you agree?

A: I agree."

Ellis Greenhill gave evidence to like effect (transcript 2/70/15 - 2/71/5). Mr Bowers also agreed in cross-examination that the calculation at page D/22 was not a detailed account of "... who is said to have been diverted at what times and in what ways" (transcript 3/106/22- 3/107/1).

149. The state of the evidence as regards the seven members of staff listed in the schedule at page D/22 is thus as follows:

(1) Darren Selman. He gave oral evidence at trial, and did refer to this topic in his witness statement. A calculation of his hourly rate is at page D/23, and a calculation of his time spent at pages D/24-25. He is however employed by MWC Holdings Ltd.

(2) Ellis Greenhill. He gave oral evidence at trial, but did not refer to this topic in his witness statement. No calculation of his hourly rate has been produced by any witness. A calculation of his time spent is at page C/134, but Hillmead adduced no evidence from him on that topic. He also is employed by MWC Holdings Ltd.

(3) Jon Bowers. He did not give any evidence at trial, and made no witness statement. A calculation of his hourly rate is at page C/136, and of his time spent at page C/135, both within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.

(4) Mr Bowers. He did give oral evidence at trial; while he referred to the topic of diversion of staff time generally on his witness statement, he did not in fact give any direct evidence about the amount of time he himself spent dealing with these matters, or as regards his hourly rate. A calculation of his hourly rate is at page C/139, and of his time spent at page C/140, both within the material produced by Darren Selman, rather than by Mr Bowers himself.

(5) Keith Honour. He did not give any evidence at trial, and made no witness statement. There is no calculation of his hourly rate. A calculation of his time spent is at page C/137 within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.

(6) Chris Lewis. He did not give any evidence at trial, and made no witness statement. There is no calculation of his hourly rate. A calculation of his time spent is at page C/138 within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.

(7) Dave Edmonds. He did not give any evidence at trial, and made no witness statement. A calculation of his hourly rate is at page C/132, and a calculation of his time spent is at page C/131 both within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.

150. There are significant deficiencies in the quality of the evidence which Hillmead has adduced in support of this item of claim:

(1) There is no direct evidence about any inter-company charge, and thus the claims in respect of time spent by Darren Selman and Ellis Greenhill are not established on this ground alone.

(2) None of Jon Bowers, Keith Honour, Chris Lewis and Dave Edmonds made witness statements, and thus their evidence on these topics was not tested at trial in any way, with the result that the evidence in their respects lacks cogency.

(3) While Ellis Greenhill did make a witness statement, he did not deal with this topic in a witness statement, and thus his position is similar to that of Jon Bowers and the others identified above.

(4) As regards the quality of the evidence about time spent, both Darren Selman and Ellis Greenhill agreed that it was impossible to have an accurate recollection of the time spent dealing with these matters, so the accuracy of the figures claimed in this regard is significantly diminished.

(5) No contemporaneous record of time spent by members of staff dealing with these matters was kept.

151. In paragraph 135 of his closing written submissions Mr Cutting referred to the decision of the Court of Appeal in Aerospace Publishing Ltd v Thames Water Utilities Ltd [2007] EWCA Civ 3, and the propositions there identified by Wilson LJ. The first of those was that:

" … the extent of the diversion of staff time has to be properly established and, if in that regard evidence which it would have been reasonable for the claimant to adduce is not adduced, he is at risk of a finding that they have not been established"

That warning rings loud in the circumstances of the present case.

152. In my judgement Hillmead has failed to establish, on balance of probabilities, the figures contended for in respect of this head of claim, and accordingly I would not have awarded any sum in respect of item 12. I have little doubt that some disruption to Hillmead was caused by these matters, and at some cost. It may be that the financial cost of such disruption was of the order of the £13,000 which Hillmead identified on 7 May 2009 (page C/20), but that figure derives from an assessment of overhead cost of 15%, and Hillmead adduced no evidence to show how such an overhead cost had been calculated. Surmise is one thing; proof - on the balance of probabilities - is another thing; and Hillmead has failed to establish the latter in respect of item 12.
153. Item 13: travel

This claim derives from the one line calculation in the schedule at page D/22. While the figure may itself be reasonable, no witness gave direct evidence to establish the underlying criteria upon which the figure had been calculated, and accordingly I would not have awarded any sum in respect of item 13.

154. Items 14 & 15: loss of business

The evidence in support of these claims is to be found in (a) paragraphs 15 and 16 of Mr Bowers first witness statement; (b) the evidence of Gerard O Sullivan, a director of Railston Design; (c) the calculation at page I/77/406, which was not produced by any witness, setting out the arithmetic of Hillmead's claims, which is then set out in items 14 and 15 of schedule 2; and (d) the "Railston schedule" at page I/75/369 setting out the value of work placed by Railston Design initially with Hillmead and thereafter with "MWC" over the years 2006-2014, which Gerard O Sullivan produced as an exhibit to his second witness statement.

155. Hillmead's claim for the first three year period 2009-2011 is calculated as follows: three contracts per annum with Railston Design with a contract value of £70,000 each; thus £210,000 worth of work with Railston Design per annum for each of those three years; total value of work over those three years thus £630,000; gross profit margin of 26% equates to £163,800 loss of business.
156. However, in his cross-examination, Gerard O Sullivan accepted that Primark had placed significantly less business with Railston Design in 2009, namely £1,385,663.63, than it had in 2008, namely £2,184,968.95, with a recovery in 2010 to £2,372,805.64 (transcript 2/162/2 - 2/164/7).
157. The Railston schedule shows that Railston Design placed £60,515 worth of work with Hillmead in 2006, and £111,041 in 2007. That is an average of approximately £85,000 per annum over those two years. In 2008 Railston Design placed £506,659 worth of work with Hillmead, and in 2009 only £11,560 worth of work. However in 2010 it placed £72,186 worth of work with Hillmead, and £84,184 worth of work in the following year 2011. Those figures are very similar to the average figure for 2006 and 2007.
158. Then during the years 2012-14 Railston Design placed a total of £492,168 worth of business with "MWC", an average of £164,056 per annum.
159. Hillmead's claim for the second three year period 2012-2014 is calculated in the same way as the first, but discounted by 50% to give credit for "anticipated recovery in future business": hence a claim for £90,366.90 for this period.
160. There are significant deficiencies in the quality of the evidence which Hillmead has adduced in relation to each element of these items of claim:

(1) The period claimed. Hillmead advances a claim for loss of business over a six-year period, but adduces no or insufficient evidence to establish how or why damages should be awarded over such a lengthy period of time. The claims are founded on a single premise, namely that the loss of orders from one customer, Railston Design, would have been the sole cause of all loss of business sustained over such a six-year period. However the evidence fails to take into account Hillmead's prospects of obtaining work from alternative sources. There was simply no evidence directed to this issue. While I have little doubt that Hillmead suffered a loss of business in the immediate aftermath of Railston Design's decision not to place any further business with it, Hillmead failed to produce any evidence to show what was - on balance of probabilities - the period during which such loss of business could be shown to have been caused as a direct result of Railston Design's decision.

(2) The inter-relationship between Hillmead and MWC Fittings Ltd. The Railston schedule shows that in the years 2012-2014 Railston Design placed very significant volumes of work with "MWC", which Mr Bowers confirms was MWC Fittings Ltd. That opens an entire enquiry as to whether, and if so in what way, any downturn in business placed with Hillmead should be balanced by an upturn in business placed with MWC Fittings Ltd, each being part of the same corporate group. The point was simply not addressed in the evidence; nor did Hillmead make any or any sufficient analysis of the point. The point could, of course, be a complete answer to the claim in respect of the second three-year period.

(3) The value of each contract with Railston Design. Mr Bowers asserts that this was £70,000: see schedule 2. But he produced no calculation to substantiate this figure, or to show how it had been calculated or derived.

(4) Hillmead's gross profit margin. Again, Mr Bowers asserts that this was 26%: see schedule 2. But again he produced no calculation to substantiate this figure, or to show how it had been calculated or derived. Palpably, Hillmead produced no accounts or any other documents at trial to establish what, if any, was its gross profit margin, achieved over what year or years.

161. The consequence of these deficiencies is that there is simply insufficient or inadequate evidence to enable appropriate findings of fact to be made upon which an award of damages in respect of these items could be based. Accordingly I would not have awarded any sums in respect of items 14 and 15.
162. There are also further factors, as identified in paragraph 178.5-7 of Mr Sheehan's closing written submissions, which would have needed to be taken into account in assessing the measure of any such loss of business. However, as Hillmead has not adduced sufficient or adequate evidence to provide the basis for appropriate findings of fact to be made, it is not necessary now to consider those factors.

J: Conclusion

163. In summary:

(1) IDS' terms and conditions were incorporated in the contracts of sale between it and Hillmead. This deals with issues 1 and 2.

(2) IDS' terms and conditions did not satisfy the statutory test of reasonableness. This deals with issue 5.

(3) There was an implied term as to satisfactory quality in the contracts of sale between IDS and Hillmead; but there was no implied term of fitness for the purpose alleged in the defence. This deals with issues 3 and 4.

(4) IDS was not in breach of such an implied term as to satisfactory quality. This is sufficient to deal with issues 6 to 9.

(5) As a result, Hillmead does not recover any loss and damage as alleged in the defence and counterclaim. Had I found that IDS was in breach of the implied term to satisfactory quality, then I would have awarded the sums identified in section I of this judgement. That deals with issues 18 to 27.

164. In those circumstances, it is neither necessary nor proportionate to provide specific answers to issues 10 to 17 (sub sales and rejection) and 28 to 30 (causation).
165. I will hear from counsel on all consequential matters when this judgement is formally handed down.

DG
20.03.15

Note 1   See transcript day 5/21/14    [Back]

Note 2   Which David Bowers confirmed was MWC Holdings Ltd, although Darren Selman referred to it as "MWC Group": see transcript day 3/35/-14 and day 1/119/14 -19.     [Back]

Note 3   item 14 being for the 3 years 2009 to 2011, and item 15 being for the subsequent three years from 2012 to 2014    [Back]

Note 4   entitled a ‘Reply’, but referred to at trial as a ‘Rejoinder’ to avoid confusion with IDS’ Reply & Defence to counterclaim    [Back]

Note 5   the Furniture Industry Research Association (see page G/22)    [Back]

Note 6   apparently dated on or about 5 August 2008    [Back]

Note 7   clause 6.2 deals with inspection, 6.3 with dimension, and 6.4 with test requirements and table 5    [Back]

Note 8   see internal page 7    [Back]

Note 9   British Laminate Fabricators Association    [Back]

Note 10   see ‘Chitty on Contracts’ 31st edn volume 1 at paragraph 26-062, and the cases cited there    [Back]