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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Rispond Estate & Ors v. Mainstream Scotland Ltd [2005] ScotCS CSOH_129 (29 September 2005)
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Cite as: [2005] CSOH 129, [2005] ScotCS CSOH_129
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Rispond Estate & Ors v. Mainstream Scotland Ltd [2005] ScotCS CSOH_129 (29 September 2005)
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OUTER HOUSE, COURT OF SESSION [2005] CSOH 129 |
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CA45/04
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OPINION OF LORD CLARKE in the cause RISPOND ESTATE AND OTHERS Pursuers; against MAINSTREAM SCOTLAND LIMITED Defenders:
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Pursuers: Bowen; Gillespie Macandrew
Defenders: Cowan, Solicitor Advocate; Simpson & Marwick W.S.
29 September 2005
Introduction
[1] In this commercial action, the pursuers sued the defenders for payment of two sums together with interest. The first sum sued for was £28,750 and the second sum sued for was £77,686. The first sum related to the breach of an alleged agreement between the parties for the supply, by the pursuers to the defenders, in 2003, of a quantity of salmon fry. The second sum related to an alleged agreement by the pursuers to supply the defenders with a quantity of salmon smolts during 2003. [2] The case came before me for proof before answer. At the beginning of his closing submissions, counsel for the pursuers, sought leave to amend the conclusions, no doubt in the light of the evidence which had been led. Counsel sought to reduce the sum first concluded for to £28,125 and to reduce the second sum concluded for to £37,200. This was not opposed and I allowed the pursuers to amend their conclusions to that effect.The background to and circumstances of the dispute
[3] The background to this action is that the parties had for some years, prior to 2003, dealt with each other for the supply to the defenders by the pursuers of salmon fry and smolts. On 17 April 1998 Mr Charles Marsham, who is one of the two partners forming the firm who are the first named pursuers, and who was the pursuers' principal witness at the proof, signed a document, which is 36/1 of process. The document is headed "HEADS OF AGREEMENT between Aquascot Group; Rispond Fish Farms Limited; Rispond Estate and Mr and Mrs Charles J L B Marsham." The document was signed, on behalf of the Aquascot Group of Companies, by Keith D Agnew, who was apparently a Director of the company known as Aquascot Sea Farms Limited, which is the former name of the present defenders. The Heads of Agreement bear to relate, to some significant extent, to the purchase by the Aquascot Group of companies of shares of Mr Marsham and his wife in a company known as Rispond Fish Farms Limited and certain consequences flowing therefrom. These matters were not explored, in any detail, at the proof. Paragraphs 4 and 5 of the Heads of Agreement were in the following terms:"4. Rispond Estate to purchase approximately 50,000 10gm parr and approximately 250,000 1998 fry for £38,500 - payment to be delayed until smolts are supplied to Aquascot. Rispond Estate will also purchase 157,000 SI at 50p and 52,000 S2 at 80p and will be invoiced by Aquascot. Rispond Estate will then sell the above when ready for sea to Rispond Fish Farms Ltd for 59p and 91p respectively.
5. Aquascot and Rispond Estate to enter into a smolt supply contract for 5 years with 2 years notice and price negotiation for 200,000 to 300,000 smolt p.a. starting at 60p each. Ova to cost Rispond Estate no more than £35 per 1000 and any vaccine to be supplied".
There was no evidence before me which established that, in implement of what is said in paragraph 5, the parties entered into a five year smolt supply contract. It will be noted that nothing is said in paragraph 5 about the weight which any smolts should have achieved before being supplied to the defenders.
[4] Mr Marsham, in evidence, advised the Court that, following the signature of that document, the pursuers supplied smolts each year to the defenders up until 2003. He said that, in the early years, the defenders were content to take smolts of relatively small size at delivery in April/May and that these could have an average weight of 40 grams each. The price to be paid for the smolts fell to be negotiated between the parties each year. The person from the defenders, with whom Mr Marsham dealt directly, was a Mr Andy Reeve. Because of changes in market conditions, and also the requirements of the defenders' new Norwegian owners, the defenders required, in due course, to be provided with smolts of increasing weight. The pursuers sought to meet the defenders' requirements in that respect. The practice between the parties was that the defenders' requirement in respect of supply of smolts would be discussed and agreed during the course of one year for delivery in the Spring of the following year. That reflected the cycle of development from the purchase of ova, to the bringing on of the fish, to smolt stage, by the pursuers. On 30 September 2002 Mr Marsham e-mailed Mr Reeve, apparently after a discussion about the defenders' requirements for 2003, regarding the quantity and weight of smolt. The e-mail (36/4 of process) is in the following terms:"Sample weights 30-9-02
21-24gms......... 60,000
24-28gms........ 115,000
28-32gms........ 160,000
Total........ 335,000
The above populations need grading and I would anticipate that we will end up with the following smolts:
60gms early - mid April ........ 160,000
60gms end April ........ 120,000
Total ........ 280,000
Whether the 'culls' 65,000 have any value or use is dubious.
Your thoughts regarding the supply for 2003 would also be much appreciated as we need to place orders for ova in the very near future.
I would be most grateful if we finalise plans soonest as it looks as if I am off to the South Coast at the weekend".
Subsequent to that e-mail being received by Mr Reeve, he informed Mr Marsham that the defenders' requirements for 2003 involved the supply of smolts of 80 plus grams weight only. In response to that, Mr Marsham wrote, on 12 November 2003, to Mr Robert Murray, who was a Director of the defenders and its financial controller. A copy of that letter was sent to Mr Andy Reeve. The letter (36/5 of process) is in the following terms:
"Apologies for not getting back to you before but we were away following our meeting in Alness.
Our position is quite clear, we consider that we have a contract with yourselves to supply up to 300,000 60gms smolts during spring 2003. We do not accept that the specifications of smolts can be unilaterally altered during the period of production.
However we are aware of your change of requirements and without prejudice we are prepared to try and seek a solution.
We are prepared to try and re-sell the above smolts to third parties at best price providing that you underwrite the price to 90% of 75p each and reimburse us for any justifiable expense incurred in marketing.
For avoidance of doubt we would expect to be paid 67.5p each for any unsold smolts and the difference between price and 67.5p for any smolts sold at below 67.5p.
In the event the smolts are sold at a price of above 75p each, we undertake to repay yourselves up to £12,000 of the surplus to repay the cost of the vaccine.
Your thoughts or comment on the above would of course be appreciated and expected"
"1. If you sell the smolts to a third party in addition to the third party sale price you will receive 20% of the previously agreed smolt price from Aquascot.
2. If you do not sell the smolts Aquascot will purchase the smolts at a 20% discount to the previously agreed sale price.
We need to agree this by latest end of November or Norway want us the [sic] write indicating that there is no deal at all".
The e-mail was headed "Draft Agreement". Mr Marsham and Mr Murray then had an e-mail correspondence on 22 November 2002 to clarify the proposal further. This correspondence is contained in 36/7 and 36/8 of process. Mr Marsham, in evidence, said that after the clarification given in that correspondence, he accepted the defenders' proposal regarding his production of smolts for 2003 and began to seek to sell them to third parties. By March 2003 it was clear that the pursuers' efforts in that respect were proving to be unsuccessful. On 24 March 2003 Mr Marsham e-mailed Mr Reeves, in inter alia, the following terms (36/13 of process):
"It does not look as if we have been successful in finding a home for the smolts. We think they will be ready for transfer around mid April. Please advise us as to destination etc to allow organisation of well boats"
It is in relation to what followed between the parties regarding the supply of the smolts that the second conclusion in the pursuers' summons is directed.
[6] In the meantime Mr Reeve had, on 26 February 2003, e-mailed Mr Marsham enquiring as to the possibility of the pursuers supplying the defenders with salmon fry (36/9 of process). The following correspondence regarding this matter, adduced at the proof, was as follows. Mr Marsham replied to Mr Reeves in an e-mail (36/10 of process). In it he wrote:"310,000 frys should be possible subject to survival rates.
Price at 20p each ex farm would be around the minimum that we could accept. However 3.5gr by end of April may be pushing it a little. We intend to start feeding 1st March and can keep the temps around 12/14ºc depending on ambient."
That e-mail was followed by another from Mr Marsham dated 14 March 2003 to Mr Reeve (36/11 of process). In it Mr Marsham wrote:
"We think that we would be safe in suggesting 175,000 + or - 50,000.
We also think we should be able to reach 4 grms in mid/late May.
Depending on size we would be looking for 20/25p each."
That e-mail was, in turn, replied to by an e-mail from Mr Reeve dated 20 March 2003 (36/12 of process). In it he wrote, inter alia, as follows:
"Could we agree on 22.5p delivered mainland Scotland.
I would be interested if you have more fry but would need to know sooner rather than later as I have other fry on offer for SI's. Let me know as soon you have made a decision."
In his e-mail of 24 March 2003 (36/13 of process), already referred to above, Mr Marsham wrote inter alia, "If we are paying all transport I would hope for at least 23p each!!...". In his evidence, Mr Marsham said that he was absolutely certain that there was either a further e-mail from Mr Reeve, or a telephone call with him, when it was agreed that the pursuers would supply to the defenders 175,000 plus or minus 50,000, fry, at a weight of 4 grams mid to late May, at a price of 23p each, including the cost of transport within mainland Scotland. In view of the potential purchase of the pursuers' smolts by the defenders, Mr Reeves had part of the pursuers' stock of smolts, which was held at the pursuers' Polla Hatchery examined by the Fish Vet Group. Their report is 30/14 of process and is dated 2 April 2003. On or about 4 April 2003 the defenders had the sizes of the smolts checked. The smolts, which were found to be under 45 grams in weight, were graded out by the parties. Mr Reeve, in the event, was not prepared, on behalf of the defenders, to accept for delivery to them, 40,000 smolts which they considered too small for their purposes.
[7] Mr Marsham, in evidence, accepted that, at that time these smolts were too small for delivery to sea. In addition what Mr Marsham had told the defenders what he could provide were smolts of 60 grammes in weight, (cf 36/4 and 36/5 of process) Mr Marsham, in cross-examination also agreed that the parties had agreed that smolts supplied to the defenders had to have a minimum weight of 45 grams. [8] Part of the whole of the pursuers' stock of smolts had been hatched at a hatchery in Cambridgeshire known as the Ben Green Hatchery. The defenders, apparently, had had previous experience of fish, sourced from that hatchery, having certain deformities. Mr Reeves decided to instruct a vet to examine and report on that stock. His report is 36/18 of process. That report identified heart defects in the sample of fish examined by the vet. In the light of that report the defenders were not prepared to take any of the smolts sourced from the Ben Green Hatchery. While the pursuers, in the present proceedings, had originally alleged that this was a breach of contract on the defenders' part, this was departed from, in the light of the evidence led at the proof, and resulted in the amendment being made to the second conclusion referred to above. The number of smolts in question was 72,000. The rejection by the defenders of the 72,000 smolt considered to be suffering from heart defects, and the 40,000 smolt which were rejected as too small for the defenders' requirements, meant a significant financial loss to the pursuers. The defenders appreciated that, and the pursuers' Mr Marsham continued to enquire of them as to what accommodation they might arrive at to deal with the matter. [9] On 16 April 2003, after delivery had been made by the pursuers to the defenders of the smolts accepted by the defenders, Mr Marsham e-mailed Andy Reeve (36/20 of process), in inter alia, the following terms:"Have you had any thoughts about either the 72,000 that were not sent or the 40,000 graded smalls. We would most [sic] grateful if you would consider the situation in the very near future."
In the same e-mail Mr Marsham touched on the question of the provision of fry to the defenders. He said "on another note we are proceeding with this year's fry, the tops are about 1.5gms now, we hope we can keep them going for the next month." On 22 May 2003 Mr Marsham e-mailed Andy Reeve. The heading of the e-mail was "Subject: Re. 2003 Fry" (36/24 of process). He wrote:
"As of today - 22 May after sample weighing and sample grading we reckon that we have 125,000 fry of an average weight of 3.5grams in range of 3.0 --- 4.5 gms. These fish should be over an average of 4.0gms on 1-06 - 03."
Mr Reeve replied in an e-mail, which also forms part of 36/24 of process, and which is dated 28 May 2003. In that e-mail Mr Reeve wrote inter alia, as follows:
"With regards fry, my understanding is that the weight of these fish have 'slipped' due to the cool conditions and are not now in the size bracket for which we had discussed and agreed a price which would be suitable for SO production.
Our original weight was 4 grammes mid May. The last time we spoke you were clear you would have good numbers of fish which would reach 4.5 grammes by the beginning fo [sic] the first week of June, a fact which has now changed........ I will try to contact you today to discuss the above however feel that this matter and the smolt issue will need some serious discussion to resolve!"
Mr Marsham's reply to that e-mail was an e-mail from himself to Mr Reeve dated 28 May 2003 (36/25 of process) which was in the following terms:
"Thanks for the E-mail today, however we are very puzzled by your concerns re fry sizes.
We have never said or intimated that we would produce fry larger than 4 gms at the end of May.
At our metting (sic) we discussed 4.5 gm fry in early June. I thought that we left it that you would come back to us because there is a great difference between June 1 and June 10 in fry growth. You also requested a breakdown of our fry and sizes which we have supplied. A sample taken today confirms our prediction of 125,000 at 4gms av on May 31".
"I am writing to outline our position and proposal for resolution of the issues related to this year's smolt input.
We see the way the issue progressed as follows:
Agreement was reached at the end of November 2002 that you would seek to sell your stock to a third party with a financial incentive to do so provided by us in the form of a 20% payment on top of any sale which you made. This was due to the projected weights being less than our requirement for 80 gramme smolts for this year's input. Despite your efforts to sell the fish throughout the industry it became apparent as smolt transfer approached that you would be unsuccessful in doing this and we made plans to accommodate your fish in our smolt input plan.
Prior to input we discussed and agreed the fact that a proportion of your stock would not meet our requirement for smolts with a minimum weight of 45 grammes and you graded the stocks accordingly. Subsequent to this we carried out a veterinary inspection on your stock prior to transfer to address specifically the concerns of our Orkney regional manager following on from health issues he had previously experienced with stock of Polla origin. As result of the checks carried out the vet raised serious concerns on heart deformities. Based on this advice we were unable to accept for transfer the fish whose fry origin was Tixover Salmon. The remaining stock which were of acceptable quality were transferred to our cage site at Quanterness. Subsequently as an attempt to help you out I waited for developments in our input plans which may have left space to transfer the remaining small stock on a deal which would have given you some possibility of some return, but no opportunities arose.
Our opinion of the episode is that we reviewed the issue with you in good time and offered a significant financial incentive to assist you in reallocating your production. Once it became apparent that this was not going to happen we were prepared to transfer the fish in keeping with the spirit of our agreement. We are confident therefore that we made every effort to transfer stocks which were of an acceptable health status and condition and have discharged our responsibilities under the agreement.
I understood that you required a sum of £30,000 to square your position for the year.
We are in agreement for the supply of 4-5gm fish in mid May. Due to the cool temperatures in late April/May your stock would not make either this or the reviewed weight of 4.5gms first week of June. As a compromise towards resolution I have offered to take from you 125,000 fry in July for our Loch Garasdale cage site at a price of £0.23p ea. This would be fish from a later batch than previously agreed and at a very good price, this price was another method towards a satisfactory compromise. The total invoice for the fry would be £28,750.
As a compromise, although we feel that we have discharged all of our responsibilities under the agreement I am prepared to raise the sum paid for the fry to a total value of £30,000 for 125,000 fish subject to agreed count and health status at the time of transfer. In addition we are prepared to review the payment terms for the smolts and fry, smolts recently invoiced to be paid for week commencing 16th June and the fry paid for 12 days post-transfer.
I will wait for you to get back to me in writing with your response, following the many years good working relationship between Aquascot/Mainstream Scotland and Rispond.
We hope that a speedy resolution will be possible".
The proposals contained in that letter, and as expressed therein, were not acceptable to Mr Marsham. His position, at the proof, was that a "substitute" agreement had been arrived at between himself and Mr Reeves regarding the supplying of fry, which was in the terms referred to in Mr Reeves letter of 12 June, but that that agreement was not made conditional on any agreement by the pursuers regarding the smolt issue. That position is reflected in an e-mail from Mr Marsham to Mr Reeves dated 18 June 2003 (36/30 of process). The e-mail was headed "Subject: 2003 fry" and was in the following terms:
"We have given the above matter considerable thought and are absolutely convinced that the 2003 fry contract as agreed in e-mails of February - March 2003 has no connection to the past smolt supply contract.
To reiterate again we believe that we met your specifications for fry as at 31 May and that you had been advised of that fact.
You informed us that you would not take them but agreed to take 125,000 8 gms fry in July for the same price, this we accepted.
The situation as we see it is that we are expecting to have the above fry delivered to a mainland site of yours towards the end of the July.
Please revert soonest with your thoughts."
"In conclusion we believe that the Contract as originally outlined in the Heads of Agreement 17/4/98 has been met by ourselves and we have invoiced you under separate cover for a total of 200,000 smolts.
We believe that the fry deal is a completely another (sic) matter and has no bearing on the smolt supply."
An invoice for the balance of the smolts which the defenders had refused was sent by the pursuers to the defenders and is 36/33 of process. Mr Marsham also sent an invoice to the defenders for £5,000 in respect of ova which had been purchased by the pursuers for the production of the smolt. That invoice (36/32 of process) is headed "Ova Adjustment - Difference Between £50/1000 and £35/1000 as per Heads of Agreement 17/04/03". The invoice (36/33 of process) for the smolts is headed "Smolts 2003 Contract (Heads of Agreement 17/04/98). It is clear from those headings that Mr Marsham considered that the payments sought under those invoices were due, as a matter of contractual obligation, by the defenders, by reason of the provisions of the Heads of Agreement (36/31 of process). That appeared to remain his position, in evidence, at the proof.
[12] On 27 June 2003 Mr Reeve wrote to Mr Marsham setting out the defenders' position in reply to Mr Marsham's letter of 19 June. In his reply (36/34 of process) Mr Reeve, inter alia, stated:"The agreement for the fry was 4.5-5grammes in the middle of May, the weight of 4.5 grammes at the end of the first week in June is significantly different from this. These fish will not reach the desired weights for our SO budgets and thus could not be used for this purpose. I have offered to still take these fish, use them for SI production and still pay the price of £0.23p delivered which was only justified by fish which would make SOs of the correct weight and transfer date. This offer was a part of our effort to find a satisfactory solution to the problem. I see the purchase of these fish as an integral part of our proposal for a solution, this creates an issue for us as I am unable to take them without your agreement on that.
Unfortunately, based on the exchange of letters, I do not see any grounds for a compromise, unless you can make a suggestion. Like yourselves we have valued our good working relationship since 1988 and have made every effort to maintain it during this process.
Please get back to me with your position on the fry as soon as possible as I am aware that the clock is ticking for transfer of this stock".
Mr Marsham's reply to that letter was an e-mail of 4 July 2003 (36/36 of process). In it he wrote inter alia:
"As I said we are expecting to supply you with 125k fry in July. We believe we met the specifications as per e-mails of 31 May, so we cannot accept any coupling with this deal and the smolt situation. We are intending to raise an invoice to yourselves for these fry at the end of the month."
On 22 July 2003 Mr Marsham, once again, wrote to Mr Reeve (36/39 of process):
"We have not received any advice from yourselves as to where you wish the 125,000 8 gm fry @ cost of 23.5p each to be delivered in July 2003.
We believe that these fish have been produced by us on Contract to yourselves for delivery in July and will consider it a Breach of Contract if you do not accept them.
We also wish to inform you that we reserve our position as to other outstanding matters such as the 2003 crop of SI smolts.
If we do not hear from you before 31 July 2003 on the above matters we have no alternative but to take legal steps to recover all outstanding amounts".
That letter was responded to by Mr Reeve on 22 July 2003 (36/40 of process) in the following terms:
"Without prejudice
I refer to your letter of 22 July. Our position on the fry remains the same as previously expressed, that is: they failed to make the agreed weight on the date specified and their purchase at £0.23 pence was a part of our attempt to work through this year's smolt supply issues with you. As such the supply of these fry would be subject to agreement on our position. We understand that you are not in agreement and therefore are not able to accept the fish, I felt that you were clear on this position last month".
On 31 July 2003 the pursuers raised an invoice on the defenders for £28,125 in respect of 125,000 fry at 23p each. The heading of that invoice is in the following terms:
"Fry as per contract (e-mails 25/02/03, 14/03/03, 20/03/03)".
It is as a result of the aforementioned invoices not having been paid by the defenders that the present proceedings were raised by the pursuers.
Evidence of the parties' witnesses at proof
[13] The evidence of the pursuers' main witness Mr Marsham I found to be somewhat vague, uncertain and imprecise at times. He appeared to consider that because of the Heads of Agreement, in particular paragraph 5 thereof, the defenders were bound to purchase in each of the five years from 1998, 200,000 to 300,000 smolts from the pursuers at such weights which they might have achieved at the normal transfer time in the spring. He also contended that, because of what was said in the Heads of Agreement, that the pursuers would be entitled, in respect of each such supply of smolt to recover from the defenders the cost to the pursuers of any ova purchased by them insofar as that exceeded £35 per thousand ova, and also that the defenders were bound in respect of the production of smolts in any of those years to pay for the vaccination of the smolts in question. He did accept in evidence, however, that it was the intention of the parties that a contract would be entered into in relation to these matters but that the parties had never entered into any such contract. Mr Reeve said in evidence, which I accepted, that he himself had in fact never seen 36/1 of process. He was the person who dealt with the pursuers regarding the supplies by the pursuers to the defenders of smolt and fry. I am satisfied that, on the basis of the evidence of both of these witnesses, and the evidence I also heard from Mr Robert Murray from the defenders that, up until 2003, what happened was that the parties, each year, met to agree the quantity and the weight of smolts to be supplied by the pursuers to the defenders, and the price to be paid therefore, in the following Spring. There never was any agreement between the parties as to the minimum number of smolts which the defenders were bound to accept every year for a period of five years from 1998 onwards. Similarly there was never any agreement about the minimum weight of smolts which the defenders would be obliged to accept in each of those years. In 2003 the defenders required that for their purposes, the smolts should be at least 80 grams in weight. They were, in my judgment, perfectly entitled, in law, to impose that requirement. The pursuers were either unwilling or unable to meet that requirement. That resulted in the agreement which is referred to in 36/5, 36/6 and 36/7 of process as supplemented by subsequent oral communings. Up until 2002, the position appears to have been that the defenders supplied the ova each year and the vaccine for the purposes of vaccinating the smolts. In respect of the proposed purchase of smolts for 2003, Mr Reeve, in 2002, informed Mr Marsham that the defenders would not have ova. Mr Marsham agreed to buy ova and he did so at a price of £50 per thousand ova. Some of this ova was transferred and sold to the defenders for their own needs. The rest was used by the pursuers for the produce of smolt (about 700,000 eggs). [14] As far as the parties' position regarding the 2003 supply of smolts was concerned, I am satisfied that, while Mr Marsham contested the defenders' requirement that the smolts should be at least 80 grams in weight, he accepted the proposal which is reflected in 36/6 and 36/7 of process. That proposal was discussed at a meeting attended by Mr Marsham, Mr Reeves and Mr Robert Murray in early November 2003. Mr Murray's evidence was that, in the context of the proposal being put forward that the pursuers should seek to sell their 2003 stock of smolts to a third party, in the first place, he, Mr Murray, agreed to give Mr Marsham a cheque for £12,000 to enable Mr Marsham to purchase vaccine. It was necessary for the fish to be vaccinated no matter who was ultimately to be the purchaser of them. Mr Murray, in evidence, said that the sum in question was, in those circumstances, paid as an advance to the pursuers which would be deducted from any price which the defenders had to pay for smolts which, in due course, they purchased, or which would be repaid to the defenders by the pursuers in the event of the smolts being sold to a third party. That was reflected in the reference in 36/7 of process to "remember less vaccine cost". In the event the £12,000 was deducted by the defenders from the payment they made for the smolts which they did take in the Spring 2003. The pursuers seek recovery of that sum as part of the sum sued for in the second conclusion. [15] Mr Murray's evidence was that all the matters referred to in paragraph 5 of 36/1 of process would be the subject of fresh discussion and agreement each year after 1998. Mr Murray was prepared to accept, in cross-examination, that it may have been the case that, prior to 2003, the ova used by the pursuers for the production of smolts had never cost more than £35 per one thousand. Mr Reeve, in evidence, confirmed that, in each year, the practice was for the parties to discuss the price, the weight and the time of transfer of the smolts to be supplied by the pursuers using "a ball park figure of 200,000 to 300,000." While, prior to 2002, the defenders had been prepared to purchase smolts of an average weight of 45 grams at delivery, for 2003 their requirement, for good commercial reasons, had changed to 80 grams. He confirmed that he had attended a meeting, in early November 2002, attended also by Mr Marsham and Mr Murray, in which this matter was discussed and the proposal was made that the pursuers should, in the first place, seek to sell their stock of smolts to a third party. He corroborated Mr Murray's evidence that the £12,000 was paid to Mr Marsham as a payment to an account for vaccine to assist the pursuers in seeking to sell the smolts to a third party. Mr Reeve said that after he informed Mr Marsham that the defenders would not be taking the 72,000 smolts diagnosed as potentially having heart defects, Mr Marsham asked Mr Reeve if the defenders would be prepared to do something with regard to the 40,000 small graded out smolts. Mr Reeve had considered that possibility but, in the event, the defenders had no room at their facilities to take these smolts and Mr Reeve, in due course, advised Mr Marsham of this. Mr Marsham told Mr Reeve that the defenders' refusal to take the 72,000 smolt diagnosed as having potential heart deformities and the 40,000 small smolts would create a financial problem for the pursuers. Mr Reeve, in evidence, said that he had asked Mr Marsham how much the pursuers would need to be paid to sort things out and that he had replied £30,000. Mr Reeve, also in evidence, said that he accepted he had made an agreement with Mr Marsham regarding the supply of fry to the defenders. That agreement, he maintained, was for the supply of fry at a weight of a minimum 4 grams mid/late May at a price of 23p each. A dispute arose between himself and Mr Marsham as to whether or not the pursuers' fry would reach the agreed weight by mid/late May because of cool weather conditions. At the time, however, the issue of the defenders' rejection of smolts was very much to the fore. Mr Reeves' position was that, in order to resolve the smolt issue or, at least to provide the pursuers with some financial help in the position in which they found themselves, he proposed to Mr Marsham that the pursuers should supply the defenders with 125,000 fry in July 2003 at 23p each and at a weight of 8 grams, but that this offer was conditional on the pursuers not seeking to pursue further any demands regarding the rejected smolts. While the value of the fry on the basis of that proposal, was £28,750, the defenders were prepared to pay £30,000 for them to meet the sum which Mr Marsham said the pursuers required to square their books. Mr Marsham, in evidence, was to the effect that Mr Reeves, having disagreed about the weight which the fry had to achieve by late May, entered a substitute agreement for the supply of fry at 8 grams in July 2003. What he did not accept was that that agreement was conditional on the pursuers not seeking recovery in respect of the rejected smolts. He said that he told Mr Reeve that he wanted £30,000 in respect of the smolts and £28,500 in respect of the fry. [16] I found Mr Reeve and Mr Murray to be credible and reliable witnesses. While I did not find Mr Marsham to be incredible, he impressed me significantly less as a witness than Mr Reeve and Mr Murray. He seemed to me to be a man who did not bother too much to focus on the precise detail of his contractual arrangement at the time they were entered into. That is, to some extent, understandable in relation to his dealings with the defenders, since that relationship had endured for some considerable time apparently, and, on the evidence of Mr Murray, was conducted on the basis of a relationship of trust. I am, however, not persuaded that Mr Marsham's memory of events and detail was as reliable as it might be. Mr Reeve and Mr Murray were clearly, in my judgment, better at recalling the detail of the parties' communings. Moreover Mr Marsham appeared to me to read much more into the document, 36/1 of process, than he was entitled to and this indeed, in my judgment, bedevilled his whole approach to the dispute between the parties. (I should add that I heard evidence also of Mr Marsham's wife, who is a partner in the pursuers' firm, and who appears to have taken some responsibility for the company's business affairs, but her evidence, insofar as material, largely related to the claim insofar as it was directed at the rejection of the 72,000 smolt, an issue which was no longer left for my determination at the end of the proof. She gave evidence to the effect of receiving a telephone call at the stage from Mr Reeve advising the pursuers not to dispose of the 72,000 and 40,000 smolts as the defenders might, in the event, have a use for them.)Submissions
[17] Counsel for the pursuers, in seeking to support the pursuers' claim in the second conclusion, regarding the supply of smolts did not, in the event, rely on the terms of 36/1 of process. He described this as merely contributing to the background. His submission was that, by implication, arising from a previous course of dealing between the parties, it had been agreed between them that the defenders would take a supply of smolts up to 250,000 in stages, as they developed their weight, within the window of opportunity for them being transferred to the defenders. The 40,000 small smolts formed part of that quantity of up to 250,000 which the defenders were contractually bound, by implication, to accept and were at a weight which had been accepted by the defenders in previous years. As far as the cost of the ova was concerned the evidence was that, in previous years, the ova was supplied to the pursuers by the defenders at a cost of no more than £35 per thousand. For 2003 the pursuers supplied the ova. It had cost them £50 per thousand. They were, as I understood counsel's submission, entitled to recover the difference in the cost between £35 per thousand and £50 per thousand because of the previous practice obtaining in the previous years between the parties. [18] As far as the cost of vaccine was concerned, it was submitted, on behalf of the pursuers, that the correspondence referred to at the proof and the other evidence should lead the Court to the conclusion that the arrangement was that the cost of the vaccine would be repaid to the defenders if the smolts were sold to a third party. Otherwise the cost was not to be deducted from the price paid for smolts taken by the defenders. [19] As far as the pursuers' claim in respect of the fry was concerned, counsel for the pursuers simply asked me to prefer the evidence of Mr Marsham to that of Mr Reeve that consensus had been reached, between the parties, in or about the end of May 2003, or the beginning of June 2003, on a substitute agreement for the supply of 125,000 fry at 23p each to the defenders in July 2003. In this connection counsel for the pursuers invited the Court to find that Mr Reeve's recollection of what the original agreement regarding fry amounted to was unreliable and inconsistent. There was no written evidence that the substitute fry agreement was arrived at on the basis of it being part of a compromise put forward by the defenders. What counsel for the pursuers invited the Court to accept was that there was an oral, unconditional, agreement in the terms contented for by Mr Marsham, entered into by the parties in or about early June 2003. The sum first concluded for required to be adjusted to make a deduction in respect of transport costs, but apart from that, decree should be pronounced in terms thereof. [20] In reply, the Solicitor Advocate for the defenders sought decree of absolvitor. In relation to the first conclusion for payment in respect of the fry, the defenders' representative submitted that the Court should hold, in the circumstances, that there never was a substitute agreement, as averred and relied upon by the pursuers for the supplying of fry in July. The position was that Mr Reeve had offered to take 125,000 fry from the pursuers at 23p each in July 2003, but that offer was made, in the context of a proposal to settle all outstanding matters between the parties. The pursuers, in the event, did not accept that offer. Mr Reeve may or may not have been wrong about what was agreed regarding weight of fry in the original agreement and whether or not that weight had been reached by late May 2003 in terms of the original agreement. But the pursuers were not suing the defenders in relation to the original agreement (notwithstanding that the invoice issued by Mr Marsham referred to correspondence regarding the original agreement). Counsel for the pursuers had made it clear that the case was based on a substitute agreement reached in late May or early June 2003. That must have been an oral agreement since no documents had been referred to to support it. But Mr Reeve's evidence was that the offer to take fry in July, was not a "stand alone" offer, but was made in the context of seeking to address the pursuers' grievance regarding the rejection of smolts. The letter from Mr Reeves' of 11 June 2003 (36/28 of process) was entirely confirmatory of that being the position. The content of that letter, and its reference to "compromise", could only be comprehensible if the proposal regarding the taking of fry by the defenders was being put forward in settlement of more than simply the "fry" issue. Mr Reeve, whether or not he was correct in his position regarding whether the fry had reached the agreed weight by the end of May, was here not agreeing to take the fry at the previous agreed weight or on the previous agreed conditions. Why, it was asked by the Solicitor Advocate for the defenders, should he be writing the terms he did in his letter if a substitute, "stand alone", agreement regarding the fry had already been reached between the parties. Moreover, Mr Reeves was proposing in the letter to raise the value of the fry from the original asking price and that only made real sense if the proposal was in relation to the settlement of all outstanding issues between the parties. Mr Reeve's position in writing remained consistent on this matter thereafter. Reference was made, in this connection, to Mr Reeve's letter to Mr Marsham dated 27 June 2003 and his letter to Mr Marsham of 22 July 2003. The terms of these letters were entirely consistent with the defenders' position on this matter and entirely inconsistent with the position being contended for on behalf of the pursuers that they had a "stand alone" substitute agreement between the parties regarding the supply of fry. Mr Marsham's own position as to the matter, at the material time, could be seen to be inconsistent with the existence of a new substitute agreement upon which the present claim relied. Reference in this respect was made to the invoice 36/41 of process, which referred to the e-mails of February and March 2003. Whether or not the pursuers might have been able to sue on any original agreement regarding fry was now beside the point. They sued on a substitute agreement, the existence of which, it was submitted, was not supported by the evidence. [21] Turning to deal with the pursuers' claim in respect of the supply of smolts, the Solicitor Advocate for the defenders drew my attention to the fact the submissions made on behalf of the pursuers, at the close of proof, in support of an obligation on the defenders to take the 40,000 small smolts which they in fact, had, refused to take, were based on an implied agreement apparently to be constructed out of the parties' previous dealings. This was not the case as averred. As averred the pursuers' position was:"the pursuers and defenders agreed to vary the smolt agreement to grade out smolts under an average weight of 45 grams without prejudice to the defenders' obligations to accept delivery of and pay for the 200,000 smolts agreed by the parties as condescended upon............ . Charles Marsham informed Andy Reeves in late April or early May that 40,000 smolts had an average weight of 45 grams which were still fit for delivery. The defenders did not accept the 40,000 smolts".
While it was true that Mr Reeve gave evidence that, in previous years, the defenders had taken smolts at different points in time, over the Spring, as they reached different weights, in the present case, the defenders' requirements were that the minimum weight should be 45 grams at the date of required transfer to them. The 40,000 smolts in question did not meet the weight at that time and were graded out on inspection. That was a position the defenders were entitled to adopt. There was no other agreement regarding the 2003 supply of smolts, to the effect that they were required to take graded out smolts at the agreed date of transfer. Mr Marsham's own evidence was that this was the first year when there was an agreed minimum weight for the smolts. Moreover he said that in previous years there had been no grading out at transfer date. Grading out had been done at the time of vaccination. There was accordingly no uniform course of dealing between the parties, from which an obligation upon the defenders to take the smolts, below the agreed minimum weight, at the date of transfer, could be implied. While Mr Marsham, in his evidence, contended that, in any event, the smolts in due course, after the agreed date of transfer, reached the 45 gram minimum weight required, Mr Reeve said that he had no recollection of the pursuers offering them to the defenders at that stage, whenever it may have been.
[22] As regards the cost of ova, the pursuers, once again, seemed to be relying on some practice which had obtained between the parties, to impose an obligation on the defenders in relation to the 2003 supply of smolts to account for the difference between ova at the cost of £35 per thousand and £50 per thousand. In previous years, however, the position had been quite different. While the parties may have been acting, having regard to what was said in paragraph 5 of 36/1 of process regarding ova, that was in a situation where the defenders had supplied the ova. In relation to 2003 the pursuers paid for the ova. To entitle them to recover the difference between £35 and £50 per thousand from the defenders, required an express agreement to that effect. There was no evidence of any such express agreement and the pursuers did not rely on any such agreement. It was noteworthy that while Mr Marsham said that he had paid for the ova in question in November 2001, he did not invoice the defenders for the difference in cost until June 2003. [23] As to the question of the cost of the vaccine for the smolts, the Solicitor Advocate for the defenders' submissions were as follows. Mr Murray had given clear unequivocal evidence that the £12,000 was paid to the pursuers as an advance towards the costs of producing the smolts for possible delivery to a third party in the first place. The payment was made at the time of the compromise agreement in November 2002. In his e-mail of 12 November 2002 (36/5 of process), Mr Marsham refers to the repayment of the cost of the vaccination. Mr Murray in his e-mail message (36/7 of process) referred to repayment of vaccination cost. While it was true that these references were made in the context of a sale of the smolts to a third party, there was nothing in the previous dealings between the parties where the defenders had supplied the vaccine required, which contradicted the clear evidence of Mr Murray, that the cheque was paid to the pursuers to enable them to progress matters and that it was the parties' intention that it should be repaid to the defenders in the event of the smolts being sold to a third party, or being deducted from the price paid by the defenders for any smolts taken by them. In any event, the pursuers had not produced any vouching for the payment by them of the £12,000 in question in respect of vaccination. For that reason alone, they were not entitled to recover this sum from the defenders.Decision
[24] This has been an unfortunate case. [25] I have come to the conclusion that it was brought due to a series of misunderstandings by the pursuers, in particular by their Mr Marsham, as to their legal position and to the material they sought to rely upon to support it. In the first place, of course, they were obliged to abandon, at the close of the evidence, their claim to be reimbursed in respect of the 72,000 smolts which were rejected because of the veterinary findings in relation to their condition. It seems to me that, having regarding to the documentary evidence in relation to that question, and the veterinary evidence led at the proof, that was a claim, had it been properly investigated and considered, should not have been brought in the first place. [26] As I have already alluded to, the pursuers' principal witness, Mr Marsham, appeared to me to proceed on the basis of certain expectations he had as a result of what he understood arose from the document 36/1 of process. In the event his counsel, understandably, standing its terms and the evidence led at the proof, did not rely on that document as creating, in itself, any legal obligations upon which the pursuers' claims could be founded. It, no doubt, formed the background, as suggested, by counsel for the pursuers, in which agreements were negotiated and concluded in each year, subsequent to its execution, regarding the supply of smolts to the defenders by the pursuers but, I am satisfied that the parties conducted themselves on the basis that each year they required to reach a fresh agreement regarding the number of smolts, the weight thereof, the time of delivery and the price thereof. As has been noted, the document is totally silent regarding the required weight of smolts to be provided. It was clear that that was a matter of considerable importance. I am satisfied, however, on the evidence, that the defenders, in the years prior to the discussions regarding the 2003 supply of smolts, acted in a fairly loose and relaxed manner regarding the weight of smolts which might be acceptable and when such weight required to be achieved. This, I considered, lulled the pursuers into thinking that what may have applied in the past must apply in the future. Whatever the pursuers' expectations in that respect might have been, the Court is concerned with seeking to discover what the legal basis was, if any, for there being an obligation on the defenders to take smolts in 2003 which fell below the previously agreed minimum weight of 45 grams at the time when they were agreed to be delivered. As I have noted, the pursuers' counsel's submissions were that the obligation arose, as a matter of implication from the previous way in which the parties had conducted themselves. That is not the case as averred. I am afraid that, in any event, I am of the view that that approach to matters is entirely misconceived for the simple reason that there was no fixed custom of dealing between the parties from which such an obligation might be implied and, in any event, it is clear that the parties were dealing with each other on an entirely different contractual footing in relation to the 2003 supply. As I have said, I accept the clear evidence of the defenders, which was not really contradicted by Mr Marsham, that the parties met each year afresh to agree their terms of dealing regarding weight of fish, delivery time, price and other relevant matters. I can find, in the evidence, no basis for any obligation based on an agreement expressed or implied, upon the defenders, to take the fish, which had been graded out, at delivery time, as not meeting their weight requirements at the time they sought and required delivery. The pursuers had undertaken to provide smolts at a weight of 60 grammes at delivery. I, consider therefore, that the pursuers' claim in respect of the 40,000 small smolts fails. [27] I, furthermore, reject the pursuers' claim in respect of the cost of vaccination, which is part of the sum sued for in the second conclusion. On this matter I preferred the evidence of Mr Murray (supported by Mr Reeve) to that of Mr Marsham. I am satisfied that the agreement between the parties was that the defenders would pay £12,000 to the pursuers, as an advance, to enable them to purchase the vaccine on the condition that if the smolts were sold to third parties, the sum would be repaid to the defenders or, in the event, which did in fact occur, that is that the defenders purchased smolts which had been vaccinated, the £12,000 would be deducted from the cost of such purchase by the defenders. Mr Murray's evidence on this question was, to my mind, more persuasive than Mr Marsham's and is, at least to some extent, supported by the documentary material. [28] As far as the pursuers' claim against the defenders regarding the difference in cost of ova is concerned, I am, once again, unable to find, in the evidence, an agreement, expressed, or implied, by the defenders that, in relation to the circumstances of the transaction for purchase of smolts in 2003 by them, they would reimburse the pursuers in respect of the difference in cost in question. The pursuers purchased the ova for that year for the purposes of producing smolts for sale, either to the defenders or third parties. They bought at a price of £50 per thousand ova. The question of the defenders paying for any part of that cost was never, on the evidence, discussed, far less made the subject of agreement. I do not accept that in the situation where the parties' dealings were each year made the subject of separate and detailed agreement, that the terms of 36/1, in particular paragraph 5 thereof and what it says in relation to the cost of ova, was somehow carried through 2002 and 2003 to impose a contractual obligation on the defenders to reimburse the pursuers in respect of the sum in question. [29] Lastly, as far as the pursuers' claim for the sum first concluded for is concerned, I reached the conclusion that, on the evidence, there was no agreement made between the parties in late May or early June 2003 regarding the supply of fry, in particular that there should be a supply of 125,000 fry at 23p each in July 2003, in substitution for an agreement made in February/March 2003 for the supply of 175,000 fry plus or minus 50,000 in mid to late May 2003. The evidence, in my judgment, does support the defenders' position that they made a proposal in that respect, with the price rounded up to £30,000, but that proposal was subject to the condition that if it was to be accepted, the pursuers would not press any further claims regarding the rejection of smolts. It was on an alleged oral substitute agreement that the pursuers sued in the present proceedings. Whether or not they might have had a valid claim based on the February/March agreement regarding fry is not for me to determine. I accept the clear evidence of Mr Reeve, in preference to that of Mr Marsham, that the proposal in relation to a supply of fry in July, by the pursuers to the defenders, was made in the context of trying to resolve all the parties' differences which had emerged by late May and to alleviate the pursuers' financial position but that this proposal was not accepted by the pursuers' Mr Marsham. That position is, in my judgment, supported by the relevant documentary material relied upon by the defenders. [30] In the whole circumstances, I shall repel the pursuers' plea-in-law and pronounce decree of absolvitor.