Scottish Court of Session Decisions
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Cite as: [2016] ScotCS CSOH_159
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OUTER HOUSE, COURT OF SESSION
[2016] CSOH 159
CA229/15
OPINION OF LORD TYRE
In the cause
ION BEAM SERVICES UK LIMITED
Pursuer
against
DYNEX SEMICONDUCTOR LIMITED
Defender
Pursuer: Martin QC, A Sutherland; Burness Paull LLP
Defender: Lord Davidson of Glen Clova QC, Stalker; DAC Beachcroft Scotland LLP (for Levy & McRae)
9 November 2016
Introduction
[1] The pursuer is a supplier of refurbished ion implanter machines to semiconductor manufacturers. The defender is a semiconductor manufacturer. By agreement dated 18 and 22 June 2009, the pursuer agreed to supply and the defender agreed to purchase a refurbished Varian VIISion 200 ion implantation system, together with spares, software, instruction books, manuals, extras and accessories relating thereto. In terms of the parties’ agreement, installation, acceptance and process development were required to be complete by 30 November 2009. The implanter was not, however, delivered to the defender’s premises until 1 February 2010, and work on installation then began. By January 2011 installation and commissioning had not been achieved, and the defender gave notice of rejection of the equipment. Further remedial work was undertaken over a protracted period of time. By letter dated 2 December 2014, solicitors acting on behalf of the defender gave further notice that the equipment was rejected and intimated a claim for damages.
[2] In this action the pursuer seeks inter alia declarator that the defender was bound in terms of the agreement to accept the equipment with effect from 16 June 2011, or alternatively from 18 May 2014, and to give the pursuer written notice to that effect. The pursuer also seeks payment of the final instalment of the purchase price of the implanter. The defender denies that any payment is due, and has lodged a counterclaim for repayment of instalments of the purchase price paid to date and damages for breach of contract; no answers have yet been lodged. At a diet of debate on 12 October 2016, the principal issue was whether, by failing to reject the equipment on 16 June 2011, the defender thereby accepted it. The pursuer sought decree de plano; the defender sought dismissal of the action.
The Terms of the Contract
[3] The parties’ agreement, entitled “Purchase Agreement for Capital Equipment” was entered into on 18 and 22 June 2009 on the defender’s standard terms. Those terms consisted of three attachments to the agreement, namely (1) Capital Purchase Order, (2) Purchase Conditions for Capital Equipment, and (3) Procurement Specification. For present purposes the relevant provision of the Purchase Conditions is Clause 9, entitled “Conformity with the Contract, Acceptance and Remedies”, which provided inter alia as follows:
“9.1 The Equipment shall conform as to the quantity, quality, performance and description of the Contract and shall be of the best workmanship and materials. The Equipment shall be of merchantable quality and be fit for the purposes of the Buyer’s intended use or, in the event that the Buyer’s intended use was not known to the Seller, for the purposes for which equipment of that type is normally used. The Equipment shall be free from defects in work and materials and such that the Equipment will perform properly upon installation and commissioning.
9.2 Buyer shall have no obligation to accept or pay for non-conforming Equipment. Buyer may reject any non-conforming Equipment.
9.3 Equipment will be accepted or not (as the case may be) under the Acceptance process described in the Procurement Specification, or if none is specified, under such procedures as Buyer shall select. Buyer will not unreasonably withhold Acceptance.
9.4 Acceptance of the Equipment shall take place, and any payment based upon Acceptance shall be deemed due, only upon the Buyer’s written notice to the Seller that the Equipment is accepted. After Acceptance, Equipment will remain subject to applicable warranties.
9.5 In case of rejection, Buyer may elect any or all of the following remedies at no additional cost to Buyer:
(a) Require Seller to propose promptly a written detailed corrective action plan on a fixed timescale and, if Buyer accepts the plan in writing, to implement the plan in the time specified;
(b) Require Seller to provide support by Seller’s senior engineers and technicians to provide and implement the corrective action plan;
(c) Require Seller to use expedited delivery means, such as airfreight, for delivery, with the extra cost thereof to be borne by Seller; and/or
(d) Require Seller to provide prompt replacement of non-conforming Equipment or components thereof.
Alternatively, and at Buyer’s sole discretion, in case of rejection, Buyer may require the return of the Equipment to Seller for a refund of all moneys paid, plus shipping costs paid or chargeable to Buyer, and may cancel the Order. Refunds in full shall be made within thirty (30) days of notice of the refund request.
9.6 If Buyer elects any or all of the remedies at Clause 9.5 and following any remedial action by Seller the Equipment still does not conform to the Contract Buyer may require the return of the Equipment to Seller for a refund of all moneys paid, plus shipping costs paid or chargeable to Buyer, and may cancel the Order. Refunds in full shall be made within thirty (30) days of notice of the refund request…”
[4] The following definitions, in Clause 1.0, are relevant to interpretation of Clause 9:
“’Equipment’ means ‘machinery or plant as specified in the Capital Purchase Order and all spares, software, instruction books, manuals, extras and accessories relating thereto or to be supplied therewith’.
‘Acceptance’ means ‘Buyer’s Acceptance of the Equipment in accordance with the procedures set out or referred to herein’”.
[5] The reference in Clause 9.3 to “the Acceptance process” appears to relate to a programme set out in the Capital Equipment Procurement Specification under a heading “Schedule”. After a statement that “Installation, acceptance and process development is required to be complete by 30 November 2009 for the start of live lots”, the Schedule provides for the following “Sequence of Events”:
“(a) Arrival of equipment including all accessories and documentation as one complete package.
(b) Facilitate and commission at Dynex.
(c) Demonstrate process and equipment requirements to OEM [ie original equipment manufacturer] specifications.
(d) Initial acceptance test.
The tool demonstrates the full OEM specifications.
Upon satisfactory completion of section 3.0 and 4.0 above, the system will be deemed to have met its initial acceptance of process and equipment requirements.
(e) Final acceptance signoff.
The system must demonstrate process consistency and uptime as outlined in purchase conditions over a 1 month period, before final acceptance.”
(The references to sections 3.0 and 4.0 appear to be to sections of the Procurement Specification respectively entitled “Process requirements” and “Production requirements”.)
The purchase price was payable as follows: 30% on order placement, 55% on delivery of tool, and 15% on final acceptance.
The Parties’ Correspondence
[6] On 13 January 2011, the defender’s contracts manager, Mr Philip Arnold, and its wafer fab manager, Mr Tony Garraway, wrote to the pursuer’s general manager, Mr Gordon Murray, in the following terms:
“Your attention is drawn to Clauses 9 of the Agreement.
Following various discussions and continued delays, we hereby give IBS notice of failure to provide the Equipment in accordance with the Agreement and rejection of the Equipment under Clause 9.
Installation of the Equipment started around 22 March 2010 and was expected to take no more than 8 weeks…
We urgently require the Equipment to be commissioned and pass acceptance.
In accordance with Clause 9 of the Agreement we need a detailed Corrective Action Plan for our consideration and discussion at a meeting in Lincoln with you, without prejudice to our rights to reject the Equipment and reimbursement of all moneys paid.
We trust you will give this matter the utmost priority.”
[7] Following a meeting on 1 February 2011, Mr Murray replied in a letter which, although dated 10 February 2011, was in fact sent by email on 24 February 2011:
“In reference to our meeting on the 1st of February 2011 regarding the install and commissioning of the refurbished Varian VIISion 200 Ion Implanter, we have the following proposals to offer to ‘Dynex Semiconductors Ltd’.
Ion Beam Services (IBS) acknowledge the delays in the completion of the commissioning of the Varian VIISion implanter. These delays are mainly due to parts issues and now the failure of the high voltage transformer that delivers power to the high voltage terminal.
Therefore we would like to offer the following to Dynex as an interim measure:
- IBS UK will implant Dynex production wafers free of charge at our facility in Bathgate, during the completion of the installation of the Varian VIISion 200.
During this time IBS will endeavour to source a replacement isolation transformer until the original unit is repaired. After discussions with the transformer repair company we have been advised that the unit will take approximately 6 to 8 weeks to repair, allowing for transportation time and 3 weeks we are currently looking at 12 weeks to complete the commission of the system. This would put the revised end date to be 27th April 2011 approximately, if we are able to expedite this date we will advise Dynex as soon as possible.
In light of these delay we will offer Dynex the following compensation if we fail to complete the installation and commission of the tool by the 27th April 2011. The compensation will be deducted from the final system payment and will be calculated as below:
| Time frame | Percentage reduction |
| 2 weeks after the 20/04/2011 | 2.5% |
| 2 to 4 weeks after the 20/04/11 | 5% |
| 4 to 6 weeks after the 20/04/11 | 7.5% |
| 6 to 8 weeks after the 20/04/11 | 10% |
Note: the percentage reduction will only be applicable to the last payment.
As we gain further information on the return date of the isolation transformer we will keep everyone involved in the project updating with any issues.
We appreciate the importance to Dynex that the Implanter has in there expansion plans and we remain fully focused to resolve the remaining issues and commission the system for Dynex use.”
[8] These proposals were not well received by the defender. On 25 February 2011, Mr Arnold emailed Mr Murray stating:
“Whilst we acknowledge the sentiments and efforts, the proposal is disappointing. It does not fully reflect our discussions 1/2/11 and now indicates further delays which is of even more concern given the track record of slippages….”
Mr Arnold set out what he understood to have been agreed at the meeting on 1 February 2011 and continued:
“Commissioning should have been completed by late May 2010. Your revised date at the 1/2 meeting was 7/4/11. NEARLY ONE YEAR LATER. At no time since the 1/2/11 meeting have you indicated there would be a further delay to 27/4/11 despite you having conversations with Tony since that meeting. We have been working to 7/4/11.
We acknowledge you have included a proposed sliding scale of compensation for failure to complete. Completion should have been late May 2011 [sic]. The percentages in monetary terms and dates proposed do not reflect the consequences or severity of the one year delay to the overall programme. Neither does our counter-proposal below.
Without prejudice to our rights under the contract we are willing to agree to 0.5% of the total price per week commencing 7/4/11…”
[9] No direct response by the pursuer to this email has been produced. It appears from other documents lodged that the high voltage transformer was re-fitted on 29 June 2011. Correspondence regarding the operability and performance of the implanter continued, however, throughout 2012, 2013 and 2014. In May 2013, the pursuer issued an invoice for the final instalment of payment. The defender refused to pay and produced a snagging list. Work by the pursuer on the implanter continued.
[10] The pursuer makes the following averments which are not admitted by the defender. As at around May 2014, the defender had been using the implanter for production of semiconductors since November 2013, and it had met all of the requirements for acceptance set out in the Procurement Specification. By the time the implanter was being used for production, it had demonstrated process consistency in terms of section 3.0 of the Procurement Specification. It had demonstrated uptime in terms of section 4.0 of the Procurement Specification from at least 18 May 2014. Unplanned maintenance had not exceeded 10% of working hours over the month to 18 May 2014. On the basis of these averments, the pursuer asserts that the defender was obliged to give written notice of acceptance to the pursuer on 18 May at the latest.
[11] On 2 December 2014, English solicitors acting on behalf of the defender sent a letter of claim under the (English) Pre-Action Protocol for Construction and Engineering Disputes to the pursuer at addresses in Scotland and France. The letter stated that the pursuer was in breach of Clause 9.1 of the Purchase Conditions in respect that the implanter had not conformed to the requisite standard, was not of merchantable quality and fit for the purposes of the pursuer’s intended use, and had not performed properly upon installation and commissioning. The letter further asserted that the defender had never given notice of acceptance, and set out ways in which the Schedule to the Capital Equipment Procurement Specification had not been adhered to. It continued:
“Our Client’s email and letter of 13 January 2011… inter alia, required you to provide a detailed Corrective Action Plan. You have either failed to provide such a Plan or you have failed to provide a Plan which is effective. This is demonstrated by the evidence at enclosures 2-5 inclusive and is ongoing.
Clause 9.6 of the Purchase Conditions says that if the remedies at Clause 9.5 fail (and for the avoidance of doubt, our Client’s case is that such remedies have failed) our Client is entitled to return the equipment and receive a full refund of all monies paid plus any shipping costs ie £590,750 plus VAT.
Our Client’s email and letter of 13 January 2011… formally rejected the equipment pursuant to Clause 9.
You have never accepted nor rejected our Client’s rejection.
On behalf of our Client we give you further notice that the equipment is rejected…”
The letter was accompanied inter alia by a schedule entitled “WF Unavailable Equipment Enquiry – History” running to 100 pages and detailing occasions between July 2011 and October 2014 when the implanter was said to have been unavailable for use.
Issues to be Determined
[12] The issues between the parties may be summarised as follows:
(i) Whether the defender, having failed by 16 June 2011 to exercise its entitlement under Clause 9.6 to require a return of the Equipment to the pursuer for a return of all monies paid, is to be taken to have accepted the Equipment and was accordingly then bound to issue written notice of Acceptance to the pursuer and to pay the balance of the price payable on final acceptance.
(ii) Whether the pursuer is personally barred from insisting that the Equipment was accepted with effect from 16 June 2011, by virtue of its agreement to carry out further actions in order to provide a functioning system.
(iii) Alternatively, whether the defender was bound to accept the Equipment in May 2014 (and pay the balance of the price) when, as the pursuer avers, the implanter had met the process requirements and production requirements in the Procurement Specification and thus completed the Acceptance process.
Argument for the Pursuer
(i) Acceptance on 16 June 2011
[13] On behalf of the pursuer, it was submitted that the requirement of conformity under Clauses 9.1 and 9.2 existed independently of the procedure for Acceptance of the Equipment under Clauses 9.3 to 9.6. Clause 9.1 was a protection for the defender (whose conditions these were) which did not preclude it from accepting non-conforming Equipment by following the Acceptance process. The only link between those sub-clauses and the rest of Clause 9 was the last sentence of Clause 9.3, which prevented the defender from unreasonably withholding Acceptance. Clause 9.5 set out the defender’s remedies if it elected to reject the Equipment. By its letter of 13 January 2011 the defender elected for the remedy of a corrective action plan. By doing so, it was seeking to determine whether the Equipment was accepted or rejected. The procedure having been triggered, the question of acceptance or rejection could not be left open: commercial certainty required that the parties knew whether the defender had accepted or rejected the Equipment. Alternatively, if, as the defender contended, the corrective action plan procedure had not been triggered, the end result was the same: the defender had to give notice under the final words of Clause 9.5, which failing, there was no rejection and accordingly there was acceptance.
[14] In terms of Clause 9.6, the defender could return the Equipment to the pursuer if the Clause 9.5 remedy had been unsuccessful, but was not obliged to do so. It could still accept non-conforming Equipment. If it did not reject the Equipment it must have accepted it. That did not deprive the defender of the option of allowing the pursuer to continue to offer support. On the contrary, Acceptance triggered the warranty period during which the pursuer was obliged to carry out repairs. Continuance of work by the pursuer on the Equipment after 16 June 2011 was consistent with Acceptance because of the warranty. The significance of 16 June 2011 was that that was the end of the longstop period (eight weeks after 20 April 2011) specified in the pursuer’s letter of 10 February 2011.
[15] Having accepted the Equipment, the defender was not entitled to reject it for a second time as it purported to do by its solicitors’ letter dated 2 December 2014. Its defence was irrelevant and it was now bound to give written notice of Acceptance and pay the final instalment.
(ii) Personal Bar
[16] The defence of personal bar was irrelevant. Reference was made to Gatty v Maclaine 1921 SC (HL) 1, Lord Birkenhead LC at page 7, and to Patersons of Greenoakhill Ltd v Biffa Waste Services Ltd 2013 SLT 729, Lord Ordinary (Hodge) at paragraph 98, approving a statement in Reid and Blackie, Personal Bar (2006), paragraph 2-01, that “personal bar penalises inconsistent conduct and prevents unfairness”. The defender failed to aver circumstances in which the pursuer’s actions after June 2011 were inconsistent with acceptance having taken place. The losses said to have been incurred by the defender were irrelevant for the purpose of establishing unfairness: only future prejudice was relevant, not prejudice which it might already have suffered.
(iii) Acceptance on 18 May 2014
[17] The defender’s criticisms of the relevancy of the pursuer’s averments were not well founded. There was no need to aver that the Equipment conformed to the requirements of Clause 9.1, which was a general expression of the requirement that the Equipment conform to the main terms of the contract. The parties had agreed a specific mechanism for Acceptance, under reference to the provisions of the Procurement Specification, whereby Clause 9.1 would be satisfied. The Acceptance process was the same as the Sequence of Events set out at the end of the Procurement Specification. In so far as the whole of the Equipment was not delivered with the implanter itself, that had been by agreement, as averred by the pursuer.
[18] The defender’s argument based upon the fact that installation, acceptance and process development had not been completed by 30 November 2009 (as provided for in the Procurement Specification) was of no assistance to it. If the whole Sequence of Events was rendered inapplicable, the defender could not found upon any alleged failure to comply with the process requirements and production requirements referred to therein.
Argument for the Defender
(i) Acceptance on 16 June 2011
[19] On behalf of the defender, it was submitted that the correspondence relied upon by the pursuer demonstrated that no “detailed corrective action plan on a fixed timescale” had ever been proposed by the pursuer or accepted by the defender. The proposal to implant wafers at the pursuer’s Bathgate premises and the offer of compensation were not corrective action. The proposal for repair included only an approximate timescale. The proposals were not acceptable to the defender. In any event, the defender, by invoking a Clause 9.5 remedy, did not restrict itself to the options of outright rejection or final acceptance, depriving itself of the option of allowing the pursuer to continue to attempt to put matters right (as in fact happened). Sub-clauses 9.5 and 9.6 were concerned with the defender’s right to reject the Equipment and not with its obligation to accept it. It did not follow from an absence of rejection that there had been acceptance. The middle option remained open. Remedial action on the part of the pursuer had not come to an end on 16 June 2011: it had continued until 2014. There was no basis for the pursuer’s assertion that the period for remedial work ended in June 2011.
(ii) Personal Bar
[20] The defender had relevantly averred that, given the actions of the parties after June 2011, the pursuer was personally barred from insisting that the Equipment was accepted with effect from 16 June 2011. Rather than rejecting the Equipment then, the defender accepted the pursuer’s assurance that it would provide a fully functional system. The pursuer did not seek payment until May 2013. There was nothing to preclude the defender from insisting in December 2014 upon its rejection of the Equipment.
(iii) Acceptance on 18 May 2014
[21] The fallacy in the pursuer’s approach lay in treating the Acceptance process (described in the Procurement Specification) as not only necessary for acceptance by the defender, but also sufficient. On that view, completion of the Acceptance process obliged acceptance irrespective of whether the Equipment was or had ever conformed in terms of Clauses 9.1 and 9.2. The pursuer did not aver that the Equipment conformed. The defender could not be bound to accept Equipment that did not conform, otherwise Clauses 9.1 and 9.2 would be otiose.
[22] It was not accepted that the Acceptance process referred to in Clause 9.3 was the same as the Sequence of Events in the Procurement Specification. The Sequence of Events could not be applicable as delivery did not take place until February 2010. It did not provide a basis for arriving at an obligation to accept the Equipment some 4½ years later. Moreover, even if the Acceptance process was the Sequence of Events, the defender had relevantly averred that this was superseded by subsequent events, and in particular by the agreement of new conditions at a meeting between the parties on 24 May 2013. The pursuer focused upon the last step in the Sequence of Events but made no averment that the preceding steps were ever completed. For example, the Equipment did not arrive as a complete package, and the implanter had not been refurbished as required by the Procurement Specification. The pursuer made no response to any of these averments.
Decision
Acceptance on 16 June 2011
[23] In my opinion a proper construction of the contract does not lead to the result contended for by the pursuer. The starting point, in my view, is the right conferred upon the buyer by Clause 9.2 to reject any Equipment that does not conform with the requirements of Clause 9.1. I agree with the submission on behalf of the pursuer that the terms of the contract leave open the possibility that the buyer might choose to accept non‑conforming Equipment, but it clearly cannot be obliged to do so. Neither rejection nor acceptance can occur more than once. Rejection may not, of course, occur at all. If, however, it does occur, then the provisions of Clauses 9.5 and 9.6 become applicable. In broad terms, these envisage remedial action by the supplier. In my opinion it makes no commercial sense to impose an arbitrary limit upon the time available to the supplier to complete any remedial action undertaken, at the expiry of which the Equipment must be taken to have been accepted if the buyer has not exercised its entitlement to require the return of the Equipment and claim a refund of the price. Ex hypothesi the supplier must have been in breach of contract at the time of rejection. Clauses 9.5 and 9.6 both give the buyer an option and not an obligation to terminate the contract. The expression “following any remedial action” seems to me to afford flexibility to parties to continue to achieve what, presumably, both would want, namely Equipment which conforms or which is otherwise acceptable to the buyer.
[24] That, in essence, is what happened in the circumstances of the present case, regardless of whether the corrective action plan procedure was strictly followed. I reject the proposition that any significance can be attached to the date 16 June 2011. Even on the terms of the pursuer’s letter of 10 February 2011, that was not a longstop date for completion of commissioning, which was expected to be achieved by 27 April 2011. The period of eight weeks from 20 April 2011 is merely a feature of what appears to be a proposal to pay liquidated damages if the expectation was not met. In any event the proposal was not acceptable to the defender and was met by a counter-proposal making no reference to 16 June 2011.
[25] After Clause 9.5 has been triggered, various possibilities can be envisaged. One is that the corrective action plan procedure is implemented and remedial action by the supplier is successful in rendering the Equipment conform to the contract, whereupon it may become unreasonable for the buyer to withhold Acceptance. Another is that after a series of unsuccessful remedial attempts the buyer might present the supplier with an ultimatum that if conformity was not achieved by a specified date, no further remedial action would be permitted and the contract would be terminated. I do not regard an interpretation which leaves open such possibilities as creating uncertainty, but if it did, such uncertainty would arise from the supplier’s initial failure to fulfil its obligation to supply Equipment that was conform to the contract. That does not, in my view, justify the somewhat extreme proposition that absence of notice terminating the contract must necessarily constitute acceptance of the Equipment.
[26] For these reasons I hold that the pursuer’s case that the defender was bound to accept the Equipment with effect from 16 June 2011, with all of the consequences flowing from such acceptance, is irrelevant.
Personal Bar
[27] In the light of my conclusion with regard to acceptance on 16 June 2011, it is not strictly necessary for me to address the defender’s argument that the pursuer is personally barred from contending that the defender was obliged to accept the equipment on that date. Had I had to do so, I would have allowed the matter to go to proof before answer. I am not persuaded that the sentence from Reid & Blackie quoted with approval by Lord Hodge (see paragraph 14 above) was intended as a definition of personal bar, or as anything more than a general description of the role of personal bar in the law of Scotland. Applying the well-known dictum of Lord Birkenhead LC in Gatty v Maclaine, the defender offers in effect to prove that the pursuer by its conduct justified the defender in believing that a certain state of facts existed, thus precluding the pursuer from affirming that a different state of facts existed at the same time. The defender’s averments in this regard would in my view have been relevant for inquiry.
Acceptance on 18 May 2014
[28] The pursuer’s case that the defender was bound to accept the Equipment with effect from 18 May 2014 is, as I understand it, based on its averments that as at that date the implanter had met the requirements for acceptance set out in the Procurement Specification and had demonstrated the requisite uptime over a one month period. It is therefore implicit in the pursuer’s argument that, as at May 2014, acceptance of the Equipment continued to be regulated by the Acceptance process described in the Procurement Specification, despite the fact that it is common ground that the implanter was not delivered to the defender’s premises until some two months after the completion date of 30 November 2009 specified in the Procurement Specification.
[29] I have found the relationship between Clause 9 of the Purchase Conditions and the Procurement Specification to be somewhat problematic. It seems clear that the reference in Clause 9.3 to “the Acceptance process described in the Procurement Schedule” is to the Sequence of Events under the heading “Schedule”, notwithstanding that references in the Sequence to “acceptance” do not appear to be to Acceptance with an upper case “A” in terms of Clause 9.4. Within the Sequence of Events, paragraphs (d) and (e) are concerned with acceptance: initial acceptance and final acceptance respectively. If it is correct that the reference in the Sequence to “satisfactory completion of section 3.0 and 4.0 above” is to Process requirements and Production requirements respectively, a difficulty appears to arise in that the first Production requirement is that “Unplanned maintenance time for the implanter will not exceed 10% of working hours calculated on a monthly basis during the first year after tool acceptance”. Obviously it cannot be known at the time of initial acceptance whether this requirement will be met, and I find it hard to see how the deemed initial acceptance of process and equipment requirements can take effect. Nor is it entirely clear how fulfilment of the requirements of paragraphs (d) and (e) (ie demonstration of full OEM specifications and process consistency and uptime over a one month period) relates to the requirement of conformity with the contract under Clause 9.1. Since, however, the defender’s right of rejection arises out of non-conformity, rather than out of failure to fulfil the requirements of paragraphs (d) and (e), it seems possible that Acceptance could be not unreasonably withheld on grounds of non-conformity even if satisfaction of those requirements has been demonstrated.
[30] Clause 9.3 also provides for a situation where no Acceptance process is specified: in such a case the Equipment is to be accepted (or not) under such procedures as the defender shall select. In the present case the parties are in disagreement as to whether, in circumstances where the contractual completion date had been departed from even before delivery of the implanter to the defender’s premises, the remainder of the Schedule, including the Sequence of Events, had any continuing contractual application. The pursuer contends that it did; the defender that it did not. In my opinion it is not possible to resolve this issue without inquiry into the facts. There may have been agreement, express or implied from parties’ actings, that the Sequence of Events continued to apply despite the delayed commencement of installation. Alternatively, the parties may have varied the terms of their agreement with regard to the conditions for acceptance of the Equipment, as the defender avers occurred in about May 2013. There seem to me to be various issues of fact, or at least of mixed fact and law, that require to be resolved before it can be determined whether the defender was bound to accept the Equipment with effect from 18 May 2014, including:
- what contractual requirements for acceptance had to be fulfilled by the pursuer as at that date;
- whether those requirements had been fulfilled; and
- whether in all of the circumstances, including the history of unsuccessful commissioning, the defender could not at that time reasonably have withheld Acceptance.
For these reasons, I propose to allow a proof before answer on this branch of the pursuer’s case.
Disposal
[31] I shall put the case out by order for submissions on the terms of my order and on further procedure in the principal action and in the counterclaim.