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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> TG Can Ltd v Crown Packaging UK Plc [2007] EWHC 1271 (QB) (18 May 2007) URL: https://www.bailii.org/ew/cases/EWHC/QB/2007/1271.html Cite as: [2007] EWHC 1271 (QB) |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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TG Can Limited |
Claimant |
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- and - |
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Crown Packaging UK PLC |
Defendant |
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Mr P Lowenstein (instructed by Clarkslegal LLP) for the Defendant
Hearing dates: 15th, 16th 17th & 18th May 2007
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Crown Copyright ©
Mr Justice Gray :
The issues
i) whether the claimant should have permission to re-amend the Particulars of Claim;
ii) whether certain passages in the pre-re-amended Particulars of Claim should be struck out;
iii) whether summary judgment should be entered for the defendant in respect of the principal claim in contract on the ground that there is no real prospect of it succeeding at trial.
It is convenient if I take the pleading points first.
Background facts
"TG Can & Sandvik (TG/S) have been awarded the contract to supply Crown Cork & Seal – Beverage European Division (CCS), with - 50% of all its tooling requirements for 2002/3. This volume will change to – 30% or – 70% of all tooling for subsequent years subject to the following conditions:
1. Quality:
The yearly average for complaints to be no greater than 2 month over the contract period.
2. Service Levels:
OTIF to average 95%+ (on quoted delivery dates) each year of the contract.
3. Pricing Structure:
TG/S will maintain all current tooling prices for year until 01.03.03. Any price changes after 01.02.03. will be jointly agreed between CCS and TG/S, and funded out of the cost reduction programme.
4. Competitive Pricing Clause:
Should CCS identify equivalent parts from an alternative supplier where the total net price differential is >5% less expensive than TG/S, TG/S shall be asked to review its prices. If TG/S are unable and unwilling to match the alternative price, CCS reserves the right to terminate the above contract. In this case, TG/S will be given 3 months termination notice.
5. Cost Reduction Programme:
TG/S is to work with CCS to reduce the tooling cost per thousand cans over the contract period 01.03.02 to 01.03.03. To enable this usage calculation to be made TG/S are to advise what information they will require.
Details of the cost reduction programme agreed with TG/S are described in Attachment 1.
6. Rebate:
TG/S to provide CCS a 5% annual retrospective rebate each year based on the total spend by CCS with TG/S over the proceeding 12 months. The rebate is to be paid is the form of free tooling.
Terms and Conditions of Purchase:
All current CarnaudMetalbox Terms & Conditions apply.
Termination Clause:
Six months written notice required by both TG/S and CCS, subject to contract compliance."
The instant proceedings
The amendments sought
i) the addition to paragraph 15 of the words "being necessary to give it business efficiency and/or by reason of the application of the officious bystander test". Paragraph 15 consists in a number of terms which TGC contends are to be implied into the Contract. The words sought to be added are intended by TGC to spell out the reasons why these terms are to be implied;
ii) the addition of a new paragraph 18 which reads:
"Further or alternatively where:
a. it is found that Crown had an otherwise unfettered discretion to reduce the percentage of consumable tooling under the Supply Contract from 70%
b. and/or an unfettered discretion whether to order consumable carbide tooling rather than consumable steel tooling
c. and/or an unfettered discretion as to whom to place the orders for tooling with as between Sandvik and TG Can,
TG Can will also aver, [as] being necessary to give it business efficiency and/or by reason of the application of the officious bystander test and/or so as to give effect to the reasonable expectation of the parties, that the following terms are to be implied into the Supply Contract:
d. in each of the cases specified in sub-paragraphs (a) – (c) above, Crown was bound not to exercise its discretion dishonestly, for an improper purpose, capriciously or arbitrarily and
e. in each said case, Crown was bound to exercise its discretion reasonably".
Breaches of these implied terms are pleaded at paragraph 23 of the pleading. The facts relied on consist essentially of the "Termination Plan" which TGC allege Crown devised in order to inflict economic injury on TGC.
iii) Finally amendments are sought to be made to paragraphs 19 and 20 which relate to the Termination Plan and are alleged to constitute breaches of the implied term introduced by paragraph 18. TGC's existing case at paragraph 19(a) is that employees at Crown agreed "to terminate without notice TG Can's commercial relationship with Crown UK". The first amendment sought is to add to those words the following:
"For reasons connected with its investigations into an employee named Allen Sheffield whom it is alleged had received inducements from Ian Williams at [the] time when he was a director of NV Tools Limited".
Paragraph 19(e), as it stands in its existing form alleges that Crown employees agreed "to keep, as far as possible, the foregoing secret from TG Can". To those words TGC apply to add the following:
"By falsely asserting, when the time came to notify TG Can and Sandvik of Crown's intentions, that the reason for severance was due to the economics of in house manufacturer, as in fact was done at the meeting on 3rd November 2004 referred to below".
Finally there is an amendment to paragraph 20 to make clear that it is TGC's case that the meeting on 3rd November 2004 was "pursuant to the Termination Plan".
Argument for TGC on the amendment
The argument of Crown on the amendment and in support of its application to strike out
Decision on the applications for permission to amend and to strike out
"a. [the implied term] must be reasonable and equitable;"
b. it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
c. it must be so obvious that it goes without saying;
d. it must be capable of clear expression;
e. it must not contradict any express terms of the contract."
"The courts' usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision. It is because the implication of terms is so potentially intrusive that the law imposes strict constraints on the exercise of this extraordinary power.
There are of course contracts into which terms are routinely and unquestioningly implied. If a surgeon undertakes to operate on a patient a term will be implied into the contract that he exercise reasonable care and skill in doing so. It is inconceivable that any patient would in any imaginable circumstances commit his bodily well-being to the ministrations of a surgeon who did not undertake that obligation, or that a surgeon could hope to remain in practice without professing to discharge it. Again, quite apart from statute, the courts would not ordinarily hesitate to imply into a contract for the sale of unseen goods that they should be of merchantable quality and answer to their description and conform with sample. It is hard to imagine trade conducted, in the absence of express agreement, on any other terms.
But the difficulties increase the further one moves away from these paradigm examples. In the first case, it is probably unlikely that any terms will have been expressly agreed, except perhaps the nature of the operation, the fee, and the time and the place of operation. In the second case, the need for implication usually arises where the contract terms have not been spelled out in detail or by reference to written conditions. It is much more difficult to infer with confidence what the parties must have intended when they have entered into a lengthy and carefully-drafted contract but have omitted to make provision for the matter in issue. Given the rules which restrict evidence of the parties' intention when negotiating a contract, it may well be doubtful whether the omission was the result of the parties' oversight or of their deliberate decision; if the parties appreciate that they are unlikely to agree on what is to happen in a certain not impossible eventuality, they may well choose to leave the matter uncovered in their contract in the hope that the eventuality will not occur.
The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong."
"It seems to me, on analysis, that all the defendants seek to do is to expose the motive of the plaintiffs for terminating….However, motive is of course, strictly speaking, irrelevant. There is no general doctrine of good faith in the English law of contract. The plaintiffs are free to act as they wish provided that they do not act in breach of contract".
I would disallow the amendments to both paragraph (a) and (e) on this ground.
Argument on the construction of the Contract
The factual matrix