Manton Hire and Sales Ltd v Ash Manor Cheese Company Ltd

This appeal raises a short point concerning the duty to mitigate. The Respondent, Ash Manor Cheese Company Limited, (“Ash”), was in 2010 supplied with a reach forklift truck for use in its three warehouses at the Ash site in Wrexham, namely the Main Cold Store, the Despatch Chiller and the Ambient Packing Store. The supplier of the forklift was the Appellant, Manton Hire and Sales Limited, (“Manton”). A Manton representative, Mr Bodman, attended the Ash site in order to take measurements of the racking arrangements within which the forklift would be required to work and to advise upon a suitable model. Mr Bodman recommended two models, the cheaper of which was a “Doosan”. Manton provided a quotation for the supply of the Doosan and Ash in turn sent to Manton a purchase order for that model.

It seems always to have been the intention that the forklift would be purchased with the assistance of a financing arrangement. In the event a Doosan forklift was purchased by Manton and sold to Albury Asset Rentals Limited, (“Albury”) in order that Albury might in turn let it to Ash. Manton appear to have made all the contractual arrangements. The Doosan forklift was let by Albury to Ash for a fixed term of sixty months pursuant to a Hire Agreement between Albury as Lessor and Ash as Hirer. The Hire Agreement was brought to Mr Foulkes, the QA Administrator at Ash, by Mr Bodman on 28 September 2010. Mr Foulkes signed it as “Purchasing Manager”, purchasing being one of his responsibilities, and his signature was witnessed by Mr Bodman. The Hire Agreement was subsequently signed on behalf of Albury on 4 October 2010. The forklift was delivered to Ash by Manton on the same day.

This process was described by Mr Foulkes as “purchasing the machine with the benefit of finance”. Nothing ultimately turns on this, but I have little doubt that all those concerned at Ash saw the matter in this way. It is not however suggested that Manton misrepresented the nature of the agreement, nor that Ash would not have understood it had they had occasion to analyse the transaction in more depth.

The forklift was not used until 12 October 2010. It was then found that it did not fit within the racking in two of the three warehouses. Ash took the view, not unnaturally, that the forklift was not fit for the purpose for which it had been supplied and that they were entitled to reject it. Accordingly, they indicated to both Albury and to Manton their desire to “cancel the agreement forthwith”.

As the judge below put it,

“There were discussions between representatives of Ash and Manton as to potential remedies including modification of the truck, but these were not pursued, and the truck was rejected by Ash. Manton collected the truck on 12 November 2010.”

Albury sought payments due under the agreement dated 4 October 2010. Ash, having rejected the forklift, stopped all payments under the agreement. However they were not entitled to do so. Clause 7 of the Hire Agreement provided:-

“The Hirer acknowledges it has selected the equipment for its own use and relies on its own skill and judgment. The Hirer expressly agrees and acknowledges that the Lessor has given no warranty, condition or undertaking whether express or implied by statute or common law in respect of the equipment.

All implied terms, conditions and warranties relating to the quality, fitness for purpose and freedom from defects are expressly excluded to the full extent permitted by law. The Hirer is not entitled to a rebate or remission or rentals whilst the Equipment is unusable or for any other reason.”

In addition, in a box on the front page of the Hire Agreement, signed by Mr Foulkes, there appeared the following:-

“The Hirer has selected the Equipment and agrees that the terms of Clause 7, the exclusion of liability clause, are reasonable. By signing below the Hirer confirms that the Hirer is entering into this agreement for the purpose of the business carried out by the Hirer or which it intends to carry on.”

There were also provisions which entitled Albury to treat the failure by Ash to pay rental payments when due as repudiatory, and on the strength thereof to terminate the agreement. In such circumstances Albury became entitled to payment of all rental due under the agreement over the five year term, less only a discount for early payment. Albury duly terminated the agreement.

In due course Albury claimed the amount due under the agreement, £17,975.47, together with interest. Albury brought an action against Ash in the Wrexham County Court. Although Ash sought to defend the claim on the basis that Manton had been acting as an agent on behalf of Albury, in reality Ash had no answer to the claim.

Ash joined Manton to the proceedings and claimed from it an indemnity in respect of its liability to Albury.

In February 2012, shortly before a final hearing of the claim listed to take place on 10 February 2012, Ash settled Albury’s claim by the payment of damages in the sum of £19,444.27, which included an element of interest, and agreed to pay Albury’s costs assessed at £8,750.

Ash’s claim for an indemnity from Manton came on for trial before Mr Recorder Duncan Bould in September 2012. It was accepted at trial that Manton had impliedly represented or warranted that the Doosan was fit for Ash’s expressly stated purpose of using the same within the existing racking at Ash’s premises. It was accepted that Ash had been entitled to rely on that representation or warranty. In effect, if not explicitly, it was accepted that Ash had entered into the Hire Agreement in reliance on and in consideration of the representation or warranty by Manton that the Doosan was fit for the purpose for which it was hired, and that that representation or warranty was enforceable against Manton as a collateral contract. The sole issue for decision was whether Ash had failed reasonably to mitigate its loss.

The issue of mitigation in turn depended upon an examination of the discussions between representatives of Ash and Manton as to potential remedies, including modification of the forklift, to which I have referred at paragraph 5 above. The judge held [13] that Ash did not act unreasonably in refusing to accept Manton’s offer to have the forklift modified. Manton appeals with leave of the judge. On appeal the thrust of the argument by Manton was not principally to the effect that it had made a perfected offer to Ash which Ash ought reasonably to have accepted. Rather, Manton argued that Ash ought reasonably to have invited or at least permitted Manton to make a more detailed offer of modification. What is said is that Ash unreasonably failed even to countenance the making of a modification, indicated that any proposal in that regard would be unacceptable and thereby failed to act reasonably in mitigation of its loss. Manton also contend that the judge wrongly regarded the decision of this court in Copley v Lawn [2009] EWCA Civ 580 as having the effect that a contract breaker has only one opportunity to put forward an offer in mitigation of loss and that, if that offer is reasonably rejected, the contract breaker has no opportunity to improve his offer.

In order to render the arguments comprehensible I propose to reproduce the relevant parts of the Recorder’s judgment, which is set out with admirable economy. Paragraphs 11-14 read as follows:-

“11.

The court has been referred to a number of authorities, from which the following principles can be derived:

i.

“The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but the first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.”

ii.

“Whether a loss is avoidable by reasonable action on the part of the Plaintiff is a question of fact not law”

(Per Sir John Donaldson M.R. in The “Solholt” 1983 Vol 1 Lloyd’s Law Reports p 608)

iii.

“Any offer made (by the defendant’s insurers) must contain all such information as will be relevant for the claimants and their advisers or representatives to make a reasonable response.” (per Longmore LJ in Copley v Lawn 2009 EWCA Civ 580)

12.

I found the following facts from the evidence presented:

i.

On or about 19^th/20^th June 2010 Mr Bodman from Manton attended the premises of Ash in Wrexham to quote for a ‘Reach Fork Lift Truck’. Mr Bodman was told by Mr Foulkes and or Mr Price of Ash that the truck would be required to work in any one of three warehouses at the Ash site, namely the Main Cold Store, The Despatch Chiller and The Ambient Packing Store. Mr Bodman’s attention was drawn to the existing racking within the warehouses.

ii.

Mr Bodman did undertake some measurement and assessment of the space within which the fork lift would be required to work. Mr Bodman’s taking of measurements, by his own admission, was inadequate. I am quite satisfied that he did not survey the warehouses with the degree of precision which might have been expected, bearing in mind that he was being asked to recommend a machine to work within confined spaces.

iii.

On or about 21^st June 2010, Mr Bodman e-mailed a quote recommending a TCM truck to Ash as suitable for their needs.

iv.

He followed up his quote with an alternative recommendation of a “cheaper option” to the TCM on 22^nd June 2010.

v.

Mr Hutton (Managing Director) at Ash decided that the TCM was too expensive, and so Mr Bodman was asked to quote for the less expensive option.

vi.

He did that on or about 23^rd June 2010 again by e-mail proposing the Doosan.

vii.

Mr Hutton accepted the quote for the Doosan, relying on Mr Bodman’s expertise and recommendation. It was reasonable for Ash to rely on Mr Bodman’s recommendation.

viii.

The truck was delivered on 4^th October 2010, however it was not used until about 12^th October 2010. It became immediately apparent that the Doosan did not fit in between the racking in the Ambient Store.

ix.

Mr Price, the designated driver for the fork lift, had other concerns about the design of the Doosan, but I am satisfied that the concern which prompted Ash to contact Manton was the fundamental problem that the machine did not fit between the racking.

x.

Mr Foulkes contacted Mr Bodman immediately and told him that the truck did not fit. Mr Bodman went to Ash’s premises on 13^th October 2010. On the same day Mr Foulkes wrote to Albury purporting to exercise their “right to cancel the agreement forthwith”. It is common ground that they enjoyed no such right. However, I am satisfied that Ash regarded the manifest problem with the truck as fundamental, and were, therefore, seeking to protect their position.

xi.

When Mr Bodman visited the Ash site on 13^th October 2010, he was shown that the Doosan truck was too big to fit within the existing racking. He realised that his original site survey had been inadequate and admitted as much.

xii.

Mr Foulkes asked Mr Bodman to take the truck away. Mr Bodman did not do that, but asked for time to speak to Manton’s managing director to see if a solution could be found.

xiii.

Mr Bodman returned to Ash’s premises on 18^th October 2010. There he met with several representatives of Ash including Mr Hutton (managing director), Mr Foulkes, Mr Taylor-Wilkin (operations director). Mr Bodman proposed to remove the truck and have it modified to reduce its size. This operation, of necessity, would involve the removal of pieces of the protective cage on the truck within which the driver sits. I am satisfied that at this meeting someone summarised the proposal as “cut and shut”, and whether it was Mr Bosman’s expression or not, he did little or nothing to dispel the clear concerns which those representing Ash had, both about the suitability of the truck and his proposal to remedy the problem. I am also satisfied that the concerns held and expressed by Mr Hutton as to Mr Bodman’s proposal contravening Health and Safety Legislation and EU directives were however erroneous, genuinely held concerns. Mr Bodman’s inadequate handling of the original site survey and his apparent acquiescence in a proposed remedy akin to “cut and shut” (synonymous with poor workmanship), did nothing to instil confidence in the representatives of Ash at that meeting that Manton could remedy the problem with the truck. Mr Bodman gave the impression that it would be Manton who would be responsible for the modifications.

xiv.

In these circumstances I do not find that the response of Mr Hutton on behalf of Ash that he was rejecting Mr Bodman’s proposal was unreasonable.

xv.

By 18^th October 2010 Ash had not been provided with sufficient information about what was being proposed to remedy the position for them to make a fully informed choice or decision as to whether the offer was one that should be accepted.

xvi.

Ash did not know:

a.

By how much the dimensions of the truck would be altered.

b.

No drawings or specifications were available.

c.

Who would be carrying out the modifications.

d.

whether the modifications would affect warranties from the manufacturer, insurance or resale value.

e.

Whether the owner (Albury) would consent or whether they had been consulted. The terms and conditions of the hire agreement prohibits alteration addition or modification to the equipment.

f.

Whether safety for the driver would in any way be compromised.

g.

Whether the proposed modifications contravened domestic or EU legislation or regulation, and if not whether the alterations could be certified to that extent.

h.

How long the modifications would take.

i.

What proposals there were for a temporary replacement during the time the work was undertaken.

j.

How the modifications were to be funded.

xvii.

Mr Taylor-Wilkin (whose evidence on this point I accept) emphasised that the primary concern of Mr Hutton on behalf of Ash was the safety of any driver of the modified truck. At the meeting on 18^th Mr Bodman did little to allay the concerns of the Ash representatives.

xviii.

Thereafter, on 19^th October 2010 Mr Grindey (managing director of Manton), wrote to Mr Hutton in apologetic tone but did not advance the detail of the proposed remedy.

xix.

Mr Hutton replied on 20^th October 2010. His letter explains why Ash had taken the stance they had.

xx.

There is a reply from Mr Grindey on 21^st October 2010. The tone of this letter is not so conciliatory as before, and advances the proposal only in the sense of telling Ash that the modification would be done by a “specialist company to approved EU and manufacturers standards”.

xxi.

Thereafter the correspondence did not and does not assist with the resolution of this dispute.

13.

In the premises I am satisfied that the contention by Manton that Ash failed to mitigate its position and alleged loss by refusing to accept their offer to have the Doosan modified, must in the circumstances fail. Ash did not unreasonably fail to mitigate its loss.

14.

It follows that in my judgement Manton are liable to indemnify Ash in respect of Albury’s claim.”

It is also necessary to reproduce the relevant parts of the correspondence to which the judge refers.

Thus Manton’s letter of 19 October 2010 read:-

“Thank you for your letter dated 14^th October 2010 concerning your recent acquisition of a Reach Truck and your subsequent meetings with our Mr D Bodman on the 13^th and 18^th of October 2010.

I am very sorry to hear of your difficulties and my company will do everything it can to help you. To this end we have been in touch with the manufacturer and we are awaiting their response. However you must realize that reputable company’s [sic] like Doosan do not manufacture fork lift trucks that are not fit for purpose.

I have also been in touch with Albury Asset Rentals who also agree that the manufacturer would not supply a truck that was not fit for purpose.

We are awaiting confirmation of the availability of a Doosan Technical representative so that an on site meeting can be arranged between all parties.”

This letter of course wholly misses, or evades, the point that the forklift was of unsuitable dimensions. The possible availability of a Doosan Technical Representative was not mentioned again in correspondence and no such meeting took place.

Mr Hutton’s letter of 20 October 2010 read:-

“I acknowledge receipt of your letter dated 19^th October 2010.

From your response it would appear that your representative, Duncan Bodman, whom I met here at Ash Manor on the 18^th October, (together with our Operations Director, Production manager, Purchasing Manager and our Warehouse Supervisor), has not fully acquainted you with the facts which are as follows:-

Mr Bodman was originally asked to quote for a new fork lift truck after he had been shown around our site and our specific requirements had been discussed. This included the specific requirement for the fork lift truck to enter our racking in both our main chilled store and our dispatch chilled store, which was fully explained at the time. Indeed, Mr Bodman measured our racking to ensure that he could provide a fork lift truck that would fit into our racking. In other words, he measured our racking so that any fork lift truck he specified would be fit for purpose in that it would be able to put product into and take product out of our racking.

Regrettably, and by Mr Bodman’s own admission at our meeting on the 18^th October, he failed to correctly measure our racking and this led to a fork lift truck being supplied by your company that does not fit into our racking. Therefore, it is not fit for purpose.

Moreover, at our meeting on the 18^th October, we also advised Mr Bodman that there are a number of ‘blind spots’ associated with this truck in its current configuration, which in so far as we are concerned is a secondary consideration, but is nevertheless worth pointing out because it brings up a number of Health and Safety issues.

Mr Bodman's answer to these issues was to imply that Manton Hire would take it upon themselves to cut down and modify the drivers protective cage area - i.e. reduce the height of the protective cage by cutting out sections of the cage. Our considered opinion on hearing this was twofold. Firstly, that by altering the cage it would no longer comply with European Type Approval as it would be modified beyond the manufacturers standard and approved EU specification.

Secondly, the head room inside the cage would be substantially reduced impeding the operators already limited space.

For the avoidance of doubt, and as we have stated at our meeting with Mr Bodman, and in earlier correspondence, we have rejected this fork lift truck because it is not fit for purpose and consequently we require its immediate uplift.

I trust by way of this letter that you are now fully acquainted with the facts, but if you should have any queries then please don’t hesitate to contact me.”

It is plain from Mr Hutton’s letter of 20 October that at the meeting of 18 October Mr Bodman had given the impression that his proposal was that Manton should itself carry out the modification work at its own premises, and on re-reading the evidence at trial it is plain that this is the impression which the Ash representatives took from him. It is clear that it is this to which the judge refers in the last sentence of paragraph 12(xiii) of his judgment. At the hearing we were inclined to think that this was a reference to financial responsibility, which I suspect it was not, although it may in the context of a modification carried out by Manton come to the same thing, which may explain how the judge came to make what we thought to be an inconsistent finding at paragraph 12(xvi)(j) to the effect that Ash did not know how the modifications proposed by Mr Bodman were to be funded. However that may be, it is plain that the judge overlooked clear evidence from both Mr Foulkes and Mr Hutton to the effect that Mr Bodman had indicated at the meeting that Manton would bear the cost of modifications.

Mr Grindey’s letter of 21 October 2010 was sent by both email and by hard copy. It read:-

“Thank you for your E-mail of 20^th October 2010.

I am disappointed that you have chosen to put the entire blame for the situation we find ourselves in on to Mr Duncan Bodman. He has fully acquainted me with the facts which obviously do not fit your employee’s version of events. Most people when they have a problem would try to solve it. Your position is to hold up your hands, admit to no involvement and blame the other party.

I will now put the situation as we see it.

You already have a TCM forklift supplied by us. Because of this your Mr John Foulkes and our Mr Duncan Bodman met to discuss the provision of a Reach Truck to replace one of your Jungheinrich’s. The new truck was to service your main Warehouse, Ambient Store and Chilled Store.

It is true to say that Duncan did his best to record the measurements required bearing in mind work was in progress all around him which was in itself a safety hazard. The overhead guard, which you refer to as the drivers protective cage would need to be modified to allow entrance into the racking in the Ambient and Chilled stores. This would be done by a specialist company to approved EU and manufacturers standards which will not reduce the operators headroom. Such a procedure is not uncommon in the forklift truck industry.

Furthermore, I must point out to you that you were offered the choice between two machines; a TCM and a Doosan.

Your Mr Foulkes was left in possession of full specifications for both machines and was happy to sign up for the cheaper option. Therefore I do not see the need to uplift the machine when the problem can be solved. All you have to do is let us do it.”

The judge described this letter, and with good reason, as being less conciliatory than Mr Grindey’s earlier letter. Not only did it impute blame to Ash, there being as the judge found none which attached to it, but it also attributed Ash’s problem to its conscious decision to adopt an unsuitable cheaper option. In evaluating whether Ash acted reasonably in mitigation of its loss, it is not irrelevant to consider, as part of the general background, whether the contract breaker had admitted liability. That is no doubt why the judge considered it relevant to find, in the event wrongly, that Ash did not as at 18 October 2010 know how the modifications were to be funded. It may be a moot point whether in the light of this letter Mr Hutton should have inferred that Mr Bodman’s indication that Manton would bear the cost of modification extended to modification carried out not by Manton itself but by a specialist company, but I will assume in Manton’s favour that Mr Grindey’s concluding words “All you have to do is let us do it” carry that implication. That is the basis upon which the appeal was argued.

Mr Hutton replied to this message on 21 October 2010 by email as follows:-

“Further to your e-mail I would make the following comments:-

Could you please explain how this company is to blame when your representative was:- a) fully briefed as to our specific requirements; b) incorrectly measured our racking?

We stand by our previous correspondence and require immediate uplift of this machine.”

Mr Grindey’s reply, also by email on 21 October 2010, was equally brief: -

“Thanks for your reply.

Mr Bodman was not fully briefed and therefore did not incorrectly measure the racking.

Can you please explain to us why you should be so intransigent when the problem can be easily overcome and we are offering to sort it out, but you are being unreasonable in the extreme.

We will not be collecting the truck and you should refer to the terms and conditions that your Mr Foulkes signed.”

The reference to the terms and conditions which Mr Foulkes had signed can only be a reference to the Hire Agreement to the terms of which I have already referred. This too was less than conciliatory.

Mr Hutton’s final email to Mr Grindey on 21 October was as follows:-

“I can confirm that your representative was FULLY briefed.

I can confirm that at our meeting here at Ash Manor Cheese Company Ltd., on the 18^th October, your representative admitted, in front of five people that he had been fully briefed and that he had incorrectly measured our racking.

The machine you have supplied is CE marked and has an individual stamped CE type approval plate attached to it.

Therefore, it cannot be modified out of this approval.

The modification you are suggesting would render the machine outside of the CE type approval.

The modification you are suggesting would not only alter the headroom available to the driver but would also result in the cage width being reduced. This would expose an area of the operators head to any falling objects as the cage would not cover the entire width of the truck, which is a requirement under EU law.

The terms and conditions you refer to were signed in good faith prior to the truck being delivered and on the understanding that the truck would be fit for the purpose for which it was specified, i.e. to fit into our racking. It doesn’t so it isn’t fit for purpose.

In view of your comments I see little point in communicating with you any further other than to point out that we will vigorously defend any action that is brought in this matter.”

Although not in evidence at trial, Mr Hutton received a further unhelpful communication, this time from Albury, in the shape of a letter dated 22 October 2010 which read:-

“I am writing further to your letter dated 20^th October and John Foulkes’ letter dated 13^th October in respect of the above agreement.

We have been in contact with Peter at Manton Hire Ltd and he is aware that you are unhappy with the equipment that has been supplied and is attempting to rectify the issues you have.

I understand that you were provided with the truck specification prior to placing the order and Manton Hire Ltd has attended meetings with yourselves to try and resolve this matter. Unfortunately Manton Hire Ltd have advised that this agreement should not be cancelled as the equipment was supplied in good faith and therefore payments should be maintained as per the Terms and Conditions of the agreement.”

Mr Le Brocq, for Manton, argued that Mr Hutton’s final email of 21 October communicated an unequivocal refusal to countenance modification. Mr Le Brocq suggested that this email put an end to the discussion, and that in the light thereof there was no point in Manton going to the expense of drawing up a specification so as to indicate how precisely the modification would be carried out. A reasonable businessman in Mr Hutton’s shoes, suggested Mr Le Brocq, would at least have permitted Manton to put forward a detailed proposal. That, submitted Mr Le Brocq, Manton was prevented from doing.

Mr Le Brocq characterised Mr Hutton’s message as unreasonable in itself. It was however, he suggested, still more clearly unreasonable if viewed in the light of (i) Mr Hutton’s erroneous concerns that the proposed modification would be unlawful, and (ii) Mr Hutton’s uncommunicated belief that Manton would not in any event carry out its promise of modification to the forklift truck. In that latter regard Mr Le Brocq submitted that whilst Mr Hutton might have been justified in regarding Mr Bodman as unreliable, he was not justified in so treating Mr Grindey, the Managing Director of Manton, whom he had never met.

There was also before the court agreed expert evidence upon which Mr Le Brocq relies but to which the judge makes no reference. It took the form of a report of an experienced Field Service Engineer in the forklift industry, Mr Geoff Willis. From this evidence it emerged that the width between the racks in the two relevant warehouses was reduced at the first level as compared to floor level, such that the top of the overhead guard surrounding the driver of the forklift could not pass between the racks. This problem could potentially be overcome either by reducing the height of the overhead guard or by reducing its width. Mr Le Brocq drew attention to the following passages in the report of Mr Willis:-

“Another option would be to modify the over head guard of the Doosan to enable it to drive between the load rails rather than under them. This is a common modification carried out to order on all makes/models of forklift trucks and is usually carried out at the time of construction by the manufacturer. It can be modified by a specialist engineering company using a written procedure from the manufacturer. Either of the two options would ensure the equipment was still within the technical requirements under the CE conformity regulations and would not have any Health & Safety implications.

It is plain from this evidence that the more usual practice is for any modification of this sort to be carried out to order at the time of construction by the manufacturer. However, a fair reading of the evidence is that a modification to manufacturer’s specification is also common industry practice.

It was against this background that Mr Le Brocq characterised Mr Hutton’s response as digging in his heels. It had, he suggested, been unreasonable. It was unreasonable to reject Manton’s offer out of hand. Mr Hutton should not have shut the door to further discussion.

Mr Gilchrist, for Ash, in addition to joining issue with this approach, submitted that the judge could have resolved the case on the basis alone that Manton had failed to prove that Albury would have consented to modification of the machine. By clause 3.3 of the Hire Agreement Ash was prohibited from making any modification. This point was apparently not made before the first day of the trial. Manton sought to counter it then by reliance upon its Repurchase Agreement with Albury, also dated 4 October 2010, which was in evidence at trial, pursuant to which Albury could “on the termination of the hiring however caused” require Manton to re-purchase the machine at a specified agreed price, £4,750, in fact 25% of the original invoice price. Albury would therefore, submitted Mr Le Brocq, be unconcerned as to the modification. This does not answer the point, for as Mr Gilchrist observed Albury might have wished to sell elsewhere for more, or simply have been unprepared to countenance the modification lest it had implications either for Health and Safety legislation or manufacturer’s warranties. On the appeal Manton sought to introduce fresh evidence, which Ash opposed on the basis that it could and should have been introduced at trial on an issue on which Manton bore the burden of proof. What this new evidence amounted to was that Albury would “have had no objection to the modification of the overhead guard if all parties were in agreement and it solved the customer’s issues with the machine”.

I do not think that we need to decide whether to admit this fresh evidence. In my view it carries the matter little further, but equally the judge’s decision is in my view supportable on grounds wider than that Manton did not demonstrate that Albury would have consented to the modification. It is a relevant circumstance that the consent of Albury was required before a modification could be carried out, and that Manton did not at the time indicate that such consent would be sought or that it would necessarily be forthcoming, and that it is not a foregone conclusion that consent would in fact have been given. I do not however regard this aspect as of itself conclusive of the issue whether Ash failed to act reasonably in mitigation of its loss.

The judge correctly directed himself at paragraph 11(i) of his judgment by reference (albeit without attribution) to the classic statement of principle enunciated by Viscount Haldane LC in British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 at 689. Sir John Donaldson MR clarified the implications of this principle in Sotiros Shipping Inc v Sameiet Solholt, “The Solholt”, [1983] 1 Lloyd’s LR 605 in a passage at page 608 just before that cited by the judge at paragraph ll(ii) of his judgment:-

“A plaintiff is under no duty to mitigate his loss, despite the habitual use by the lawyers of the phrase “duty to mitigate”. He is completely free to act as he judges to be in his best interests. On the other hand, a defendant is not liable for all loss suffered by the plaintiff in consequence of his so acting. A defendant is only liable for such part of the plaintiff’s loss as is properly to be regarded as caused by the defendants’ breach of duty.”

Viscount Haldane in British Westinghouse also went on to approve a statement made by James LJ in Dunkirk Colliery v Lever (1878) 9 Ch D 20 at 25 to the effect that an innocent party faced with a breach of contract is not required to do anything in mitigation of his damage otherwise than in the ordinary course of business.

It is well-established that a claimant may be unable to claim in respect of loss which could have been avoided by accepting an offer made by the party in breach himself, and McGregor on Damages, 18^th Edition, devotes a section, paragraph 7-04 et seq, to the situation “where the door to mitigation is opened by the party in breach”. Whilst the paradigm case there under consideration is one of an offer made by the contract breaker which will eliminate or reduce the loss which would otherwise flow from the defective performance, there may be circumstances in which the reasonable course requires the “innocent” party to negotiate with the contract breaker and possibly even to initiate negotiations in an effort to eliminate or reduce the loss. On the other hand, it is also well-established that, in the words of McGregor at paragraph 7-070 “in mitigating his loss the claimant victim of a wrong is only required to act reasonably and the standard of reasonableness is not high in view of the fact that the defendant is an admitted wrongdoer”. The author goes on to cite the celebrated passage of Lord MacMillan in Banco de Portugal v Waterlow [1932] AC 452 at 506:-

“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those that have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”

It should be noted also that in Payzu v Saunders [1919] 2KB 581 at 588 Bankes LJ said that “there may be cases where as a matter of fact it would be unreasonable to expect a plaintiff to consider any offer made in view of the treatment he has received from the defendant”.

The present case was not argued on the basis that Ash was simply entitled to a machine which had left the manufacturer’s factory in a condition which was fit for purpose, i.e. that it had been constructed to the correct dimensions. Nor was the case argued on the basis that Manton’s contractual performance had been so abject that it was unreasonable to expect Ash to consider any offer in mitigation of loss from that quarter. As Scrutton LJ said in Payzu v Saunders, above, at page 589:-

“In certain cases of personal service it may be unreasonable to expect a plaintiff to consider an offer from the other party who has grossly injured him; but in commercial contracts it is generally reasonable to accept an offer from the party in default. However, it is always a question of fact.”

For similar reasons it is not fatal to Manton’s position that in the course of the critical correspondence it appeared to lay the blame for the problem at the door of Ash. If it was sufficiently clear that Manton would be responsible for the cost of any modification, as I am assuming that it was, it is not a bar to success of Manton’s case that its conduct fell short of an acceptance of liability. This is a point discussed by McGregor at paragraph 7-069 by reference to a decision of this court in Uzinterimpex J S C v Standard Bank plc, [2008] EWCA Civ 819. As McGregor explains, that case:-

“involved a dispute between the claimant seller of the cotton and the defendant bank financing the purchase on behalf of a buyer now in insolvent liquidation. The judge having held that the bank, by refusing to release the documents of title to the cotton, had converted the cotton, the bank proposed to the seller that the cotton be realised and the proceeds placed in a blocked account so as to preserve its value, against deterioration, fall in market value and continuing storage charges, for the benefit of which ever party should ultimately prove to be entitled to the cotton. The seller’s unpreparedness to agree to this was held to be a failure on its part to mitigate loss. It had been found by the trial judge that the seller’s attitude to the bank had not unreasonably been coloured by a lack of faith and confidence, the bank having behaved badly in a number of ways, but this did not suffice to justify the seller’s refusal to agree to the sale of the cotton. The whole transaction was a commercial one where it was more appropriate for commercial men to consider profit and loss than to stand on principle.”

McCardie J put the point well in Payzu v Saunders at first instance when he said:-

“I feel no inclination to allow in a mercantile dispute an unhappy indulgence in far-fetched resentment or an undue sensitiveness to slights or unfortunately worded letters. Business often gives rise to certain asperities. But I agree that the plaintiffs in deciding whether to accept the defendant’s offer were fully entitled to consider the terms in which the offer was made, its bona fides or otherwise, its relation to their own business methods and financial position, and all the circumstances of the case; and it must be remembered that an acceptance of the offer would not preclude an action for damages for the actual loss sustained.” [See [1919] 2 KB 581 at 586.]

It is plain that neither as at 18 October 2010 nor as at 21 October 2010 was there an offer on the table from Manton which Ash could reasonably have been expected to have accepted without more. It was unclear whether the proposal was to reduce the height of the overhead guard or rather its width, or whether the proposal was to reduce both, as Mr Hutton in fact understood it to be. Mr Grindey’s email of 21 October said that the operator’s headroom would not be reduced. As the expert evidence demonstrates a reduction in width would have been a longer and more complex operation. The precise extent of the modification was completely unclear - no measurements were proffered. The proposal had developed from one of an apparently crude modification by the Manton engineers themselves to modification by a specialist company, but the specialist company was unidentified. Ash was offered nothing by way of independent confirmation that the modification proposal, whatever it was, would be acceptable to the manufacturer or would comply with the relevant legislation and regulatory structure.

Ash plainly did not act unreasonably in rejecting such offer or offers as were communicated to it by first Mr Bodman and then Mr Grindey on behalf of Manton. It is of course correct to observe that Mr Hutton in his communications did nothing to suggest that Ash would look more favourably on a more detailed and properly worked-out and documented proposal. There was however nothing to prevent Manton from putting forward a detailed proposal supported not just by a proper specification and drawings but also by independent material or material from the manufacturer indicating how both the manufacturer’s requirements and those of the relevant legislation and regulations would be met. Manton could have dealt too with the position of the owner of the machine, Albury, whose consent to any modification was required. The necessity to rise above “unfortunately worded letters” to which McCardie J refers, an approach urged upon us by Mr Le Brocq as relevant when considering Mr Grindey’s combative letters, is equally applicable when considering Mr Hutton’s apparent intransigence. Whether or not Manton chose to remove the truck from Ash’s premises as Ash was demanding, a detailed and documented proposal could have been put forward which Ash might then have rejected at its peril. Such a proposal could have contrasted the liability to which Ash was exposed under the Hire Agreement with the relatively modest cost to Manton of effecting the necessary modification.

In all the circumstances I do not consider that the conduct of Ash is to be characterised as unreasonable. It did not shut the door to the making of a more measured proposal. The tone of Mr Hutton’s messages, and in particular his last message of 21 October, was in part informed by and responsive to the tone in which Mr Grindey couched his messages. The door was not shut because Mr Hutton could not prevent the making of a properly detailed and documented proposal for modification.

I do not consider that the judge misunderstood the decision of this court in Copley, above, in the manner alleged. Having evaluated the nature of Manton’s offer, as it stood as at 18 October, he went on to consider the extent to which subsequent correspondence altered the position. He noted that Mr Grindey’s email of 21 October carried the matter forward, albeit he thought not by much. I agree with the judge about that, but the point is that the judge was prepared to countenance that the initial offer, if rejected, could be improved upon. The judge did not approach the case on the basis that Manton had only one opportunity to make an offer in mitigation of loss. He looked too at the correspondence which followed Mr Grindey’s offer of 21 October to see if it altered the position. He concluded that it did not.

Copley is an unusual case, concerned with the offer to a motorist by the defendant’s insurer of the use of a replacement car whilst the motorist’s damaged vehicle is undergoing repair. It is a situation in which time is of the essence in that the motorist will often if not usually need to make arrangements for a replacement vehicle as a matter of urgency after the accident in which his own vehicle has been damaged. The purpose of a defendant’s insurers themselves offering a replacement vehicle to the claimant motorist is that the insurers may be able, as frequent and volume hirers of vehicles, to obtain cheaper rates of hire than are available to an individual motorist. In such circumstances the defendant’s insurers hope to escape the liability to compensate the claimant motorist for the cost of car hire at the prevailing market rate. It is in that context, including the need for the claimant motorist quickly to secure a replacement vehicle, that Longmore LJ made the observation quoted by the judge at paragraph 11(iii) of his judgment. In such circumstances there may realistically be only one chance for the defendant’s insurers to make an offer, as in the absence of a comprehensive offer from the defendant’s insurers the claimant motorist will act reasonably in promptly making his own arrangements to hire a replacement vehicle at the prevailing market rate. The case is not authority for any more general proposition concerning the manner in which offers of reparation are to be made by wrong-doers or contract breakers if they are to generate in the innocent party an obligation reasonably to accept them in extinction or reduction of his loss.

The ultimate question in the present case is whether Ash should have invited a further or perhaps a proper offer or should have permitted Manton to make one. There may sometimes and perhaps often will be an obligation on the innocent party to take the initiative, since he can only recover such part of his loss as is caused by the defendant’s breach. The Solholt was such a case. In that case buyers of a merchant vessel for US$ 5M inexplicably cancelled the contract, as they were contractually entitled to do, on account of the sellers’ breach of contract in tendering her for delivery a day or two late. The market value of such ships had risen since the contract had been made and the vessel was on cancellation worth US$ 5.5M. The buyers claimed US$ 500,000 by way of damages for the sellers’ breach. In point of form, the buyers’ claim was made pursuant to clause 14 of the contract which provided:-

“If default is made by the sellers in the . . . delivery of the vessel . . . within the time herein specified, and the default shall have arisen from events for which the Sellers are responsible, the Buyers shall have the right to cancel this contract and the deposit in full shall be returned together with interest thereon at the rate of 5% per annum. The Sellers shall in addition make due compensation for any loss caused to the Buyers by non- fulfilment of this contract.”

The buyers did in fact offer to buy the vessel for US$ 4.75M which would have both eliminated their loss and given them an incidental profit of US$ 250,000, but that offer was rejected by the sellers and neither the sellers nor the buyers did anything further. It was held by both Staughton J and the Court of Appeal that had the buyers offered to buy the vessel at the original contract price of US$ 5M, without prejudice to any claim they may have had for the three day delay, the sellers would have accepted. It was held that it would have been reasonable for the buyers to make such an offer, and that, accordingly, they could not recover their loss of US$ 500,000 which they could in this manner have avoided. The position was perhaps complicated by the presence of the contractual provision to which I have referred above, but the decision might perhaps have been justified on the ground that the buyers’ loss was caused not by the sellers’ breach of contract but by their own decision to exercise a contractual right of cancellation. However that may be, it should be borne in mind that the ship sale and purchase market is a structured and sophisticated market conducted by professional shipbrokers. Moreover both the sellers and the buyers were active players in the shipping market.

The decision in The Solholt does not com pel the conclusion that a cheese company in Wrexham should have countered a local forklift truck supplier’s vague, unparticularised and unconvincing offer to modify the vehicle supplied with an invitation to put forward a properly formulated and documented proposal. Manton had put Ash in a most invidious position. In reliance on Manton’s representation Ash had entered into a contract which obliged it to pay rental for five years for a forklift truck which, had Ash purchased it from Albury or Manton outright, it could almost certainly have rejected as unfit for purpose. It was not unreasonable that Ash should view with scepticism unparticularised proposals to modify the forklift without reference to the actual manufacturer, only “to manufacturer’s standards”, or without reference to the owners of the vehicle without whose consent it could not be modified. It was a situation in which it behoved Manton to put forward a properly formulated proposal which Ash could not reasonably refuse. Moreover Manton was here the expert in the field. It behoved Manton to satisfy its customer that what it was proposing was lawful and that it could deliver its proposed solution. Manton failed on all these fronts. The suggestion that Manton was deprived of the opportunity to put forward a proper proposal by Mr Hutton’s understandable indignation is quite hopeless. It would have helped to have approached the problem from the outset in a more professional manner than did Mr Bodman at the meeting of 18 October, but it is idle to suggest that Mr Hutton’s peremptory rejection of so inadequate and unconvincing a response was effective unilaterally to foreclose all further discussion. Mr Grindey’s email of 21 October was a poor attempt to repair the impression given by Mr Bodman. The conduct of Ash is not “to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty”.

In my view the judge came to the right decision. I would dismiss the appeal.

I agree.

I also agree.