This has been the trial of claims by the Claimants for breach of contract and negligent misstatement against the Defendants arising from an exclusive supply agreement dated 1^st June 2001 (“the Agreement”) made between the First Claimant and the First Defendant. The claims which are for up to some $20 million are denied.

The First Claimant (“Globe”) designs and manufactures electric motors, including motors and leadframe assemblies. These are a component part of the electric power assisted steering system (“EPAS”) fitted to cars, which sense drivers’ input to the steering wheel and provide the necessary steering assistance.

The Second Claimant (“Porto”) is a subsidiary of Globe incorporated for the supply of the motors to the Defendants under the Agreement. Globe says (but the Defendants deny) that following the execution of the Agreement, Porto became a party to it and/or performed part of the Agreement on Globe’s behalf. It began to supply motors from about November 2002.

The Third Claimant (“Safran”) was added as a Claimant by consent, having taken an assignment of the respective rights of Globe and Porto in this litigation.

The First Defendant (“TLVES”) is an English company that supplies components to car manufacturers such as Renault, Fiat and Nissan. TLVES assembles EPAS systems from components it buys from third party suppliers, including Globe. The electric steering business of TLVES started with Lucas in the 1990s. Lucas merged with Varity Corporation in 1996. In about 1998 there was a joint venture between TRW Group (51%) and LucasVarity (49%) (for which purpose TLVES was incorporated). Finally TRW acquired Lucas Varity in 1999. This history is relevant as an aspect of the case involves differences of view between the European and US arms of the Defendants about the merits of Globe and its products.

The Second Defendant (“TRW Ltd”), which is the parent of TLVES, was added following a contested hearing by order dated 25 September 2013 after an inter-company Business Transfer and Agency agreement came to light. TRW Ltd denies that it can be liable for any breaches of the Agreement and asserts a limitation defence.

I will refer to the Claimants generally as “Globe” and to the Defendants as “TRW” except where the identity of a particular company matters.

Globe says that in breach of the Agreement, from about 2005, TRW bought products (known as “Gen 2” products) from DEAS ( which I will sometimes refer to as “Emerson”), a competitor of Globe. (DEAS was itself bought by TRW in 2006). Globe says that TRW was contractually obliged to buy these products from Globe and that it has suffered loss and damage as a result of TRW’s failure to do so. Globe says that the Agreement covers the Gen 2 products at least to the extent that they could and would have been produced by making engineering changes to the first generation (“Gen 1”) products which it has the exclusive right to produce. TRW says that Gen 2 products are significantly different from the Gen 1 products, they represent a re-design, and they are not covered by the Agreement. Further Globe could not have produced motors that met the requirements for the DEAS Gen 2 products at all and/or within a reasonable time. Such products could not and would not have been produced as a result of engineering changes to the Gen 1 products. TRW also says that, in any event, the products under the Agreement were defined by steering system power and platform, and that the Gen 2 products were for systems with a different power rating and largely for a sub-platform (the B85) which was not covered by the Agreement, a claim which Globe disputes.

Globe also claims in negligent misstatement. It says that TLVES was negligent in grossly overestimating the estimated volume of products both before and at the time of entering into the Agreement, and Globe has suffered loss as a result. Globe says that TLVES knew at the time of the Agreement that Renault did not intend to purchase from TLVES any Gen 1 Motors for its P1 platform and that the true estimated volume of purchases by Nissan was as set out in a document dated 7 May 2001, rather than in the Agreement. TRW says that this is not the case.

There are various more minor claims including one by TRW of estoppel based on the alleged absence of complaint by Globe at the time of the alleged breaches.

Apart from the issue of liability TRW disputes the quantum of damages and also a claim by Globe for restitutionary damages which was largely abandoned at the end of trial.

The disputes between the parties are set out in a List of Issues. In retrospect that list turns out not to be in the most logical sequence but I shall follow the parties and deal with each in turn after setting out some introductory matters and the undisputed facts.

The trial lasted 32 days in March, April and then June 2014. The parties produced many bundles of papers including 5625 “Key contemporaneous documents”. The Court was fortunate that the entire documentation for the trial was put onto a computer system accessible to the parties and to me. Several laminated sheets were much used at the trial. Three of these are from the “Master Schedule” of Specifications prepared by Mr Arwine and dealt with in his Fourth witness statement. The fourth is a helpful chart of Platforms, models and motors prepared by Globe which is not agreed but was not much disputed by TRW.

The Claimants called evidence from the following witnesses of fact:

The Defendants called:

The Defendants tendered statements which were not challenged from Mr Marian Sedmak, who since November 2005 has been a financial manager for TRW Automotive (Slovakia) s.r.o, Mr Rocio Arizcuren, who has been a financial controller at TRW Automotive España S.L. since 2005 and Mr Adrian Robinson, global purchasing director of electronics at TRW.

The Claimants called expert engineering evidence from Dr Michael Sidman. The Defendants called Professor Ansgar Ackva.

The Defendants, but not the Claimants, tendered but then did not call expert accounting evidence, a report by Mr John Fisher of PwC, which in effect responds to the quantum evidence from Mr Keegan and Mr Pinto of Globe. The Claimants rely on parts of that report for their damages claim.

The trial was long. The parties found it necessary to examine in great detail in 2014 the dealings between Globe and TRW between 1996 and the signing of the Agreement in 2001 and then the events that followed. That came about for the first period because of the negligent misstatement claim advanced by Globe, the emphasis placed by TRW on the detailed factual matrix and the case of both on damages in general. For the later period it was caused by aspects of damages and negligent misstatement and an estoppel claim by TRW. For both periods it came about also because of the need to examine the evolution of two motors and to make comparisons between them.

All the witnesses faced the problem of giving evidence about routine business events taking place between 10 and 18 years ago. This was the fault of Globe in failing to bring its claims earlier, although in this area of industry with parties trying to cooperate in existing and new business, it is to a degree understandable that action is only brought when one side finally realises that unless it does so, any rights which it has will be lost. As a result, the quality of recollection, except about major events, could not be high. At times in the trial it became easy to forget how difficult it would be for witnesses to remember routine matters that had taken place so many years ago. Caution about evidence of matters taking place so long ago is necessary- see for example the observations of Hamblen J in “The Panamax Star” –v- “The Auk” [2014] 1 Lloyd’s 606 at 613 (not cited by the parties but read by me for another purpose while writing this judgment). Moreover the witnesses were dealing with mundane and not particularly memorable business events. This is not a case about a memorable event such as a fire or a plane crash. I discount heavily much of the oral evidence including some of what the witnesses honestly recall was the significance of the documents. I place more emphasis than usual on the documents, read in context, and on commercial probabilities when evaluating the competing recollections of honest and intelligent witnesses. I am also cautious about making even that evaluation. It is common ground that the parties worked in close and friendly collaboration and that their dealings comprised much more than is recorded in written exchanges. I conclude nonetheless that anything significant would have found its way onto paper at some point.

There were few differences about matters of primary fact. When the witnesses differed it was usually about the significance to be attached to undisputed facts and technical matters. Typical disagreements were about what was or was not relied on, what the respective bargaining strengths were at particular times and what people knew or did not know at particular times. There was however considerable disagreement about technical matters among the fact witnesses and to a degree between the experts.

All the witnesses of fact were clear, honest and straightforward. Some of Globe’s witnesses were hampered by the effects of some external ‘witness preparation training’ which their integrity and common sense fortunately enabled them to shake off as their cross-examination continued. Thus at first Mr McHenry and Mr Keegan appeared reluctant to answer questions clearly and were prone to ask for these to be repeated when witnesses of their calibre should not have had difficulty in understanding what was being asked. Apart from that I was impressed by how readily all the witnesses generally put candour and integrity before the interests of the party for whom they were giving evidence.

As in so many cases many witnesses were afflicted by statements containing passages of detailed submission supported by the documents about which they could give little relevant or admissible evidence. Criticism was made of similar wording being used in several statements, with Counsel citing observations by Hamblen J in Foster v Action Aviation (2013) EWHC (Comm) to the effect that it is unsatisfactory for there to be a number of similarities in language and points made in a number of witness statements as that reveals witnesses being willing to allow their evidence to be marshalled and to use words that were not their own. In cases such as this one, that criticism is not justified. In a case where witnesses genuinely have the same view, perhaps of company policy, and a solicitor is helping them separately to express it in words I see no reason why he or she should have to search for some different formulation with which the witness is happy for the sake of making it look right. Solicitors have a difficult job as it is steering between on the one hand leaving the statement to the witness and then being criticised for including irrelevant material and, on the other hand, actively directing the drafting and being rebuked for putting words into his or her mouth.

I disagree with the parties that there are 5625 key documents in this case. Many of the documents record the dealings within and between two large companies over some 8 years about a variety of products and subjects. Few of the documents are formal or contractual. Most are informal, created at speed for a particular purpose. Documents dealing with technical matters often make remarks about business matters which are vague or wrong, and vice versa. Positions change over the course of time and are seen differently within separate areas of a business. Documents seeking a particular outcome often contain hyperbole or deal with issues selectively. Managers referring to something in the past will often misremember. Remarks in routine correspondence will understandably not be checked for accuracy with close examination of the documentary history. While the broad picture is important when evaluating the significance of documents genuinely relevant to the particular issues I have to decide, I decline in this judgment to give routine documents the close examination they have received during the trial.

The litigation process has required the parties to seek out and put together all the contemporaneous documents still in existence which address a particular subject- for example TRW’s records of estimates of future sales. It is a mistake to assume that the equivalent exercise would have been carried out at the time before a decision was taken or estimates conveyed to the other party or that it would have been negligent not to do so. There is a risk of making the false assumption that managers in reputable and well organised companies always generate paper that is consistent, accurate and carefully drafted, know what each other are writing and doing and agree with each other.

Some points pursued at length in cross examination did not assist resolution of the issues. Most witnesses readily accepted what might seem obvious, that their opposite numbers were astute business people and shrewd negotiators. Some admissions obtained from witnesses about what the detailed position had been many years earlier seemed to me to be more a product of the skill of the cross examiner than evidence to which I could attach much weight.

Each side at different stages of the case makes forensic points about the changing or shifting case of the other, usually responded to on the grounds that changes occurred only as a result of disclosure (often allegedly late) by the other. In a case of this size which has lasted so long such changes are to be expected and I decline to burrow into the cause of each. I will disregard this aspect of the submissions except where it relates to a point being raised unacceptably late.

It is the experience of the Court that business (as opposed, perhaps, to intellectual property) litigation between manufacturers of high reputation in the automotive and related industries is uncommon in England, particularly where as in this case the parties continue to have commercial dealings. Suppliers, manufacturers and customers all have good reason to keep on good terms with each other. The sums at issue in this case are large but not as great as the amounts which sometimes make cases of this size and length worthwhile. I have throughout this case frequently urged the parties to try to resolve their differences by discussion and negotiation. I am sorry that a settlement has not been possible in a case where both parties produce such obviously ingenious and useful products and their executives are of such conspicuous ability and integrity.

The Agreement, dated 1 June 2001, consists of six Articles set out over seven pages with appendices dealing with a variety of technical matters. Rather than just identify the key provisions as I would in a shorter case I set it out below but without the appendices:

AGREEMENT

This Purchase Agreement (this "Agreement") is entered into as of June 1, 2001 (the "Effective Date") by and between (i) TRW Electric Steering Ltd ("Buyer") and (ii) Globe Motors, Inc. ("Supplier").

Premises

A.

Buyer wants to purchase from Supplier Brushless electric motor and leadframe assembly, produced in accordance with the Specifications attached as Appendix A ("Products") to be used in conjunction with EPS Systems. This was not attached

B.

Supplier wants to sell Products to Buyer.

In consideration of the premises and the mutual promises herein, Buyer and Supplier (the "Parties”) hereby agree as follows:

Article 1

Purchase and Sale

1.1

Products: The Products include, but are not limited to, (i) motor and leadframe assembly for 38Nm Nissan B/Renault P1. (ii) motors and leadframe assembly for 58Nm Fiat C192, and (iii) motors and leadframe assembly for 58Nm Renault P2. The parties may add additional products by mutual agreement. Supplier shall not sell the part numbers referenced in this agreement to a third party,

1.2

Volume: Buyer will purchase from Supplier all of Buyer's requirements of the Products and Supplier will sell to Buyer all such quantities of Products as Buyer order from time to time pursuant to this Agreement. The quantities will depend upon the requirements of Buyer's customers (currently Fiat, Nissan, Renault). At present, Buyer estimates that it will require the following:

	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011
Fiat C 192; 58Nm	126k	350k	452k	450k	450k
Nissan B Renault P1 38 Nm		225k	475k	743k	1081k	1081k
Renault P2, 58Nm		92k	652k	927k	949k	950k	950k	950k	950k	719k	135k

Variance is estimated at +/- 15%

1.3

Delivery: Supplier will deliver Products to Buyer in accordance with a mutually acceptable order entry and delivery schedule process all of which shall also conform to the lead times for each Product as specified herein.

1.4

Invoices: Supplier will submit a separate invoice for each individual delivery.

1.5

Identification: Supplier will include on each invoice, bill of lading, or other document relating to the shipment of a Product the (i) part number and issue level of the Product, (ii) the delivery date of the Product, and (iii) the location to which the Product is to be delivered.

1.6

Payment Terms: For those Products shipped from North America Buyer shall pay 60 days net after such Products are withdrawn from the consignment stock. For those Products shipped from Supplier's plant located in a European facility, Buyer shall pay 90 days net after such Products are withdrawn from the consignment stock.

1.7

Consignment stock: Supplier shall maintain a consignment of inventory of the Product in accordance with a mutually agreed upon Consignment Agreement. Such agreement will take into account that the inventory levels will be ten (10) working days maximum whilst Supplier is shipping Product from North America and such time will reduce to five (5) working days maximum when Supplier is shipping product from Europe. The consignment stock will be located at the relevant TRWassembly plant.

1.8

Manufacturing Location: The supplier has committed to produce the products at a European manufacturing location as soon as practicable - anticipated to be in 2002.

Article 2

Price

2.1

Initial Price 2001: The Initial Price (as of the Effective Date) for each Product based on the assumptions with details of tooling and amortization as shown in Appendix. D.

2.2

VA/VE: Any cost reductions Supplier achieves during the Term will be shared 50/50 between Buyer and Supplier. Implemetation of such reduction will be agreed to by both parties as to the date of effectivity of the price reduction.

2.3

Productivity Price Adjustment: As agreed to in the pricing schedule as outlined in Appendix D.

2.4

Material Cost Adjustment. Adjustments which will be mutually agreed, will be determined as follows,

a.

Each Party will have the right to seek a price adjustment if changes in raw material prices as listed on Appendix C cause the cost to Supplier of selected raw materials to vary by more than +/- 10% from the baseline assumptions stated in Appendix C.

b.

Review of raw material prices will be carried out on the 30 June and 31 Dec. of each year, (based upon 6 monthly average compared to the baseline indices).

c.

Supplier will not issue to Buyer an invoice for a retrospective price increase unless, following discussion with Buyer, written permission from Buyer has been received in advance.

2.5

Currency:

a.

Buyer shall pay in US $ for Product shipped from North America. Buyer shall pay in Euros for Product shipped from Europe. Should the supplier not relocate the production to Europe by 31/12/2002 then the purchaser shall reserve the right to pay in Euros thereafter, as if the supplier had changed location.

b.

Exchange Rate: For purposes of establishing the appropriate sales price of each Product upon the shift of production from the US to Europe, an exchange rate between US $ and Euros shall be established and shall be based on the mathematical average of the exchange rates between US$ and Euros as listed in the Wall Street Journal for the calendar month immediately preceding the month in which such production is begun in Supplier's European facility.

2.6

Underrecovery of supplied products: The parties acknowledge and agree that Supplier shall recover its costs of tooling and capital by amortizing such costs over the units to be sold over the first five (5) years of this Agreement (''Recovery Period"). During the Recovery Period, the volume of Buyer's purchases of each Product shall be reviewed the first month of each year following the initial year of the agreement. In the event that the aggregate volume of Buyer's purchases of each Product during the preceding years is less than that which is provided in Article 1.2 above and such variance is greater than fifteen percent (15%), then Supplier shall adjust its pricing so as to amortize the remainder of Supplier's tooling and capital costs over the forecasted units to be produced for the remainder of the Recovery Period. If, at the end of the Recovery Period, Supplier shall not have fully recovered its tooling and capital costs, then Supplier shall invoice Buyer for the remaining portion of such costs and Supplier shall pay on such invoice within ninety (90) days following its receipt of such invoice.

Article 3

Warranty and Quality

3.1

Product Warranty: The warranty under which the Product will be sold to Buyer shall be that which is detailed on Appendix B.

3.2

Traceability: Supplier will provide for Product traceability.

3.3

Re-call campaigns: Will be negotiated and treated separately to this agreement.

3.4

Trend Information: To be agreed

Article 4

Engineering Changes

4.1

General: Buyer reserves the right to propose, at any time, changes in the Specifications or other requirements relating to the Products (''Engineering Changes").Supplier has to mutually agree. Buyer will advise Supplier of all Engineering Changes by giving Supplier prior written notice. If Supplier proposes to make an Engineering Change, Supplier will advise Buyer of such proposal. Before making such proposed Engineering Change,

Supplier must obtain prior written approval from Buyer.

4.2

Effects of Change: Following notice of an Engineering Change by Buyer or of a proposed Engineering Change by Supplier, Supplier will use all reasonable efforts in cooperation with Buyer to minimize the effects of such Change and will submit to Buyer as soon as reasonably practicable a written statement of the anticipated effects of such Change on production costs, delivery schedules, and matters related thereto.

4.3

Cost: Buyer will reimburse Supplier for all reasonable costs associated with each Engineering Change made by Buyer within ninety (90) days following its receipt of Supplier's invoice for such costs, which such invoice will not be issued prior to the implementation of such Change. Such costs will include reasonable costs related to surplus inventory and obsolete Products, tooling, and equipment. Buyer and Supplier will negotiate, in good faith, the allocation of costs associated with each Engineering Change proposed by Supplier.

Article 5

Term

5.1

Term: The Term of this Agreement will begin on the Effective Date and shall continue for the lifetime of each of the platforms at a rate of 100% of the platform requirement as estimated in Article 1.2.

5.2

Termination: Either Party has the right to terminate this Agreement forthwith by written notice to the other Party if the other Party (a) becomes insolvent or enters into any composition or arrangement (whether formal or informal) with its creditors;(b) is unable to pay its debts; (c) has a receiver, manager, administrator or administrative receiver appointed of its assets or income or any part thereof; (d) has passed a resolution for its winding up; (e) has a petition presented to any court for its winding up, which is not discharged within fourteen days after first hearing; (f) has done or suffered any equivalent act in accordance with the laws of its country of incorporation or (g) has committed a material breach of this Agreement and such breach is not cured within nine (9) months following the party-in-breach's receipt of written notice from the other party advising of such breach.

5.3

Rights of each Party: The termination of this Agreement will not affect the rights and duties of either Party which accrued prior to such termination.Article 6

Miscellaneous

6.1

Intellectual Property: Each party will continue to own all rights in its respective intellectual property and further, the parties acknowledge and agree that no licenses to such intellectual property are granted, expressly or impliedly, by either party to the other by virtue of this Agreement.

6.2

Service Parts: Supplier will continue to supply Products to satisfy customer service needs ("Service Products") for ten (10) years following the date on which the relevant platform ceases Serial Production. During such ten-year period, Supplier will maintain, in good condition, the tools, machinery, and equipment necessary to produce Service Products. The price for Service Products will be negotiated on a case-by-case basis.

6.3

Entire Agreement; Amendment: This Agreement, which includes the Appendices hereto, is the only agreement between the Parties relating to the subject matter hereof. It can only be amended by a written document which (i) specifically refers to the provision of this Agreement to be amended and (ii) is signed by both Parties.

6.4

Ownership. If ownership of either Party changes, the provisions of this Agreement will remain in full force and effect until the end of each platform life.

6.5

Resolution of Disputes: The Parties will take reasonable steps to settle amicably and in good faith any disputes which may arise hereunder. The English language version of this Agreement shall be the authoritative version even though it may be translated into some other language. All aspects of the Agreement (including its formation) shall be governed by English Law. Both parties hereby agree to submit to the exclusive jurisdiction of the English Courts.

Some basic matters need to be clear before considering the dealings between the parties. In this field Globe supplies electric motors which fit in a part, the EPAS produced by TRW, which is installed in car built by a manufacturer such as Renault. Globe also supplies leadframes built by others which in this judgment are included in the word ‘motor’ except where otherwise stated. There are helpful introductions to the technology in both side’s skeleton arguments. This passage is adapted from the skeleton arguments, refined by what I learned from the witnesses.

The steering assistance provided to a driver by an EPAS system is generated by an electric motor. Power from the motor is delivered to the steering column through a gearbox, which amplifies the turning force (ie the torque) generated by the motor. The system torque is measured in Newton metres (“Nm”). Importantly the motors in this case are designated not by the motor torque but by this system torque.

The motors comprise stators which include copper windings through which an alternating electric current is passed, and rotors which rotate within the stator and to which a series of permanent magnets are fixed. The interaction of the electro-magnetic fields in the stator and the magnetic fields on the rotor causes the rotor to turn within the stator, generating the turning force. The rotor assembly consists of a number of sub-components that allow the permanent magnets to rotate along an axis, to interact with the wire coils in the stator. The rotor assembly transmits the motor torque to the TRW EPAS system. “Stack Length” is the physical length of the stack of laminations that are put together to form the stator. “Slots” are the number of slots or 'teeth' that are stamped into the laminations of the stator. “Poles” are the number of magnets attached to the outside of the rotor shaft (glued to the back-iron). “Slot fill” refers to the amount of copper wire that is fitted into the slots in the stator. TRW relies on differences in the slot and pole numbers between different motor designs to demonstrate that Globe could not have provided the Gen 2 motor.

The segmented stator controversy. The Gen 1 motor had a skewed stator (the teeth and slots were skewed) with a conventional rotor piece in the centre. In order to increase the slot fill, the Gen 2 motor was to use not a skewed but a segmented stator .Thus the rotor magnets had to be skewed in order to deliver the required performance as to cogging torque and ripple torque (both terms used to define the “smoothness” with which the rotor turns either with or without a current passing through it). A segmented stator comes in a number of different pieces. The copper wire is wound round each piece before the pieces are then put together. Winding on a stator that is not segmented is more difficult as the copper wire has to be wound around each tooth (the teeth are the solid parts of the stator between the slots) in situ. Globe used, instead of a segmented stator, a winding method for this that they had acquired from a company called Electrowind. This was a technique whereby the wire was threaded into place through the slot openings, which are the spaces between the teeth on the inner diameter of the stator, using a guide or a nozzle. The differing approaches to this aspect of the motor are also relied upon by TRW.

An electronic control unit (“ECU”) provides current to the wires in the stator. The amount of current to be applied, and the place where it is to be applied in the stator depend on the position of the rotor within the stator, and the amount of torque being applied by the driver.

Motor position sensors detect and determine the position of the rotor, and torque sensors on the steering column measure driver input torque. This information is relayed to the ECU. The leadframe provides connections to the ECU, so that information from the motor position sensor passes through the leadframe to the ECU, and current introduced by the ECU to the motor is provided through the leadframe. The motor and leadframe assemblies are two of many parts of an EPAS system, which TLVES, as the supplier of such systems to vehicle manufacturers, must largely source from others. The motor and leadframe assembly includes housing for the stator. It also contains holes to allow it to be bolted to the TRW EPAS System. The leadframe provides the primary interface between the ECU and the motor.

The vehicle manufacturer specifies the vehicle steering performance requirements to the EPAS supplier. The EPAS supplier determines a system level specification to meet the vehicle manufacturer’s requirements and it then produces specifications for the component parts of the system, such as the motor and ECU, to ensure that the system level specification is met.

EPAS systems have a torque rating. For example, a 38Nm system provides a maximum of 38Nm assistance to the driver. The motor within the system usually has a lower torque rating than the system overall because the gearbox amplifies the motor’s turning force power to produce the overall system rating. A car generally requires a more powerful motor for its steering system the heavier it is over the front axle.

EPAS systems are designed for vehicle platforms. A platform is part of the vehicle architecture sharing key mechanical components which may include the chassis, axles, wheelbase, steering mechanism, suspension, and engine. A platform may last for some years- Globe says a decade or more. There are four platforms under discussion in the events that follow of which only one is the subject of dispute.

The Defendants say that different vehicle platforms may have sub-platforms. For example, the Renault P1 platform had sub-platforms called the J77 and B85. The Claimants do not accept that there are sub-platforms but do not dispute that the Renault P1 was used for J77 and B85 vehicle models.

Different vehicle models may have different requirements for steering systems. Even vehicles covered by the same sub-platform or vehicle model may have different requirements. For example, for each of the B85 and J77, TRW Automotive España SL supplies both a 42Nm EPAS system and a 53Nm system.

Since this was developing technology, TRW worked closely with Globe (and its competitor Emerson) to design and refine motor components. There were discussions over a number of years. TRW would engage Globe in early discussions, followed by written Requests for Quotations (“RFQs”) which attached drawings and specifications. There then followed a process of engineering collaboration involving Globe producing written “Exceptions” to the RFQs and then engaging in debate with TRW over the evolving design. This evolutionary process, common to the industry, was engaged in by both parties with a view to creating and testing sample motors and then reaching the point of a “design freeze”, prior to the start of production of a motor. TRW tends to see the raising of “exceptions” as being signs of unwillingness to participate. Globe tends to see this as a conventional part of the dialogue by which the supplier identifies aspects of the customer’s requirements which would benefit from being addressed differently. Having heard the evidence I share Globe’s view of this.

Specifications. The car manufacturer, here Renault, would take a close interest in all aspects of the process by which TRW would supply it with an EPAS system but leave aspects of the components to be put into that system, such as the motors, to TRW. Renault would have less involvement than TRW in the details of how its requirements for the system would be met by a particular motor. Most obviously one sees the debate about whether Globe or Emerson should have the business raging more within TRW than Renault. Renault would impose requirements on TRW and TRW would place more detailed ones on Globe.

Specifications imposed by TRW would include ;

Renault and Nissan, which were by then to a degree in common ownership, began to develop a common platform, in mid to late 1999. By this stage, TLVES was becoming integrated within the wider TRW organisation. TRW’s Paris-based sales team became involved in developing this business.

An offer by TRW in respect of this “B platform steering system” appears to be recorded in a presentation dated 17th November 1999. Mr Connor says that Mr Laguette, the Paris-based sales director for one of the TRW companies, who oversaw sales of steering and suspension systems to Renault, was the main driving force behind securing the B-platform business.

Despite concerns from Renault as to whether supplying this common platform would endanger the P2 programme, a note of a meeting between Renault and TRW on 15th and 16th December 1999 records that TRW had been chosen as supplier of EPAS systems for the “B platform” apparently to include B85, J77, MM and C89.

Before that selection, on 9th December 1999, Mr Fearon emailed Mr Keegan a document described as “Motor (Globe) Sourcing Matrix Oct 1999.xls” with the subject heading “As per request”. The attachment appears to have included a document called “Column Drive 1999 Business Plan Forecast Volumes”. This is one of the documents upon which Globe’s negligent misstatement claim is based, and it includes forecast volumes for the “Nissan B (P1)” and “Renault B (P1)” for the years 2003 to 2010 inclusive. At this stage, TLVES had not been selected as the B-car supplier, and Globe was only providing quotes to TLVES for the Renault P2 and Fiat platforms.

On 8th January 2000, Mr Keegan emailed Mr McHenry to say that during conversations with Mr Connor, he confirmed that they:

“… have received a contract for the P1 platforms from Renault. The term contract means that they have the same agreement that they currently have on the P2 (Megane). They have been selected as the approved technology source etc … According to both Mike and Brendan the P1 platforms are the Renault Clio and Nissan Micra. Maybe J L Lamy can glean some additional information out of his contacts at Renault.”

A note of a meeting between an unknown representative of Globe, Mr Fearon and Mr Connor on 18th January 2000 records in effect that Globe was told that Emerson would be asked to quote for the 38-40Nm motors for the Renault P1. The note says that Globe was also told that Renault was concerned that TLVES may not have the resources to launch the P2 and P1, and that TLVES had the same concerns in respect of Globe with the Fiat C, P2 and P1. The Globe representative said that the P1 motor was essentially the same as was being developed for the other programmes.

It appears that at some point in early 2000, it was decided that a 38Nm system might not be powerful enough for all the vehicles on the B-platform. Internal TRW correspondence on 16th March 2000 between Mr Dugout, the Paris-based programme coordinator for the B car, and Mr Laguette, records that Renault and Nissan were doubtful that TLVES could deal with the B-car business, partly because of TLVES’ poor performance but also because TLVES had decided a more powerful 42Nm system was required, which was more expensive than the 38Nm system originally quoted. But this issue was not resolved until after autumn 2001.

Notes of a meeting apparently between Renault/Nissan and TRW on 9th and 10th May 2000 record that TRW was supposed to present to Renault and Nissan on the actual cost of the steering system and reasons for the cost increase and “VA/VE”, which stands for Value Added or Analysis/Value Engineering, (ie, making improvements to and achieving price reductions in respect of existing products through better engineering). The notes record that TRW agreed 38Nm for the B-platform but this was not enough, and a torque of 42Nm was now required, but Renault and Nissan would not pay more because their technical specification had not changed since the initial RFQ to TRW.

Differences of view within TRW-Summer 2000. Mr Gerald Smith of TRW in the US firmly wanted the company to have one development partner and for that to be Emerson. This becomes particularly important in 2002 when TRW was in dialogue with both Globe and Emerson over the Gen 2 motor. Globe, on the other hand, had supporters within TRW in the UK and Germany who genuinely preferred it to Emerson. There were strong differences of opinion within TRW.

Globe was up for sale at this point. In the period up to and including the making of the Agreement some executives at TRW assumed that Globe, as an independent entity, was not long for this world.

The strategy within TRW appears to have been to split volume on the P1 part of the common B platform between Emerson and Globe. This appears from a handwritten note from Mr Connor to Mr Fearon on an email of 15th July 2000 and elsewhere. It is clear that from this point TRW in the US had decided that Emerson should be the supplier of brushless motors for EPAS systems. Dr Russell Wilson-Jones at TLVES wrote to Gerald Smith, who was in the purchasing department of TRW in the US:

“I think that the strategy for the Clio is to split the volume between Globe and Emerson because:

a)

We do not have a system with an Emerson motor yet. The prototypes are being shipped with Globe motors.

b)

Globe are more advanced and seem to be the only supplier that can meet our timescale for job 1.

c)

The Emerson technology offers a potential for a higher torque output within the same package – our customer wants this post-job 1.”

In an email dated 8th August 2000 from Mike Fearon to Mr Smith, Mr Fearon said:

“Nissan Micra, Renault P1 (Clio) replacement vehicle, 1000K p.a.

Selected source – to be confirmed, likely split with Low power motor (38Nm) at Globe and High power motor (42Nm-45Nm) at Emerson …”

There were continual efforts by Mr Smith at TRW in the US to award all the Nissan B/Renault P1 business to Emerson. On 30th August 2000 Mr Smith emailed Mr Fearon and Mr Connor to say that he had committed the volumes for both the 38Nm and 45Nm motors to Emerson with a letter of intent (“LOI”). This caused some surprise within TLVES, and Mr Fearon emailed Mr Smith on 4th September 2000 and reiterated that the plan was to split the contract between Globe for the 38Nm and Emerson for the 45Nm variants. Mr Fearon argued that the 38Nm award to Globe had to be confirmed immediately to avoid any delay to the programme.

Lack of support for Emerson is apparent from Mr Connor’s email to Mr Smith on 6th September 2000, copied to eight other TRW employees, including Gerhard Schmitz, who was at the time purchasing manager for motors for European projects at TRW GmbH, Hans Heckmann, who was senior commodity purchasing manager for electromechanics in Europe, Mr Fearon and Theo Benz, vice president of purchasing for TRW. Mr Connor said he was very surprised that the commodity and product functions in purchasing seemed disconnected; he was clear that there was no technical or commercial justification for awarding P1 business to Emerson. He said that both LOIs to Emerson should be withdrawn. On 26 September TRW confirmed Emerson “is the chosen supplier for the Brushless Motor for the EPIC programs” and imposed certain technical, commercial and environmental conditions.

Gen 2 developments. A document dated 17th August 2000 appears to be the first mention of EPAS Gen 2. It sets out the scope of the Gen 2 project as designing and developing the next generation EPAS column drive system from a clean sheet approach that would significantly reduce costs. The target programme was said to be the 38Nm Renault P1 that was to launch in 2003.

A TRW presentation entitled “B-platform Project Follow Up”, which appears to have been given at TRC Guyancourt, the Renault technical centre on 6th September, makes reference to a “Gen II opportunity” . The presentation envisaged that:

A list of nine problems or issues with the Nissan B EPAS system was included in the presentation.

Globe’s nomination for the 38Nm. Globe was nominated as the supplier of the “38Nm motor variant of the Nissan/Renault P1 platforms” by a letter signed by Mr Connor and Mr Benz on 13th September 2000. At this point, according to the evidence of Mr Connor, “38Nm” was shorthand for the P1 platform generally. The nomination was:

“subject to the terms and conditions set out in the Preferred Supplier Agreement which we expect you to agree and sign forthwith”.

A TLVES supplier conference took place the next day. Both Mr McHenry and Mr Keegan of Globe attended. The presentation provided that the SOP for the “Renault Nissan Micra/Clio” was November 2000. This fell between SOP for the Fiat C192 in May 2000, and the Renault Megane (which was the P2), in May 2001. The “Renault Nissan Micra/Clio” programme was said to be “38Nm/44Nm” at 1.2 million units per year.

Six platforms were said in the presentation to make up the Nissan B/Renault P1 platform. The six platforms, with start of production dates, were:

This presentation included a slide headed “Manufacturing Locations Study” which included volumes at various assembly plant locations, and upon which the Claimants appear to rely in Globe’s negligent misstatement claim. The Gen 2 project was also discussed. The presentation recorded: “Gen 2 Design commences on a ‘clean sheet bases in October 2000”. TRW emphasises “clean sheet” but Mr McHenry of Globe says that he did not see this as requiring complete redesign of the system and Mr Keegan recalls that he thought that the Gen 1 motor would still be used.

On 18th September 2000, a Globe representative, Mr Ribot, attended a meeting with Mr Farmer of TRW and various representatives of Sumitomo, a magnet manufacturer. The note made by Mr Ribot, which was sent to Mr Arwine, records:

“TRW claims that they will be using the same magnets for the two Nissan motors: 38Nm and 45Nm. The two motors will have the same length (42mm), but they will find a way to put more copper in the 45Nm motor.

The second supplier is still not nominated, that will be done by November.”

It appears that TRW was keen to get a supplier agreement in place with Globe at this time, and that one reason for this was Globe’s prospective change of ownership. On 4th October 2000, Mr Fearon emailed Mr Keegan and Mr Arwine with a draft agreement, which was apparently the last discussion document from a meeting with Globe’s in-house counsel, Tom Carroll, modified to include a revised clause from Mr Benz concerning Globe’s potential change of ownership. The draft was however unrelated to that which later led to the Agreement.

Late 2000. In a letter dated 9th October 2000, Mr McHenry provided revised quotes for the Fiat/Renault P2 platform and the Nissan/Renault P1 platform. The Nissan/Renault P1 quote was $31.20 for one million units per year. The quote included the leadframe. Tooling for the P1 platform was said to be at $1,015,000 for 500,000 units per year, or $1,595,000 for one million units per year. He said Globe’s commitment to support business locally in Europe had not changed, but that given the potential sale of Globe, he could not confirm the location.

Most of the quotes were split in volumes of 500,000 units. This was apparently because 500,000 was the anticipated annual capacity of a production line. Thus a quote for 0-500,000 would require one production line (with the associated tooling and capital), and 500,000-1,000,000 would require two lines and so on. The Claimants claim that this explanation is incorrect. The volumes quoted related to the forecast "peak" volumes of a product.

Mr Heckmann gave evidence that quotes in the initial stages of a products development tended to be given for multiples of 500,000 units (for example 0.5m, 1m and 1.5m units). He referred to these as “generic numbers” – used in order to give a "ballpark” price for a product. Once the stage was reached where more detailed programme volume forecasts were available, quotes could be given against those volumes.

Globe was concerned (as it had been with the motor for the Renault P2/Fiat platforms) that its investment in capital and tooling on the motor for the P1 platform would be wasted if no motors were ordered, or if the project went ahead but was then subsequently cancelled before it had recouped that investment. Thus on 12th October 2000, Mr Connor and Mr Fearon signed a letter to Mr Keegan in respect of the “Nissan – Renault P1 Programme 38Nm only – Payment Liability”, in which TLVES confirmed that if the Nissan/Renault P1 38Nm programme was cancelled for a reason not attributable to Globe, TLVES would cover Globe’s capital and tooling costs for the programme.

Gen 2 developments around the same time. An announcement was made within TRW on 10th October 2000 about the launch of the Gen 2 programme. The announcement provided that as a result of the need to prioritise engineering activities in the UK on the three customer programmes for the current design, the first phase to January 2001 for Gen 2 would be prepared by a team from Sterling Heights in the US; the project would then be transferred to the UK.

According to a hand-written note of a management meeting between TRW staff and Renault-Nissan on 21st October 2000, Mr Ali Badawy of TRW is said to have mentioned that there was a full team working on Gen 2, and he appears to have said that if chosen, Gen 2 would lower the price (presumably compared with the price of the Gen 1 system).

A TRW forum or presentation in respect of Gen 2 took place on 24th to 26th October 2000 at TRW’s premises at Sterling Heights in the US. Jeff Coles, technology leader (motors) at TLVES attended. It recorded that the design for the system was to be from a “clean sheet approach”. A slide states Gen 2's target programme to be the 38Nm Renault P1, the same as that identified in clause 1.1 of the Agreement. Over the next 18 months TRW worked closely together with Emerson (but not Globe) on developing Gen 2.

There was always pressure placed on both TRW, and through it, on Globe, to reduce its prices. A presentation for a TRW management meeting on 15th November 2000 recorded that TRW was in a loss making position of 25FF per unit by SOP in respect of the Renault-Nissan programme, and that it would commit to a VA/VE programme to achieve the cost target in partnership with Renault-Nissan.

B Platform progress. Agreement between TLVES and Globe as to the Nissan specification was recorded in an email from Mr Arwine to a Mr Farmer on 27th November 2000. Mr Farmer appears to have responded by fax on the same day, saying that there were issues of detail in respect of a drawing, but that need not hold up Globe’s order release.

The hand-written note of a Renault/TRW meeting on 7th December 2000 by an unknown author records that SOP for P1 with the Gen 2 was “not possible for 2005 or before, ie: J77/C89/B85”, and that the decision to be taken bore “some risk for the current Gen 1 programme: TBTIA”. The note records:

“◊ VAVE is driven by Hoshino-san for Nissan …

◊ wants to concentrate on Gen II 100% and to understand if it can fit into P1 Prg for Renault Target is 2004”

On 25th January 2001, Mr Fearon responded to two letters from Mr Keegan, one in respect of a 3% productivity reduction and one about amortisation of tooling by Globe for the “Nissan 38Nm Programme”.

On 6th February 2001, a number of TRW’s suppliers, including Mr Keegan of Globe, received an email from Mr Groom, supply chain manager for TLVES/TRW Chassis Systems Northern Europe, attaching documents which he said identified information to enable them to supply their capacity planning activities. The total “Customer Volume” for the entire Renault/Nissan P1 platform was shown for the years 2002 to 2011 as follows (all volumes in ‘000s):

P1 volumes communicated to TRW at a meeting with Renault and Nissan in January 2001 were faxed on 20th February 2001. The hand-written, faxed volumes were for 2002 to 2006 inclusive and they covered: the MM Japan, YY Japan, EE Japan (Nissan Japan sub-platforms); MM Taiwan March, MM Europe Micra, EE Europe Micra (which appear to have been classified as Nissan Europe); the J77 Europe Twingo; C89 Europe Twingo; B/C85 Europe Clio (classified as Renault Europe (France, Spain)); Mercosur; and other zones including Mexico. Elements of these volumes were eventually included in the volume estimates in the Agreement. The handwritten P1 volumes faxed on 20th February 2001 appeared in a typed table of “P1/B Platform volumes” faxed by Paul Bryant, the programme manager for the Nissan B/Renault P1 platform (see Robinson para 11) to Mr Schmitz on 27th February 2001. The fax from Mr Bryant has a number of hand-written notes on it which record “38Nm” beside a number of the sub-platforms; “Unknown prob 38Nm” beside other sub-platforms; “Currently 38Nm” beside others; “Not defined” beside the B/C85 Europe Clio; and “Not known (a mix?)” beside the Mercosur volumes. The table has two columns for each year: the first headed “Previous” and the second headed “Jan-01”. At the bottom of the fax is a manuscript note which reads:

“Gents. Best information I have. We need to see more specifications from Renault. PB”

The totals of the volumes as of January 2001 in this table for the years 2002 to 2006 for sub-platforms designated “38 Nm”, “Unknown prob 38 Nm”, and “Currently 38 Nm” do not include any volumes for the B85 and they are the same as the Nissan B/Renault P1 38 Nm volume estimates that appear in the table at Article 1.2 of the Agreement.

A further hand-written document dated 27th February 2001 by Mr Fearon contains volume figures. Mr Fearon says those volumes originated from the table faxed from Mr Bryant to Mr Schmitz on the same day. Mr Schmitz says he thinks the notes that appear to be in biro on Mr Fearon’s document may be his hand-writing.

By late February 2001, TRW was testing Gen 2 motor samples produced by Emerson.

A further table of volumes, this time for the Fiat C192, Nissan/Renault P1 and the Renault P2 was dated 5th March 2001. Handwritten notes on this table suggest that Globe was awarded the 38Nm section of the Nissan/Renault P1 platform, but Globe was not awarded the 42Nm section of that platform. The hand-written note also says “platform award decision May 01” in respect of the J77, C89 and B85 sub-platforms. No platforms had in fact been awarded by March 2001.

Mr Connor told Alan Holzhausen, TRW EAS director, North America, in an email dated 28th February 2001 that he had told Mark Gallion of Emerson that Emerson was selected for the P1 motor for the Clio (Phase 2) in 2005. Mr Connor also noted “They are going to have another go at getting Globe!” (Emerson was a prospective purchaser of Globe).

By 5th March 2001, it appears that the sale of Globe had failed. In a letter of that date from Mr Keegan to Mr Connor , Mr Keegan wrote:

“… I just wanted to take a moment and clarify a couple of things if I could. I certainly appreciate where the Emerson personnel would make it easy to claim that the value of Globe Motors dropped relative to the subsequent meeting with John Plant. I appreciate that Mr Gallion would want you to believe this. I personally believe that this was not what caused our friends in St Louis to back away from the pursuit of Globe Motors. It is my belief that the two factors affecting or leading to this decision were the commitments made by TRW to both (Globe Motors and our competitor) as well as their concerns relative to the margins involved in the automotive marketplace.

… The other important point I would like to make is that I know you personally had nothing whatsoever to do with the other commitment or letter of intent issued to our competitor…”

TRW says that as of 5th March 2001, Globe knew that TLVES/TRW had committed business to Emerson as well as Globe but it is not suggested that any legal obligations had arisen.

On 12th March 2001, Mr Connor recorded in a letter to Mr McHenry that Fiat had instructed TLVES to introduce a third party audit of Globe’s assembly processes to ensure the products supplied to TLVES and Fiat contained no defects or deviations from the key characteristics.

At a meeting between Renault, TRW, and Globe on 14th March 2001 which was attended, but only for part, by Mr Keegan, and which appears to have focused on the P2 motor it appears Globe was asked why it was investing in a third line when it could work three rather than two shifts. It was also noted that

“TRW for B platform (W85) is developing a new motor with Emerson”.

Archaeology of the Agreement relied on by the parties. Mr Fearon sent a version of a draft supplier agreement to Mr Keegan and Mr Schmitz on 26th March 2001. It appears that the draft had already been discussed between the parties because Mr Fearon referred to “changes as discussed”. The products at Article 1.2 of the draft agreement included the same products as were included in the final Agreement, and specifically the motor and leadframe assembly for the 38Nm Nissan/Renault P1.

The volume estimates at Article 1.3 appear to be the same as those in the Agreement at Article 1.2, although variance was stated as +/- 20% rather than +/-15% as in the Agreement. Volume estimates for the Nissan B/Renault P1 38Nm were for the years 2002 to 2006 inclusive.

A further draft of the Agreement was circulated between the parties on 30th March 2001. Another revision, with Mr Connor’s comments in yellow, was emailed by Mr Fearon to Mr Keegan on 24th April 2001, and a version of the Agreement with the handwritten note “Brendan mark up 4/24” appears to have been faxed to France (or a fax machine with French-language settings engaged) on 26th April 2001.

TRW refers to handwritten comments on this version of the draft agreement including the question “only one motor for the P1?” in respect of the 38Nm Nissan B/Renault P1 product reference at Article 1.1, and the comment in respect of the volume estimates being expressed as subject to variance estimated at +/-15% “just for info? Not contractual …” Mr Lamy, who made these hand-written comments, also appeared to express some surprise and queried whether Mr Connor had agreed the product warranty provisions at Appendix B; the comment is “ok!!! Agreed by B.C?”

Mr Keegan sent further quotes for the motor for the Fiat/Renault P2 platform and Nissan/Renault P1 platform to Mr Fearon and Mr Schmitz on 1st May 2001. The quote for the Nissan/Renault P1 was $36.24 including $1.82 of amortisation for 1m units per year. For the Fiat, the quote was $40.40 and for the Renault P2 $38.61, both including amortisation of $1.72, for a total of 1,395,000 units per year. Amortisation for all three quotes was over five years.

These quotes were higher than those of October 2000 and they caused consternation at TLVES. Mr Connor wrote directly to Mr Lamy on 9th May 2001 expressing his concerns. He said the impression was that Globe was trying to achieve a last minute commercial recovery from TRW.

Mr Fearon, on 9th May 2001, wrote a detailed response to Mr Keegan’s quotes of 1st May 2001. He suggested a meeting at the Labinal HQ in France to be attended by Mr Lamy, Mr McHenry, Mr Keegan, Mr Connor, Mr Schmitz and himself.

7th May document. Globe relies upon a document that was found in the Paris office of TRW’s French company dated 7th May 2001 for its negligent misstatement claim. The document is on TRW Chassis Systems-headed paper and it refers to “B.30 CQA GDPIM2 Executive Approval”. Mr Robinson was the TLVES EPAS programme director in 2001. In his statement he says that this document format shows it is part of the GDP Gateway system, which is a recognised product management process, and it is part of the Commercial Quotation Approval (“CQA”) management process. No similar documents have been found in respect of the other platforms.

The document contains volume estimates for the Nissan and Renault P1 that are lower than those originating from the figures communicated by Renault in January 2001 and faxed within TRW on 20th February 2001. The document records that two options were underway to reduce costs on the Renault P1. The first was VA/VE on the Nissan B design, and the second was a Gen 2 design. The document says that Renault was working towards a sourcing decision “this fall” and was expected to require quotations before the end of September. Renault had apparently also requested the best view as to the likely range of prices in absolute terms and in comparison with the Gen 1 design, and said that if the target of €200 could not be reached by 2005, they would consider talking to other suppliers.

Final negotiation of the Agreement and the TRW reaction in the US. TRW was concerned that Globe was unwilling to commit to its new plant in Portugal until it had a contract. Mr Keegan’s evidence was that Porto was established in June 2001 for the sole purpose of undertaking the European manufacture of motors and leadframe assemblies for TRW. He also says that Mr Lamy signed an agreement to lease the Porto premises directly after he received confirmation from Mr McHenry that the Agreement had been executed. TRW also had concerns that if it did not sign a contract with Globe swiftly a new owner of Globe might refuse to supply. It appears that the final pricing negotiations took place mainly between Mr Connor and Mr Lamy, although Mr McHenry also had some direct communications with Mr Connor all largely by telephone or fax. After some further correspondence a fax from Mr Lamy to Mr Connor on 28th May 2001 recorded that final prices for the Fiat/Renault P2 of $40.23 and for the Nissan of $34.07 had been agreed between them over the telephone that morning. These were the rates recorded in the Agreement signed by the parties and dated 1 June.

Mr Schmitz faxed the Agreement to Mr Smith, Mr Pinkowski and Mr Heckmann on 12th June 2001 stating that it had been signed quickly so that Globe could go ahead with a European plant, and that Mr Benz had agreed. The Agreement caused consternation within TRW in the US and manuscript notes written by its in house Counsel indicate concern that the company might be “locked in” to taking the whole of the Gen 2 from Globe. Letters from David Bialosky, vice president and assistant general counsel of TRW, dated 12th June 2001 and then from Ethan Gilan, counsel for TRW Chassis Systems, on 15th June 2001 to Mr McHenry attempted to distance TRW Chassis Systems from the Agreement and suggested that it was not binding. The grounds put forward by TRW for claiming that the Agreement was not binding were hopeless and suggest a degree of desperation.

In a fax dated 14th June 2001, Mr Fearon told Mr Connor that John Plant, chief executive officer of the TRW group, had seen the Agreement and gone “ballistic” because the price increase was unacceptable, and because it was perceived to have no value to TRW and be Globe-biased. Of course nothing in TRW’s reaction to the Agreement is relevant or admissible to its meaning and this is relied on for other aspects of the case.

The J77 motor. The Claimants rely on the development of the J77 from the Gen 1 (and the Defendants’ concession that these differences could be characterised as “engineering changes”) as a basis for saying that the difference between the J77 and the Gen 2 motors equally could be characterised as “engineering changes”.

On 13^th July 2001, Mr Dugout emailed Mr Schmitz about the J77. He said that the J77 would start with a 44Nm system and he believed Mr Fearon had asked Globe to quote for this. He asked several questions in respect of “phase II”, including when Emerson and Nidec would send updated quotes based on the last reviews.

Mr Dugout mentioned in his email “12/10 slots poles”. The Gen 1 design had 9 slots and 6 poles, so it was referred to as a 9/6 design. The initial Gen 2 design was a 12/10 configuration, although the DEAS Gen 2 was eventually built as a 9 slot 6 pole design to overcome noise problems with the 12/10.

It appears that the volume figures from the vehicle suppliers were still not fixed in August 2001 because Gary Green and Lyn Rodney in TRW’s product line purchasing emailed Mr Keegan on 16^th August 2001 to say that “TRW’s customer” was seeking confirmation that if volumes increased to a continuous volume of 15,000 Nissan EPAS units per month effective from 1^st March 2002, TRW could maintain that volume. They asked Mr Keegan to confirm Globe’s production capability.

On 5^th September 2001, Russell Wilson-Jones of TRW sent an internal memorandum to Jeff Coles about requirements for the J77 system. He said that the system would be based on the 38Nm B-car system, but that Renault had increased the front axle loads and requested that a 44Nm system was required. He said data from Renault suggested that a more powerful system was needed, and preferably a 47Nm system.

In an email summarising for Mr Dugout an internal TRW meeting Mr Coles said that, among other matters, the J77 was needed for 2004, for one year at 250,000 motors, with timing and volumes to be confirmed; that Globe had declined to supply and they could not meet the specification with their current technology; that Emerson and Nidec were going to be given a last chance to quote for P1 Phase 2 by 28^th September; that the J77 was a different motor from the P1 Phase 2; and that he had done the motor design for the J77 and confirmed that they could meet the specification within the P1 Phase 1 38Nm envelope and the design could be made by Emerson or Nidec (a third competitor that always seemed to lose). The Claimants ended up supplying the J77 (phase 1) motors and so these discussions were overtaken by actual agreement and production of that motor.

It appears that the J77 hybrid motor was at first considered to be a temporary measure for the J77 platform until a Gen 2 system was available. It was to serve for 18 months or so until 2004. Renault apparently at one point considered the J77 hybrid as a long-term option when noise issues emerged in respect of the Gen 2 motors, but in the end, it was a short-term project as had originally been anticipated.

Potential liabilities to Globe. In late 2001 TRW began to consider the “exit costs” on an assumption that the Agreement would end before long. That is a reference to liability under Article 2.6. In an email to Mr Pinkowski and Mr Benz dated 12^th October 2001 Mr Fearon estimated that TRW had a potential liability to Globe of $21m. The attachment to his email included a liability under the amortisation provisions in the Agreement of $9.8m, and costs associated with the “Portugal Plant” of $11.2m. On 17^th October 2001, Mr Pinkowski emailed Mr Schmitz to say that Emerson was the motor supplier for the Phase 2 and J77. He said he did not think Globe would be around for long.

A table setting out TLVES’ liabilities under the amortisation provisions of the Agreement was apparently prepared in March 2002. The liability was said to be €15,588,000. There is also a note “Potential claim from Globe” stating;

“Assuming TRW ceased to purchase motors from Globe at the end of 2003 due to customer or product reasons which were not caused by Globe, then they would presumably believe TRW was in breach of the contract.”

The note set out estimates of unrecovered set-up costs for the plant in Portugal and closure costs, the total was €4,935,000. It also said:

“TRW has per the above agreement undertaken to source all its motor requirements for the three existing customers from Globe" and sets out potential claims by Globe that could be envisaged “Should TRW prematurely cease to purchase motors for the three initial customers from Globe”

Kevin Turley, a purchase manager at TRW in the UK, emailed Mr Schmitz on 2^nd April 2002. He said he had spoken to Mr Benz and Robin Evans about Globe and Emerson liabilities, and he asked for detailed information as to TRW’s commitments to Emerson in respect of the Gen 2, and investment and motor specifications and capacity at Globe including information as to the move of production to Europe. He said it was very important to understand clearly the options with Globe and Emerson.

A presentation by Mr Coles entitled “Initial Assessment of Globe as supplier for Gen 2 Motors” was dated 4^th April 2002. It said;

“Gen2 Gear Ratio and Pole Number are the primary reason for the motor size and cost reduction – Emerson NT Technology is not the enabling factor.”

There is a slide entitled “Could Globe provide the Gen2 motors? Note the concern over Globe Quality!!” ( The text under the heading reads: “Yes…Options…)”. Mr Coles’ presentation provided that Globe could make the Gen 2 motor and he gave three options, one of which included buying in a stator from Emerson or Nidec.

From a hand-written note dated 4^th April 2002, it appears there was a meeting at Holford in the UK attended by Mr Benz, Mr Fearon and a third person about Globe liabilities. It appears to have been noted that the Emerson liability was $1.6m. It was noted that Gerhard Schmitz would “Review Globe’s ability for Gen 2 motor”, and that a more general review of Globe’s investment, capital and processes would be undertaken. The evidence of Mr Coles, in charge of the technical side, indicated that he had been instructed to work with Emerson and that while he would, if so requested by his business colleagues now work with Globe, this seemed to be a challenging task technically; given the time scale.

Gen 2 RFQ. Globe says that there was never a genuine intention on the part of TRW to consider Globe for the Gen 2 product. TRW says that the position was less clear cut. There was clearly a concern within TRW that there were “political” reasons to consider Globe for the work to mitigate the substantial liability faced with regard to the amortisation and tooling costs under Article 2.6 but disagreement about whether Globe was capable of delivering on the product, both technically and also in terms of quality.

On 10^th April 2002, Mr Schmitz emailed Mr Keegan an RFQ for a Gen 2 motor. The email was entitled: “RFQ for updated Gen II 38/47Nm Spec (RESEND DUE TO MAX eMAIL CAPACITY EXCEED)”. The email provided:

“… Due to cost reasons we need to have a Gen 2 system which has to be cheaper with same or even better performance.

As discussed at our meeting you find attached the Specs for the new Gen 2 motor and we ask you to quote until end next week (19. April). Sorry for the delay, the specs are just finished.

The specs are developed around a 12 slot 10 pole motor but we think that you have several options to quote acc. our requirement:

12/10 motor with Globe winding technology

9/6 motor with Globe winding technology or existing modified motor (may have some Spec constraints)

12/10 motor with conventional wound Stators (bought in; if you have a problem to find a stator supplier please inform us, we can help you.

These 3 options may have different impact on achieving Spec. requirements and costs, therefor we ask you to quote all variance which make sense and please express Specifications deviations and assumptions.

Expected prices are: 32-33 Eur for 47Nm @ 1m/a, ddp, inc. amort. On invest & Tooling, 3% productivity for 4 yrs, inc. packaging, 90d net 25 Eur for 38Nm @ 1m to same conditions.”

The complete specifications for a 38Nm motor were never sent to Globe.

Mr Schmitz forwarded the email to Mr Arwine on 10^th April 2002 because Mr Keegan was away. Later on 10^th April 2002, Mr Schmitz asked Mr Arwine in an email about a shipping plug and whether he had received the Gen 2 RFQ. He said again that the quote was needed urgently.

Mr Arwine responded that Globe had received the RFQ and was considering its options, but that Globe would not have time thoroughly to evaluate the design options, and he expected that the quote TRW would receive the following Friday would be accompanied with general exceptions. He noted that Globe would need to work with TRW and there was insufficient time. Globe emphasises that the draft specifications contained in the RFQ were incomplete, Emerson was not able to meet them and TRW's requirements for Gen 2 subsequently changed as the functional specifications of the Gen 2 motors ultimately manufactured demonstrate.

On 11^th April 2002, Mr Schmitz responded to Mr Arwine and Mr Keegan that TRW needed at least cost indications for the Gen 2, that it was expected that Globe would be able to give indicative pricing at a forthcoming Portugal meeting, and this was very important for future business with Globe. On 12^th April 2002, Mr Keegan emailed Mr Schmitz to say that giving Globe until 19^th April 2002 was “both ridiculous as well as unfair.” He said it would take at least a month to offer credible recommendations or alternatives, and that they would respond by 15^th May 2002. Mr Schmitz responded that the RFQ had been sent out as soon as it was finalised, and that he had been trying to reach Mr Keegan for two weeks, and had left several messages. He said that TRW expected a commercial indication in respect of the Gen 2, and “a study if Globe is capable to make the motor”.

Mr Arwine asked a colleague to compare the Gen 2 specification against the performance of a Fiat motor that Globe produced. The response recorded that the results were not encouraging. An email from Mr Schmitz to Messrs Keegan, McHenry, Heckmann and Benz on 24^th April 2002 recorded that Globe had said they would support the Gen 2 programme to secure and maintain current and future business, but that indicative quotes would not be available until the week of 13^th May 2002. Mr Schmitz reported that Globe had said buying in a stator was not an option.

On the same day, Mr Arwine emailed Mr Schmitz. He said they were going to contact Mr Coles about Gen 2, and that they had completed the 47Nm electrical design the previous day; he said they had also discovered that the 38Nm could not be made with any configurations. In response, Mr Schmitz referred to his email of the same day in which he confirmed that the electrical parameters for the 38Nm had not been updated and that they would be as soon as possible.

A presentation by TRW to Renault dated 13 May 2002 set out the differences between Gen 1 and Gen 2. The motors were described as "No change same fundamental motor technology". I will refer later to this document in more detail. On 26^th May 2002, Mr Arwine updated Mr Schmitz by email and said Mr Coles told him the 38Nm requirements would not be available until the 3^rd May 2002 which would not give them time to design and cost a 38Nm motor and present anything meaningful by 7^th May 2002. Mr Schmitz said a presentation in respect of the 47Nm on 7^th May would be fantastic. There were meetings on 7^th and 8^th May 2002 in the UK between TRW and Globe; Gen 2 and the J77 hybrid were on the agenda. The meeting notes record that Globe was to provide a Gen 2 quotation on Friday 17^th May 2002.

Globe eventually provided a Gen 2 quote on 24^th May 2002. In his covering letter for the Globe quote, Mr Keegan said that the overriding opinion at Globe was that the Gen 2 specification did not contain significant changes to the current Gen 1 specification which would enable an alternative low cost design.

The Globe quotation was $36.00 “in volume production”, and Globe’s engineering department did not believe some of the performance requirements could be met. The “Deviations from Spec” included with Globe’s quotation provided that the motor would be a 12 slot 10 pole design, in accordance with the specification, but in other respects it would not be compliant. It provided that a Globe two bearing unit would be used and gave reasons why this would be superior to a single bearing unit; a variable reluctance resolver would be used instead of a Halls and sense magnet because (among other reasons) the specified tolerances could not be met with the latter and the former would be cheaper. The “Deviations from Spec” also included the following “Technical Exception Notes”:

“Due to Globe’s production experience, we know that the inductance balance and resistance balance specifications cannot be met. Globe can provide production achievable ranges if this proposal is accepted. Due to the significant differences between this proposal and the specified motor, a detailed spec review cannot be provided at thus time …”

On 11^th June 2002, Mr Malenich of Globe told Mr Keegan by email that Mr Schmitz had told him that he was willing to let Globe re-quote for the Gen 2. The same day, Mr Schmitz wrote to Mr McHenry and Mr Keegan rejecting Globe’s Gen 2 quotation because it did not fulfil TRW’s expectations or meet the target pricing. He urged Globe to revisit its calculations and respond quickly.

Mr Heckmann of TRW introduced himself to Mr McHenry in a long email on 12^th June 2002. Mr Heckmann raised two main issues. The first was the unacceptable quality of motors being supplied to TRW. He said that he had been told that Globe’s performance over the last four weeks had been in the region of more than 24,000 ppm per week, meaning that Globe was delivering defective motors at a rate of 24,000 per million per week which was costing TRW around $85,000 per month. Mr Heckmann said that he expected a failure rate of less than 50ppm.

The second issue raised by Mr Heckmann was the Gen 2 project. He noted that Globe’s quote was way above the target compared with the competition, and he urged Globe to consider how it could meet the proposed cost target. Mr Heckmann said that TRW would not receive this additional business unless it improved its cost and design.

Although it appears that staff at Globe had been working on a further Gen 2 quote nothing was sent through to TRW at that stage. On about 1 July 2002, Mr Schmitz asked that Globe send through their “technical exceptions” not in a separate Review document but “in the quote”.

Mr Schmitz emailed Mr Keegan on 5^th July 2002 to say he was disappointed not yet to have received a Gen 2 quote as had been agreed, and he had not been told there would be a delay. Mr Schmitz wrote:

“You are giving me a hard time because I have committed my management to have the updated quotation by 3 ^rd July. I think I have been very fair to Globe and I thought that it is also in Globe s [sic] interest to take the given chance. You have now postponed several times, don t [sic] claim missing the “point of no return”.I will stop reminding you. It s [sic] your call now. Additionally you should think about responding at least to Hans Heckmanns letter regarding Quality Issues (not mentioning several other outstanding Globe answers). Its [sic] your decision.”

Mr Keegan emailed a basic Gen 2 quote on 9^th July 2002.There was limited explanation or commentary with the quote, except for a note that pricing was in euros and materials in dollars, and that it would be followed up with a BOM in the morning when they discussed the Holford and Pamplona visit. Globe took exception to the resistance and inductance tolerance imbalance targets. The next day a full breakdown of BOM costs and technical exceptions was provided. Mr Heckmann confirmed in evidence that there was nothing unusual in the scope of the technical exceptions given by Globe on Gen 2.

In an email from Mr Schmitz to Mr Keegan on 10^th July 2002, Mr Schmitz noted that Globe had forgotten to consider a relay and something to put the relay on, such as a leadframe. In the same email, Mr Schmitz also noted that no 38Nm specification had yet been made available to Globe and urged his colleagues to review Globe's proposal and to evaluate if their design is feasible. He said that TRW "should not leave out a chance to avoid obvious liabilities".

A meeting between Globe and TRW was arranged to enable Globe staff to speak to TRW engineering staff about the J77 and Gen 2 designs (see the email from Mr Schmitz to Mr Keegan on 11^th July 2002), although it is not clear whether or not this took place. In an internal TRW email also on 11^th July 2002, Mr Coles noted to colleagues that Globe was being considered for Gen 2 because of its liability of around $5m. He said that if TRW was to switch to Globe, it would have to be done quickly because there would be slippage.

Mr Schmitz said that he had understood from the engineering department that they considered Globe as possibly being capable of producing the Gen 2 motor; and Alastair McQueen, the director for EPAS in Europe at TRW, commented that the only solution would be for Globe to make an exact copy of the Emerson Gen 2 design and use them as a second source after the main launch.

A TRW email questioned whether Globe was really being considered seriously for Gen 2. Mr Chew confirmed that TRW would not consider Globe as anything other than second source for the Gen 2.

From the notes of a telephone conference on 15^th July 2002, it appears that Renault was still undecided as to whether it wanted a Gen 1 or Gen 2 EPAS system for its part of the common B platform. The note records that Renault asked TRW to prepare three scenarios in respect of the B-platform (and a C platform) for consideration. The scenarios were:

Mr Schmitz forwarded Globe’s Gen 2 quote from the 10^th July 2002 to Mr Coles on 24^th July 2002 and said engineering should review Globe’s design proposal to see if it was feasible. He said he knew Globe was behind in terms of timing but that TRW should not miss a chance to avoid liabilities. He also noted that Globe had not been able to provide a quote for the 38Nm Gen 2 because it had not been provided with the relevant specification.

On 25 July 2002 Mr Schmitz confirmed by email to Mr Heckmann that “Emerson and Globe are in the same range price-wise”. He created an accompanying spreadsheet which stated that Globe was the contracted supplier for the P1 platform and this also included the B85 vehicle model.

Mr Lauver of TRW went to review Globe’s Gen 2 design in the US in early August 2002. An email from Mr Arwine to Mr Noga, another engineer at Globe, on 30^th July 2002 suggested that Globe was short of engineering staff around this time:

“Agreed, I just wanted to know if I had alternate staffing options. It appears to be feast or famine. TRW is now rumbling about getting Gen II samples, they seem to be getting serious, if that hits, we will be swamped during the Porto crunch time [Redacted Confidential]. I am on a workload whipsaw, I seem to be either worrying about no work or too much.”

Mr Willmann from Renault wrote to Mr Dugout on 31^st July 2002 to confirm that TRW had been chosen as an expert supplier to design a low cost EPAS system for J77/B85 Gen 2:

“The primary objective of this new gen2 is to develop a low cost EPS according to our specification. You committed to co-operate with “open books” on costs, in order to allow Renault to help you improve your current price.

This product is a new product for you, especially on electronics. Our main requirement is to validate there is no risk for Renault. Taking into account Nissan bad experience with Meregreen, production by Motorola is the basic assumption. This co-operation will last until next December, when we are expecting from you a detailed file in the technical and economical feasibility and your quality commitments …Your choice as an expert supplier does not pre judge of your choice as a production supplier.”

Mr Heckmann urged Mr Lauver in an email dated 2^nd August 2002 to keep an open mind during his trip to Globe in the US to review their Gen 2 motor design. Mr Heckmann also told Mr Lauver that he did not think timing would be a bar to Globe manufacturing Gen 2. Mr Heckmann appeared concerned about possible liabilities under the Agreement and asked Mr Lauver not to "use a wording which make them believe that the Gen II motor will never ever be supplied by Globe".

Mr Lauver had commented in an earlier email that the short-term timing of the Gen 2 programme would not allow the use of Globe supplied motors. Mr Short of TRW commented in an email in response to Mr Heckmann expressing similar sentiments. Mr Lauver’s report of his visit to Globe on 8^th August 2002 was not enthusiastic. He noted that the motor concept sketch was very preliminary and had little detail, that the Gen 2 design had a lot of work left to bring it to where it needed to be and was not interchangeable with the current design.

Nominations for the J77 and B85 Gen 2. Before Mr Lauver had distributed within TRW his Globe visit report and review of Globe’s Gen 2 proposals, Mr Heckmann sent a letter to each of Globe and Emerson on 16^th July 2002, headed “Subject: Nomination for EPS Motor J77 / B85 Gen 2”. Each letter provided that the recipient had been chosen as an expert supplier to design low cost motors, and that they were required to accept the same conditions as Renault were demanding of TRW.

On 26 August 2002, Mr Heckmann wrote to Mr Ketterer of Emerson to confirm that the Gen 2 project would be awarded to Emerson. He told Mr Ketterer: "We will continue and nominate Emerson one minute after we have received the Mass Production Nomination from Renault". From the evidence it seems to me that this was the considered view of TRW.

After having received Mr Lauver’s report, Mr Heckmann on 29^th August 2002 asked if the Globe design was worth pursuing. He said that it looked like the only way to use Globe was as a second source if they were technically and commercially competitive. Mr Coles responded that Globe’s offering would have to be considered in more detail before a final judgment could be made. Mr Heckmann responded that the consequence of not proving that Globe could meet the Gen 2 requirements would be a $6m liability for TRW.

On 30^th August 2002, Mr Keegan emailed Mr Heckmann to say that Globe accepted the challenges and goals in TRW’s Gen 2 nomination letter, and that they agreed the warranty terms of three years, as previously set out in the Agreement.

An undated TRW presentation contains a slide similar to some others which states:

“Action Gen 2: Inform and discuss with GLOBE about TRW Gen2 technical and commercial needs. (Political reason only!)

Work with legal on GLOBE exit plan – minimize liability!

Legal to clarify whether a change to a 47Nm new motor design results in a breach of the contract.”

Notes of a meeting on 13th September 2002 between Mr Coles and engineers at Globe including Mr Malenich record that among other issues, Globe sensitivity studies had suggested that a 12 slot 10 pole design was not as robust as a 9 slot 6 pole design. It appears that Globe suggested a 15 slot 10 pole design as a solution. The note says that Mr Coles did not object to a 15/10 design as long as it met the motor design, cost and package requirements, and that he said to look for the best 9/6 design, and then look at a 15/10 design, and that cost was key.

On 14 October 2002, Mr Malenich sent an email to TRW to request the missing Gen 2 specifications. Globe were told that it would be 3 weeks before the specifications would be available.TRW never provided the updated specifications to Globe.

38 Nm motor. A TRW internal memorandum dated 15th November 2002 recorded that analysis of the latest available data from Renault showed that the 38Nm system was inadequate, and that the minimum required was 41Nm. This change in requirement was never communicated to Globe for quotation. The relevant motor power requirements fluctuated throughout 2001 and 2002.

On 4th December 2002, TRW sent Mr Willmann at Renault its offer for the Gen 2 “J77/X85” EPAS system with output torques of 41Nm and 51Nm.

Mr Malenich of Globe wrote to Mr Schmitz on 16^th December 2002 asking in effect if Globe should continue the quotation process for Gen 2. TRW did not reply.

A briefing note, created after 20 December 2002, makes clear what internal processes had led to TRW progressing with Emerson over the previous two years. It also explains that throughout 2002, TRW did not give any engineering resource to Globe to work with it on Gen 2. TRW had worked only with Emerson. The document also records that up to late December 2002 there had been “many changes in volume scenarios and motor power requirements (eg only since2 month is known that a 68Nm motor is required)”. The document explains why Emerson was selected for the Gen 2 motor – which followed the historic pressure from the US arm of the TRW company (through, in particular, Gerald Smith and Mark Pinkowski) to ensure that Emerson was the primary supplier of brushless motors to TRW for its EPAS systems, in part because of a liability owed to Emerson arising out of a separate venture between the parties (regarding the BMW Mini motor vehicle) giving rise to a TRW liability to Emerson of some $800,000 (or $900,000). The writer sees the Gen 1 as a Porsche and the Gen 2 as a Ford, a characterisation by a business not a technical person which was dismissed as wrong by Mr Coles in evidence.

On 23 December 2002 Renault/Nissan confirmed their intention to appoint TRW Automotive as head supplier for the B85/J77 project. As late as 31 January 2003, Globe was continuing to press for up to date specifications for the Gen 2 motor. Mr Keegan informed Mr Schmitz on this date that Globe would need to shift resources from Gen 2 to other opportunities given that it appeared:

“TRW is not interested in pursuing Globe Motors as a potential supplier….Obviously, if TRW were to get serious we could certainly adjust the situation to support TRW’s efforts. Just wanted to advise you as we continue to hear nothing regarding this matter.”

TRW did not provide Globe with more information.

Emerson awarded the Gen 2. On 23rd February 2003 TRW wrote to Emerson stating that it would be appointed as the sole head supplier for the development of the project. SOP was November 2004, and the target pricing was €20 for the 38Nm motor and € 25 for the 47Nm motor.

J77 Hybrid. On 25th February 2003, Mr Schmitz in an internal TRW email chain recommended nominating Globe for the J77 hybrid programme. Robin Evans agreed, stating that TRW needed as much volume as possible to “offset the inevitable liability claim”. Mr Heckmann said:

“The ‘award’ to Globe for this 1.5 year contract does help reduce the liability to Globe based on our inability to buy the volume which was the basis for the investment and tooling amortization. In case we have the opportunity to extend the lifetime of GEN 1 longer than 2005/2006 our liability to Globe and other Supplier will be significant reduced AND we would be in a position to REESTABLISH a relationship with Globe based on partnership and not based on war as it is actually!!!”

Change to Gen 2 slot / pole design. There were noise issues with the 12 slot 10 pole Gen 2 design, and TRW began to design solutions. A TRW presentation for Renault dated 2nd April 2003 noted that 9/6 motors were being developed to match the performance of the existing 51Nm 12/10 motor, and quotations were being obtained. A back-up plan was to change to an Emerson 9 slot 6 pole motor, which was said to be similar to Globe Gen 1. It was also noted that the Globe Gen 1 on a Gen 2 system performed well, and that purchasing was to obtain quotes for 9/6 motors from Emerson and Globe. News of noise and performance problems with the Gen 2 system reached Mr Keegan at Globe through a third party and also through Mr Lamy. Mr Noga of Globe emailed Mr Arwine on 10th April 2003 to say that he would look into making a 15/10 motor for free delivery to TRW in an attempt to “get back in the game on Gen II”. In the event the Gen 2 had a 9/6 motor so objections to Globe’s own Gen 2 on the basis that it was a 9/6 are unconvincing.

Other developments. TRW lost Gen 1 business from Nissan. Mr Fearon emailed Mr Keegan on 28th April 2003 stating that:

“Nissan has resourced the YY volumes away from TRW to Koyo. Effective April 2003. Volume loss is about 400K over YY platform life which ceases in 2006.”

Renault’s Gen 2 nomination. In November 2003, TRW issued (but not to Globe) a revised version of the Gen 2 motor specification. The motor specification was for Type 1 and Type 2 motors. Mr Coles says these motors were for systems with assistance torque requirements of 42Nm and 53Nm, and that the requirements for the Gen 2 motors that first went into production were set out in this specification, document 50820132.B00. Globe emphasises that the Emerson motors were actually accepted as long as they fell within the EOLT parameters in the document. Globe says that the Gen 2 requirements are to be found in other documents too.

There appears to have been deterioration in the relationship between TRW and Globe from June 2003. Quality issues arose and there was a serious issue as to the appropriate rate of exchange referable to the contract. The details of these disputes are set out in many documents but they are largely irrelevant to the cases of the parties.

The J77. Negotiations for the J77 continued. On 27th November 2003, Mr Keegan wrote to Mr Schmitz in respect of the J77:

“As you are aware, this product was not included in the original agreement for the supply of EPAS products. Addition of product or products to the agreement is by means of mutual agreement.

Globe Motors, at this time, has not agreed to the addition of this product to the original agreement between the two companies.”

Amortisation payments.The prices agreed between the parties in respect of Gen 1 motors and leadframe assemblies included $1.74 per unit for amortisation in respect of the Fiat C192 and Renault P2 products, and $1.82 for amortisation in respect of the Nissan P1 products. Globe has apparently recovered some $15,953,620 from TRW in respect of capital and tooling costs as a result of amortised sums and lump sum payments.

B2E. The parties cooperated between around May 2005 to October 2006 in developing motors for steering systems for Ford and Mazda. The project is referred to in the documents as the B2E. Globe was ultimately unsuccessful in winning this business, and the Defendants say this was because Globe could not meet the specifications or the programme timing but Globe, mainly through the evidence of Mr Arwine, contends that it could. The Claimants say the changes made to the Gen 1 to get to the J77 were similar to the changes they made to the Gen 1 to produce B2E prototypes and that the B2E was similar to the DEAS Gen 2.

Portugal. Porto was incorporated on 19^th July 2001. Globe and the Portuguese State entered into a written investment contract on 18^th September 2002. There is also an agreement called “Contract for Concession of Fiscal Incentives” dated 17^th September 2002. Globe built production lines in Portugal in the last quarter of 2002 for production of the Renault P2 and in the second and third quarters of 2003 for the Nissan and Fiat products. There appears to have been some dispute in mid-2003 as to when production transferred in respect of which lines from Globe’s site in Dotham, Alabama to Portugal. This arose because of the dispute about exchange rates.

Mr Keegan said that Globe established Porto with the full knowledge and encouragement of TRW. TRW says that it did not know that Globe was setting up Porto (as a separate subsidiary) before it did so, or until some time after the first purchase order to Porto in January 2003. Mr Connor said that he knew before the Agreement was signed that Globe was setting up a manufacturing facility in Portugal, but he did not know that Globe was establishing a Portuguese company for this purpose. Mr Fearon said that he would not have been surprised to learn that there was a subsidiary. Mr Schmitz was also aware that the Agreement was signed to allow Globe to commit to a European manufacturing plant. To the extent that it matters, the issue is not whether TRW knew about Porto, it clearly did, but when it became aware that it was operating as a separate subsidiary company.

The List of Issues covers 24 points most of which to a degree remained live at the end of the trial. I shall, like Counsel in their closings, deal with each issue in turn. For the sake of coherence I first set out the issues in full:

Construction Issues:

“Is there any material difference between the parties as to the meaning of the term ‘Engineering Changes’ and, if so, what?

In respect of motors and leadframe assemblies for the Renault P1 Platform, does the term “Product” include motors and leadframe assemblies built to different specifications from the Globe Gen 1 specifications, where the Defendants required those motors and leadframe assemblies for the platforms identified in the Agreement; those motors were comprised of motors and leadframe assemblies initially produced by the Claimants but with changes to their specifications or other requirements; and where the Claimants could and would have produced those motors and leadframe assemblies by making Engineering Changes to the motors and leadframe assemblies that it initially supplied to the Defendants under the Agreement, under Article 4.1?

Are "Products" for the Renault P1 Platform limited to a 38Nm EPAS system, as contended by the Defendants?

Are the Claimants obliged to implement Engineering Changes proposed by the Defendants under Article 4.1?

The factual disputes relating to GEN 1 and GEN 2 motors

What were the relevant specifications of the DEAS Gen 2 that the Defendant supplied to its customers for the Platforms?

What were the material differences between the specifications of the Globe Gen 1 and the relevant specifications of the DEAS Gen 2?

Do the changes the Claimants allege they could and would have made to the Gen 1 and/or J77 motor and leadframe assemblies to manufacture their own Gen 2 motor and leadframe assemblies (Globe Gen 2) constitute "Engineering Changes" under Article 4.1 of the Agreement?

Could and would the Claimants have implemented those changes to the Gen 1 and/or J77 motor and leadframe assemblies and, if so, within what period of time could they have done so?

Would the Globe Gen 2 meet the relevant specifications of the DEAS Gen 2 and/or constitute a direct substitute for that motor?

Breach of contract

If, by making only Engineering Changes to an existing Product, the Claimants could and would have made the Globe Gen 2 as direct substitutes for the DEAS Gen 2, then as the Claimants allege

Between which dates and for which vehicle model types on the Renault P1 Platform did the Defendant purchase the DEAS Gen 2 and/or manufacture equivalent motors and leadframe assemblies itself?

Did the Defendant (or either of them)

Estoppel

Are the Claimants estopped from bringing this claim for the reasons alleged by the Defendants in paragraphs 65 to 67 of the Defence?

Loss and damages flowing from breach of contract

In the event that the Defendants (or either of them) are found to have acted in breach of the Agreement, are the Claimants entitled, as they allege, to recover damages in respect of:

If the Claimants (or either of them) are entitled to recover damages in respect of all or some of the above, what is the quantum of each of their loss and damages?

The Second Claimant’s right of action

Does the Second Claimant have any right of action against the Defendant? In particular:

Negligent misstatement

Did the First Defendant make the Volume Representations or any of them to the First Claimant (and, if so, which)?

Did the First Defendant owe a duty of care to the First Claimant as alleged in paragraphs 35B and 35C of the Particulars of Claim, and if so, what is the scope of that duty?

Was the First Claimant induced to and did the First Claimant rely upon the Volume Representations and the Estimates or any of them in entering into the Agreement (and, if so, which)?

At the date of the Agreement, were any of the Volume Representations (if made by the First Defendant) inaccurate or false or put forward in circumstances where the First Defendant had no reasonable grounds for believing the same were based on reliable and accurate Estimates?

Did the First Defendant act negligently and in breach of duty as alleged in paragraph 35E of the Particulars of Claim?

If it is held that the First Defendant acted in breach of duty, did this cause the loss and damage alleged in paragraphs 35H to 35JC of the Particulars of Claim (or any loss) as a result?

If it is held that there is a claim for negligent misstatement, is that claim (or any part of it) statute-barred?

If the Claimants or either of them are entitled to recover damages for negligent misstatement, what is the correct measure and quantum of each of their damages? Without prejudice to the generality of this issue, which of the Scenarios A to C from paragraphs 35JA to 35JC of the Particulars of Claim applies?”

The first four issues deal with aspects of construction and I refer to some general aspects of that.

The approach is not in dispute. As Lord Hoffmann famously put it:

“Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912 – 913.

Business common sense. Where there are competing meanings the Court may choose the more commercially sensible of rival interpretations of express terms (Rainy Sky SA v Kookmin Bank [2011] UKSC 50 [2011] 1 WLR 2900). But that exercise remains one of finding what the parties intended from the words used in the contract not of devising a reasonable and appropriate contract term to suit the judge’s view of the circumstances. As is conventional both sides focus on business common sense. Thus Mr Downes cites Wickman Machine Tool Sales v Schuler [1974] AC 235 at:

“The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result, the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make their intention abundantly clear.”

And The Antaios [1985] AC 191 at p.201, Lord Diplock said:

“… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must yield to business commonsense.”

I bear business common sense in mind but also the limitations on that concept helpfully summarised by Hamblen J in Cottonex Anstalt-v- Patriot Spinning Mills [2014] 1 Lloyd’s 615 at 621 -2. (Not cited by or to the parties):

As is now commonplace, I was referred in relation to the issue of construction to the guidance provided by the Supreme Court in Rainy Sky SA v Kookmin Bank [2011] UKSC 50 , [2012] 1 All ER 1137, [2011] 1 WLR 2900.

[53] As is now equally commonplace, both sides contended that their interpretation of the contract made more business common sense and should therefore be preferred – “where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense” – per Lord Clarke at 30.

[54] The assumption underlying the argument made in this and, in my experience, many other cases is that the interpretation which makes most business common sense is to be preferred. However, this is an oversimplification.

[55] First, the approach of adopting “the interpretation which is most consistent with business common sense” only applies where the court considers that the words in issue have “more than one potential meaning” – per Lord Clarke at 21. If the court concludes that the words are only capable of one meaning then that is their meaning regardless of considerations of business common sense.

[56] Secondly, where the words in issue have more than one potential meaning there is no rule of law or construction which requires the court to give effect to the interpretation which is most consistent with business common sense. It is “entitled” to prefer that interpretation (per Lord Clarke at 21) and it may be “generally appropriate” to do so (per Lord Clarke at 30), but it is not bound so to do. The more ambiguous the meaning and the stronger the business common sense arguments the more likely it is to be appropriate to do so.

[57] Thirdly, it will only be appropriate to give effect to the interpretation which is most consistent with business common sense where that can be ascertained by the court. In many cases that is only likely to be so where it is clear to the court that one interpretation makes more business common sense. If, as frequently happens, there are arguments either way the court is unlikely to be able to conclude with confidence that there is an interpretation which makes more business common sense. It is often difficult for a court of law to make nice judgments as to where business common sense lies.

[58] The importance of the court being able to ascertain which interpretation makes more business common sense and, where it can, that there is no “overriding criterion of construction” that that interpretation is to be preferred was emphasised by Aikens LJ in BMA Special Opportunity Hub Fund Ltd and others v African Minerals Finance Ltd [2013] EWCA Civ 416 at 24:

“There has been considerable judicial exposition of these principles by the House of Lords and the Supreme Court in recent years [ Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101; Re Sigma Finance Corp [2010] 1 All ER 571 and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900] There is no point in my going over the same ground again at any length. The court's job is to discern the intention of the parties, objectively speaking, from the words used in the commercial document, in the relevant context and against the factual background in which the document was created. The starting point is the wording of the document itself and the principle that the commercial parties who agreed the wording intended the words used to mean what they say in setting out the parties' respective rights and obligations. If there are two possible constructions of the document a court is entitled to prefer the construction which is more consistent with 'business common sense', if that can be ascertained. However, I would agree with the statements of Briggs J, in Jackson v Dear [2012] EWHC 2060 at 40 first, that 'commercial common sense' is not to be elevated to an overriding criterion of construction and, secondly, that the parties should not be subjected to '. . . the individual judge's own notions of what might have been the sensible solution to the parties' conundrum'. I would add, still less should the issue of construction be determined by what seems like 'commercial common sense' from the point of view of one of the parties to the contract.”

Something going wrong with the language. Where the parties have made their agreement in writing, one starts from the presumption that the written instrument, given its ordinary meaning, correctly embodies their intention. As Lord Hoffmann said in ICS at page 913:

“The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents.”

Mr Downes also relies on the recent decision of the Supreme Court in Marley v Rawlings [2014] UKSC 2. Lord Neuberger summarised the position at paragraph 19 as follows:

“When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party's intentions.”

Mr Downes also relies on another part of that judgment at paragraphs 36-41 which begins:

“36… In Investors Compensation Scheme Ltd v West Bromwich Building Society, Investors Compensation Scheme Ltd v Hopkin & Sons (a firm), Alford v West Bromwich Building Society, Armitage v West Bromwich Building Society [1998] 1 All ER 98 at 114–115, [1998] 1 WLR 896 at 912–913, Lord Hoffmann set out the principles which the court should apply when interpreting documents in five propositions. Most of the content of that passage is unexceptionable, although, in one or two places, the language in which the propositions are expressed may be a little extravagant; thus, the words 'absolutely anything' in his second proposition required some qualification from Lord Hoffmann in Bank of Credit and Commerce [2001] 1 All ER 961 at [39], [2002] 1 AC 251 at [39].

37.

However, the second sentence of Lord Hoffmann's fifth proposition in Investors Compensation is controversial. That sentence reads, so far as relevant:

“… if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.”

38.

Lord Hoffmann took that approach a little further in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 at [21]–[25], [2009] 4 All ER 677 at [21]–[25], [2009] 1 AC 1101. Having observed that the exercise of interpretation involves “deciding what a reasonable person would have understood the parties to have meant by using the language which they did” and referring to the “correction of mistakes by construction”, he said this:

“[T]here is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.”

39.

In a forcefully expressed article, “Construction” and Rectification after Chartbrook” [2010] CLJ 253, Sir Richard Buxton has suggested that Lord Hoffmann's approach to interpretation in these two cases is inconsistent with previously established principles. Lewison on The Interpretation of Contracts ((5th edn, 2011, Sweet & Maxwell Ltd) para 9.03, footnote 67, in an illuminating chapter dealing with mistakes) suggests that Sir Richard has made out “a powerful case for the conclusion that the difference between construction and rectification has reduced almost to vanishing point”, if Lord Hoffmann's analysis is correct… “

Mr Downes develops this theme with skill and learning in his written submissions but I do not propose to deal with these in detail as I do not see these particular difficulties arising in this case. As I see it this is not a “something has gone wrong with the language” case. The Agreement presents the familiar problem of deciding what the parties meant by woolly language in some poorly drafted passages in a comparatively formal document.

Globe emphasises the need to look at the language of the Agreement in proper context but to avoid evidence of subjective intention. TRW emphasises the need to look closely at the whole detailed factual matrix including negotiating dialogue that casts light upon it not only at the language used in the Agreement.

Negotiations prior to contract. There are disagreements between the parties about the admissibility of exchanges between the parties during precontractual negotiations. When dealing with these below I bear in mind the following passages from the speech of Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at 1120H-1121D which conclusively state the law:

[41] The conclusion I would reach is that there is no clearly established case for departing from the exclusionary rule. The rule may well mean, as Lord Nicholls has argued, that parties are sometimes held bound by a contract in terms which, upon a full investigation of the course of negotiations, a reasonable observer would not have taken them to have intended. But a system which sometimes allows this to happen may be justified in the more general interest of economy and predictability in obtaining advice and adjudicating disputes. It is, after all, usually possible to avoid surprises by carefully reading the documents before signing them and there are the safety nets of rectification and estoppel by convention. Your Lordships do not have the material on which to form a view. It is possible that empirical study (for example, by the Law Commission) may show that the alleged disadvantages of admissibility are not in practice very significant or that they are outweighed by the advantages of doing more precise justice in exceptional cases or falling into line with international conventions. But the determination of where the balance of advantage lies is not in my opinion suitable for judicial decision. Your Lordships are being asked to depart from a rule which has been in existence for many years and several times affirmed by the House. There is power to do so under the Practice Statement (Judicial Precedent) [1966] 1 WLR 1234. But that power was intended, as Lord Reid said in R v National Insurance Comrs, ex parte Hudson [1972] AC 944 , 966, [1972] 1 All ER 145 , [1972] 2 WLR 210, to be applied only in a small number of cases in which previous decisions of the House were “thought to be impeding the proper development of the law or to have led to results which were unjust or contrary to public policy”. I do not think that anyone can be confident that this is true of the exclusionary rule.

[42] The rule excludes evidence of what was said or done during the course of negotiating the agreement for the purpose of drawing inferences about what the contract meant. It does not exclude the use of such evidence for other purposes: for example, to establish that a fact which may be relevant as background was known to the parties, or to support a claim for rectification or estoppel. These are not exceptions to the rule. They operate outside it.” http://www.lexisnexis.com/uk/legal/ - #

It is trite that in looking at the background common to both parties and interpreting the contract, the court does not consider evidence of subjective intention or, usually, pre- contractual negotiations or subsequent conduct. There is material in all these forbidden categories in the evidence, sometimes properly there for some other aspect of the case. There was however extensive cross examination by both sides (and some reliance in their closing submissions) on witnesses’ understanding of the meaning of words in the Agreement.

Starting point. The Claimants say that engineering changes are not necessarily limited in scope whereas the Defendants say engineering changes are minor, iterative changes to existing products.

Both parties have called and relied on fact and expert evidence to establish the meaning of Engineering Change. My starting point was to resist this. The expression is common in business English and has, as I see it, a broad conventional meaning connoting alterations to the way in which a product, design or something similar is engineered. Further it is a term which the Agreement adopts only as shorthand for “changes in the Specifications or other requirements relating to the “Products“(with the difficulty that there were in the event no Specifications ). However both parties rely on a special meaning in their pleadings.

Engineering changes. There is much evidence from the parties about the meaning of this expression. It is used in the Agreement to define “changes in the Specifications… or other requirements relating to the products.”

TRW says that these are initiated by a Product Change Request (“PCR”) or an “engineering change request” which is a request by any party for a change to a product. Mr Penketh, who was from March 2001 to August 2003 electronics project leader at TRW, gave detailed evidence as to the engineering change process at his company, including the relevant documentation that is needed and the internationally recognised procedures. Mr Penketh says at paragraph 17 of his first statement: “Engineering changes are minor changes to an existing product. They are not major changes and can be contrasted to re-designs, which involve changing the key features / designs of a product …”.

However in evidence he took a broader view. T28/16-19:

“Q. Just terminology. But would you agree with me and I put it to you that this is too restrictive, it's not minor changes, it's any changes, that is what you have agreed with? You have agreed?

A. Any changes should go through a change control process, yes.

Q. And it's not just minor changes which are engineering changes?

A. All changes.”

Globe’s evidence about engineering changes was given mainly by Mr Arwine who says that the term “engineering changes” means a process whereby any changes for whatever reason are documented and managed. He said that by “documented” he does not mean that all changes must be documented.

The engineering experts also give evidence as to the meaning of the phrase. Professor Ackva said that changes may be requested by the sub-supplier (Globe), the supplier (TLVES) or the vehicle manufacturer, and that they must be approved by each party before they can be implemented; in other words, one party cannot impose an engineering change on the other. Dr Sidman believes that engineering changes should ideally happen by consensus of the parties involved, but says they do sometimes occur outside this process. Professor Ackva and Dr Sidman agree that the engineering change process should be documented and ideally managed but they do not agree as to the scope and limitations of engineering changes. At paragraph 5.24 of his first report Dr Sidman says that engineering changes may vary considerably in complexity and timeframe, and at paragraph 5.25, he says: “Engineering changes are not necessarily limited in scope. …” . Professor Ackva says at paragraphs 5.49 to 5.52 of his report that engineering changes in the automotive industry result in gradual changes to a product over time, and he draws a distinction between engineering changes and new motor designs.

Globe’s case. Globe says that the term should be interpreted broadly. There is no contractual basis for reading down the scope and meaning of “changes” in the definition. There is no ambiguity. There is no basis for narrowing the application of what comes within the definition either (i) by reference to the nature of the change (i.e. by saying only “small adjustments or changes” come within the definition); or (ii) by retrospective reference to the end result (i.e. by saying if the end result is significantly different from the original Product, then the process adopted to achieve that end result could not qualify as the use of Engineering Changes).

The contractually agreed mechanism in relation to Engineering Changes applies to the changes that Globe would have had to make to the Globe Gen 1 and/or J77 motors in order to produce the Globe Gen 2. This is because the changes that would have been made were to “Specifications” or “other requirements” relating to motors that were already “Products” under the Agreement.

The Agreement does not specify that Engineering Changes under Article 4.1 have to go through any set procedures within either TRW or Globe. If the parties were to be held to such a requirement the Court would expect to see an express term to that effect that either specified what the relevant procedure was or whether one or other party’s internal processes had to be complied with. Three points follow from this conclusion.

First TRW’s reliance upon evidence such as that of Mr Penketh to the effect that TRW had a painstaking internal procedure to be followed in relation to Engineering Changes that would have prevented the development of the Globe Gen 2 is irrelevant. Second, the contemporaneous evidence demonstrates that at the date of the Agreement no such procedure was followed by the parties at any material time. Third TRW was not entitled to frustrate or otherwise hinder the performance of the Agreement (by either party) by subsequently imposing a procedure for the implementation of Engineering Changes that would (or might) prevent the production of the Globe Gen 2 motor.

TRW’s case. TRW points to the difference between the parties in respect of a narrow or broad definition of engineering changes in their evidence. It cites examples in the evidence of Mr Arwine describing how engineering changes may vary considerably in complexity and urgency and are not necessarily limited in scope. TRW contrasts this with Mr Arwine accepting that the industry usage of “engineering changes” was a narrow definition, but claiming that under the Agreement the parties operated under a broad definition. He accepted that:

“Q. Then it must follow, must it not, that the engineering change, the concept of engineering change in the industry, is a narrow concept? A. The definition of an industry change is a narrow concept, yes… Q. When one carefully reads your evidence -- in fairness to you, Mr Arwine, when one carefully reads your statement, what you are in fact saying is that the industry definition is a narrow concept but it doesn't have to be the case. A. That is correct.” (T21/121).

Further, it is well-established that technical words in a contract should usually be given their technical meaning, see paragraph 12-052 of Chitty on Contract 31st Edition (2012), which provides: “ Technical words . Prima facie the assumption is that technical words should have their technical meaning given to them unless something can be found in the context to exclude it, for if a word is of a technical or scientific character, then its primary meaning is its technical and scientific meaning. …”

Dr Sidman, whilst, TRW says, a wholly unsatisfactory witness, did accept that there were limitations to the engineering change process (albeit based on his very general experience). In particular he accepted that an engineering change should have a “predictable outcome” [T29/104]

“Q. In your first report you identify limitations, firstly, shouldn't require new invention, secondly, should be feasible and, thirdly, should generally have a predictable outcome?

A. Right, and those three are interrelated obviously.

Q. So it wouldn't be right to say that any change can be achieved by an engineering change. One has to weigh in those factors that are in your first report?

A. Yes.”

Professor Ackva said at T30/44 after it had been suggested to him that his evidence was inconsistent on this issue:

“A. I don't think the report is inconsistent. Maybe I can explain to his Lordship. A change to a product, let's say you have a motor running on production lines, if you do a change there is always a risk that with the change you have some problems which you don't see in the beginning. And if you have a problem in the motor there might be a problem with the steering system or maybe, in the worse case, a problem with the car. So changing something has to be judged very carefully by engineers, by every people, to see whether the benefit I expect with the change is not compromised by any risks of deficits in producability on the TRW line, on the Renault line or especially in safety for the driver. Therefore, especially in the safety-critical area of power steering motors, any change can be risky very quickly. And if you now put together many small changes, which in itself are small changes like engineering changes, the more and more you put together you get a complexity of risks which no customer like Renault or TRW would accept, they would say: if you change too much you have to go through complete validation, complete risk analysis before we put this to the customer. And this is what I mean with complexity.”

The Defendants submit that the weight of the evidence shows that not all changes are suitable for the engineering change process, and that a major change or accumulation of changes would not be suitable for certain aspects of product development. As Professor Ackva described it [T30/61]:

Decision. I return to where I started. Engineering change is a concept of relatively clear general meaning. Unlike, say, “motor position sensors”, it is not a technical term. Further it is an expression chosen to describe “changes in the Specifications or other requirements relating to the Products” and should, without glosses, have the meaning which follows from that. The parties are agreed that it has an industry meaning but differ about what that is. TRW seeks to rationalise the evidence of Mr Penketh but this does him a disservice. There was clearly some doubt among the witnesses about the precise significance of this expression which clearly does not have the same universal and immutable meaning in the motor industry. Given the range of views I do not accept that either side has established a special meaning.

While in the ordinary way people in this industry would expect all engineering changes to be fully documented for the sake of good order and where, as with this range of products, safety is critical that is not invariably the case. Similarly there is no reason why a change in a product should not involve multiple engineering changes at the same time. There will of course come a point where it is not feasible to proceed with more than a certain number of changes at the same time.

Given the structure of the Agreement and the background the question that arises when the Buyer makes a change is whether what is proposed is a change in the Specifications or other requirements relating to the Products. As that phrase is called “Engineering Change” as shorthand in the Agreement the critical phrase is no doubt coloured by those two words. If the proposed alteration is a change to the specification and no more the Buyer must offer and can impose it on the Seller. If it goes beyond such a change it will be a new Product whose introduction requires agreement between the parties. The boundary between engineering change and new product is a question of fact and degree. It would be unexpected in a long term agreement for the Buyer to want to limit its scope to impose change on a constantly evolving product or for the Seller to restrict its right to supply. So I take the words at issue to have their natural and usual meaning.

This issue is whether the definition of “Product” includes a motor required for a contractually specified platform (here the Renault P1 platform) which could have been produced by making Engineering Changes to the Products which Globe was supplying under the Agreement.

TRW’s case. Mr Downes argues as follows. The Claimants’ pleaded case in respect of the products covered by the Agreement provides:

“17A. “The Products” included:Motors and leadframe assemblies built to different specifications where: (1) TRW required those motors and leadframe assemblies for the platforms identified in the Agreement; (2) those motors and leadframe assemblies were comprised of the motors and leadframe assemblies initially produced by the Claimants but with changes to their specifications or other requirements; and (3) Globe could and would have designed and manufactured those motors and leadframe assemblies by making only Engineering Changes to the motors and leadframe assemblies that it initially supplied to TRW under the Agreement, being as set out in paragraph 17A(a) above.”

The words pleaded, or indeed words which bear any resemblance to the words pleaded, do not appear anywhere in the Agreement, and in fact, the word “Products” is defined in terms of the specifications attached at Appendix A; it is common ground that the specifications were not appended to the Agreement, but that they had been agreed (as is set out below). The issue therefore arises as to how the words pleaded come to be part of the Agreement. Unless they are somehow read into the Agreement, the Court cannot find that the Defendants were in breach of contract as the Claimants allege. The Claimants seem therefore to be saying that the definition of products contended for can be derived from the express terms of the contract on its true construction.

The principal objection is that there are no words in the contract that have the meaning contended for by the Claimants. It is necessary for Globe to show that “something has gone wrong with the language” but the form of the Agreement is perfectly workable as it stands: it gives an exclusive right to supply specified products for specified vehicle platforms: it is both platform and product specific. The suggested product definition would give rise to very substantial uncertainty as to the products which TLVES was obliged to source from Globe and those which it was not; and is to be contrasted with the parties’ decision to make specific provision for the precise products that were to be covered by the Agreement (albeit in separate documents setting out the agreed specifications).

The response to issue 2 is therefore that the term “Product” in the Agreement does not include motors and leadframe assemblies as identified in paragraph 17A(b) of the Re-Re-Re-Amended Particulars of Claim. The Agreement was for the supply of specific motors and leadframe assemblies for specific platforms. Products could be added to the Agreement by mutual agreement under Article 1.1, and engineering changes could be made to the Products pursuant to Article 4.1, as was identified by Mr Arwine at the strike out hearing in October 2012, but there is no third way under the terms of the Agreement by which specific products can be added. It is not pleaded that the Products included all conceivable motors and leadframe assemblies that would be used on the specified platforms.

The Claimants on their own case are asserting that their construction of the Agreement would:

The response to issue 2 is therefore that the term “Product” in the Agreement does not include motors and leadframe assemblies as identified in paragraph 17A(b) of the Re-Re-Re-Am POC: the Agreement was for the supply of specific motors and leadframe assemblies for specific platforms. Products could be added to the Agreement by mutual agreement under Article 1.1, and engineering changes could be made to the Products pursuant to Article 4.1, but there is no third way under the terms of the Agreement by which specific products can be added.

Globe’s case is as follows. Long-term and exclusive supply arrangements were the only type of contract that made commercial sense for TRW and Globe in this context because (a) both parties had mutually made upfront resource and financial investment in developing the technology; and (b) it was rare that a vehicle manufacturer would switch suppliers. The execution of the Agreement resolved any uncertainty that might have existed (but did not exist, on the evidence, in the mind of Globe) by giving Globe 100% exclusivity in respect of the provision of motors for the life of each contractual platform. The words “not limited to” in Article 1.1 put the issue beyond argument.

As a general matter, the parties’ common objective was to provide components that met the vehicle manufacturer’s requirements (here those of Fiat, Nissan and Renault). In the context of EPAS systems, the focus for the vehicle manufacturer was that it received an EPAS system that met its requirements. Mr Connor accepted this during cross-examination.

Given the long term nature of the anticipated relationship, it was likely that the Products required at the outset of the life of the platform would need to be updated and/or upgraded and/or modified in the years to follow. This would have been the obvious concomitant to the proposed long-term arrangement, given the likely movement of technology and refinement of drivers’ and hence vehicle manufacturers’ requirements over time. As to this Mr Fearon (then of TRW) said in his evidence (which was not challenged) that “both parties knew that the new product and technology would inevitably undergo improvement and changes over time such as changes in the motor torque rating different motor and system mounting and other changes in specifications”. Mr Arwine said much the same adding “Thus I always understood that the motors would inevitably need to undergo changes over the life of the platforms ... In particular TRW would not want to be tied into product which would not allow for changes to be made particularly when those changes may be determined by the vehicle manufacturer rather than TRW itself.”

It is common ground that product development for major EPAS components, such as motors and leadframe assemblies, was collaborative. This is as true for modifications to existing motors as of the design of new motors.

Under the Agreement TRW was to buy from Globe all of its requirements for motors and leadframe assemblies of an agreed specification for the lifetimes of the vehicle Platforms named in the Agreement (Article 1.2). These are mutual obligations whereby on the one hand TLVES had to purchase all of its requirements for Products from Globe, but by the same token, Globe had to supply whatever quantities were ordered. Thus there are the long-term arrangements made by Article 1.2, which sets out volume estimates for the period between 2001 and 2011 which estimate the quantities of Products that would be ordered to meet the requirements of TRW’s customers +/- 15%. The exclusivity is further reinforced by Article 5.1, which provides that:“Term: The Term of this Agreement will begin on the Effective Date and shall continue for the lifetime of each of the platforms at a rate of 100% of the platform requirement as estimated in Article 2”. The clause deals not only with the term of the Agreement, but also, in the final words, with the allocation of volume of requirements to Globe and exclusivity.

“Products” are defined in two places in the Agreement, in Premise A as being “…Brushless Electric motor and leadframe assembly [sic], produced in accordance with the Specifications attached as Appendix A…”and in Article 1.1.

The Products encompassed by the Agreement were not restricted to those identified as at 1 June 2001. Whilst the initial Products under the Agreement were listed in Article 1.1 and the table in Article 1.2, the Agreement expressly provided at Article 1.1 that “The Products include, but are not limited to…” the listed Products. Accordingly, the Agreement expressly provides that further or modified Products might be added to those initially stipulated as being included.

Further, there is nothing in the Agreement which prevents many Engineering Changes being made at the same time. This is what happened with the J77 motor and what would have happened with the B2E motors, had TRW not peremptorily cancelled that program.

The foregoing is the only reasonable interpretation of Articles 1.1 and 4.1 of the Agreement. The parties envisaged that there would be changes that would need to be made to the motors over the life of platform (at least 7 years), and for that reason, provision was made in Article 4 to cater for those changes, in a manner that ensured that they were covered by the exclusivity.

Accordingly, when (after 1 June 2001), TLVES chose not to provide to Globe the relevant specifications for the Gen 2 motor and failed to collaborate in developing that motor in the usual and expected collaborative manner (as TRW had with Globe to develop the Globe Gen 1 motor and as it did with Emerson from October 2000 to develop what became the DEAS Gen 2 motor), TLVES created the risk for itself that it might develop and purchase Products from other suppliers, and hence breach the exclusivity at Article 1.2. In the event, TRW compounded that risk by going ahead with the development of the DEAS Gen 2 with Emerson. It then failed to place orders for its customers’ requirements of the motor with Globe, thereby breaching the Agreement.

Decision. TRW is correct to point out that the words in issue are not to be found in the Agreement but Globe’s case is that the true construction of the Agreement has that effect. I agree. The existence of the Agreement as a contract is not disputed. It is intended to regulate the dealings between sophisticated and substantial parties over a lengthy period and to cater for inevitable technical changes as the product matures and improvements to the models of car are made. It is worded in a way which suggests legal knowledge but it was put together by intelligent business people under some time pressure and not finalised by lawyers. It is common ground that the Agreement contains flaws. It was entered into in something of a rush and was not apparently the subject of careful amendment and review in the days before it was signed.

The definition of “Products” is primarily that at Premise A. These Products are then at 1.1 stated to include but not be limited to three specified platforms. While there is a need for some caution where a contract has flaws in attributing particular significance to every word and phrase the words “include not limited” do emphasise that the specifications in the Agreement are only the starting point. The parties can add additional products by mutual consent. I see no reason why a motor which evolves from a Gen 1 through the process in Article 4 is not as subject to the Agreement as any other given the wording of the Agreement and its long term and exclusive nature in an area of industry where regular improvement and development is obviously expected. This is not an agreement just for the Products in existence at the outset. There will be changes and these will be given effect to by Article 4 if they fall within its terms or otherwise by agreement, if that be forthcoming. I do not see this approach as requiring any implication of terms or doing violence to the language of the Agreement. Neither do I see it as sufficiently unclear to warrant investigation of whether the approach produces results that are very unreasonable or which flout business commonsense.

Parties habitually enter contracts on terms which on consideration (not necessarily hindsight) appear to be unreasonably harsh for one side. Even if I do look at that aspect some of the factors suggested to be unreasonable are simply the consequence of entering into an exclusive arrangement whereas others, such as timing, become unsatisfactory only if the Buyer moves too slowly in recognising its obligations. The fact that there are reasons why a long term exclusive agreement might be commercially unattractive to TRW is not a reason why the Agreement should not have that effect. Further, as Globe points out such terms could equally have advantages for the Buyer. The exclusivity of the Agreement gave TRW the benefits of ensuring that Globe did not sell the Products to TRW's competitors, would provide a supply of Products for the lifetime of each of the contracted platforms, would supply the Products at a pre-determined price and with any Engineering Changes proposed by TRW to reflect the need to develop the Products over a long period of time (i.e. the duration of the Platforms).

The answer to this issue is therefore “yes”.

I summarise the parties’ submissions only to the extent that they are not made on other construction points.

TRW’s case. The Agreement covers “motor and leadframe assembly for 38Nm Nissan B/Renault P1” .These words did not cover the Renault Clio (or B85) variant of the Renault P1 platform because the B85 required a steering system with a higher power rating than 38Nm. TRW relies on four matters which it says do not offend the exclusionary rule as to pre-contractual negotiations. They are evidence of the meaning that was commonly attributed to the words “motor and leadframe assembly for 38Nm Nissan/Renault P1”.

First there were two variants of the motors from the outset: one was quickly established as a motor for a 38 Nm system; the other was unclear but was believed to be for a more powerful system. TRW relies on extensive passages in the cross examination of Mr McHenry in which he recalled that there were two variants for the P1 platform, for example, T3/73/1-18:

“Q. We know, don't we -- and do say if you don't know -- that in relation to the P1 there were two variants that were being looked at for the motor: there were motors for a 38 Newton metre system, and motors for a 42 Newton metre system at this stage. Do you remember that?

A. At least that many, yes.

Q. Yes. The 38 Newton metre, that became the J77 before it went over to the Gen 2?

A. I'm not certain of that, I believe so.

Q. The more powerful system, the 42 Newton metre system, the motors for that, that system is what then became the B85?

A. The higher powered one I believe is correct. I'm not sure what the Newton metre rating of the system ended up being.

Q. You recollect that it was the more powerful system?

A. Yes.”

TRW also relies on documents referring to potential variants, the first twelve of which predate 2001 and also these:

The volumes for the “Nissan B/Renault P1 38Nm” at Article 1.2 are:

The volumes from the 5^th March 2001 table seen and written upon by Mr Keegan, in respect of the Nissan/Renault P1, are:

TRW claims that it must have been clear to Mr Keegan from the table that one of the sub-platforms or variants for the Renault part of the common Nissan B/Renault P1 platform was for a B85 Clio or Clio replacement, and that it had, or potentially had a higher power rating than the other sub-platforms or variants. Both sides rely on passages in Mr Keegan’s evidence on the topic. Globe responds that the volume table refers to projected volumes for the Nissan/Renault P1 platform overall (and hence all sub-platforms fell within that P1 designation) and there was no reason for Globe to think anything was being left out. Globe says that TRW’s case rests upon an unfair and unrealistic approach to the likely impact of these documents at the time they were transmitted. As I see it the point is equivocal and adds little.

Secondly TRW says that pre-contractual exchanges show that the discussions between the parties (which ultimately led to the Agreement) were restricted to the 38 Nm variant. In the months before the contract TRW made it clear that Globe was only being asked to quote for the 38Nm variant of the P1 platform. In terms of the correspondence TRW relies on seven documents in 2000. TRW says that it is likely that there was some discussion between Mr Fearon and Mr Keegan around the time that Mr Keegan obtained the volume table dated 5^th March 2001 as to the distinction between the 38Nm variant for the Nissan B/Renault P1 platform and the higher power system and motor requirement because that distinction is drawn in the table itself and it appears that Mr Keegan actually produced a price estimate for the Nissan product alone on 20^th March 2001. The email from Mr Fearon to Mr Keegan on 22^nd May 2001 referred to quotes on 9^th October 2000 for the 38Nm motor. Mr Schmitz’ note of a meeting with Globe on 22^nd and 23^rd May 2001 shows that Mr Schmitz was reviewing the costed BOM for a motor for a 38Nm system (as well as a 58Nm system for the Renault P2 and Fiat C192) because prices are recorded for the 58Nm system and the 38Nm system.

Thirdly the Request for Quotation (“RFQ”) sent on 29^th May 2001 which was plainly referable to the B85 (Renault Clio) variant made it clear that this motor was not covered by the agreed prices and terms of the Agreement which by then had been finalised. On 28^th May 2001, shortly before the Agreement was signed, Mr Keegan received from Mr Schmitz by email an RFQ for a 49Nm motor. Mr Schmitz asked that quotes were given for volumes ranging from 500,000 units per year to 1.3m units per year. The motor specification document was entitled “P1 Stator Phase II, Rare Earth Motor Specification”. On being asked by Mr Keegan for “further details as to the program (platform) and the timing to start”, Mr Schmitz emailed Mr Keegan: “Derek, so far I have only a few informations. Informations are changing very quickly. It seems that it will be the Renault Clio P1 (the earlier 43Nm version) with a probably SOP in 2005. Volumes are not confirmed yet, I think it will be in the area of 500-700k.” Mr Keegan forwarded the motor specification and the emails he had received from Mr Schmitz to Mr Arwine.

TRW says that the receipt of an RFQ for a new motor, specifically stated to be for the Renault Clio P1 system with a higher power rating than the 38Nm system and volume estimates which were uncertain and which clearly was not covered by the Agreement because pricing and specifications for the specific products covered by the Agreement had by that stage been agreed, must have, or at least should have, made it clear to Globe that this was a different motor from that required for the 38Nm Nissan B/Renault P1 variant. Globe responds that the RFQ was merely an illustration of the variety of options being discussed between Renault and TRW. There were discussions about more than two potential variant system torques for the P1 Platform and nothing was certain as at the date of the Agreement. The fact there was an RFQ as at May 2001 for a 49Nm system is neither here nor there – the first time Globe received a Gen 2 RFQ was in April 2002.

Fourthly the words in the Agreement expressly differentiated the motor which was covered by the Agreement from the other more powerful variant which was not. Article 1.1 makes it clear that the “Products” are in respect of the 38Nm Nissan B/Renault P1 :“… (i) motor and leadframe assembly for the 38Nm Nissan B/Renault P1, (ii) …”

There are no words used in the Agreement that provide for motors and leadframe assemblies for higher powered systems for the Nissan B/Renault P1 platform. The Claimants say that the Agreement expressly covers all motors and leadframe assemblies for the Nissan B/Renault P1 regardless of the power rating of the system because the Agreement provides for exclusivity for the life of the platform. TRW states that such a finding by the Court would require the “38Nm” in the definition of “Products” at Article 1.1 to be disregarded entirely and crossed out.

TRW’s case is that the fact that a system torque might change and thus the motor with it does not in any way detract from the point that the contemporaneous documents establish beyond doubt that in the period leading up to the Agreement, there were two motors that were being considered and the Agreement only covered one of them.

Globe’s case is made at length. I refer only to those submissions which seem the most important. In the course of developing EPAS systems for Renault and Nissan, more than one system torque power rating was under consideration but no decision had been made as at 1 June 2001. The parties had communicated about the fact that two types of system were being discussed for the Renault P1 platform. However, Mr Connor confirmed that Renault had made no decision as to its final power requirements for the EPAS systems to be fitted to the Renault P1 platform.

Mr Connor therefore accepted that “…no one actually knew what the system assistance torque would be at around this time or for some time to come…” That uncertainty continued for a significant period after the execution of the Agreement, as Mr Fearon accepted, until after he left at the end of the year.

Furthermore, given the variable relationship between motor output torque and system torque, it would be possible for TRW to change the Nm rating of an EPAS system by making changes independent of the motor’s output torque (such as changes to current, voltage and gearing ratio) without Globe's knowledge or control. This was accepted by both Mr Fearon, Mr Connor and Mr Coles in the course of their evidence.

Further still, the importance of stipulations as to system torque is diminished in the light of the fact that Globe supplied motors of a single design for inclusion in TRW EPAS systems of different system output torque ratings. Examples are: The Agreement specified the Renault P2 as a 58Nm system, but the system ended up (without Globe’s knowledge) as 56Nm – but there was no issue with Globe supplying the motors in relation to either system. The Fiat C 192 was targeted at a 58Nm system and the Renault Megane (using the P2 Platform) was originally targeted at a 55Nm system, and both were to use the same motor.

There was no communication by TRW to Globe prior to the Agreement of any fixed intention within TRW to source a motor for the higher power system from Emerson or otherwise to dual or split source the motors for the P1 platform. The parties did from time to time discuss different power motors for different rated EPAS systems and Globe was aware that TRW was in contact with Emerson in this regard. However, there was no decision as at the date of the Agreement as to what torque system rating would be required by Renault for the P1 platform or as to who was supplying those motors.

In particular, it follows that there was no conclusion by Renault or TRW as at the date of the Agreement that Globe would only be the supplier of a 38Nm motor for a 38Nm EPAS system for the Renault P1 platform.

Critically, though (even if TRW had determined that internally) no such “decision” was communicated to Globe at any time. TRW’s cross-examination on this point failed to elicit any concession from Globe’s witnesses, reinforcing the position that nobody had said to Globe that the Agreement was limited for the Renault P1 platform to 38 Nm or lower power motors.

The definition of “Products” was expressly not limited to the specific EPAS systems set out at Article 1.1. That reading goes counter to the express wording of the Article (“…includes…not limited to…”) and makes no commercial sense in the context of a long term life of platform exclusivity commitment. Were TRW’s argument correct, there would be no reason for the Agreement to contain any of:

The contract could simply have been drafted so as to bind Globe only to produce motors for a specific 38Nm EPAS system if that was what was required.

No 38Nm EPAS system was ever used on the Renault P1 platform – so TRW’s construction would have rendered the Agreement meaningless.

The question is whether “motor and leadframe assembly for 38Nm Nissan B/ Renault P1 …” describes the product which is to be one of the three which are to be produced for the lifetime of the platform or limits the motors to those to be included in systems with 38Nm torque.

While the parties knew more than one system torque power rating was under consideration for the Renault P1 platform in the summer of 2001, neither Renault nor TRW had any firm idea about what the final EPAS system power ratings were to be at the date of the Agreement. Mr Connor confirmed that this was the general position in cross-examination: Furthermore, the evidence clearly established that the proposed Renault P1 system torque ratings fluctuated wildly over time.

The laminated Motors Table sets out the various different motor torques and system torques that were used for EPAS systems further to the Agreement. As regards the Renault P1, none were 38 Nm. It was possible for one motor to be used in systems with different system torque ratings, so there was no reason for Globe to believe that the ultimate system designation would be determinative of the motor. Globe had not agreed only to supply for a lower power system. The 38Nm EPAS system was merely the first and most likely to be used on the Renault P1 platform. That did not mean it would be the only system used on the platform.

Decision. Much time was occupied asking the witnesses what was in their minds in the weeks (and even years) before the Agreement was signed and in examining in close detail documents created in that period. As is to be expected different people remember different things and for the reasons I have given I place little reliance on this reminiscence whether relied on by Globe or by TRW. In broad terms it was common ground that there was discussion and uncertainty about what the specifications for the higher power motor would be. It was still early days and in the hands of Renault, not the parties. Globe witnesses (including Mr Fearon who had been at TRW at the time) recalled that there was uncertainty also about the “38” but that all P1 present and future motors were to be within the Agreement. TRW witnesses recalled that there was no doubt about the “38” and it alone was covered by the Agreement. This evidence was as unsurprising as it was in law unhelpful and to a degree irrelevant. The elapse of time, fading memory, differing recollections, and the submissions about the documents on both sides lead me to find from the negotiations no special facts known to the parties which count as particular background knowledge to shape construction of the Agreement.

The documents have the limitations I refer to at the start of this judgment. Further the documents predating the Agreement by many months can tell one little about what both parties had in mind much later. At times this seemed pointless. For example both sides spent time debating the significance to contractual construction of the Agreement of the word “only” in the letter of 12^th October 2000 entitled “Nissan – Renault P1 Programme 38Nm only – Payment Liability”, cross examined witnesses about it and continued the debate in their closings. In most cases the rationalisation of the documents to fit the recollections of the different witnesses is plausible for both sides and in no case determinative. The examination does not greatly assist when the limits of admissibility are borne in mind.

Evidence of what was said by the parties in pre contractual discussions is, as I have already mentioned, inadmissible unless it is of the factual background known to the parties at or before the date of the contract, including the genesis or aim of the transaction - see Prenn-v-Simmonds above. That is of course evidence of the factual background and the shared aim or objective of the deal known to both parties not what was known only to one and not a blow by blow examination of all the documents as the deal evolved. Contracts are often entered into in a hurry or under pressure. All sorts of considerations may lead parties to accept or obtain terms that would not have been offered without last minute pressures or, sometimes, negotiating folly.

On this issue the best point for TRW is that the reference to 38 Nm in the Agreement is explicit, albeit in the context of the Nissan B Renault P1. That description is not however part of the definition of Products but of what that definition non-exhaustively included. Further it would be odd for the parties to limit the motors in this long term agreement to those to fit a 38Nm system. The torque of the system is not that of the motor and could change, and on TRW’s case, the Agreement effectively terminated, at almost any time by the 38 changing to 37 or 39, either deliberately to frustrate Globe or almost unintentionally as a result of some improvement in the system unrelated to the motor. Further the witnesses agreed that it was common for there to be changes to the system Nm in the evolution of a product (as of course happened in this case). The fluidity of the Nm of motor torque was established in the evidence (and is conveniently illustrated- although not relied on or available for the purpose of interpretation- in the motor torque history of the three platforms in this case). It is not clear why either side would want such a restriction in a long term agreement- at least without perhaps some plus or minus percentage formula to accommodate some change. TRW might say that Globe should be stuck, as it has been, with the consequences of a bargain that it may have made unwisely. Yet the structure of the Agreement would have been very different had the parties sought a one off agreement limited to the 38. Mr Lowenstein’s list of provisions that would serve no purpose if TRW is right is persuasive. This approach is a matter of conventional contractual analysis and does not involve special consideration of business common sense. I conclude that the words refer to the Nissan B and Renault P1 as they were identified to be at the date of the Agreement and that the wording overall refers to the motor in a system whose torque was unresolved and does not limit the Agreement to a 38 Nm EPAS system. So my answer to this question is “No”.

When refusing to strike out aspects of the case in October 2012 I said this about the Agreement, views which I have not changed. I have added a few words in ordinary type to the text. (Mr Downes challenges those views on the basis that they were expressed only on a strike out application before the evidence was heard and should be revisited. I will explain later that the further submissions he makes do not change my view).

“This is a long-term written contract indicating that the parties intended to enter into a lasting and legal binding commitment. [the volume estimates extend to 11 years overall and to 6 years on the platform in dispute and the Agreement is in a form which indicates that the parties intend it to be legally binding] The concept of Product results in important exclusivities for both sides. The parties envisage that they may from time to time add products but this will only occur by mutual consent (see 1.1). This course having been addressed in article 1 I would initially expect Article 4 to deal with something else. The words “has to mutually agree” are poorly chosen and ambiguous but when read in context connote obligation not merely an opportunity to discuss. The distinction between Engineering Changes proposed by the Buyer as opposed to those put forward by the Supplier reinforces the indication that where TRW wants changes Globe has to agree to them. Mr Downes has some sound arguments but in most construction disputes there are points going each way. The process in Article 4 is consensual in the sense that it requires the parties to work together in terms one often comes across in longer term agreements. There has of course to be agreement at each point to Engineering Changes which may indeed be very wide ranging.[It is common knowledge that a car will be enhanced and improved during the potentially long life of the platform] The proposal for a change results (see Article 4.2) in an obligation to use “all reasonable efforts” to minimise its effects and submission “as soon as reasonably practical” of statement dealing with various matters. The Buyer (Article 4.3) has to reimburse “all reasonable costs”. The word “reasonable” appears again in the penultimate sentence. The parties thus intend that they will work together over Engineering Changes but, if one fails to do so, there are yardsticks of reasonability against which compliance with Article 4 can be measured. In contrast where the Supplier, Globe, proposes a change there is only a good faith obligation to negotiate (not firmed up by the single reference to “reasonable” in Article 4.2). Resolution of such a dispute might be expensive, time consuming and replete with expert evidence (except of course where a party failed altogether to engage in the process). Nonetheless I consider that there are enough objective considerations available to enable Article 4 to be legally enforceable. Mr Downes makes the point that the court will not grant specific performance in a case such as this. That is correct but damages are available to provide a remedy as far as money can, just as in any other case.”

Globe’s case. The language used at Article 4.1 of the Agreement distinguishes between Engineering Changes initiated by TRW and those initiated by Globe. There was obvious purpose to the distinction between the positions of Globe and TRW in relation to Engineering Changes. If TRW properly notified Globe of Engineering Changes to the specifications or other requirements of the Products, Globe was required to manufacture (and agree to manufacture) the Products with those changes. Where Article 4.1 states that Globe ‘has to’ agree to Engineering Changes it means that it ‘must’ agree, and not that it ‘has the option as to whether or not to’ agree.

The obligation to comply is not absolute: it is tempered by qualities of reasonableness and mutuality. That fits precisely with the evidence as to how these things are actually done in the industry, with the parties cooperating over a period of time to find the best way to achieve TRW’s requirements.

Factors which confirm that Globe’s construction of Article 4.1 is in line with business common-sense include the following. This was a long-term contract, to last for the lifetime of the vehicle ‘platforms’ named in the Agreement. It was therefore likely that there would be some evolutionary changes to TRW’s customers’ requirements during the lifetime of the platforms. If TRW could not compel Globe to make the changes that its customers wanted – even if these changes were very minor (for example a requirement to use a different coloured wire) – and Globe refused to implement, TRW would be in difficulties since it could not buy the Products elsewhere. By contrast, if Globe wished to make Engineering Changes, it could result in a product which might not precisely meet TRW’s customer’s requirements. If Globe were permitted to impose (as opposed to propose) Engineering Changes, TRW could end up with products that it could not sell to its customers.

TRW says that Article 4 involves a consensual process and that this is the only way the clause can work in practice. The parties to the Agreement had to agree to each engineering change before it was implemented, no matter which party proposed it, and each side was free to refuse to implement a proposed engineering change. The Defendants submit that the Court is able to revisit this issue with the benefit of the full factual matrix and it is apparent that the Defendants’ construction of the clause (ie (a) above) is correct.

A right to “propose” is inconsistent with a right to “impose”. Propose means to “put forward for consideration” according to the OED Concise 6^th Edn. Note the same word appears also in relation to supplier engineering changes: “If Supplier proposes to make an Engineering Change”. The words “Supplier has to mutually agree” are ambiguous. They may be taken to read either: “The Supplier has no choice but to agree”; or “The Supplier has to agree before the following consequences apply”. The latter is more probable because the concept of an obligation to agree is a misnomer. In both a buyer proposed engineering change and a supplier proposed engineering change case the word “advise” is used: “Buyer will advise Supplier of all Engineering Changes” and “Supplier will advise Buyer of such proposal”.

TRW produces a chart breaking down the clause which it says shows that there is no meaningful distinction between the two processes.

Mr Downes says that the only point that could be made in Globe’s favour is the different words “notice” and “proposed” in Article 4.2. However this is a distinction without a difference since Article 4.1 has already used the word “propose” in relation to Buyer engineering changes and the word “notice” is also consistent with the “prior written notice” in the previous article. He then tests the Claimants’ construction saying there are three potential alternate versions of the supplier’s obligation. The supplier is obliged to comply with all engineering change requests regardless of scope, cost, feasibility, reasonableness, inconvenience. The supplier is obliged to comply with all feasible engineering change requests regardless of scope, cost, reasonableness, inconvenience. The supplier is obliged to comply with all reasonable engineering change requests regardless of scope, cost, feasibility, inconvenience. Mr Downes submits that none of these mechanisms is commercially viable because none of them would be workable or sufficiently reasonable and certain from a business point of view. He then eliminates the first two of his mechanisms and turns on the third which he says is unlikely for four reasons which include these.

He says that an agreement to negotiate is not legally enforceable and the evidence is clear that engineering changes are invariably arrived at by a process of negotiation (which is of course, as a matter of law, common ground.) .He says that the Courts will strive to give legal effect to a provision in a contract, especially a commercial contract, as opposed to finding that the agreement had no legal effect. However that bias in favour of saving clauses is based on the proposition that the parties to a commercial contract are presumed to wish its terms to have effect as opposed to being unenforceable. However no such difficulty arises here because it is common ground that Article 4 is enforceable as a whole in relation to the costs of engineering changes. This is not therefore a case where the maxim verba ita sunt intelligenda, ut res magis valeat quam pereat has any application since the clause has effect in both cases. The case is thus closer to Pena v Dale [2004] BCLC 508 where it was held that an option clause did not give rise to an enforceable obligation but that this did not vitiate the balance of the agreement.

Fourthly he invokes the absence of sufficient objective criteria. He says that the cases where the Court is prepared to fill gaps in a contract by use of the concept of reasonableness (eg Hillas v Arcos (1932) 147 LT 503) are to be compared with cases where the Court finds that a form of words is too vague to be saved even with the use of the concept of reasonableness, see Scammell v Ouston [1941] AC 251. The Defendants submit that the distinction between these two situations is whether there exist objective criteria against which a Court would be able to assess reasonableness on an objective basis. As Patten LJ put it in Durham Tees Valley Airport v bmibaby Ltd [2010] EWCA Civ 485 at para 56:

“Many of the cases in which this issue has arisen involve contracts for the supply of goods where either quantity, quality or price is expressed in non-specific terms. In Hillas & Co Ltd v Arcos Ltd itself the timber sold was to be “of fair specification”. The court's attitude has been to attempt to give effect to the contract by resorting to market rates and prices or to trade standards which provide objective criteria for the determination of what the parties agreed. Where such criteria exist and are ascertainable then a term of reasonableness is often implied in order to incorporate them as the measure of performance required under the contract.”

The question is: how would the Court go about assessing the reasonableness of Globe’s stance? The case in hand demonstrates the impossibility of such a dispute (with hours and hours of evidence as to what parts of the motor are and are not “functional”). There exist no objective criteria against which a Court could even begin to adjudicate on the reasonableness of an engineering change request in circumstances where TLVES asserted it was both reasonable and necessary, but Globe maintained that it was not.

Before turning to the next five issues the overall position of the parties on these issues needs to be stated.

The exercise which forms the basis for Globe’s “could and would” case is this. Globe first takes what it says is the functional specification of the Gen 2 as built by Emerson. Secondly it constructs a notional Globe Gen 2 motor to demonstrate that had Globe been asked to build the Gen 2 as it should have been it would have done so. What are these two models?

The functional specification. Globe takes a combination of the written specifications from TRW assembled by or on behalf of Mr Arwine of Globe. The specifications were amended over time in the course of TRW’s development of the Gen 2 motor with Emerson. They are first Rev A dated April 2002. These were the only Gen 2 specifications provided to Globe outside litigation. These were never put into production. Secondly there is Gen 2.1 (referred to by Mr Arwine as Rev B) dated 3 November 2003 provided to Globe in the course of disclosure in September 2012. Thirdly there is Gen 2.5 dated October 2005 provided to Globe in the course of these proceedings in October 2013. These have then been relaxed or amended by further instructions (e.g. contained in emails) and EOLT parameters and data.

The specifications of the motors actually produced by DEAS are in Mr Arwine’s Master Schedule. Rev B is in Column E (as relaxed and/or amended by the EOLT parameters and data at Column G) for Type 1; and Column J (as relaxed and/or amended by the EOLT parameters and data at Column K) for Type 2. Gen 2.5 is at Column L (as relaxed and/or amended by the EOLT parameters and data at Column N) for Type 1; and Column H (as relaxed and/or amended by the EOLT parameters and data at Column I) for Type 2. Globe describes this overall combination as the “functional specifications” of the motor.

Globe Gen 2 motor. Mr Arwine has taken test data from the Globe Gen 1 and the B2E motors and has also has also run simulations on SPEED and other simulation data which he says are industry standard to demonstrate that the proposed Globe Gen 2 motor would have met the necessary functional specifications.

TRW points to respects in which Globe’s Gen 2 allegedly fails to comply with the Gen 2 specifications and to other suggested shortcomings in the exercise.

At this point in the case some of the listed issues overlap and the parties have repeated some arguments and dealt with different matters under different headings. This section of the judgment therefore contains a degree of repetition going beyond my own lack of clarity.

There is a risk that the formidable amount of detail deployed on these issues will obscure what seem to me the fundamental realities. This exercise is not a static comparison of two sets of specifications but one involving evaluation of what would in reality have happened if these two companies and the individuals within them had worked differently. Many of the points taken now by the parties would not have arisen if they had been working together in the real world. Further extrapolation from what happened between the companies at the relevant time is of limited value give the decision of TRW to work with Emerson.

Consideration of the technical issues requires evaluation of the experts and I turn next to them.

Dr Sidman. Globe’s expert Dr Sidman is a consultant based in the United States. He obtained a Bachelor’s and a Master’s degree in Electrical Engineering from Northeastern University in 1975 and in 1986 a Ph.D. in Electrical Engineering from Stanford University. Between 1975 and 1992, he worked for Digital Equipment Corporation in many important roles. He has taught numerous courses and seminars and is a member of various professional organizations. He has published numerous articles relating to control systems, and the motion sensing and precision control of motors and actuators. He is the named inventor of eighteen U.S. patents. I can take the essence of Dr Sidman’s conclusions from the summary in his Report.

“I am of the opinion that all the changes to the motor and leadframe assemblies that Mr. Arwine has said he would have made constitute only Engineering Changes to the specifications or other requirements of the Gen 1 motor and leadframe assemblies. I am also of the opinion that the Gen 2 motor and leadframe assemblies proposed by Globe would have fully met all TRW’s functional requirements for the DEAS Gen 2 motor and leadframe assemblies except for minimum inductance, which would not preclude them from being plug-in replacements (i.e. fully functional substitutes) for the DEAS Gen 2 in an EPAS system. I am also of the opinion that Globe has proposed Gen 2 motor and leadframe assemblies which would perform at least as well as the DEAS Gen 2 motor and leadframe assemblies in all respects.”

Professor Ackva. TRW’s expert, Professor Ackva has since May 2007 been professor at the University of Applied Sciences Würzburg-Schweinfurt (FHWS), Germany where he teaches and researches in power electronics and electric drives. He does research work on small electric motors. In October 1986 he finished studies in electrical engineering at the Aachen University of Technology (RWTH). Since then, he has worked on electric drives to be used in various areas. He has a doctorate in electric vehicle drive and years of directly relevant industry experience, including 14 years at Siemens as set out in his CV. He has carried out research at university and in industry and has published 34 papers in recognised journals and has 14 patents or patent specifications.

The essence of Professor Ackva’s report is this;

“In the automotive industry an "Engineering Change" is a known term and known company-standardized procedure with strict rules to be followed along that change. An engineering change includes any change to a product: it may therefore include changes to the product itself, its drawings, materials, specification, production or other processes.

Looking to the many engineering changes documented and applied to the Gen 1 it is obvious that those engineering changes were gradually changing the existing product... .

The Globe Gen 2 motor does not comply with the Gen 2 motor specification:

The tight tolerances in the electromagnetic design such as 3% tolerance for resistance and inductance balance are not accepted by Globe;

The Globe Gen 2 motor does not have a skewed rotor with a 3 piece stagger as specified; and

The specified inductance values are not accepted by Globe.

Scott Arwine on behalf of Globe has referred to a “functional specification” of the DEAS motors and has said that Globe could have made a Globe Gen 2 motor that complied with that functional specification.

From my point of view a "functional specification" does not exist in the motor business. The only relevant document is the motor specification. I do not know exactly what Scott Arwine is referring to when he mentions the functional specification. It might be the motor specification. However reading the explanations in SA2/13.4 and the following chapters I can only conclude that he is extracting his own and particular subset of specifications from the different motor specifications (Gen 1, Gen 2, B2E) and calling it a functional specification. However this is risky and not correct.

From the documents I have seen I would say that eventually Globe could and would have designed motors and leadframe assemblies that complied with its Gen 2 “functional specification”. However this would have needed enough development time, engineering resources and investments in tools, machines and supplier parts; and I do not believe that Globe could have done this within the time available given the history of their quoting for the Gen 2 in 2002/3 and the B2E in 2005.

Globe’s Gen 2 still would not have met the Gen 2 specification however. In the case of non-compliance Globe is seeking to negotiate the specification parameters (e.g. inductance) and tends to argue that other parameters, which Globe would be able to achieve, would have been equal or even better for TRW. I do not consider this to be fair or correct.

Globe’s Gen 2 motor has never existed and never would have met the Gen 2 motor specification. Whilst Globe was willing, it was neither ready nor able to supply motors to TRW that could be used for the Renault program at the time, nor would it have been even if it had been given the final DEAS Gen 2 specification in 2002.”

The experts produced a joint statement. Paragraph 9 contains the following conclusions:

“We agree that the Globe Gen 2 did not meet DEAS Gen 2 specifications as follows:

a ) The motors proposed by Globe for Gen 2 do not meet TRW 's minimum inductance specification.

b ) TRW Gen 2 .1 spec requested a skewed magnet rotor for Gen 2 .1 while Globe proposed a skewed stator. TRW removed this request for Gen 2 .5.

9 .6 Globe 's proposed Gen 2 motors incorporate Globe 's Gen 1 motor technology which utilizes a full -round skewed stator and an un -skewed rotor (having 6 long magnets ), whereas DEAS ' Gen 2 motors utilize a skewed magnet rotor (having 18 smaller magnets ) and a segmented unskewed stator”

Other principal differences are that the Gen 2 motor has a high resolution encoder, socket connectors as opposed to soldered connectors, and no plastic overmoulding because of the winding technique facilitated by the segmented stator.

Evaluation of the experts. The differences between the witnesses were not fundamental but there was disparity in their quality. Dr Sidman is clearly a gifted engineer but he lacks the detailed direct experience of the issues possessed by Professor Ackva. His written report is a detailed and very helpful document. It provides guidance about the wider engineering background which helped me to understand some of the terms and to get points into perspective. Unfortunately his oral evidence was very unsatisfactory indeed. Dr Sidman was hesitant and evasive, even after advice, and then explicit direction, from me. He seemed unable to answer a direct question with a direct answer. He seemed not to understand that his primary duty was to the court and persisted in making points as though he were Globe’s advocate. He too attended a witness preparation course with apparently disastrous results. The closing written argument of TRW’s Counsel contains at Part 3 a devastating but largely fair demolition of the quality of Dr Sidman’s oral evidence including this:

“Dr Sidman …had developed a very simple technique for resisting cross-examination: he simply refused to answer the questions as put. He sounded like a politician who had undergone media training: he listened to the question asked, and then answered a different question, ie the one that he would prefer to answer.”

I do not doubt Dr Sidman’s integrity and TRW’s attempt to attack this by reference to cases in which he has worked on the US was as unwise as it was unsuccessful. However he unfortunately lacked understanding of his role. His oral evidence was not reliable.

Professor Ackva was an admirable expert witness. He is learned and on top of his subject and in his evidence was frank and to the point, well aware of his duties to the Court and helpful and detached throughout. He was very ready to acknowledge error. He readily accepted that in preparing his evidence he had spent substantial periods of time with the lawyers and with Mr Coles. While the witness’s contact with Mr Coles will have caused him to pick up a great deal of information it did not as I see it cloud his judgment. The limitations on the Professor’s report were first that it is quite complex in its structure, secondly in some respects he was asked to answer the wrong questions and thirdly some of his conclusions were reached without him having all the relevant material. To some extent he acted as the single joint expert on his subject in the case.

Before turning to the competing submissions on Issues 5 to 9 I will consider the main areas where the Globe Gen 2 is said to fall short of the Gen 2 specification. It helps to obtain a perspective on the true significance of technical issues to consider how things were seen at the time.

Contemporaneous perceptions of the differences between Gen 1 and Gen 2. I consider all the documents in context but I attach importance, for the general reasons I gave at the start, to TRW’s presentation to its customer Renault dated 13 May 2002. By this time TRW had been working with Emerson, but not with Globe, on the Gen 2 for about a year. The presentation is entitled “Renault B Platform Motor Comparison :Gen 1- Gen 2”. It is prepared by a team led by Mr Coles. I set out the salient passages from the relevant slides below. I am sure that it is a fair and accurate summary by a responsible company to a major customer. It is a contemporaneous document and there is no reason to doubt that it is TRW’s true view of what it discusses. I reject the rationalisations at the trial suggesting that the presentation was for some reason slanted to diminish the extent of the changes. Mr Coles described it in his first statement as “simplified” and as a “low level engineering review”. Even if Mr Coles is right in saying that TRW wanted to downplay the shift to Gen 2, that sentiment does not alter the accuracy of what TRW was telling Renault at the time.

The presentation conveys information from TRW to Renault about the features of a motor- not from Renault to TRW. There is no sign in the other documents at the time of Renault having views of its own about what the major features of Gen 2 system motor should be. This is consistent with evidence that Renault was content to leave these matters to TRW and the absence of evidence to the contrary.

Overall it is “No change-same fundamental motor technology” but “changes have been made to certain design features”. The two main changes are first electromagnetic, by changing the slot pole configuration, a “major benefit”, and secondly the change in the stator type , “a minor benefit” to a segmented stator. In summary “Gen2 has the same type of motor as Gen 1-however some design changes have been made to reduce size and cost”. The changes listed in order of significance are first the higher gear ratio- not an issue in the debate, secondly the higher pole number and thirdly the segmented stator.

The overall evaluation by TRW of the significance of the changes to the motor (of course between Gen I, not Globe Gen 2, and Gen 2) is valuable evidence that this was how things were seen at the time and that it was indeed the case.

The design change described as a major benefit did not materialise because, like the Gen 1, the Gen 2 motor ended up as 9 slot 6 pole anyway.

The presentation confirms what I would have accepted in any event, the evidence of Mr Coles that by this point he genuinely preferred a segmented stator for the motor. It also confirms however that this was a minor benefit.

A mass of evidence and submissions has been put forward to support a different perception of the changes and what TRW thought to be significant at the time. I find none of it as persuasive as the conclusions in this note.

The segmented stator. I have described the stator and the different approaches to its function above. It is common ground that the segmented stator was not part of the specification for Gen2. “TRW did not specify a segmented stator as a design requirement.”: Joint Expert Report paragraph 10.2 TRW.

In May 2002 TLVES’s internal requirements were for a segmented stator design as the presentation makes clear. I do not doubt the truth of Mr Coles’s statement T26/4-7:“A. We always wanted a segmented stator that was our intention from the year 1999 to 2000.” This view would have been shaped however by working with Emerson, certainly after 2000. It was understandable that Emerson would favour the segmented stator because it did not have access to the Globe Electrowind technology. In February 2003 Emerson had agreed to provide a design based on a segmented stator, which, according to Mr Coles, Globe were refusing to do. By this stage however Globe was out of contention for the Gen 2.

Mr Coles saw the advantages of the segmented stator as cost, and safety. Professor Ackva sees the advantages of the segmented stator being a reduced risk of jamming, a reduced risk of short circuit and a higher speed winding process with less material.

There is no evidence that Globe saw the Rev B document from which a reference to a skewed rotor might implicitly require a segmented stator. The presentation I have mentioned indicates the limited importance of this aspect. Mr Coles conceded that if there had been a technical or price-driven reason for using a conventional or other type of stator, TRW would have moved away from the segmented stator. TRW would have been open to other options (as they showed when they changed from the 12/10 configuration to the 9/6 configuration): T26/7/6 to 8/16:

“6 Were we open to other options? I guess if something

7 had gone wrong with the segmented options we would have been.

8 Q. And price as well. If you had had for example

9 a standard stator at competitive or lower price that

10 would have driven the decision, wouldn't it?

11 A. There is no doubt the price would always be part of this

12 debate.

13 Q. Yesterday you told his Lordship that if the price was

14 lower by 10 euro it would have been a different

15 consideration, correct?

16 A. The point I was making to his Lordship was that I am

17 just an engineer, the work I do is funded by the product

18 line, and if there was a sufficiently strong incentive

19 I would have been instructed to work on something other

20 than the segmented. It is not me that decides what the

21 business does.

22 Q. No, but there were many other things, it was not just

23 always TRW's requirement that there be a segmented

24 stator. Your mind was open to other architectures and

25 topologies as well, it is just that you were going down

8

1 that track as your primary option but there were others

2 as well, correct?

3 A. For the RFQ spec in 2002, we definitely wanted a 12/10,

4 we thought it was the right way, and that had to be

5 a segmented because of the parameters in

6 the specification. But would we have changed that?

7 Yes, and we did.

8 Q. So it was still open to change and your mind was still

9 open, it was not a fixed requirement that you always

10 had?

11 A. Our primary candidate was the 12/10 segmented and we

12 went with that as long as we could stay on that course.

13 And it was only at the last resort that we had to

14 change.

15 Q. But you were knocked off that course, weren't you?

16 A. We were.”

TRW says that even if the Court was convinced that the preference was unsound and would be inclined to “shy away” from the segmented stator it should not seek to substitute its own view for the view of the actual managers at the time. The wording of the agreement clearly only requires a subjective requirement and thus there is not scope for the Court to reach its own view. Support for this approach is to be found in several analogous situations. Thus for example in relation to the exercise of directors’ powers (a subjective test) in the case of Re Charterhouse Capital Ltd v Bonnyman [2014] EWHC 1410 (Ch) at paragraph 229 per Asplin J: “The Court will not substitute its own view for that of the board as to the exercise of its management powers.” That point seems to me to be misconceived. Quite apart from questions of construction it is unrealistic when, eventually, TRW itself has acknowledged through Mr Coles that it would have been prepared to accept other options, including a non-segmented stator.

Mr Coles made specific criticisms at the winding technique for the Globe stator citing the risk of short-circuit, the need for large slot openings leading to wire coming out of them and the need for over moulding. These were not substantiated as they might have been, most obviously by reference to experience with the Gen 1. Professor Ackva saw a theoretical risk and referred to some experience with Siemens. He also accepted that there were disadvantages to using segmented stators. If there was anything much in these points they would have been developed and at length.

I agree with Mr Lowenstein that this is a “swings and roundabouts” point .The choice of stator at the time was not critical or indeed all that important. TRW chose Emerson’s viable option and Mr Coles himself preferred it but Globe’s option was equally viable and one way or another the parties, if developing the Gen 2, would undoubtedly have resolved this issue.

High resolution encoder. The encoder is helpfully described in Mr Coles’s evidence. Motor position sensors include Hall sensors and an encoder. The encoder analyses the rotor position and converts that to an electronic signal. Having an encoder allows improved motor control which reduces torque ripple and gives improved feel at the steering wheel. An encoder analyses the rotor position and converts that to an electronic signal. This is because the encoder allows the position of the rotor to be determined more accurately than in the Gen 1 systems and this means power can be deployed more accurately within the stator by the ECU, which improves the operation, feel and efficiency of the motor. The Gen 1 systems, whilst they did not have a motor encoder, used an optical torque sensor in conjunction with Hall sensors to infer the motor position, but an optical torque sensor is not a motor encoder, although it gives an encoder-like function.

The Gen 1 motors had Hall sensors but did not have an encoder that was mounted on the motor shaft. The Gen 2 motors were intended to use an encoder directly mounted on the motor shaft and the Gen 2.1 (the first version of the Gen 2) motors produced by Emerson had this but the later Gen 2.5 motors did not. The 2.5 went back to the Gen1 scheme.

The encoder is controversial because Professor Ackva thought that its addition (but only to the Gen 2.1) went beyond the scope of an engineering change as it would trigger a requirement for a complete EPAS system revalidation. The first response to that is that the need for a revalidation would not stop something being an engineering change. Dr Sidman said that the addition of the encoder falls within the scope of engineering changes on the basis that it was part of the natural evolution of the product. It involves a straightforward change to the printed circuit board; an encoder chip can be bought off the shelf and does not require new invention or significant experimentation. The encoder chip already existed within the Gen 1 EPAS system before being added to the Gen 2 motor. It is also an issue on “could and would” because Mr Coles complains that Globe seemed unable to provide it in 2002.

Mr Arwine explained that he would have bought and obtained the encoder as part of the leadframe from a third party, in the same way that Globe sourced the leadframes from a third party for the Gen 1 motors. His witness statement explains uncontroversially how he would have done this. Professor Ackva did not disagree that Globe could buy the sensors from a third party, that there is no reason to suppose that Globe would not have made the relevant changes to add the encoder in the way outlined by Mr Arwine within the required timeframe, particularly had TRW collaborated with Globe and provided Globe with the specifications for the encoder. He also accepted that Globe would have been in a better position than Emerson to do so given its experience with the Gen 1 motors-see T30/79 to 83.

There is no sign of this issue being of concern to TRW’s customer Renault.

Thus the encoder does not assist TRW on the could and would case and, as I see it, is not material to the dispute about engineering change. I find it hard to see how the need to buy something in and fit it on the Gen 2 makes the new motor a Product rather than a development by engineering change except as part of an accumulation of other matters. The high complexity of the encoder identified by Professor Ackva is much less of a concern once it is clear that in this case it would have been bought in from a specialist supplier.

Inductance became a bigger issue for the parties at trial than the written evidence and documents had indicated. While I recognise that the issue arose only in response to Globe’s introduction of the Globe Gen 2 into the litigation there is no sign in any of the contemporaneous documents of inductance being a matter of particular significance or of it being a perceived weakness of Globe.

It is common ground that the Globe Gen 2 would not have met TLVES’s inductance parameters specified for the Emerson Gen 2. It would have had lower inductance values. There is no evidence that Renault itself specified requirements relating to motor inductance. It is also unclear how critical the specified inductance parameters were.

There was a change between the inductance parameters between the Rev A and Rev B specifications for the Gen 2 motor. The inductance specifications of the Emerson Gen 2 motors were relaxed, including as part of the EOLT process by TRW following release of the Gen 2.1 specs in order to accommodate the performance of the manufactured Emerson motors.

The evidence on the importance of inductance was set out in Mr Coles’ second witness statement: paras 122 – 125. He explains the relationship between speed and torque output but does not go on to apply his theoretical information. Mr Coles exhibits a report compiled for him by colleagues in January 2014. One of its seven bullet point findings is “The proposed Globe Gen2 motor will have reduced torque at high speeds when compared with the DEAS Gen2 motor”. Mr Coles gave evidence that higher inductance was an advantage at higher motor speeds. Mr Coles relied on a graph in the January 2014 report to show that at speeds up to approximately 2,200 rpm, Globe would have produced either the same or more torque assistance with its Gen 2 motors than the Emerson Gen 2 motors; but at speeds above 2,200 rpm, it would have produced less torque assistance with its Gen 2 motors than the Emerson Gen 2 motors. Globe objects that Mr Coles did not carry out the analysis himself and there is no evidence to verify the data and TRW has not adduced any documentary evidence that would permit Globe, the experts or the Court to verify the accuracy of that data. Globe also objects that the graph cannot show whether the impact of the lower levels of assistance at motor speeds above 2,200 rpm would have had any impact on compliance with Renault's requirements for torque-speed of the Gen 2 EPAS system.

Mr Coles accepted at T27/126:15-23 that the difference in torque assistance was "miniscule" (about 1Nm) even at speeds of 3,000 rpm. He was not able to say that Renault would have rejected the lower inductance motor. Mr Coles also accepted that TRW would have worked with Globe to manufacture a Gen 2 motor which would have met Renault's requirements for the EPAS system T27 /17/12-22.

There are also some references in Professor Ackva’s report. Professor Ackva accepted in cross-examination that he had done no independent work on the relationship between speed, torque output and inductance in relation to these motors in this system and he was unable to opine based on his own work as to the relevance of high-speed manoeuvres in relation to the motors in issue.

TRW says that the starting point is that all its specifications included a minimum level for inductance. The Court should therefore infer that this was part of TLVES’s requirement and it should be extremely cautious in second guessing this view as the Claimants invite it to do.

Globe says that the failure to meet specification does not prevent the motors being direct substitutes for the DEAS Gen 2 motors which would have met Renault's requirements for the Gen 2 EPAS system because the impact of the difference between the inductance values is de minimis and the Globe Gen 2 motor would have met the relevant performance requirements. Further Globe and TRW would have worked together to agree a relaxation in the specified inductance values (because in doing so it would have had no material or noticeable effect on the performance of the Gen 2 EPAS system and Renault's requirements for the Gen 2 EPAS system), or to address the difference, insofar as necessary, by making other changes to the motor (for example by increasing the number of turns in the copper wiring to bring the inductance levels even closer to the TRW specified inductance values).

Globe says that TRW’s position is not made out on the evidence. Mr Arwine explains that lower inductance is most important because it means the system can provide greater assistance at lower speeds. In evidence Mr Coles admitted that the inductance parameter was an example of a specification that was relaxed by TRW in consultation with DEAS. Globe accepts that the EOLT data reveals parameters for inductance that were met by the DEAS motor but that could not be met by the Globe Gen 2. Globe says that the reason that shortfall is not fatal is that Globe would not have needed to come within the parameters met by DEAS in order to provide a motor whose functionality meant it would have been a direct substitute for the DEAS Gen 2 motor.

Mr Coles said this about the issue:

“Would the lower inductance have an impact on compliance with Renault’s requirements for torque-speed at a systems level and therefore require a concession on those requirements? I do not know and to find out would require a top level analysis of all areas of the flow down. I do not have that information and it would take a considerable amount of time to get the answer. I however strongly suspect that it would impact compliance with Renault’s torque vs. speed requirements, and then to deviate from compliance with it would require TRW to have to seek a concession from Renault which may or may not have been given.”

Dr Sidman developed an argument as to the electrical time constant for which there was no other evidential support. Mr Coles answered the point in evidence convincingly. As I am sceptical about any point made by Dr Sidman alone and was impressed by the truthfulness and technical expertise of Mr Coles, I prefer the position of TRW on this aspect. I have the same view of other suggestions made by Dr Sidman alone about means of providing a higher inductance level.

I bear in mind but will not repeat the purpose and limitations of this exercise. If I had to determine, on the limited evidence available, whether overall a higher level of inductance was more desirable than a lower I would choose the higher. It is unlikely that low inductance is a positive advantage as Globe seemed to contend. I sense from the volume and lack of depth of preparation on this issue however that it is of less significance than it was made to seem. Neither Mr Coles nor Professor Ackva carried out any of the actual work needed to demonstrate the point TRW seek to make.

Mr Coles accepted that the shortfall was minor. Inductance was not something which appears to have concerned Renault at any point. There is no reason not to accept Mr Arwine’s view that inductance, except insofar as it affects safety is less important than other aspects. It seems to me more likely than not that if this issue had actually arisen the parties would have resolved it without difficulty, as indeed TRW and Emerson appear to have done on the real Gen 2. The fact that Globe’s Gen 2 does not meet the inductance requirements would not have prevented the parties achieving an overall solution. It is very likely that they would have done.

EOLT. There was lengthy debate at the trial repeated in detail in the closing submissions about the significance of the fact that in the real world specifications are amended or relaxed along the stages leading to EOLT (end of line testing as I explained earlier in this judgment) and production. There are many reasons for these EOLT amendments the most obvious being those necessitated by lessons learned in turning a design into a real motor.

Globe points to TRW’s acceptance to a degree in its pleaded case that Gen 2 motors and leadframe assemblies that did not in their entirety comply with those specifications would be acceptable so long as they fell within the parameters set out in an End of Line Testing Document. This was common ground. Mr Coles confirmed that specifications were relaxed or amended in practice by reference to the actual performance of the motors. This is in line with the usual procedure in the automotive industry described at paragraph 5.1 of the Joint Experts’ Report. Professor Ackva agreed that specifications could be relaxed or amended in this way. Globe complains that TRW have not provided a collated record of the DEAS Gen 2 specifications “post-relaxation” by reference to EOLT or any specification that reflects the EOLT data.

Mr Downes contrasts this with other evidence that the end of line test parameters did not constitute a relaxation of the motor specification. The motor in question still had to be designed to the full rigour of the motor specification. Mr Coles explains in his first statement at paragraphs 119-121 that end of line testing parameters only applied to motors once they had gone into production. Professor Ackva explained the distinction at T30/16:

“A. I do not fully agree because you have to develop a motor according to a motor specification and you have to pass then all the testing, and only when you have passed the testing do you know that the motor will do what it should do. And then it goes into production and you need these production parameters and end-of-line tests so I think a question of time. So you start a development and you have to develop a motor which meets that motor specification, to my understanding. Once you have done this, you have shown this by DV testing, PV testing, then you go into production, you define probably other tests and try to see on the line, is this a good motor or a bad motor? So you see that the end-of-line testing is go/no-go criteria while the other one is a specification-dedicated testing.”

EOLT- conclusion. The upshot is that EOLT is the last stage of checking and changing and is concerned with actual motors not drawings and specifications. It can fairly be distinguished from the design stage. A comparison between a design made in theoretical or lab conditions with an actual motor achieved after EOLT will not be a fair one. A comparison between motors which has regard to EOLT as well as specifications for both products is a relevant one. EOLT remains a valid factor to take into account, for what it is, in evaluating the could and would case.

I turn next to the more general submissions on this issue.

Globe’s case. The question, as put by Globe is whether or not it could and would have built a direct substitute for the Emerson Gen 2 motor and thereby have met Renault’s requirements for the Gen 2 EPAS system. Globe accepts that it must prove that there was a breach of contract and that it has suffered loss. Globe accepts that it must show that it would have been able to perform by meeting its obligation to supply Products under the Agreement. It submits that it can show this and would have made the Globe Gen 2 using Engineering Changes, and it would therefore have been a Product.

Globe says that the Court must undertake a hypothetical exercise because Globe was never commissioned to build or supply any Gen 2 motors. The Court should carry out that exercise on the assumption that the Agreement had been performed and so that the exclusivity upon which Globe relies had been observed by both parties from at least June 2001 onwards (if not earlier). TRW may not say (as its employees were apparently hoping in the summer of 2002) that Globe was unable to provide an appropriate Gen 2 motor and that there was no choice other than to go with Emerson for the Gen 2. In reality, as Mr Coles explained, TRW were always going to go with Emerson on the Gen 2 motor. Even when TRW did belatedly ask Globe to quote on the Gen 2 motor, TRW’s continuing failure to engage with Globe thereafter made it impossible for Globe to develop its Gen 2 motor - in particular, TRW refused to fund any engineering support for Globe to develop the Gen 2 with TRW in the usual collaborative manner.

Globe was under no obligation to build a sample motor to make good its case. Globe has not built a sample motor because the SPEED and other simulation data it has provided are industry standard and may properly be relied upon to satisfy the burden of proof to the requisite standard.

A further reason why the best guide for the Court is the functional specifications of the DEAS Gen 2 is the absence of other evidence. TRW has chosen not to put forward any witnesses who can explain what Renault’s actual requirements were as regards the motor in the Gen 2 EPAS. Mr Laguette, Dr Wilson-Jones or Dr Burton, Mr Dugout and Mr Laguette might have done so. On the technical side, Mr Coles explained that he did not know himself what the Renault requirements were. It was the systems team that had the interface with the customer and Renault provided system specifications to that team. The relevant individuals at TRW who dealt with Renault, such as Dr Russell Wilson-Jones and Dr Tony Burton, did not give evidence

Globe says that Renault’s requirements would not have caused a problem. Renault’s primary concern was that the Gen 2 EPAS system performed to the requisite standards, met safety requirements and fitted in the box. The customer was not concerned with details as to what was “in the box” as Mr Connor, Mr Heckmann and Mr Coles confirmed. The history of the development of the Emerson Gen 2 reveals that Renault was prepared to make concessions on formal specifications as long as performance of the EPAS system in the vehicle was satisfactory. Renault’s flexibility as regards the type of motor that was used in the Gen 2 EPAS system was demonstrated by the fact that even in July 2002 (almost two years after the Gen 2 programme began) Renault was asking TRW to consider various alternative configurations for the Gen 2 motor – including using Globe’s Gen 1 motor in a form of hybrid. Renault’s focus was on performance of the Gen 2 EPAS system. In cross-examination Mr Coles accepted the proposition that generally “as long as it fits in the box and does what it needs to then that is good enough”: T25/44:16-25.

Globe points out that the phrase “functional specifications” is one that TRW itself uses in its internal correspondence and dealings with Renault. Dr Sidman understood the concept of “functional specifications” but Professor Ackva stated in his report that “a functional specification does not exist in the motor business”: Report paragraphs 1.9 and 6.35. Despite taking that stance, Professor Ackva assessed Globe’s functional specifications and concluded that (subject to timing) Globe “could and would have designed motors and leadframe assemblies that complied with its Gen 2 “functional specification””: Report paragraph 1.10 and 8.44. Professor Ackva accepted in the course of cross-examination that he had taken too stringent an approach in focusing upon specification documents alone as the basis for setting out specifications, given the practice of amending specifications following testing and even by email: T30/20:14-24. He also accepted that there is evidence that TRW used and understood the phrase “functional specifications” but sought to distinguish the use of the phrase as being permissible in relation to the EPAS system, but not permissible in relation to a motor in an EPAS system: {Day30/25:13-17}.

The experts agree that Globe could have built the Globe Gen 2, though Professor Ackva disagreed that Globe could have done so in a short time frame from April 2002 and whether the necessary changes would have been Engineering Changes.

In the hypothetical scenario, Globe and TRW would have collaborated in order to meet Renault’s requirements using Globe’s technology. Mr Coles confirmed this. He said that, as with all its suppliers, TRW would have been looking for solutions rather than difficulties. TRW employees would have done their utmost to ensure that the outcome of that collaboration would be a motor that worked and met Renault’s requirements. As Mr Coles stated T27/17:12-22:

12 Q. You would have taken whatever you needed to, to get this

13 work done and done properly, wouldn't you? You are

14 nodding?

15 A. We offered Renault what we thought was appropriate and

16 what was the best technology at the time.

17 Q. I am not asking what you did, I'm asking you what you

18 would have done if you had had to work with my clients,

19 and against the background of your 2.5 revision, you

20 would have taken them my clients' technology and made

21 sure it worked?

22 A. Correct

That collaboration would have begun in 2001 well before April 2002 and not from a standing start. Globe says that it would have met the Start of Production in January 2005 with TRW’s co-operation and engagement - even if that had only begun in April 2002.

Globe was able to meet any relevant safety and quality requirements and the undisputed track record of some 7 million Gen 1 motor sales to TRW demonstrates that Globe has had no problems in this regard. Globe did not have any quality, or timing or capacity issues that would have prevented the supply of the Globe Gen 2 motor.

In addition to actual test data from the Globe Gen 1 and the B2E motors, Mr Arwine ran simulations on appropriate software to demonstrate that the proposed Globe Gen 2 motor would have met the necessary functional specifications. The failure to meet the inductance and resistance performance of the Emerson Gen 2 motor would not prevent Globe’s Gen 2 from being a direct substitute. The relevant information is in the Arwine Master Schedule and Mr Arwine’s witness statements and exhibits.

The likelihood of success and the fact that the changes would have been Engineering Changes is supported by the fact Globe developed the J77 hybrid and B2E motors with TRW.

TRW’s case is as follows. The Claimants’ hypothetical Gen 2 “functional specification” is unworkable legally and in practice. It is inconsistent with the wording of the Agreement. There is no such document or list of documents for the “functional specifications” which the Claimants say are relevant. It is noted that the lack of a document or documents setting out the “functional specification” persists despite the fact that the Emerson Gen 2 motors and leadframe assemblies are actual products built to actual written specifications. There is an actual set of specifications that the Claimants could have used as a template for their full “functional specifications”, but they have not done so. (The difficulty with that point is that Globe does not claim to have been able to build the Emerson Gen 2 itself but the Globe Gen 2 which it says would have emerged from the collaborative process).

TRW points out that the documentary evidence of the actual specifications that TLVES used in relation to the Gen 2 products goes far wider than the “functional specifications” suggested by Mr Arwine. The relevant specification is for the Gen 2.1 since this was the specification that DEAS initially provided motors against and it is set out in 18 separate documents. The breadth of these documents establish beyond any question that TLVES’s requirements went beyond matters of functionality as Mr Arwine has restricted them. They included points relating to faults in the system, motor life, the thermal duty cycle, the operating environment and 5 or 6 other matters. The Claimants cannot define TLVES’s requirements by reference only to the core functionality.

A common sense list of legitimate criteria to which any motor and leadframe assembly had to be built would include elements that go beyond functionality, for example, it would include requirements in respect of safety and reliability. A “functional specification” therefore cannot be a full specification. It cannot be a blue-print by which to build a product.

A requirement that a motor and leadframe assembly had to meet a “functional specification” would offend the need for there to be commercial certainty in the terms of a contract because there will always be scope for dispute as to what is functional and what is not.

The restrictions of the automotive industry suggest that TLVES/TRW ought to be allowed to define its own requirements as to what should and what should not be specified for motors and leadframe assemblies. The Defendants, as suppliers of parts to the automotive companies, are better informed about the needs and requirements of their customers than Globe is; it is not for the Defendants’ sub-supplier to dictate what the Defendants and their customers want or require.

TRW says that the EOLT parameters are of no relevance because these were referable to actual motors as opposed to a motor design. They did not dilute the requirement for a motor that was capable of meeting the full motor specification .

The Court should not second guess the views of the managers and engineers with responsibility for the decision making at the time, for example those of Mr Coles about the segmented stator. It should not seek to substitute its own view for the view of the actual managers at the time. The wording of the agreement contains only a subjective requirement and thus there is no scope for the Court to reach its own view.

Mr Arwine has accepted that Globe could not have met the Gen 2.1 or the 2.5 specifications. Thus at T19/121:

“MR DOWNES: So when his Lordship comes to answer the question: could Globe have manufactured a Gen 2 motor to the specification, the rev B specification, the answer is "no"?

A. Yes.

Q. You are agreeing with me?

A. Based on this information, yes.”

Mr Arwine also accepted that Globe could not have built a motor that was a “direct substitute” for either the Gen 2.1 (the Rev B) specified motor or the Gen 2.5 (the 188) specified motor at T21/100:

“Q. I think it follows from the answers that you have given already that the hypothetical Gen 2 is not, you accept, a direct substitute for the rev B specified Gen 2?

A. For the rev B substitute, yes.

Q. It is not a direct substitute for the 188 specified Gen 2?

A. Correct.”

Decision. Globe’s starting point is that TRW was in breach of contract in 2005 by ordering the Gen 2 from Emerson. Globe claims damages based on what it says would have happened if its rights had been respected. Can it show this on balance? The question is whether Globe can show on balance that it would have received the business. This is a hypothetical and imperfect exercise. Numerous criticisms can fairly be made of the detail of that approach, for example that even the hypothetical model is not fully spelled out. They could no doubt have been made of any other model. TRW is entitled to perform a contract in the least burdensome way it can consistent with its legal obligations. I assume for this purpose that TRW would have recognised its duty without enthusiasm but would have been bound to cooperate in devising a system acceptable to Renault and to itself using a motor which Globe could reasonably have built at a cost established consensually or by the machinery in the Agreement. Even minimal compliance by TRW would have been likely to produce an acceptable result. TRW wanted Renault’s business and had a contractual obligation to source the motor through Globe. TRW had in the past worked well with Globe and, it was clear from the evidence in this case, would have willingly worked with it again if required to do so. TRW’s preferences for particular technical solutions on Gen 2 would not, on the assumptions of this exercise, have been shaped by adjustments made, as must have happened on this project, to the particular strengths and weaknesses of Emerson and would have had to be subordinated to the need to work with Globe.

The exercise requires the court to assume that the parties would from 2001 onwards have conducted themselves collaboratively in working on a Gen 2 built by Globe. As a matter of contract TRW did not have to do more than the minimum but, whatever effect that consideration had upon the terms as to price, TRW was locked in to Globe and had to keep Renault happy. This is not because of a particular contractual commitment to cooperate going beyond what is imposed by Article 4. It is because, as the evidence makes clear, TRW could not, in the real world, have met its contractual obligation to place the order with Globe not Emerson in 2005 without years or many months of preparatory work. (This point, as I see it, also disposes of TRW’s argument in closing that this preparatory work was, if anything, part of a contractual obligation which arose in the years before 2005 and is thus statute barred.) The cogent evidence that Globe could not have met deadlines imposed as a result of what actually happened in this case, with Emerson being treated as the Gen 2 supplier until , for a period, Globe was brought into the picture because of a wish by business (as opposed to technical) management within TRW to avoid amortisation liabilities, is a distraction. If TRW had complied with its contractual obligations Globe would not have been placed in this invidious position in the first place.

TRW had legitimate requirements going beyond those identified as functional. It is conceded that these included reliability, safety, ability to deliver on time and cost. The first two were not seriously in issue given Globe’s reputation and record both generally and within TRW with whom it had worked for a long period and with whom it still works today. The ability to deliver on time is addressed further below but does not seem to me to be an issue when it is borne in mind that the hypothetical exercise involves the parties working together from 2001 not from some date in 2002 when TRW sought to reduce its amortisation liabilities and Globe was considered alongside Emerson. Cost seems irrelevant because the price for Gen 2, if it was a Product, would be determined under Article 4.3. TRW points out that the rationale for the Gen 2 was to produce a motor which was cheaper than the Gen 1 and Globe would not have achieved that. That may be true but in the event Emerson did not produce a cheaper motor either but it still went ahead.

TRW had the right to impose its own requirements for the motors upon Globe. The Agreement does not permit Globe simply to build what it likes as long as it meets the requirements that Renault can be persuaded to accept. A consequence of TRW entering into the Agreement however is its commitment to buy and Globe’s obligation to sell Products. A line has to be drawn somewhere, but not in this case, between two considerations. First there are TRW’s legitimate detailed requirements including no doubt technical changes which might be seen as not essential but desirable as the way forward to future improvements. Secondly there are changes which Globe could not accommodate at reasonable cost or at all with the result that it was not able to obtain its rights to supply under the Agreement or could not be compelled to supply a Product which was commercially unattractive to it.

The Court needs to identify enough information about the DEAS Gen 2 motor to understand Renault’s requirements and to assess whether Globe could have met them with the Globe Gen 2 motor-or rather the specifications they have devised for what that would have been. This is part of the inevitably imprecise hypothetical or ‘counter factual’ exercise of deciding what would have happened if Globe, and not Emerson, had been offered the Gen 2 from the start. Evolution of the system and of the motors was a lengthy and collaborative process as emerges from my summary of the facts. Renault and TRW worked closely on the system. While Renault, the car experts could dictate requirements these would be shaped by technical and other factors over which TRW (and perhaps its competitors) as the EPAS experts would have influence during the collaborative process. Specifications were not simply devised by Renault and handed to TRW. A commercial constraint upon TRW after June 2001, which carried with it an assured source for motors, was the Agreement and the obligation to give Globe, with its own technical strengths and weaknesses, its business for the Products. That factor would have fed into the discussions with Renault. TRW would have discouraged Renault as far as possible from imposing requirements that Globe would have found difficult or expensive to meet. Renault was the customer and could specify to TRW and its competitors as it pleased. On the other hand Renault was after a system “in a box” and would rely on TRW for much of what, such as the motor, was inside that box. There was no evidence from Renault or from anyone within TRW who dealt with Renault over these matters and in that vacuum I conclude what seems most likely, given the totality of the evidence, to have been the Renault position.

TRW would in turn have discussions over a long period with Globe (as it did in this case over the Gen2 with Emerson) before issuing its own specification which would have been shaped both by Renault’s requirements and by Globe’s advice and its perceived strengths and weaknesses. That is clear even from the extracts from the evidence cited by the parties in their submissions. So it is necessary as best one can to arrive at the specifications which Globe would have been required to meet (making allowance for likely amendments and EOLT changes), not what Emerson actually produced. I do not accept that the word “requirements” permits TRW to impose what it wants regardless of the real needs of Renault and the capacity of Globe the company with whom it has chosen to contract. The important requirements would have been those then imposed by Renault plus those of TRW, shaped by the fact that they could not, consistently with the Agreement, and would not consistently with delivering systems to Renault adopt a technical solution that Globe would find it impossible to deliver. In reality the motor would have evolved down TRW/ Globe not TRW/ Emerson tramlines.

Given the hypothetical nature of the inquiry, and it being necessary only because TRW broke the contract, the collection of material identified and extracted above and described by Globe as a functional specification is a fair basis upon which to carry out the proposed exercise, subject to reservations. Clearly the email variations and EOLT changes have to be seen as at the point when they occurred, not as transposed in some way to the specifications themselves. The expression “functional specification” is itself unhelpfully controversial. I accept that it is not an expression much used or of any special significance in the automotive industry but it clearly has some meaning in engineering as the experts agree and it was used in places and at times by TRW. Mr Downes has rightly pointed to flaws in the concept of functional specification but I have been shown no more reliable tool with which to begin the task. Further other factors not included in the functional specification, such as safety, timing and cost are relevant to the decision on the ‘could and would’ case but the Court can still pay regard to that outside the parameters of functional specification.

Globe’s case. I have referred above to what Globe says these are. Globe adds that the final specifications that Globe and TRW would have settled upon may well not have been the same as those for the Emerson Gen 2. This is one reason why a rigid comparison with the Emerson Gen 2 written specifications is both unnecessary and likely to mislead. The second reason is that Emerson itself did not manufacture to the written specification but instead manufactured to the relaxed/amended parameters as detailed in the Master Schedule.

TRW’s case. In TRW’s view, Globe’s case seems to be that the relevant specifications of the DEAS Gen 2 are hypothetical specifications which would have included compromises required by Globe and agreed to by TLVES for aspects of the actual DEAS Gen 2 specification that Globe could not meet. At [T22/10/5-20] Mr Arwine accepted that there was no document which set out the hypothetical specification to which Globe would have built a functional equivalent of the DEAS Gen 2 and that there was in fact no full hypothetical design.

TRW’s position is that the relevant specifications are the actual Emerson Gen 2 specifications to which Emerson produced Gen 2 products (both the Emerson Gen 2.1 and the 2.5). The Globe construct is irrelevant.

Decision. There is no real dispute as to what these specifications were. The dispute is the ‘could and would’ issue.

This question is no longer relevant. The Court is not concerned with comparing the Globe Gen 1 and the DEAS Gen 2. The only relevant comparison in terms of specifications is between the Globe Gen 2 and the DEAS Gen 2. This is, as Mr Downes puts it, a “fossil” left over from an earlier version of Globe’s case put forward before disclosure.

Globe’s case: Yes. The Court must assess the relevant proposed changes and decide whether, as a matter of fact, they fall within the contractual definition of Engineering Changes. The necessary changes would have been to the “Specifications or other requirements” relating to the Gen 1 and/or J77 hybrid. Both of those motors were Products under the Agreement. Globe relies upon Mr Arwine’s factual evidence as to what he would have done in designing and directing the manufacture of Globe’s Gen 2 motor. Mr Arwine’s evidence is that Globe could readily have made a series of simultaneous Engineering Changes to other Products (as defined in the Agreement) so as to produce the Globe Gen 2 motors that would have been direct substitutes for the DEAS Gen 2 motors.

Globe says that Mr Arwine’s evidence is carefully considered and highly detailed. As between the witnesses of fact, it was Mr Arwine who had the broadest experience of both development and manufacturing, including through engineering changes. The details as to the nature of and method for manufacturing the Globe Gen 2 motor using the proposed changes were little challenged.

Globe says that Mr Coles confirmed that manufacturing is not really within his purview and that he relied upon input from others when dealing with that area in his evidence and accepted that Mr Arwine has greater experience of manufacturing than he does.

Mr Penketh also accepted Globe’s position as regards the broad scope of what could go through the TRW engineering change procedure, that it would be possible to compress the timeframe for complying with that procedure where there was a commercial need and that a number of engineering changes could be made at once.

Mr Penketh conceded (as did Professor Ackva) that Engineering Changes encompassed all changes to an existing product- see T28/19:7-17 but could not explain why there had been no procedural record of changes to create the J77 hybrid and how that practical example could fit with his rigorous insistence that engineering changes could only be made in accordance with TRW processes: T28/25:17

The fact that Professor Ackva took the view that the totality of the changes proposed by Mr Arwine could not amount to Engineering Changes is neither here nor there. The opinion runs counter to the factual admissions made by Mr Penketh and is based upon Professor Ackva’s own assumptions as to the motor architecture of the Gen 2 (such as the segmented stator) which are contrary to Globe’s design.

TRW’s case. TRW concentrates on the evidence of its expert and argues that the Court should accept the evidence of Professor Ackva which was as follows in paragraphs 9.6 – 9.8 of his expert report:

“9.6

There are other single items like eg the high resolution encoder (line L) which is a completely new device with high complexity in function and tolerance stack-up that to my understanding is no engineering change.

9.7

For making the Globe Gen 2 motor we have to include all the “modify” plus all the “new” items from Table 10 together into the motor at once. This is an accumulation of technical complexity. Resolving all the technical, tool, process and validation requirements is a huge challenge.

9.8

To my experience that would never be engineering change but a new motor design. It could not be handled through the engineering change process.”

At T30/44 Professor Ackva was cross-examined about this issue, and his evidence remained firm and clear:

“A change to a product, let's say you have a motor running on production lines, if you do a change there is always a risk that with the change you have some problems which you don't see in the beginning. And if you have a problem in the motor there might be a problem with the steering system or maybe, in the worse case, a problem with the car. So changing something has to be judged very carefully by engineers, by every people, to see whether the benefit I expect with the change is not compromised by any risks of deficits in producability on the TRW line, on the Renault line or especially in safety for the driver. Therefore, especially in the safety-critical area of power steering motors, any change can be risky very quickly. And if you now put together many small changes, which in itself are small changes like engineering changes, the more and more you put together you get a complexity of risks which no customer like Renault or TRW would accept, they would say: if you change too much you have to go through complete validation, complete risk analysis before we put this to the customer. And this is what I mean with complexity.”

Decision. This issue overlaps with Issue 1. The starting point is the meaning of engineering change which I have decided above. Professor Ackva in his evidence takes a more rigid and formalistic view of the expression than the meaning that I have decided that the Agreement bears. His views have to be seen in light of that. I accept of course what he says about the importance of the changes from a safety standpoint and the need for them to be carefully evaluated. It does not follow from this that the changes cannot be engineering changes. I repeat again that the words in the Agreement are “changes in the Specifications or other requirements relating to the products.” Dr Sidman, whose views have limited weight for the reasons I have given, is some support for a broader engineering view. Mr Coles’ views on the manufacturing side are based on much less experience in that particular area than Mr Arwine. Mr Penketh’s views also generally support those of Mr Arwine. The process of making engineering changes can be less formal and more flexible than the Professor suggests as one sees from the evidence and from the way in which the companies did business as recorded in the documents.

I reject the claim made as I recall late in the trial that Mr Arwine’s evidence is inadmissible opinion evidence. In most technical disputes fact witnesses familiar with the subject give opinion evidence. In most claims for damages of the kind sought in this case evidence is put forward of, for example, the Claimants’ estimate of the sales that would have been made and he or she is cross-examined about this. Opinion and fact evidence overlap in this area and if a point was to have been taken this should have been at the directions stage. See Multiplex-v-Cleveland Bridge [2008] EWHC2220 at 675-6 (not cited by the parties.)

I largely accept Mr Arwine’s evidence which has to be seen against the background where Globe was a successful company in its field which had worked closely and successfully with TRW in the past and where TRW had an incentive given the terms of the Agreement to make changes feasible and workable. TRW may not have had a legal duty to cooperate but in practice it had every incentive to do so, had done so in the past and, having seen and heard some of those involved and what they wrote at the time, would have done so. Mr Arwine did not pretend that his Gen 2 was a direct substitute for Emerson Gen 2 or even that Globe would be able to reproduce the Emerson product. I do not need to evaluate Mr Arwine’s claim that he was over 95% certain of what Globe could do beyond concluding that it was over 50%, more probable than not.

The answer to the question is “Yes”.

TRW’s case. TRW contends first that Mr Arwine’s evidence on this issue is inadmissible. I disagree for the reasons I have given.

TRW says that it is unlikely that the hypothetical Gen 2, if built would meet the specification (however the Claimants select or define the relevant specification), and particularly the ripple torque and inductance and resistance tolerance and balance requirements. TRW says that notwithstanding any issues as to how the Claimants could have produced in 2003 or 2005 a motor and leadframe assembly to a hypothetical specification that was not available until late 2013, and issues as to how long it would have taken them to develop the design at all, it seems that even if they had been given as much time as they required in 2002-2003 (or indeed earlier), the Claimants would still not have produced a design matching the hypothetical Globe Gen 2 design submitted for the purposes of this litigation because they were in fact working on a 15 slot 10 pole design at the relevant time. Mr Arwine said the following in cross-examination:

“Q. If we are talking about start of production in 2005 and you need two years from design to delivery, and an early version of your design is only available in 2013, am I right in thinking the only way that the motor built to your hypothetical design could be available in 2005 is with a time machine?

A. I would disagree with that, because I believe when we spoke about that last week when I put myself back in time we wouldn't have proposed this theoretical design, we would have proposed the 15/10. At that time we had a design as best we could in that 2003 timeframe, but we still didn't have all the information we needed. So I wouldn't -- putting myself back in 2003 timeframe, what would I design, it would not have been this theoretical design, it would have been the 15/10 that we proposed at the time.”

Additionally, Globe was incredibly busy around the time it was working on Gen 2 designs, and it is not at all clear that sufficient resources were available to handle the project. On 30th July 2002, Mr Arwine emailed Mr Noga [F6/1744] in the following terms:

“… TRW is now rumbling about getting Gen II samples, they seem to be getting serious. It that hits, we will be swamped during the Porto crunch time. Delphi seems to have a life of its own and who knows where Motorola is going. I am on a workload whipsaw, I seem to be either worrying about no work or too much.”

Globe’s response is that it would have been able to implement the relevant changes to the Gen 1 and/or J77 motor (i) prior to Start of Production of the Gen 2.1 motor in January 2005; and (ii) prior to Start of Production of the Gen 2.5 motor in May 2006 (Type 1) and July 2006 (Type 2). Globe relies on the evidence of Mr Arwine.

Other factors are relied on by TRW. TRW criticises the absence of a prototype. Globe responds that there was no need to create a sample. Mr Arwine had first-hand knowledge as to the development and manufacture of EPAS motors for these purposes. His conclusions are based upon computer simulations and the application of actual test data. Mr Arwine explained that though a Finite Element Analysis has not been carried out on the hypothetical model, his SPEED tools are “very accurate” – and are used in military applications that go straight to production.

Globe emphasizes that it built not only the Globe Gen 1 motor (which was supplied to TRW) but also a similar motor to the Globe Gen 2 in the form of the B2E. That enabled Mr Arwine to use actual Gen 1 and B2E test data as well as SPEED data from his model - where necessary.

TRW relies on the fact that Globe made formal exceptions to requirements of specifications. Globe responds that the provision of exceptions to RFQ specifications was standard practice for Globe and TRW as the TRW witnesses Mr Heckmann and Mr Coles accepted. It is clear to me that exceptions, despite their wording, were a routine and expected stage in the process by which the parties reached a design. It is wrong to suggest that they are a sign of refusal to engage.

TRW points to Globe’s apparent inability to produce a Gen 2 motor after April 2002. Globe’s short response is that Globe did what it could after receiving the April 2002 RFQ but was never given adequate support or information as to the necessary requirements at the material times. The chronology of events, detailed citations from documents and the evidence on this point in Globe’s closing submissions and findings I have already made bear this out. Globe says that it could have built the Globe Gen 2 motor by January 2005 even if it had to start from scratch in April 2002. Had it begun in June 2001, the motor would have been developed even sooner given Mr Coles’ estimates of the timescale for development. Emerson did not begin from a standing start in April 2002 with the formal specifications but had been working with TRW since autumn 2000. Where there was a business need for changes to be implemented quickly, TRW and Globe would have worked quickly and efficiently to meet that target. They had already proved with the J77 hybrid that they were able to comply promptly and to deliver a safe and compliant product for Renault. TRW and Globe were not required by the Agreement to comply with internal procedures for engineering changes, but were in any event prepared to fast track if required. TRW’s engineering resource was directed to help Emerson and not Globe.

Decision. The answer is that Globe could and would have implemented those changes within a timescale acceptable to TRW and Renault. What happened in 2002 is not a useful basis for evaluating what would have occurred if the parties had worked as the Agreement, on its true construction, required. It is clear on the face of the documents that TRW was virtually almost from the start determined to award the Gen2 contract to Emerson given the policy it adopted in the US. TRW worked closely with Emerson but not with Globe, from the outset. TRW involved Globe, but only to a limited degree, when some business managers saw the possibility of reducing amortisation liabilities. That involvement was too limited and too late to provide relevant guidance as to how Globe and TRW would have worked and performed in other circumstances.

Globe’s case is as follows. The Globe Gen 2 motor would have constituted a direct substitute for the DEAS Gen 2 motor and would have met Renault’s requirements for the Gen 2 EPAS system. Globe is not required to meet the specifications of the DEAS Gen 2. Globe’s case is not that it would have built a carbon copy of the DEAS Gen 2. The purpose of looking at the DEAS Gen 2 functional specifications is to enable the Court to understand what Renault required by way of functionality for the motor in the Gen 2 EPAS system on the P1 platform. The Court should not focus rigidly or exclusively upon the DEAS Gen 2 specifications, given that Globe and TRW were likely to have come up with their own formulation to meet Renault’s requirements through collaboration.

Globe’s evidence in support is that of Mr Arwine distilled into the Master Schedule. Columns F and M of the Master Schedule set out the relevant performance levels of the Globe Gen 2 that Mr Arwine modelled. Where the boxes on the Master Schedule are filled in yellow, the Globe Gen 2 was able to match the functional specifications of the DEAS Gen 2. A small number of the boxes are filled in grey. Those are where the Globe Gen 2 parameters or specifications did not match the DEAS Gen 2 functional specifications but Globe says that the functionality of the Globe Gen 2 motor would have been adequate to meet Renault’s requirements and so the Globe Gen 2 would have been a direct substitute.

Globe supports its case with the evidence of Dr Sidman but I place little weight on that for reasons I have given. Of more significance is the contemporaneous factual evidence involving TRW such as Mr Coles’ feasibility study of April 2002 and the fact that in the summer of 2002 the only issue TRW engineers thought prevented Globe from doing the Gen 2 motor was one of timing.

Globe criticises Professor Ackva’s evidence on the basis of the limited relevant information he received about matters such as Globe’s tooling, equipment, suppliers or other capacity and the formalistic approach he adopted towards matters which both sides’ fact witnesses saw as not presenting difficulty. Professor Ackva’s central objection to the “could and would” case was based on timing, a consideration not available to TRW given its obligations under the Agreement.

TRW’s case. Since the relevant specifications are far broader than the functional specifications identified by Mr Arwine and include inductance, Globe must fail on this issue. In any event Mr Arwine confirmed in cross-examination that he had not considered the full breadth of the specification for the Gen 2.5 so as to ascertain which parts could be met which could not. There are twelve points identified in Mr Coles’ evidence where Globe’s Gen 2 design did not meet the specifications of the DEAS Gen 2. Mr Downes’ closing submissions develop the technical aspects of these at length.

Decision. The Globe Gen 2 would not meet the relevant specifications of the DEAS Gen 2 but would be a direct substitute. The blizzard of detailed evidence on these issues obscures the fundamental point that these two companies could and would have worked together to produce a suitable Gen 2 motor.

was the Defendant free to purchase the DEAS Gen 2 motors and/or manufacture the equivalent thereto itself?

It follows from the conclusions I have reached above that the answer to (a) is “Yes” and to (b) “No”.

The answers to this Issue seem to be common ground and, subject to correction if I am mistaken, are set out in the table below:

Issue 12. “Did the Defendant (or either of them) (a) act in breach of the Agreement by purchasing the DEAS Gen 2; and if so (b) which purchases of the DEAS Gen 2 in respect of which motors (to be identified by reference to vehicle model designations using the Renault P1 Platform) constituted such breach or breaches?”

It follows from my conclusions that the answer to 12(a) is “Yes” and that the answer to 12(b), following the answer to Issue 3 is “All such purchases”.

This issue arises because of an unattractive position taken by TRW as regards its responsibility for companies in its Group. Under a Business Transfer Agreement of 30 December 2006 between TLVES and TRW Ltd, TRW Ltd assumed from that date, among other things, the full benefit (subject to burden) of all contracts subsisting in connection with the business at Clause 1.5 and all the liabilities, engagements and obligations whatsoever and wheresoever of TLVES in relation to TLVES' business as at the transfer date (being the 30 December 2006) at Article 2. TRW agreed to observe and perform all obligations of TLVES in respect of or arising under all contracts at Article 4. It also agreed to ratify and confirm all contracts entered into and all acts done by TLVES in the course of carrying on the business as agent for the principal at Article 2.2 (i.e. following the transfer, TLVES was to act and acted as agent for TRW Ltd in carrying on the business).

It is common ground that the Agreement was a contract that was "subsisting in connection with the business" as at the transfer date and remains so today and that the Transfer was effective. TLVES has been dormant since the date of the transfer of its business on 30 December 2006. It has no current assets and no net assets and it did not enter into any transactions during 2012. Since 30 December 2006 TRW has been acting as agent for TRW Ltd in accordance with a Deed of Agency.

The Claimants currently do not have permission to claim losses for breach of contract against TRW Ltd for the period 30^th December 2006 to 25^th September 2007. Globe’s application to amend to join TRW Ltd was heard on 25^th September 2013 and permitted except that the application in respect of an additional claim for losses against TRW arising from breaches of contract between 30^th December 2006 and 25^th September 2007 was reserved to the trial judge.

TRW argues as follows. TRW is not a party to the Agreement of 1^st June 2001 between TLVES and Globe. The Agreement has not been novated, assigned or varied so as to make TRW a party. So, while the Business Transfer Agreement can be enforced as between TLVES and TRW, the Claimants (who are not parties to it) cannot rely upon it to make TRW liable for breaches of the Agreement between TLVES and Globe.

Globe responds that the claims for breach of contract are for continuing breaches dating back up to six years before the claim form was issued (i.e. 1 June 2005). The Claimants only need to show that, with effect from the date of transfer on 30 December 2006, TRW Ltd assumed the burden of exclusivity under the Agreement. The Claimants say it did because that is the effect of the Transfer Agreements; that is clearly what TLVES and TRW Ltd intended; and that is how they have operated in relation to the Agreement. This is amplified below. Globe sets out persuasive arguments to show that the burdens of the Agreement as well as the benefits were transferred under the Business Transfer Agreement. Those arguments focus on the exception of “conditional benefits” and the case of Tito v Waddell (No 2) [1977] Ch 106 (at 302) “… it is a question of construction of the instrument or transaction, depending on the intention that has been manifested in it, whether or not it has created a conditional benefit...”

The transfer of the burdens is not in dispute. The question is whether, where there has been no novation, Globe can sue TRW Ltd under the Agreement when TRW Ltd is not a party to it and Globe is not a party to the Business Transfer Agreement.

As to Tito Mr Downes says, in what seems to me to be an accurate statement of the law, this in his closing submissions:

“There is reliance on the case of Tito v Waddell (No.2) [1977] Ch 106 (see footnote 35). However this is misconceived: in that case reference was made to the principle of conditional benefits and burdens based on the decision of Denning MR in ER Ives Investment v High [1967] 2 QB 379 (see at p.295). In the case of Ives, the claimant’s predecessor in title had granted the defendant a right of way in exchange for the defendant’s agreement to allow a part of a construction to encroach onto the defendant’s land. The right of way was not registered. Thus the claimant said that the right of way was invalid. The defendant counterclaimed for a mandatory injunction to require the block of flats to be demolished. Denning MR said at p.394:

“When adjoining owners of land make an agreement to secure continuing rights and benefits for each of them in or over the land of the other, neither of them can take the benefit of the agreement and throw over the burden of it. This applies not only to the original parties, but also to their successors.”

It is important to note that in this case the “burden” was not being used as a “sword” so as to found a claim that would otherwise not have been available; but rather as a “shield” as a means of defending a claim for relief.

The main cases cited in Tito (for example Aspden v Seddon (No.2) 1 Ex D; Westhoughton v Wigan [1919] 1 Ch 159; Chamber Colliery v Twyerould (1893) [1915] 1 Ch 268) and Tito itself all concern rights over land such as mining rights etc and that a party enjoying the rights must also as a condition of that enjoyment observe the obligations that went with them. In Tito this was an obligation to make good the land after the period of phosphorous extraction had ended in 1999.

This is to be contrasted with cases which do not concern land, and in respect of which there appears to be no precedent for the ability of a party who is not a party to the contract in question to claim rights under it. Thus in Barker v Stickney [1919] 1 KB 121 (referred to at p.300 of Tito) the author of a book assigned the copyright to a publishing company that agreed to pay a royalty to him. The copyright was later assigned to another company, but the author could not recover the royalty from the subsequent assignee.”

Mr Downes points out that the Defendants have not been able to find a single case where an assignee of a contract who has agreed to accept the liabilities of the assignor (as between the two) has been sued by the covenantee.

Decision TRW Ltd and TLVES and everyone else on the Defendants’ side agree and accept that the liability as between them is as claimed by Globe. Globe is not however a party to the contract by which that comes about or to any contract with TRW Ltd. For the reasons given by Mr Downes Globe has no right to claim under the Business Transfer Agreement or against TRW Ltd in this case.

TRW Ltd claims that further to section 5 of the Limitation Act 1980, it can only be liable in respect of breaches that occurred in the six years prior to the order by which it was joined to these proceedings (25 September 2013). For those reasons, TRW says it is not liable for breaches of contract that took place within approximately a ten month period following the Deed of Agency (30 December 2006 – 25 September 2007). This defence would only become relevant if the Court had accepted, which it does not, that the burden of exclusivity under the Agreement was effectively transferred to TRW Ltd and Globe could claim against it. As I cannot speculate about the basis on which my decisions on (a) may be held to be wrong it is not useful for me to examine this point beyond stating my view that broad justice would favour Globe.

It follows that the answer to 13(a) is No and that 13(b) does not arise.

The Defendants plead that the Claimants are estopped by convention, representation and/or conduct from claiming that the Agreement applied to Gen 2 products.

The applicable legal principles are not in dispute. In Johnson v Gore Wood [2002] 2 AC 1, at 33D-F, Lord Bingham quoted with approval the dicta of Lord Denning MR in Amalgamated Investment Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at 122, which were as follows:

“The doctrine of estoppel is one of the most flexible and useful in the armoury of the law. But it has become overloaded with cases. That is why I have not gone through them all in this judgment. It has evolved during the last 150 years in a sequence of separate developments: proprietary estoppel, estoppel by representation of fact, estoppel by acquiescence, and promissory estoppel. At the same time it has been sought to be limited by a series of maxims: estoppel is only a rule of evidence, estoppel cannot give rise to a cause of action, estoppel cannot do away with the need for consideration, and so forth. All these can now be seen to merge into one general principle shorn of limitations. When the parties to a transaction proceed on the basis of an underlying assumption – either of fact or of law – whether due to misrepresentation or mistake makes no difference – on which they have conducted the dealings between them – neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands.”

In ING Bank NV v Ros Roca SA [2012] 1 WLR at 472, at para 57 (p.488D) Carnwath LJ quoted with approval the dicta of Lord Steyn in Republic of India v India Steamship Co Ltd (The Indian Endurance and The Indian Grace (No 2) [1998] AC 878 at p.913 in respect of estoppel by convention as follows:

“It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption …”

TRW says that the parties proceeded on the common assumption that the products covered by the Agreement were those identified by the express words of the contract which were the motors and leadframe assemblies for: the 38Nm Nissan B/Renault P1; the 58Nm Fiat C192 and the 58Nm Renault P2. These were also the specific products in respect of which specifications had been agreed before the Agreement was signed. TRW says that the following matters suggest that the parties assumed that the Agreement covered only the products for which express provision was made at Article 1.1:

The matters relied upon by the Defendants in their pleading in respect of estoppel are:

TRW recognises that a point against the estoppel argument is that there is a relatively early possible allegation by Globe that TLVES was in breach of the Agreement. A note made by Mr Keegan for a meeting with Ed Carpenter of TRW on 11^th September 2003 says:

“TRW’s limited resources have eliminated Globe Motors from the Gen II … We have intimate knowledge of commitments made to the competition even prior to the start of manufacturing the Gen 1. This is clearly a violation of Article 5 (life of platform commitment) …”

Globe submits that in order to succeed on this estoppel argument, TRW must show that the parties operated on a common assumption that the Gen 2 was not covered by the Agreement and that the only products relevant were those expressly mentioned in the contract; and that TRW relied on the above representation or common assumption in sourcing Gen 2 from DEAS.

Globe says that there was no representation (still less the necessary unequivocal representation) or basis for a convention as between the parties. Neither party thought that Gen 2 fell outside the Agreement; in fact both thought as a matter of fact that TRW was contractually required to purchase Gen 2 products from Globe.

The evidence of Mr McHenry and Mr Keegan already referred to above in the context of the pre-contractual negotiations was that they believed Globe had an exclusive right to supply the motors required for the lifetime of the P1 platform – both in relation to the 38Nm and whatever followed. That being the case, TRW alleges that there could have been no common assumption to the contrary of the kind.

The fact that TRW was always going to give Gen 2 to DEAS created tensions within TRW given the terms of the Agreement. This is because from June 2001 TRW always believed at the material times that the Gen 2 motors fell within the Agreement. So the contention that there is an estoppel because TRW believed it did not have to buy Gen 2 Products from Globe is untenable. From shortly after the Agreement was signed, TRW believed it applied to Gen 2 motors. Alison Evans of TRW commented on the contract and her email and manuscript notes make clear that Gen 2 would fall within the Agreement if it was a 38Nm system. By email dated 11 June 2001 she communicated these thoughts on the contract to Mr Benz, Mr Connor and Mr Fearon and that shared belief was not contradicted at any point. As soon as a copy of the Agreement was received at TRW (USA), senior personnel there were under no illusion that TRW had signed an unfavourable contract- see the narrative earlier in this judgment. The result was that TRW’s USA senior management started a campaign to tear-up the Agreement and to jettison Globe. Globe cites numerous other points to support its position and refers to its regular complaints leading up its claim. In the interests of brevity I do not set these out.

Decision. This issue was a therapeutic opportunity for each party to raise points in support of but inadmissible to their contractual cases. Globe had no duty to communicate its now considered legal position to TRW as commercial dealings took their course. It had no duty to take advice and consider the consistency of its contractual position under the Agreement when discussing business with TRW. Mr Keegan’s position of not getting into an argument with a major customer about the legal position under the contract, unless and until he had to, was understandable and what any prudent executive in his position would do- as the Court sees in countless other cases. The fact that Mr Keegan took the obvious approach is no basis whatsoever for a claim of representation. Mr Lowenstein’s other points also have considerable force. There was no reliance. Gen2 was always going to go to Emerson whatever position Globe adopted. This claim fails. The answer on this issue is “No”.

The parties agree that if there was a breach of contract then, as a matter of legal principle, Globe is entitled to recover damages for loss of profit. Globe says that the lost profits claimed flow naturally from the particular breaches of contract. The claim is based on the sales of the Products that Globe would have made to TRW but which were not made because TRW purchased the DEAS Gen 2 Motors rather than purchasing the relevant Products from Globe.

Globe’s claim to loss of profits is put in principle in three alternative ways but in practice in many more. It says that the Court must decide between adopting (i) Mr Keegan’s evidence as to the operation of Article 4 of the Agreement; (ii) comparison between Gen 1 and hypothetical Gen 2 BOMs (as to which there are two alternatives based on the evidence); or (iii) the actual prices TRW agreed with DEAS.

Legal principles. Mr Downes did not dispute the basic principles and I therefore refer to just two of the cases cited. When facing a claim for loss of profits such as this, the Court is required to carry out a task set out in the speech of Patten LJ in Durham Tees Valley Airport v bmibaby [2011] 1 Lloyds Rep 68 at [79]

“The court, in my view, has to conduct a factual inquiry as to how the contract would have been performed had it not been repudiated. Its performance is the only counter-factual assumption in the exercise. On the basis of that premise, the court has to look at the relevant economic and other surrounding circumstances to decide on the level of performance which the defendant would have adopted. The judge conducting the assessment must assume that the defendant would not have acted outside the terms of the contract and would have performed it in his own interests having regard to the relevant factors prevailing at the time. But the court is not required to make assumptions that the defaulting party would have acted uncommercially merely in order to spite the claimant. To that extent, the parties are to be assumed to have acted in good faith although with their own commercial interests very much in mind.”

The Court’s task is to reach a conclusion by reference to the broad sweep of evidence before it and taking all significant factors into account. The Court of Appeal confirmed this in Parabola Investments v Browallia Cal Ltd (formerly Union Cal Ltd) and others [2010] EWCA Civ 486. Toulson LJ observed that once an actionable head of loss is established (which can include loss of a chance)

“[t]he next task is to quantify the loss. Where that involves a hypothetical exercise, the court does not apply the same balance of probability approach as it would to the proof of past facts. Rather, it estimates the loss by making the best attempt it can to evaluate the chances, great or small (unless those chances amount to no more than remote speculation), taking all significant factors into account: see Davies v Taylor [1974] AC 207 , 212, per Lord Reid, and Gregg v Scott [2005] 2 AC 176 , para 17, per Lord Nicholls of Birkenhead, and paras 67–69, per Lord Hoffmann.”

Vasiliou v Hajigeorgiou [2010] EWCA Civ 1475 adopted the Parabola approach at [25] where Patten LJ said:

“Where the quantification of loss depends upon an assessment of events which did not happen the judge is left to assess the chances of the alternative scenario he is presented with. This has nothing to do with loss of chance as such. It is simply the judge making a realistic and reasoned assessment of a variety of circumstances in order to determine what the level of loss has been.”

Mr Downes qualifies his agreement by emphasising that before any such exercise can get under way the Court must be satisfied on balance that there has been at least some loss.

This approach is thus not in dispute as regards the general principles but its application is fiercely contested with Globe claiming a range of options between €7,628,000 and €20,682,000 and TRW contending that Globe would have made a loss if it had been the supplier of Gen 2. I deal with this under Issue 16.

The way that this claim has developed and been presented and resisted is unsatisfactory. The claim for damages is put in eleven alternative ways (twelve with the loss of a chance alternative to the first limb). Despite this Globe puts forward no expert evidence on quantum. That is an unusual feature in any case this size particularly given the way the second set of claims is put forward. While TRW served a report from Mr Fisher it decided not to call him as a witness. Globe in turn relies on that report and there is dispute about how far it can do so. The damages claim and the resistance to it has also shifted as the trial has progressed. Despite the mass of detail Mr Downes’ written closing submissions on this issue run to only 13 short paragraphs (fewer than are devoted to the obviously flawed and now abandoned claim for restitutionary damages). I of course had the great help of his oral submissions but with only a day in which to cover all the issues in this case even these could not be comprehensive.

Further some of the time devoted to damages in closing submissions was wasted on arguing about who was responsible for the unsatisfactory position in which Mr Lowenstein was putting, by way of submission on the documents a case (on the second alternative claims) which would have been put in cross examination of Mr Fisher if he had been called. As a result of that Mr Lowenstein could not put his case at the right time and to a witness and Mr Downes had no sufficient time to respond. It has been disappointing when writing this judgment and looking for assistance on damages in the transcript of the closing submissions to have to read detail about what one solicitor wrote to another on a particular date and how one barrister chased another for something while he was in France.

The answer to 15 (a) is thus “Yes”.

Issue 15 (b) is whether Globe can recover restitutionary damages. In closing submissions Mr Lowenstein dropped this claim saying that he would only pursue it if compensatory damages could not be recovered. In my judgment compensatory damages can be awarded so this issue does not arise. It seemed apparent from an early stage that neither category of restitutionary damage was likely to be recoverable over this routine commercial dispute and very clear once the evidence had finished. The reasons why that was are helpfully set out in Mr Downes’ closing submissions.

The appropriate calculation for evaluating Globe's lost profits is, as helpfully put by Mr Lowenstein:

The Gen 2 volumes to be applied to the above calculation will be those that TRW would have purchased from Globe had it not breached the Agreement by purchasing the DEAS Gen 2. Globe's case is that the relevant volumes should be all TRW’s DEAS Gen 2 purchases since June 2005. I agree. The number of motors depended on the number of systems ordered by TRW and there is no evidence that that would have been sensitive to the identity of the maker of the motor or minor variations in its price.

Estimated Gen 2 Costs. The evidence about the costs that Globe would have incurred in manufacturing the Globe Gen 2 is from Mr Pinto. The only aspect of Mr Pinto's evidence on Gen 2 costs that was questioned is that relating to Gen 2 freight costs on points put forward by Mr Fisher's comments. Mr Pinto dealt with that in his third witness statement. Mr Fisher did not give evidence. So broadly I accept Globe’s evidence about the costs. All Globes’ calculations have been carried out using Mr Pinto's estimated Gen 2 costs.

Gen 2 Prices. Globe says that the price per Globe Gen 2 motor should be based on what the parties would have agreed, on the true and commercially sensible construction of Article 4.3 of the Agreement, when that Article is applied to a situation where a suite of Engineering Changes was required. That requires a determination as to how the parties, in practice, would between them have negotiated and agreed the “reasonable costs associated with” the Engineering Changes further to Article 4.3. Globe argues that the Agreement does not specify that “reasonable costs” have to be determined by reference to some third party or otherwise objective standard: rather, it was up to the parties to agree what they believed was reasonable. There is no basis for construing this provision as requiring that the costs had to be objectively reasonable or for the Court to hold that the parties would only have negotiated and agreed upon costs that could objectively be shown to have been reasonable.

That is correct so far as it goes but it is not the case that the parties would have an open and unrestricted negotiation with TRW at the disadvantage of being locked in to Globe as sole supplier. The premise upon which Article 4 is enforceable is that costs can, absent agreement, be determined objectively by a court. The court does not of course try to do that exercise now but should have regard to its availability to TRW if necessary in the hypothetical discussions between the parties about price. In the hypothetical situation under discussion TRW would have, with gritted teeth as it clearly did not want Globe to have the business, complied with the Agreement in the most favourable way open to it. I am not sure therefore that the models of what happened in more enthusiastic collaborations like the J77 are a firm guide to what would have happened with Gen 2.

Globe advances “In light of the way in which the evidence has developed” three alternative ways to determine the hypothetical Globe Gen 2 price which with their variants lead to eleven alternative solutions. First there is Mr Keegan's hypothetical pricing method, secondly there is Mr Pinto’s estimated pricing of the costs of changes in two alternative versions and thirdly there is simple application of the Gen 2 prices that TRW paid to DEAS.

In terms of money the options, adapted from a chart in Mr Lowenstein’s closing submissions, look like this.

Before turning to the three basic methods I should refer to some of the more general points made by Mr Downes in closing (at 145 onwards):

“The first point is this: this is not the sort of case where one can be fairly certain that Porto would have made a profit. In most loss of profit cases the courts start from the principle of, well, yes, I know all of this stuff but the chances are they would have made some profit. The reason that your Lordship can't be certain of that is that they in fact made losses in the later years, significant losses, and we get those from the audited accounts. We know the reason that they made losses, or one of reasons, was because of the increase in cost of certain raw materials and in particular magnets, and we know that the Exclusive Supply Agreement gave Globe no protection on that front. So it isn't the case where you say, well, chances are they would have made a profit. It could have been a poisoned chalice. They did in fact make losses over several years on the Gen 1 products.

Globe’s response is not to deny what is on the face of the accounts that show Porto to be loss making after 2008 but to rely on evidence from Mr Pinto that with the volumes involved with Gen 2 the business would still have been profitable. ..

The second thing is the effect of the engineering change price adjustment mechanism meant that the profit per motor stayed constant. I put that to Mr Pinto, he accepted it, and it is mathematically inescapable. You have your revenue figure for the old motor, you have your costs of the old motor, and that gives you your profit for the old motor. You change the motor, it costs you more, your revenue increases by those costs, that is Article 4, your costs increase by those costs, the end result is your profit per motor stays the same. Mr Pinto accepted that.

So one thing is for sure, that the engineering change pricing adjustment will not have enhanced the profit per motor. That was what it was.

The third point is that there are other cost fluctuations that would not be protected under the engineering change mechanism so there is no allowance for fluctuations in fixed or administrative costs, there is no allowance for costs of raw materials that are outside the Exclusive Supply Agreement. So one can find oneself in a situation where one is manufacturing the Gen 1 motors at a loss and then has to manufacture Gen 2 motors at a loss. That is not outside of the bounds of possibility.

Fourthly, the position your Lordship is faced with is that we have no live witnesses who have come to court and I have cross-examined on what they now say the price adjustment would actually have been. So no witness who says, and I have cross-examined on, it -- that is maintained at any rate, well, here is the Gen 1, here's the engineering changes, this is the end result. That surely was a fairly basic requirement, claimant coming to court.

The second, third and fourth points seem to me to have some force. I am not sure that speculative evidence about a one off exercise would have been as convincing as that based on a regular exercise but it would have been more relevant.

Mr Keegan's hypothetical pricing of reasonable costs following negotiations. This is the primary claim and nearest, Globe says, to the price that is most likely to have been agreed between the parties. The difference in size between the higher and lower sum claimed under this method (almost €7 million) turns on whether the Gen 2 price should be adjusted in 2011 - 2013 to account for fluctuations in the prices of the materials.

The basis for this hypothetical pricing is set out in Mr Keegan's second witness statement. He says that it is the process he would have followed with TRW in estimating the cost of building Globe's Gen 2, as he did with the J77 motors. He does this by reference to the BOMs for the Globe Gen 2 motors provided by Mr Arwine and the cost of those BOMs as calculated by Mr Pinto and by the same process as Globe carried out with the J77 motors

The Globe Gen 2 motors would have been priced by reference to and in order to reflect the series of Engineering Changes that Globe would have made to the Gen 1 motors to produce the Globe Gen 2 motors. The factual situation before the Court is therefore distinct from that involving one or two (or even a handful of) Engineering Changes – in respect of which a one-off costing process would have been practical under Article 4.3. Globe says that Mr Keegan’s evidence reflects how the parties would have acted had TRW acted in accordance with the Agreement – as demonstrated by the parties’ dealings on J77. The evidence is that they would have looked at and priced the Engineering Changes in one go, rather than piecemeal by reference to each change. There would have been a negotiation as regards the “reasonable costs” and (as with J77) these costs would have been assessed to reach an agreed price for the Globe Gen 2 motor.

Globe says that important factors in that negotiation would have included Globe’s very strong bargaining position derived from factors including the exclusivity, the imperative for TRW to maintain its tentative early footing in the new EPAS market, with no equal protections of exclusivity as regards Renault as Globe had as regards TRW, the pressure on TRW to meet the dates imposed by Renault and Mr Keegan’s tough negotiating style. (I dismiss the last factor because as I explained earlier there is no evidence that one side was a more competent negotiator than the other).

Mr Lowenstein emphasises TRW’s weaker bargaining position, given that it had nowhere to turn other than Globe if it wanted to stay in the market. Mr Connor, Mr Heckmann and Mr Schmitz all accepted that TRW would have been in a difficult negotiating position and this was foreseen by TRW senior management and in house Counsel in the US when it reacted to the news that the Agreement had been signed and tried to get out of it.

Cost of materials. In 2011 rare earth magnet prices rose significantly. Renault made a one-off payment of €4,142,834 to TRW. This was passed on to Emerson (or TRW Slovakia as it then was) through increases to the Gen 2 motor price. When rare earth magnet costs reduced the next year, DEAS' Gen 2 prices accordingly fell.

Globe says that the same would have occurred had Globe been supplying Gen 2 motors and that the Court should take into account the fact that Renault and TRW in fact agreed to material cost adjustments because that acknowledges actual events between the date of breach and the date of judgment. This price variation should therefore be factored into the price per motor in any compensatory damages award.

TRW points out that the Claimants advanced a starting price of €27.99 for the Type 1 and €32.41 for the Type 2 based on a clean sheet price negotiation. This was not the appropriate approach. If the Globe Gen 2 had been provided to TLVES it would have been under Article 4, which would have required the operation of the price adjustment mechanism associated with engineering changes. Neither Mr Pinto nor any other witness had evidence to give on the matter.

TRW is correct about that. Paragraph 6 of Mr Keegan’s Second Witness Statement contains a careful, detailed and convincing explanation of how he would have gone about negotiating the selling price on a new deal. There is however no evidence of how the process would have run in the hypothetical situation I have to consider where the Gen 2 is supplied following Engineering Changes under the Agreement.

TRW also points out that the hypothetical Gen 2 prices advanced by Mr Keegan are above the Gen 1 prices for 2005. This meant, TRW contends, that the Globe Gen 2 would never have been sourced from Globe because it was essential in the development of the Gen 2 motor that its cost be lower than the Gen 1. In fact Gen 2 prices charged by DEAS were above those of Gen 1 in the end so that point has limited weight.

Decision. While the Keegan method has useful content for me to consider as part of an overall evaluation I reject it as a self standing assessment because it starts from a false premise as to how the selling price was to be approached. There is no evidence under this head of what would have happened if that exercise had been conducted but I recognise that this would of course have been even more speculative. The negotiations about price would have been governed by Article 4, with that likely advantage for TRW. In turn TRW would have been under some negotiating pressure, probably less than that claimed by Globe. Globe would, under the Agreement, be landed with the consequences of the rise in earth magnet costs. TRW received relief from Renault presumably on the basis that this would be used to relieve DEAS. In the hypothesis I have to consider this may in practice have been repeated depending on whether a grudging TRW wanted to ensure that things went smoothly, for the sake of its duties to Renault, in its relationship with Globe or chose to stand on its rights and perhaps see this cost issue as a chance to renegotiate.

Keegan alternative method. Anticipating the prospect that the Court would not accept the Keegan method Globe has an alternative case that it had a prospect of successfully negotiating the price claimed and so has lost the chance of recovering that price. Globe says in this regard that since the Agreement provided for an exclusivity – further to which the J77 and Globe Gen 2 were to have been produced– and TRW had nowhere else to go for it supply of motors, there was a strong likelihood of Mr Keegan’s price being accepted.

Mr Pinto’s estimated pricing of the costs of changes -comparison between Gen 1 and hypothetical Gen 2 BOMs . Globe’s second alternative is to set the Gen 2 price by reference to the incremental cost of manufacturing the Globe Gen 2 motors. This was the comparison exercise adopted by Mr Fisher in his expert report and which Mr Pinto has endorsed. The assessment boils down to (i) a comparison of the cost of a Gen 1 BOM with the cost of the Globe Gen 2 BOM; (ii) identifying the difference in cost; and (iii) adding that difference to the price of the Gen 1 motor as at 2005. This second alternative is now put in further alternative ways.

In principle this approach has the attraction that Globe is adopting an approach put forward by TRW’s expert who was not in the event called. There is however a fundamental difference between the parties. Mr Downes points to the fact that Mr Pinto accepted in cross examination that the exercise he had adopted involved a false comparison because the BOMs were prepared on different bases. Mr Downes says that is an end to the matter and objects, as I have mentioned, to the timing of Mr Lowenstein’s response to that. The response is that the method is not discredited, after all it was put forward by an eminent accountant retained by TRW, and the only flaws are in the data put into it which he then seeks to correct in his alternative claim under this head.

The Claimants are entitled to rely on Mr Fisher’s report under CPR 35.11 and gave sufficient notice to do so. I reject the argument to the contrary in TRW’s submissions for the reasons given by Mr Lowenstein. It is obviously just to permit this.

The first variant is known as Pinto Approach A. It is a cost comparison of Keegan 2001 Gen 1 BOM and Porto 2005 Gen 2 BOM. In his third statement, Mr Pinto adopted the comparison exercise in Mr Fisher’s report but made certain changes to the input figures. Having adopted that exercise, Mr Pinto applied the updated (unchallenged) data in his third statement. On this basis, Globe claims €7,628,122.

Mr Fisher and Mr Pinto carried out their calculations on the assumptions that (a) the incremental cost of the Gen 2 motor should be added to the 2005 Gen 1 price less amortisation and (b) that the Gen 2 price should not be adjusted in 2011 - 2013 to account for material price variations. Globe challenges both assumptions. If amortisation value is included, Globe’s claim rises to €12,718,539 and with material cost adjustments to €14,524,474. If both the amortisation value and the material costs adjustments are included, then Globe claims €19,614,891.

As the parties characterise Mr Pinto’s controversial answers differently I set these out: [T24/53]:

Q. These are two different exercises, prepared for completely different times, for completely different purposes, by different people using different assumptions.

A. That is correct. I agree with that.

Q. Doesn't it fall foul of what you said earlier, that it is meaningless really?

A. It is. Unless you identify exact and you correct exactly what the differences are, yes, it is…

[T24/59]:

Q. Can I suggest to you that you can't really give evidence on the extent to which these differences were the result of engineering changes as opposed to changes in material costs, different suppliers, US versus Europe, VA/VE possibly, productivity improvements. It would be very difficult for you, wouldn't it, to identify how much of those changes are down to engineering changes?

A. That is correct. The way you -- the comparison that you are putting here, yes, it is very difficult to assess that difference because there are so many variables that we can't -- we can't control and identify all of them. Although the exercise that has been -- I look at -- I have looked at, and has been produced by Mr Fisher, does not rely on these kind of comparisons that we are doing between the two BOMs. Basic what relies is he's taking the price for the product and applying the engineering changes using the actual prices of the change that have occurred. The calculation that is being done here by Mr Fisher, what I mentioned I would agree to the methodology as well, is that, I mean, if that method was presented to me by someone, I could have agreed to that method. I do have agreed to the calculation, they are correct. I mean, there were some mistakes but I understand mistakes.

Q. Yes.

A. This exercise takes the price as the starting point. It is not comparing BOMs, it just takes the price as the starting point. The BOM that is included in that price has changes, and the change that has occurred to that BOM is priced at an actual cost and a very identifiable cost, and that is what has been taken out or added to that base price. That analysis can be done. This comparison cannot. You cannot compare the BOM that was produced in one year, or with five years difference, to the other without identifying and accounting for all the variables that were in place.”

There are also detailed differences between the parties on this point which I cannot properly evaluate.

The alternative and recent approach to this head, known as Pinto Approach B, is a cost comparison of Porto 2003 Gen 1 BOM and Porto 2005 Gen 2 BOM (not, as TRW suggests would be more appropriate, between the Keegan Gen 1 with the Keegan Gen 2 BOMs).

Globe says that there is nothing wrong with the approach and its adoption of the comparison exercise. Mr Pinto has supported it, as did TRW in giving instructions to Mr Fisher. Globe relies upon essentially the same exercise but using BOMs in evidence generated via Porto only. Mr Lowenstein submits that this alternative exercise is based upon comparisons put by TRW’s counsel based on a method about which TRW did cross-examine Mr Pinto. TRW itself proposed the correct input data which has been substituted for that originally used by Mr Pinto.

Globe relies upon arithmetic, based on a comparison exercise that TRW has endorsed using a screenshot of the Gen 1 BOM as at November 2003, a summary of the same 2003 Gen 1 BOM and the cost of each component, an updated copy of Mr Fisher's Appendix 4.3 and an updated copy of Mr Pinto's Gen 2 Loss of Profits model.

Under this further alternative, Globe claims the basic figure of €8,695,624, rising, if the amortisation value is included, to €13,786,041, if the material costs adjustments are included to €15,591,977 and both are included €20,682,393 .

Mr Downes says that this approach is unacceptable not because the material is inadmissible but because it lacks weight. There is no witness to give evidence about it and to be cross examined. There are time inconsistencies and documentary ones. There is selective reliance on documents and these finish in 2007 (albeit for a good reason) just before the years of losses. Moreover a better comparison would have been between the two Keegan BOMs which would have shown a reduction in price.

Decision. Mr Pinto’s exercise adopts TRW’s expert’s method and does an exercise involving comparisons which he accepts to be false although his concessions read in context are less extensive than they appear. Globe’s repair work to that does not restore the credibility of Pinto A beyond being something to consider when doing one’s best to reach an overall solution. Pinto B is an untested and necessarily artificial exercise but it does have the real advantages identified by Mr Lowenstein. No doubt in the papers there is the material needed to evaluate it properly but I lack the skills to do that without expert guidance. The guidance has come late in the case and has been too brief and uninformed by expert evidence. As with other areas, such as evaluating the significance of apparent losses and trying to work out the justification for what is said on both sides about the likelihood of future profits, the material for forming a clear judgment is missing.

In Reply submissions Globe presumably seeks to present this version of the claim as attractively and digestibly as possible and yet says this: “In any event, although the material as to the calculation of damages is complicated, with the consequence that it requires careful study, as the Court will have appreciated it consists purely a series of arithmetic re-workings of the methodology which is already before the Court (Pinto based on Fisher), but using different input data, all of which is also already before the Court. In this way, the Court has before it a comparison of the relevant BOMs, and also has the arithmetic exercise conducted in order to quantify alternative scenarios to account for variations in price engendered by fluctuations in raw material prices, etc.” But the Court is not equipped with the time or the ability to wade through all the material making reliable judgments about the significance of individual items. It remains the case that Globe has to prove its damage.

The Emerson price. As a third alternative, Globe says that, following Mr Schmitz’s evidence, the parties would have settled upon the same price as that agreed and in fact paid to DEAS from time to time for the equivalent motor. The passage relied upon reveals however only that in other circumstances of unrestricted negotiation TRW would have paid the same price to another company as it did to Emerson. Mr Lowenstein says that at the very least, evidence of such prices is available to the Court as a benchmark reflecting the level that TRW was prepared to agree to pay for Gen 2 motors for the P1 platform at the relevant times.

The loss claimed on this basis is €10,226,397. This is a synthesis of the DEAS Gen 2 prices referred to and the estimated cost of manufacturing the Globe Gen 2 made by Mr Pinto.

Mr Downes makes two main points. First he says this:

Your Lordship cannot infer, for example, that DEAS price increases would have been agreed with Globe. It’s a wholly different contract, a wholly different commercial consideration, and, as is stated in the authorities, your Lordship must assume that we would have acted in our own best interest consistent with the terms of the contract. What is sometimes called "the rule of minimum compliance".

Secondly he says that insofar as the Claimants’ case was to be advanced on the hypothetical Gen 2 price being the same as the DEAS Gen 2 price they would not have made any profit. Mr Pinto did not accept this but TRW produces a table, which I cannot evaluate, which at least superficially supports that submission.

Decision. This approach leads to a figure that is certainly not what would have resulted from the hypothetical exercise and is useful only to the limited extent accepted by Mr Lowenstein.

Wasted expenditure. There is an alternative claim for wasted costs amounting to some €300, 000 which arises only if the primary damages claim fails. The amount is disputed but not greatly and I do not propose to decide this point as it can be resolved by others on paper without live evidence should the need arise.

The issue is worded at greater length above but is in substance whether the Agreement was varied so that Porto became a party to it. Globe does not pursue the other pleaded routes to its goal. Globe says that Porto became a party to the Agreement from the last quarter of 2002 when manufacture was transferred from Alabama to Portugal with the consequence that TRW is liable for losses allegedly suffered by Porto from 1 June 2005 (six years before the Claim Form was issued) onwards. TRW says there was no variation or other process by which Porto became a party to the Agreement and could not be because of Article 6.3 which provided that the Agreement could only be amended by a written document.

Globe says that the Agreement was varied. Article 6.3 was varied or waived by the parties' conduct in that they operated under the Agreement as if Porto was a party, in the same way that the parties operated under the Agreement as if TLVES (as opposed to the non-existent TRW Electric Steering Limited, the named contracting party) was a party.

The law is common ground. For a contract to be varied, the Court must be satisfied on the balance of probabilities first that there was a valid and subsisting contract between the parties, secondly consensus between the parties as to the manner in which the Agreement was to be varied and thirdly that the parties acted in some way to their benefit or detriment, providing consideration.

The first requirement is not in doubt, it is the Agreement.

Globe says that the second requirement , consensus, is established by conduct as demonstrated by the following facts beginning with Article 1.8 of the Agreement –“1.8 Manufacturing Location: The supplier has committed to produce the products at a European manufacturing location as soon as practicable - anticipated to be in 2002”

TRW required Globe to manufacture the Products in Europe. Globe chose Portugal as TRW knew before the Agreement was signed, as Mr McHenry and Mr Fearon agreed. TRW witnesses accepted that Globe might incorporate a local company in Portugal. Porto was established and its identity and role became known to and accepted by the Defendant companies as soon as production transferred to Portugal. In this way:

Globe says that in view of this it would be absurd to suggest that the Agreement has not been varied simply because the parties did not record their agreement in writing. That would fly in the face of the facts, would opportunistically put legal formality over commercial reality and would constitute a serious and unjustified restriction on the parties' freedom to act in such a way as to rearrange their contractual affairs.

TRW disagrees saying that the evidence comes nowhere near establishing an unequivocal agreement to add or substitute Porto as the main contracting party:

-TLVES was not even told of the existence of Porto as a subsidiary. The suggestion that they might have guessed or assumed that would be the case is not sufficient.

-The management of Porto never considered or approved the undertaking of the potentially onerous liabilities associated with the Agreement.

-A decision by Porto to accept the liabilities of Globe would almost certainly be a matter that ought to have been the subject of Board approval. The absence of such consideration strongly points away from an implied agreement to this effect.

-The existence of the consignment agreement entered into between TLVES and Porto on 10th November 2005 does not support the Claimants’ case but demonstrates that where a direct contractual link between TLVES and Porto was desired, it was established by a formal written agreement.

-Although there are documents that are consistent with Porto being a party to the Agreement (the invoices and orders), that is also consistent with Porto being an agent or some other form of intermediary.

-The invoices and orders themselves are ambiguous. There is an example in which the order is placed by Lucas Automotive GmbH as agent for the “Purchaser” which is in turn identified as being 10 entities none of which is TLVES.

-The shipping schedules that Mr Pinto raised in the course of cross-examination make no reference to TLVES, referring instead to TRW Electric Steering Limited. That document is perfectly consistent with Porto, as Globe’s nominee or sub-contractor, agreeing with TRW (or TLVES) the timing of the product shipments.

-There is no evidence of any discussion or communication on the point whatsoever.

The fact that TRW knew that, to fulfil its obligation to build in Europe, Globe was going to operate in Portugal does not mean that it must have known that a subsidiary would be established. Foreign companies frequently operate without incorporating a trading or manufacturing subsidiary. As TRW points out there appears to have been no discussion about the issue and there was of course no written variation. On the other hand the parties were generally not much occupied with the niceties of corporate identity, albeit at the outset TRW Counsel in the US tried to use the existence of TRW Electric Steering as a party to get out of the Agreement. Thus TRW itself relies on variation by conduct by pleading that "the parties have at all times operated under the Agreement as if it had been made between" Globe and TLVES, notwithstanding that the Agreement named Globe and TRW Electric Steering Ltd as parties.

In practice it is overwhelmingly clear on the facts and material deployed by Globe, recognising that some of the trading documents are ambiguous (as they so often are in routine transactions) that TRW treated Porto as a contracting party. TRW would be disconcerted if Porto started ignoring warranty claims on the basis that there was no contract between them.

TRW points out that the very existence of alternative formulations under this issue shows that the facts are not consistent only with variation but could also fit a variety of other legal analyses which do not result in Porto being liable. I see the facts in context and the dealings of the parties over such a long period as consistent only with variation. The second requirement is satisfied.

The third requirement, consideration is not in dispute.

Globe points to the consequence that would follow if the Defendants were correct. Neither Globe nor Porto could claim any damages arising from any breach of the Agreement because, on the Defendants' case, Globe would have suffered no loss and, although Porto would have suffered loss, it is neither a party to the Agreement nor did it act as agent for Globe. This would plainly be at odds with the intention of the parties and their conduct and would ultimately render TLVES' obligations under the Agreement meaningless and unenforceable.

TRW responds that this is not a hard case. The Claimants might have attempted to mount a reflective loss claim based on the loss of the value of their investment in Porto or a loss of dividends type claim but chose not to do so. However, such claims would have to be pleaded (since it would depend on establishing a diminution in the value of the Porto shareholding and/or a loss of dividends, which would in turn have required expert evidence etc) and since such claims have not been made, the Claimants are now unable to pursue this route.

Operation of Article 6.3 of the Agreement. Although I am clear that the parties agreed to vary the Agreement this Article raises a distinct issue. It provides that the Agreement "can only be amended by a written document which (i) specifically refers to the provisions of this Agreement to be amended and (ii) is signed by both Parties". I turn first to the legal position which I mentioned in my earlier judgment. There have been developments in the law since then.

Mr Downes submits that this court is bound by the 2000 Court of Appeal decision of United Bank Ltd v Asif. I disagree. In that case, Thorpe LJ (without discussion of the issue) accepted what Sedley LJ had said as a single judge upon giving permission to appeal, namely that the first instance judge was “incontestably right” in concluding that, among other things, “no oral variation of the written terms could have any legal effect” (at [17] to [18]). This case is not binding authority for the position TRW now takes and was not treated as such in the 2002 decision of the Court of Appeal in World Online Telecom Ltd v I-Way Limited. [2002] EWCA Civ 413. My remarks in Spring Finance Ltd v HS Real Company LLC [2011] EWHC 57 (Comm) at [53] add nothing but two later first instance decisions do.

In Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2013] EWHC 2118 (Comm) at [271] to [274], Gloster LJ (as she had by then become) having reviewed the recent authorities, held that whether an entire agreement clause has been overridden is a fact-sensitive question and that, though not deciding the point, she “incline[d] to the view that there can be an oral variation in such circumstances, notwithstanding a clause requiring written modifications, where the evidence on the balance of probabilities establishes such variation was indeed concluded.”.

In Virulite LLC v Virulite Distribution [2014] EWHC 366 (QB) Stuart-Smith J (after trial) summarised and followed the above authorities in the context of the parties’ acceptance of the World Online Telecom approach: [55]-[59]. Stuart-Smith J also held as regards the necessary evidential threshold that “while all relevant facts should be given their due weight in assessing these questions and the burden of proof rests on the person who alleges that the original contractual obligations have changed, the standard of proof is and remains the balance of probabilities throughout.”

As I see it the decision of the Court of Appeal in Investec v Zulman [2010] EWCA Civ 536 cited by Mr Downes does not affect the position set out in these cases.

Mr Lowenstein submits that the overwhelmingly better view is that it is possible for the parties to vary or waive such a requirement and whether they have done so is fact sensitive. To decide otherwise would be inconsistent with principles of freedom of contract. I agree. These clauses, as this court sees regularly, serve a valuable function. It is common for parties to argue that their written contractual obligations have been relaxed or waived in discussions. Common examples are contracts for the sale of goods where it is said that the buyer agreed to take a lower quality than the contract provided for and guarantees where the guarantor recalls that the bank had made collateral promises in order to persuade him or her to sign up. These clauses when enforced save the parities uncertainty, time and money and should be upheld unless the evidence of variation or waiver is clear. I might have said very clear but the law as I see it is as stated in the two recent decisions.

Decision. In this the facts are very clear. The court is concerned not with a claim that the obligations have changed but with one that there is an additional party. I agree with Mr Lowenstein when he says this:

“The Court has been shown that the Defendants (or their nominees) engaged in a series of open, obvious and consistent dealings which constituted a variation to the basis of dealings provided for in the Agreement. There is no other commercially realistic explanation for what happened: i.e. the evidence of conduct unequivocally demonstrates an intention to add Porto to the contract (and, so, the fact of variation). In these circumstances, to find that Porto had not become a party to the Agreement would ignore the weight of all the relevant evidence.”

The answer to this question is “Yes”. The Second Claimant has a right of action.

This claim is covered by Issues 18 to 23. I prefer to deal with this issue by taking Issue 19 first after identifying what the claims are.

The alleged representations. The claim arises out of estimates as to likely order volumes under the Agreement provided by TRW’s representative (Mr Fearon) to the Globe representatives (Mr Keegan and Mr McHenry) in the course of negotiating the Agreement. TLVES is the only relevant defendant. Globe says that they were negligently made by reason of their inaccuracy at the date they were relied upon by Globe (through Mr McHenry and Mr Keegan) in entering the Agreement. Those statements are made up of a series of representations as to volumes for the Nissan B and Renault P1 platform in a business plan in 1999 (an unpromisingly early alleged misstatement relating to an Agreement entered into in June 2001), in a presentation on 14 September 2000 dealing with the division between estimated volumes for the Nissan B and Renault P1 GEN 1 platforms and in drafts of the Agreement passing between the parties on 26 March 2001 and 24 April 2001.

The alleged representations (known as the Volume Representations) are set out in Paragraph 35 of the Particulars of Claim and were as follows:

TRW accepts that the express representation was made in that Globe was entitled to assume that the estimates of future volumes were sourced from Renault and Nissan and that they were being passed on in good faith but nothing more. TRW points out that the estimates under consideration were not estimates of present facts but of future requirements. That much is clear from the wording of the Particulars of Claim: “estimates of the volumes of Products that it would require…” Mr Downes points out that it is a cardinal principle of any claim in negligent misrepresentation that the representation has to be as to a present fact or a statement of opinion or expectation or belief as to future events, see per Hamblen J in Foster v Action Aviation [2013] EWHC 2439 (Comm) at para 97:

“Further, most of the representations alleged involve representations as to the future (“was unlikely to be incapable”). A representation which speaks to the future is only a representation of fact in so far as it reflects a statement of expectation or belief or of an actual opinion held. However, no allegation of a representation of expectation, belief or actual opinion is made. In so far as the reasonable grounds representation may be said to do so impliedly, the belief relates only to “the facts” in the representations made – ie the present facts. Further, if, properly analysed, the representations are limited to the present facts then they are of such restricted scope that it is difficult to discern the alleged necessity for their implication.”

I first state what might seem obvious that this is not a contractual misrepresentation claim but one of negligent (not fraudulent) misstatement founded on Esso Petroleum Co. Ltd v Mardon. [1976] QB 801. That case concerned a claim by Esso for unpaid rent and possession of a petrol forecourt business. The tenant counterclaimed for damages saying that he had only taken the tenancy on the basis of representations as to the anticipated petrol throughput of the business after acquisition. In giving judgment for the claimant, Lawson J held that there had been no warranty as to the throughput of the station and that whilst there had been a negligent misrepresentation, this had become spent because after the true state of affairs became known, the Defendant had continued with the lease at a revised rent. The Court of Appeal allowed the appeal and found that there was a contractual warranty as to the care with which the estimates had been produced (but not one which entitled the Defendant to a loss of bargain based award) and further that there had been a collateral negligent misstatement which had not been spent by the subsequent revision of the lease.

Lord Denning said at p.820:

“…it seems to me that Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, properly understood, covers this particular proposition: if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another – be it advice, information or opinion – with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable. If he negligently gives unsound advice or misleading information or expresses an erroneous opinion, and thereby induces the other side to enter into a contract with him, he is liable in damages. …

Applying this principle, it is plain that Esso professed to have – and did in fact have special knowledge or skill in estimating the through put of a filling station.”

Ormrod LJ said at 827H-828B:

“There is no magic in the phrase "special relationship"; it means no more than a relationship the nature of which is such that one party, for a variety of possible reasons, will be regarded by the law as under a duty of care to the other. In this case [Esso] had all the expertise, experience and authority of a large and efficient organisation carrying on the business of developing service stations to sell their petroleum products through dealers who were expected to invest a substantial amount of capital in the business and to observe the detailed trading requirements laid down in the tenancy agreements.”

It is well established that a duty of care may arise in a commercial context where parties are in a contractual relationship. Lord Goff’s speech in Henderson v Merrett Syndicates [1995] 2 AC 145 makes this clear (at 194D)

“an assumption of responsibility coupled with the concomitant reliance may give rise to a tortious duty of care irrespective of whether there is a contractual relationship between the parties, and in consequence, unless his contract precludes him from doing so, the plaintiff, who has available to him current remedies in contract or tort, may choose that remedy which appears to him to be the most advantageous.”

The principles are common ground but the parties give them different emphasis. Globe points to what Lord Goff said in Spring v Guardian Assurance PLC and others [1995] 2 AC 296 at 318H as regards the nature and scope of the skill being exercised, which it says is of direct relevance in this case:

“It is, I consider, clear from the facts of Hedley Byrne itself that the expression 'special skill' is to be understood in a broad sense, certainly broad enough to embrace special knowledge. Furthermore Lord Morris himself, when speaking of the provision of a statement in the form of information or advice, referred to the defendant's judgment or skill or ability to make careful inquiry, from which it appears that the principle may apply in a case in which the defendant has access to information and fails to exercise due care (and skill, to the extent that this is relevant) in drawing on that source of information for the purposes of communicating it to another.”

Globe argues that since Esso v Mardon applies, there is no need to consider the application of the other authorities regarding the test for a duty of care and cites the judgment of Lord Toulson JSC in Cramaso v Ogilvie-Grant, Earl of Seafield & Ors. [2014] UKSC 9 at [52]-[53] (when referring to the category where the statement is made to the other contracting party and not to someone who then contracts with a third party)

TRW cites a statement of Oliver J in Midland Bank v Hett Stubbs & Kemp [1979] Ch 384 approved by Lord Reid in Henderson v Merrett at 191].

“A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort.”

TRW also cites Paragraph 113 of the judgment of Jonathan Hirst QC in ParOS plc v Worldlink Group plc [2012] EWHC 394 (Comm):

“ … I think it would take quite exceptional facts for a court to conclude that one party assumed a duty of care to the other going further than the contract required – all the more so where (as here) the parties were sophisticated businessmen with their own professional advisers.”

Globe says that a duty of care existed here because of the following facts:

TRW responds that it is clear that in the present case no such duty could be established. TLVES did not profess to have any special skill. On the contrary it was simply passing on the estimates that it had been provided with by Renault and Nissan. This was known by Globe and so there was no reliance on any special skill. The estimates were not provided so as to induce Globe to enter the Agreement. Globe knew it had no guarantee of the volumes and was instead reliant on Article 2.6 for comfort. In one sense, the higher the volumes the more onerous they made the amortisation covenant at Article 2.6. The wording of the clause suggests merely that the volumes were being put forward as TLVES’s present estimates. Given that estimates could change on a frequent and drastic basis, it is hardly likely that any inducement was intended or actually resulted.

TRW says that the parties negotiated and agreed a price adjustment mechanism and amortisation recovery guarantee, and specifically did not agree any price adjustment to take account of a shortfall in the volume estimates at Article 1.2. This was obviously a possibility but one which Globe did not ask for and was not therefore agreed. Globe is patently seeking to use a claim in negligence to circumvent the pricing mechanism which was agreed. This is not permissible: see per Oliver J in Midland Bank v Hett Stubbs & Kemp set out above. This was apparent from Mr Keegan’s evidence at T7/98:

“Q. You have only inserted a clause here that enables you to revisit the capital and tooling element of the price, haven't you?

A. That is correct.

Q. Why did you not insert any protection for Globe that would enable you to revisit the other elements of the price in the event that the volumes didn't come through?

A.

I do not know.”

The facts of this case are not exceptional so as to distinguish it from normal breach of contract claims; there was no duty of care as alleged.

Decision. I accept that “special skill and knowledge” is a wide concept but it does not follow from the fact that someone has special knowledge that he or she is assuming legal responsibility. Lord Goff in Henderson said that assumption of responsibility “may” arise in a commercial context. While Mr Lowenstein may be right that it is unnecessary to consider authorities beyond Esso itself the fact remains that most cases which fall within its ambit are ones of professional negligence where the defendant has assumed responsibility for the special expertise he or she imparts. The fact that so few cases are in the context of two sophisticated contracting parties confirms what I perceive the legal position to be.

Esso was an unusual case. As Shaw LJ pointed out; (at p 828):

“In this case the Plaintiffs had all the expertise, experience and authority of a large and efficient organisation carrying on the business of developing service stations to sell their petroleum products through dealers who were expected to invest a substantial amount of capital in the business and to observe the detailed trading requirements laid down in the tenancy agreements.”

As the course of this judgment already makes clear there was nothing special about this contract. It is a conventional business deal between very substantial commercial concerns with access to the best professional advice. There was no inequality of bargaining between them. In most if not all significant business contracts one side will have knowledge not available to the other. If that knowledge is material to the deal a party may seek protection and assurance in a variety of well known ways. If provided with estimates he may seek warranties in respect of them or terms which alter his obligations if they turn out to be inaccurate. In the context of what he seeks from the deal he may not ask for this protection. Alternatively he may seek it but not get it, or get only some of it as part of the overall bargain which is struck. This seems to me to be an unlikely basis for imposing a tortious duty on top of and different from the bargain reached by the parties. I agree with Jonathan Hirst QC in ParOS that, while in principle a tortious obligation can arise, there must be exceptional circumstances for it to do so in this sort of contractual context.

The starting point is how the Agreement deals with the estimates. Article 1.2 sets out the estimates of motors “At present, Buyer estimates that it will require the following” (the first two words warning that the figures may change). The Agreement then refers to the estimates at Article 2.6 which I have set out in full above in words including

“The parties acknowledge and agree that Supplier shall recover its costs of tooling and capital by amortizing such costs over the units to be sold over the first five (5) years of this Agreement (''Recovery Period"). During the Recovery Period, the volume of Buyer's purchases of each Product shall be reviewed the first month of each year following the initial year of the agreement. In the event that the aggregate volume of Buyer's purchases of each Product during the preceding years is less than that which is provided in Article 1.2 above and such variance is greater than fifteen percent (15%), then Supplier shall adjust its pricing so as to amortize the remainder of Supplier's tooling and capital costs over the forecasted units to be produced for the remainder of the Recovery Period. …”

In this case the allegations of misstatement relate to estimates of numbers of motors. Those estimates turned out to be optimistic. That led to a contractual consequence under the amortisation provisions in Clause 2.6, the only explicit purpose for which the estimate has been provided. Globe contends that it relied on these estimates for other purposes and has suffered damage as a result and should have relief even though it is common ground that its bargain with TRW does not provide it. Where the purpose of the estimates in the Agreement is limited but could have been wider I infer that that was the deal. Globe is correct that there is no clause in the Agreement which excludes or limits liability for misstatement but there is one which explains why the estimates are there and nothing which is consistent with, in effect, altering the bargain in Globe’s favour. I repeat that the circumstances would have to be exceptional before the court found an assumption of responsibility.

The features identified are not exceptional, they are conventional, even as Globe itself states them, for the reasons I have given. It is unnecessary for me examine at this point the claims by TRW about the roles of Mr Lamy and Mr Keegan and Globe’s response as I leave that aspect out of consideration. The fact that, as one would expect, the parties to a complex and long term agreement trust and respect each other is not a reason to alter the basis of the bargain they have entered into. The fact that executives at TRW, and no doubt in all reputable companies, carry out a sanity check before passing on figures is not an exceptional feature. TLVES did not owe Globe the duty of care alleged and this aspect of the claim fails. I will, in case I am wrong deal with the other issues under this head but more briefly than I would otherwise have done.

The answer to the question is “No”, the First Defendant did not owe a duty of care to the First Claimant.

It is not disputed that the following principles apply to this issue (see for example the judgment of Popplewell J in Mabanga v Ophir Energy plc [2012] EWHC 1589 (QB) Comm at [25] – [30].):

Globe claims as follows. The evidence of both TRW and Globe witnesses was to the same effect. The volume representations contained estimates provided by TRW to Globe with the intention from TRW and expectation from both parties that they could be relied upon. TRW had a number of suppliers on whom it relied to source components for the parts and systems that TRW would in turn create and supply to vehicle manufacturers. The 1999 business plan and 2000 presentation estimates were provided to Globe as part of the regular dealings between TRW and its suppliers in the course of developing products. TRW’s aim in 1999 and 2000 was to build up a “partnership” relationship with its suppliers, as Mr Connor confirmed. He went on to confirm that TRW and Globe (and the other suppliers) were in a “volumes business”, which underscored the importance of volumes provided by TRW to Globe from 1998 onwards. Mr Connor also confirmed that TRW itself needed the volumes for its own pricing. Mr Heckmann corroborated this by stating that as a general matter volumes led to the pricing of products.

Mr McHenry similarly confirmed in re-examination that “All the volume estimates I believe that I saw were coming from TRW out of the UK, and I quite honestly trusted them, as a customer, that they were giving me good data. There would be no reason for them not to, in my opinion, given the fact that this was a brand new product, both sides were working very hard to make the system work, and I took them as good input.”: T7/14:18-24.

The consistency between the estimates provided over time was also important to Globe. Mr McHenry stated that he would not have signed the Agreement had the estimates not been in the contract or if they had been substantially lower than what had gone before. He relied principally on the figures in the draft Agreements. Mr Keegan confirmed his primary reliance upon the volumes in the draft Agreements upon receiving them.

All the relevant TRW employees knew where to go to get the relevant information. Mr Robinson says in his witness statement that he would get volumes from the Paris sales office. Mr Connor and Mr Fearon were also well aware of this. M Perrin confirmed there was no problem as regards anyone in TRW accessing information from that office. So therefore Mr Connor and Mr Fearon knew where to go to update the volume information before executing an important document like the Agreement. Globe relies upon the negligent failure of TRW’s employees (specifically Mr Fearon or Mr Connor) to correct the Volume Estimates by reference to information that was available to them within the TRW Group of companies not just TLVES. The evidence was that the TRW Group was, by 2001, intended to operate as a single unit with a free transfer of information, including in relation to Volume Estimates.

Globe also made very detailed submissions to the effect that there was no qualification of the representations and that they were not limited or restricted to model types.

TRW says that a representation as to the accuracy of a prediction cannot be found where the evidence has uniformly been that the estimates were not guarantees of future requirements and everybody understood them to be as such. It cites evidence from Mr McHenry and Mr Connor to that effect. Mr Downes points out that Mr McHenry at one point volunteered that the volumes in Article 1.2 were included in the Agreement for the capital and tooling guarantee (which is at Article 2.6), although he quickly retracted that.

TRW says that the evidence has been that everybody believed that the estimates had not been generated by TLVES. On the contrary, the evidence particularly that of Mr Connor, was that Globe understood that these figures would have been sourced from Renault and passed onto its suppliers. The Defendants accept that Globe was entitled to assume that the estimates of future volumes were sourced from Renault and Nissan and that they were being passed on in good faith but nothing more.

Decision. As I said earlier I have reservations about the value of the honest reminiscence of witnesses about their state of mind so long ago and what their reactions might have been to events that did not occur. I do not dispute the substance of the factual assertions by Globe on this issue. No doubt volumes were important and TRW gave indications from an early stage in general terms to Globe and others. It would have been very odd in this business if they had not done so or that Globe would not have relied on this to some degree. This is the ordinary process of product and commercial development. It does however seem to me fanciful to try to mount a misstatement case on, amongst other things, estimates given in the course of a product development, months or years before the Agreement was entered into.

The estimates appear to have come from figures provided by Renault and Nissan to which TRW would no doubt have applied its own experience and expertise. Essentially the number would turn out to be what Renault and Nissan chose to order so the scope for TRW to apply a sanity check would have been limited. Globe sought to elevate Mr Connor’s description of the sanity check he would apply to the figures into some independent exercise by TRW on which Globe placed value when in truth he was referring to the common sense which any competent professional would apply to a set of data before passing it on to others. Globe recognised that the primary source for the figures would be the companies who would buy TRW’s systems and thus Globe’s motors. It also knew that estimates were only that and that these could be made irrelevant at any time, as they were in this case, by decisions outside the control or even influence of the parties. The detailed evidence and submissions about these comparative obvious points did not take the matter much further. Globe’s case confuses the exchange of information and understandable reliance in a commercial context of what one party is told by another in a day to day working context with the legal bargain which is eventually struck as to the terms on which they will contract.

In answer to this question any representations made were limited to the extent that I have identified in this passage.

Globe cites Mr McHenry and Mr Keegan’s evidence that they relied upon the Volume Estimates and submits that it should be accepted. Globe’s case is not that these figures were somehow guaranteed. However, in the context in which they were given, Globe says that these Volume Estimates were proffered on the basis that Globe could rely upon them. Mr McHenry understood that the estimates could be wrong and “end up at zero”. However, in acknowledging that fact he was not saying that Globe was not relying on the Volume Estimates. The purpose for which Volumes were provided was agreed between the witnesses. It was crucial to Globe’s pricing, business and production planning.

Globe’s evidence is that it relied on the estimated volumes recorded at Article 1.2 in order to arrive at the Gen 1 sales price. Without the volumes estimates, Globe’s negotiating stance on price, capital recovery and tooling would have been substantially different, and in reliance on the estimates, Globe agreed prices per unit taking into account its ability to achieve economies of scale. Mr Keegan’s evidence was that volumes of orders estimated by the customer can affect overall component costs because ordering large volumes of components allows the Claimants to achieve economies of scale on the prices charged by their suppliers. In cross-examination, Mr McHenry agreed with Mr Keegan’s evidence that volume estimates were important in relation to material costs [T4/26/9-18]. Mr McHenry’s evidence was that he would have called a “time-out” had TLVES provided Globe with the “correct volumes” before signing the Agreement. Mr Downes says that central to the Claimants’ case is that the estimates were important because they affected the pricing; if the volumes went down, the price per unit went up. He says that this evidence was shown to have been false. Mr Keegan’s evidence was that he always applied the same methodology. That methodology meant that the only variables were the BOM and the amortisation figure; the other elements were all either fixed or calculated on the basis of fixed percentage adjustments.

Mr Downes submits that analysis of the BOMs that were available from disclosure showed that the material prices were not affected by volumes. The limited documents that were available showed no evidence of supplier quotes being affected by volumes. There was no evidence or disclosure from negotiations with suppliers showing prices affected by volumes. There was no evidence or disclosure of the contractual arrangements etc with suppliers. There was no evidence of complaints from suppliers when the order volumes did not come through or an attempt to renegotiate prices as a result. The Court was given no overall picture as to whether, or the extent to which, a shortfall in volumes on these motors would affect Globe’s overall volumes ordered (ie across all its product ranges). When the volume of actual orders was significantly lower than the volume estimates in the Agreement, there is no evidence that the Claimants took steps to renegotiate prices on the basis that the orders were lower than estimated.

TRW points to a quotation provided by Mr Keegan in May 2001, shortly before the Agreement was finalised, where the exclusion of Renault (the exact eventuality that Globe now complain of) was quoted against. Essentially prices are the same whether the volume is 475,000, 500,000 or 1,000,000 units per annum. Criticism is made of Mr Keegan’s explanation for this.

TRW also relies on another matter which Globe disputes. TRW says that Mr Lamy, the chairman of Globe, had direct links to Renault, and this was known and relied upon/used by Messrs McHenry and Keegan: see the email dated 8th January 2000 from Mr Keegan to Mr McHenry: “Maybe J L Lamy can glean some additional information out of his contacts at Renault”. Mr Keegan attended meetings with Renault representatives, and so he had direct contact with, and links to Renault. For example, he attended a meeting involving staff from Renault and TRW on 14th March 2001 at which the products for the P2 platform in particular were discussed. In re-examination, Mr Keegan said that he thought Mr Lamy, chairman of Globe, who reviewed the draft Agreement sometime around 26th April 2001 before it was signed, would have had access to Renault information, including information about volumes; see [T9/3/4 – T9/4/8].

Globe responds that there is no evidence that M Lamy (or anyone acting through or for him) communicated to Globe and verified the Volume Estimates upon which Globe relies. That response is correct.

Decision. In general Globe would, like any other business counter-party, have relied on what TRW told it for a variety of purposes but for reasons I have explained that does not create a legal duty. The fact that Globe had access to Renault through its chairman would not generally mean that that route, presumably an occasional one, would have been a major source of information about detailed matters. I disregard that point about Mr Lamy. The remaining documentary record which, as I have said is particularly important in this case, unsurprisingly reveals little after all this time to support Globe’s case. No doubt the main reliance would have been on what TRW told Globe at the usual working level. The oral evidence is of particularly limited value in this area and a sign of this is the way that both sides’ closing submissions distance themselves from some of what their witnesses said. Mr Downes’ cross examination indicated that Mr Keegan’s recollection might well after all this time be inaccurate. As I have explained there are many reasons why honest witnesses may be mistaken about events so long ago. It is for Globe to prove reliance and it has not done so.

Globe submits that the answer is “Yes” to both questions and in relation both to the Renault and Nissan B demand estimates.

Renault. TRW were apparently chosen as "nominated supplier" for the combined Nissan / Renault platform in December 1999. TRW knew, from October 2000 (at the latest), that Renault was looking to the Gen 2 EPAS system and was targeting it for the Renault P1 Platform. On 8 January 2000, Mr Connor informed Mr Keegan that TRW had a “contract” with Renault in relation to the relevant platform when all it had was a letter of commitment which was not legally binding. Globe did not have sight of any actual agreement and had no reason to distrust what Mr Connor had said. At some point Renault made the decision not to go with the Gen 1 motor. TRW knew or should be taken to have known at the date of the Agreement that the overwhelming likelihood was that TRW would not proceed to buy the Gen 1 motors for the P1 platform. In those circumstances the Court is invited to infer that TRW had the relevant knowledge prior to 1 June 2001 and the failure to update the volume representations was negligent.

TRW responds that to allege that the express volume representation was false would be to make an allegation tantamount to dishonesty. It was not suggested to Mr Connor that the volume estimates put forward were not in fact the estimates that TLVES held at that time. Mr Fearon, who was the Claimants’ own witness, confirmed that these estimates were TLVES’s estimates at the time.

As I see it TRW‘s position is correct. If (and the matter was insufficiently explored) TRW knew that Renault would not buy Gen I motors, any representation in the form of estimates that included the Gen 1 would have been dishonest. There was no suggestion of dishonesty or that Mr Connor was not acting in good faith. There is no reason to doubt the evidence of TRW that these were the estimates at the time. There is nothing in this point.

Nissan B platform. This allegation rests upon the volume estimates in the CQA document of 7 May 2001 which I refer in the narrative at the start of this judgment.

Globe says that the figures in the CQA document were likely to be as up to date and accurate as possible because this was a crucial document used by TRW for its own pricing and hence future negotiation with Renault. Mr Heckmann confirmed this in cross-examination. Mr Perrin agreed that the information had to be accurate: T28/103:15-23.

Globe says that Mr Perrin’s witness statement gave the impression that volume data of this type would routinely be downgraded so as to reduce US expectations of the French sales group’s performance. Mr Perrin had no recollection of the actual 7 May 2001 CQA document or 16 May 2001 documents themselves. He said as a general matter that the latter was an example of a Long Range Plan and data in it would be assessed within the Paris office to ensure it was “realistic”. Globe says that this means that the information must have been checked with Renault and suggests why. Globe says that the Court should find that the Long Range Plan dated 16 May 2001 from the Paris office included accurate customer volumes, that TRW was happy should subsequently be adopted into the CQA document and that the volume information in that document would have come from TRW’s customer and was likely to be accurate and treated as realistic.

Even if the 7 May 2001 document was created in a number of iterations and the Court has before it various versions of a travelling draft, the accurate figures for the purposes of volumes on Nissan B and Renault (and hence the Volume Estimates) were known within TRW, through its US arm and in the Paris sales office, from at least 16 May 2001 and were likely to have been updated into the CQA document either at that date or very shortly afterwards.

TRW’s response is as follows. Mr Perrin’s evidence was clear and unshaken. The volumes behind the May 2001 document were sourced in the sales department in Paris. They represented his conservative estimate of sales volumes for the purposes of internal planning - T28/113, 115, 116. They were not Renault’s figures: they were the estimates of the Paris sales office. The link between the Paris Sales office and TLVES however could not be made out. Mr Perrin accepted that there would have been contact between Mr Robinson and Mr Laguette and that the Paris estimates may have been available to Mr Robinson [T28/111-112, 118]. However the Claimants elected not to cross examine Mr Robinson and his evidence about the 7^th May document stands unchallenged.

Decision. This limb turns on the 7^th May document. It is important to bear in mind what Mr Robinson (who was unchallenged) and Mr Perrin (whose truthfulness was not disputed) say about it.

Mr Robinson says this in his statement:

“I have reviewed the document titled Renault P1 Column Drive EPS System with the date 7 May 2001 in the top left hand corner). I recognise this type of document, although do not think I had seen the document before it was provided to me by TRW’s lawyers. The fact that it has “GDPIM2 Executive Approval” at the top shows that it is part of the GDP Gateway system which is a recognised product management process. This document represents one of the Gateways and is part of the CQA (Commercial Quotation Approval) management process.

If I had seen this document, or any other document with lower volume estimates than the estimates to which we were working, or if I had been told by Renault or Nissan that there had been a change in the volume estimates, I am sure we would have discussed it at a weekly meeting as it would have a material effect on our business, including production planning, business planning etc.

I do not know who created the document dated 7 May 2001, I believe it is extremely unlikely that it was created by anyone within TLVES, given that it is headed ‘TRW Chassis Systems’, which suggests it is a document emanating from within the wider TRW Group in the US. I believe TRW Chassis Systems was an early TRW legacy group in North America. I am told by TRW’s lawyers that it was found in the Paris sales office files, so it may be that is was produced in Paris to report on the Renault P1 project to the TRW management team based in the US, but as I have no first-hand knowledge of the document, this is just a guess.”

Mr Perrin says this in his statement:

“I have been shown an excel spread sheet entitled the Product Forecast Business Plan 2001 (AXP1/1-6). I have been informed by Wragge & Co LLP that this spread sheet was found on a CD located in the TRW Paris Sales office during the disclosure review which they undertook in early 2013.

This document has my name in the final column under the heading ‘sales manager’. I understand that this document is dated 16 May 2001. Given the date of this document I must have been assisting Mr Laguette with the steering division at this time. The volume estimates from Renault would have been conservatively adjusted downwards to reflect a more conservative prediction of the actual sales that would have materialised.

I produced this document. Due to the lapse of time since this document was created, I cannot confirm exactly who had input into this document. Typically a number of different people within the TRW Paris Sales office would have assisted with the production of this document.

I do not recall the actual set of figures contained within this document. My understanding set out above is based on how I remember things generally worked in the Paris Sales office during this time.

I cannot remember where this document would have been sent. It is however likely that information such as that in this document would have been provided to members of the TRW Management office based in the US. This information could potentially have been used by officers in the US to measure the performance of individuals in the Paris sales team, such as Mr Laguette. It was neither in Mr Laguette’s nor my interest to overestimate TRW’s own internal analysis of potential volumes from customers in this type of document as one of the things we were judged against was sales achieved against sales forecasted. For this reason I remember Mr Laguette telling me to take a conservative approach to drafting any document such as this.

I have been shown a document titled Renault P1 Column Drive EPS System . Whilst I recognise the phrase GDPIM2 Executive Approval process, I have no recollection of this document nor do I recall having seen any other documents in this format….”

What Mr Robinson says is in effect common ground. I believe what Mr Perrin, a strikingly honest and intelligent witness had to say. I have no doubt that if either manager obtained information about sales from customers that was significant (and there is no evidence that they did) this would have been passed up the line. The 7 May document appeared on disclosure only many years after it was written because of the timing chosen by Globe for this litigation. It has understandably but unrealistically been seized on to mount a case. I refer back to my general observations about documents created in businesses. There was, applying commercial common sense, no reason why this document or what may have been many others, should have been referred up to those negotiating the Agreement or supplying the estimates. The document was prepared for a particular purpose and this no doubt shaped its contents. Globe’s submissions misunderstand the way large companies work. This is a claim in negligence. There is no evidence, expert or otherwise, to support a claim that a company such as TRW would be failing in a duty of care by not seeking out, in effect, the documents which would be produced on disclosure in later litigation, before giving estimates.

I therefore conclude that Globe cannot show that, on the assumption that there were actionable misrepresentations, these were either false or negligently made. So the answer to both questions is “No”.

These issues deal with loss, damage and limitation flowing from negligent misstatement. While I wish to decide all relevant points between the parties I have concluded not only that no duty of care arose in this case but also that, if I am wrong, Globe cannot show that any representations were false and negligently made. I see no useful purpose in doing an exercise requiring me to make a double assumption that I am wrong on both fundamental points and where there would be many possible permutations. Further each issue begins with the word “If” and thus, in literal terms, does not require an answer.

Globe’s claim for breach of contract succeeds. Globe has suffered loss and its claim to damages should in principle be assessed on the “Pinto B” basis but this requires further argument. Globe has no cause of action against the Second Defendant. The Second Claimant has a cause of action against TRW. Globe is not estopped from bringing its contract claim. Globe’s claim in negligent misstatement fails.

I shall be grateful if the parties will submit corrections of the usual kind, preferably agreed, not less than 7 days before the hand down of this judgment. There will be a need for a further hearing on the issue of damages, perhaps half a day following short further submissions, and to deal with consequentials. It will be helpful if the parties will let me have their views, either briefly in writing or by coming to court (not necessarily at Leading Counsel level), about the most efficient way of taking matters forward. In a case of this length there may be aspects which require decision which I have omitted to deal with. If so will the parties please let me know?

Finally I express my very considerable thanks to Counsel and Solicitors on both sides for their formidable ability and commitment throughout the trial. I have for brevity attributed submissions to Leading Counsel, but as they were the first to acknowledge, all these matters were team efforts for which the Court is very grateful.