DRL Ltd v Wincanton Group Ltd

This case concerns claims and counterclaims arising out of contracts for the provision of logistical services by the Defendant, Wincanton Group Limited (‘Wincanton’), and its predecessor, Lane Group plc (‘Lane’), to the Claimant, DRL Limited (‘DRL’).

DRL is a Bolton-based company whose business involves retailing electrical white goods such as fridges and freezers to private customers over the internet, both under their own trading name and also on behalf of well known high street retailers such as Sainsburys. Initially in October 2005 it contracted with Lane, a Bristol-based logistics company, (‘the 2005 Agreement’) for the latter to provide a complete delivery service, from taking delivery of the products from their manufacturers to delivering them to DRL’s customers. During the course of the contract DRL, which expected high standards, expressed its dissatisfaction with the quality of Lane’s performance.

Wincanton is a substantial logistics company based in Chippenham, Wiltshire. At this time it was interested in moving into the home delivery market. In October 2006 it acquired the majority of the shareholding in Lane. It proceeded to integrate its business with that of Lane, but in the meantime the 2005 Agreement continued in existence, being performed by the new integrated business on behalf of Lane. However, following a process of negotiations between DRL and Wincanton, in May 2007 they entered into a renegotiated contract (‘the 2007 Agreement’), the purpose of which was to resolve historical disputes and provide a basis for an improved relationship going forwards. Unfortunately that expectation did not materialise. For its part DRL became increasingly dissatisfied with the quality of the service provided whereas Wincanton became increasingly concerned both as to what it believed were DRL’s unrealistic expectations and as to the amount it believed it was owed by DRL.

In January 2008, by which time it was clear that the differences between the parties were such that there was little prospect of the commercial relationship continuing, DRL and Wincanton entered into a further agreement (‘the 2008 Agreement’) the aim of which was to provide for an orderly and amicable termination of the working relationship, leaving any disputes to be resolved post-termination. Unfortunately that did not happen, and the relationship came to an end on 28/2/08 in acrimonious circumstances, where both parties were contending that the other was in repudiatory breach.

On 29/5/08 DRL issued proceedings against Wincanton in the Chancery Division, Manchester District Registry. By its Particulars of Claim DRL advanced 18 separate claims against Wincanton, the details of which were contained within 15 separate appendices. In his written opening for this trial Mr De Verneuil Smith for Wincanton identified the amount claimed as totalling £5,478,449.44, involving claims arising out of 24,528 separate deliveries. In its Defence and Counterclaim DRL raised a number of general defences, including notification and limitation defences relying on the incorporation of the Road Haulage Association Conditions of Carriage 1998 edition (‘RHA’) and/or the UK Warehousing Association Conditions of Contract 2002 (‘UKWA’). DRL also responded to the details of the claims in its statement of case, also accompanied by voluminous appendices. Again adopting Mr De Verneuil Smith’s very useful summary Wincanton accepted, without prejudice to its general defences, that DRL would be entitled to an allowance of £1,192,572.26, but that this was subject to and cancelled out by a counterclaim of £1,926,480.80.

An application by Wincanton for summary judgment relying on its general defences was unsuccessful and, following transfer into the Manchester Mercantile Court, directions were given by His Honour Judge Hegarty QC on 9/9/09 for the trial of all issues of liability in the claim and counterclaim, such issues to be identified by way of a schedule and an agreed list of issues. He also ordered the trial at the same time of a limited number of specimen transactions, up to 30 per individual claim.

By the time of trial counsel for DRL, Mr Chaisty QC, and counsel for Wincanton, Mr De Verneuil Smith, were agreed that given the number of specimen transactions in issue and the volume of evidence, both documentary and oral, which would be required to decide those specimen transactions, it would be impossible in the time available to try the specimen transactions as well as the liability issues. Accordingly, the parties were agreed that the most sensible way forward would be to leave those matters over and use the time available to try the liability issues. I agreed with that approach and the order of 9/9/09 was varied accordingly.

The trial proceeded therefore on the basis of the list of issues as agreed between the parties. Both during the course of the trial and subsequently there have been some amendments to the agreed list of issues. There have also been some re-amendments to the pleadings. Up until receipt of the first draft judgment in this case this was all achieved by consent, the parties having taken the eminently sensible approach that all disputed issues of principle in relation to liability should be resolved at this stage so long as neither party was disadvantaged by the late introduction of new points.

During the course of the 2 weeks commencing 12/4/10 I heard evidence from the following witnesses:

The evidence ending on Friday 23/4/10, I adjourned for written closing submissions on the basis that I would then produce a written judgment. Having already had detailed written opening submissions from both counsel, I then had the benefit of, written transcripts of evidence, written closing submissions from Mr Chaisty, followed by written closing submissions from Mr De Verneuil Smith, followed in turn by written submissions in reply from Mr Chaisty. The parties were content that I should proceed to judgment on the basis of the written submissions.

During the course of preparing the first draft judgment I considered that there were points which appeared to me to be material to my decision but where I was conscious that it could be said by one of the parties that they had not had the opportunity to make full submissions on that point or even that it was not a point which I should be deciding, either at this stage in the proceedings or at all on the respective pleaded cases. That of course is always a potential problem where, as happened here, the trial proceeded by reference to a substantial number of specified issues, the precise ambit of some of which were not entirely clear, and where the issues and the arguments were subject to some refinement as the trial took its course. I took the view that what I was required to do was to decide all issues of principle arising in relation to liability at this stage, unless it could fairly be said by one or other party that an individual point was not one which they had come prepared to argue and where there would be material prejudice to them in my deciding it at this stage. What I did therefore was to identify at the relevant part of the first draft judgment any particular points where I considered that either party might want either the opportunity to make further submissions on that point or to argue that I should not decide the point, so that they could consider at that stage whether or not they wished to do so. Before providing the first draft judgment, I notified counsel for the parties that in the circumstances I intended to produce the first draft judgment on that provisional basis, and they indicated that they were in agreement with that approach. Subsequent to circulation of the first draft judgment I received further written submissions from both counsel with submissions in response, and I have taken those submissions into account as appropriate in producing this final judgment.

Neither counsel has suggested to me that any of the witnesses from whom I heard evidence were dishonest witnesses, although each has suggested that in some respects evidence adduced by witnesses called by the other side (and unusually, in relation to one aspect of the case, by witnesses called by that particular party) was unreliable and should not be accepted. I agree that with one exception all of the witnesses from whom I heard were honest witnesses who were doing their best to assist the court. The exception was Mr Carrol who, it was quite clear to me, had no desire to assist either party or for that matter the court, and deliberately adopted the tactic of claiming to remember virtually nothing when asked about almost every aspect of his involvement in the case. Although that stance was perfectly reasonable in relation to certain matters of detail, it was simply not credible in relation to the more important issues, where I have no doubt that he remembered more than he was willing to admit. I also consider that the evidence of certain witnesses, such as Mr Caunce and Mr Roberts for DRL and Mr Flanagan and Mr Lunn for Wincanton, suffered in certain respects from the flaw of imperfect recollection, coupled with an element of subjective belief about who was ‘in the right’ and who was ‘in the wrong’. Fortunately, however, I also had the benefit of voluminous contemporaneous documentation, includes minutes of meetings assiduously taken by DRL representatives and usually copied to Wincanton at the time and rarely objected to as inaccurate, which enabled me to make a reasonable assessment of what had actually happened at the time.

Mr Chaisty suggested in closing submissions that I should draw inferences against Wincanton because of their failure to call certain witnesses whose evidence was obviously relevant to the issues in the case. Although he identified 4 particular witnesses, I am satisfied that the only witness who Wincanton could reasonably have anticipated would be able to give significant evidence which could not adequately be covered by other witnesses was Mr Burns, then the business unit director of retail operations at Wincanton, reporting to Mr Flanagan. However he was no longer employed by Wincanton and, it emerged, had some 3 months pre-trial successfully applied for employment with DHL or one of its associated companies. In those circumstances it seems to me quite unrealistic to draw any inference against Wincanton for failing to call Mr Burns as a witness. In any event, no specific issue was identified as being one where I should draw an inference against Wincanton having regard to the absence of Mr Burns as a witness.

The issues for determination by me, in accordance with the revised agreed list of issues, are as follows:

This agreement is contained in a document entitled ‘Commercial Agreement between DRL and Lane’. It is common ground that the document, although apparently unsigned (Footnote: ¹), took effect as a legally effective agreement, its stated purpose being to ‘set out the commercial terms under which Lane would provide logistical services to DRL’. Although it also recorded the parties’ intention that they would proceed to negotiate and agree a ‘binding agreement’, there is no evidence that they ever attempted to do so. It is clear that the parties proceeded on the basis that it was an immediately binding and effective contract, and neither party submitted to the contrary.

The document continued that ‘the term of this agreement will be a minimum term of 3 years and will include, without limitation, the terms and condition set out in the document’. There would appear to be scope for argument as to whether this had the effect of imposing a minimum 3 year term, or only providing for the further envisaged formal agreement to contain such a term, but that point was not argued and does not appear to be material to any of the issues which I have to decide.

There followed a list of 14 specific terms and conditions. Those of particular relevance to this case are as follows:

Clause 1, under which DRL appointed Lane as its ‘strategic partner’ for home deliveries of white goods, and under which the ‘agreed IT solution’ identified as Appendix 1 would be implemented to time-scales to be agreed. I shall refer to Appendix 1 below.

Clause 2, under which the logistics services which Lane agreed to provide were set out in 12 numbered sub-paragraphs, including the following:

Clause 2(ii), under which Lane agreed to store 2 days delivery stock at its Rugby warehouse, inclusive of returns and collections, with storage of items in excess of this ‘to be charged as agreed’.

Clause 2(v), under which the ‘minimum service’ was to include ‘product unpacking and checking’ (otherwise known as ‘unpack and inspect’ - ‘unpack and inspect’) and ‘packaging return and disposal’.

It is common ground that, in addition to the benefit to the customer conferred by these activities, there was a real benefit to DRL because unpack and inspect, if done properly, significantly reduced the incidence of customers only discovering damage to a product when they came to unpack it after the delivery driver had left. Avoiding this not only avoided the administrative and logistical costs of collection and delivery of a replacement, but also avoided customer dissatisfaction. It also reduced the risk of DRL becoming embroiled in a dispute with the customer and Lane as to whether the damage was sustained in transit or on delivery (in which case it would prima facie be Lane’s responsibility) or subsequently whilst left with the customer (in which case it would prima facie be the latter’s responsibility). Whilst there was also a benefit to Lane in avoiding such disputes, performing unpack and inspect for each delivery also involved a potential element of disadvantage to Lane or to its drivers in that it extended the ‘dwell time’ for each delivery. This therefore reduced the number of deliveries which delivery drivers, working conscientiously, could make each day, with a potential impact on operational efficiency, but also carried with it an inherent risk of abuse by unscrupulous or hard-pressed delivery drivers who, either pressed for time or keen to finish the working day as quickly as possible, were tempted into what was known as ‘dump and run’ whereby they would leave the product with the customer without properly performing the unpack and inspect obligation.

Clause 2(vi), under which Lane would provide certain further services on request, including ‘product exchanges, returns, collections and simple connections of freestanding [products]’, and also clause 2(vii), where Lane would on request collect and dispose of customer’s existing appliances destined for scrap.

Clause 2(viii), under which Lane would scan all goods from delivery homes into the customers’ home and update delivery progress during the delivery day. This was said to be ‘subject to systems development’, obviously intended as a reference to the IT solution in Appendix 1.

Clause 2(x), under which Lane agreed to obtain a signed proof of delivery (‘POD’) document from the customer before leaving the address, and to supply an electronic copy to DRL by 10am the day after delivery and a hard copy on request. In addition to proving delivery, the POD also aimed to ensure compliance with the unpack and inspect obligation, because it required the customer to tick and sign to confirm that unpack and inspect had taken place. It would appear from the reference in Appendix 1 Phase 1 that what was envisaged was that the blank POD would be provided in electronic format. The format and content of the POD was changed on at least two occasions during the course of the relationship between the parties with a view to making clearer both to the delivery drivers and the customers the importance of complying with the unpack and inspect procedure.

Clause 2(xii), under which Lane agreed to provide management information in relation to operational matters such as the deliveries achieved, collections, reasons for failed deliveries and product damage information.

I refer at this point to Appendix 1, which in substance provided for a phased roll-out of IT services to achieve the objective of Lane being able to provide relevant information to DRL by electronic means, including the important objective of DRL having access to the appropriate part of Lane’s IT system so that it could view what was happening to any particular delivery as soon as each new piece of information was entered onto Lane’s system, and Lane having access to the appropriate part of DRL’s IT system (known as ‘DOFS’).

Clause 5, which specified the rate of charge per delivery and collection. These were stated to ‘reflect a minimum weekly volume’ of 800 deliveries per week, although there was no express provision specifying the consequence of not achieving that volume.

Clause 7, under which invoices would be raised weekly and paid within 21 days, save in relation to items the subject of a bona-fide dispute.

Clause 11, under which ‘the services will be provided in accordance with the RHA Conditions of Carriage 1998 and the UKWA Conditions of Contract as applicable and the liability of Lane in respect of loss or damage to DRL’s products or otherwise in connection with the services will be subject always to the limitations and exclusions specified therein’.

Clause 12, which permitted Lane to offer ‘doorstep compensation’ up to £75 to customers, the cost of which would then be shared equally between the parties. The intention was that where on unpack and inspect minor damage such as a scratch was found, to avoid the need for removal and re-delivery the delivery drivers would be authorised to offer compensation to induce the customer to accept the product with that minor damage.

Clause 13, under which Lane agreed to accept liability for damage to products whilst in its control or possession, and also where reported damaged after delivery unless it could prove unpack and inspect and produce a fully completed POD or could prove that unpack and inspect did not take place at the customer’s specific request. Clause 13 also provided for such damaged products to be returned to the manufacturer (‘RTM’) where possible – i.e. where there was a reasonable argument for saying that it was manufacturing damage – and, if not, to be sold off with Lane reimbursing DRL for the difference between the replacement cost and the sale price achieved. The process of selling off damaged stock was referred to as ‘jobbing off’ stock, because it would be sold to ‘jobbers’ - so described, presumably, because their business was to buy job lots of damaged stock with a view to disposing of them for profit.

Clause 14, under which Lane excluded liability for ‘loss of profits, goodwill, anticipated savings or any type of indirect or consequential loss even if such losses were reasonably foreseeable or Lane had been advised of the possibility of DRL incurring the same’.

I refer to the RHA conditions and the UKWA conditions at this point. Although similar they are not identical. The former are of course promulgated by the Road Haulage Association and are intended to be used for contracts of carriage, whereas the latter are promulgated by the UK Warehousing Association and are intended to be used for contracts of warehousing. The former have attracted most attention at trial, whereas the latter have attracted little or any attention. That is because clause 11 said the conditions would apply ‘as applicable’. Here, as Mr De Verneuil Smith submitted in his closing submissions, the services which Lane were contracted to provide in this case were fundamentally delivery services and services ancillary thereto. Although those services would include some element of storage pending delivery and storage of returned goods, that does not affect the fundamental nature of the contract as being one of delivery. Accordingly, in my judgment it is the RHA which are relevant to this case. Insofar as it could be argued that a particular claim relates to storage rather than to carriage it is not suggested by either party that there is any difference material to this case between each set of conditions. Individual conditions of particular relevance to this case include the following:

Condition 8(2), which entitled Wincanton to charge interest at 8% above base on all overdue amounts owed to it.

Condition 9(2)(b), under which Wincanton was liable for physical loss, mis-delivery or damage unless due to specified causes including faulty design or latent or inherent defect, but not for loss or damage arising after the end of transit.

Condition 11, entitled ‘limitation of liability’. Under clause 11(1) Wincanton’s liability for physical loss, mis-delivery or damage to goods was limited to the lesser of the value of the goods lost, mis-delivered or damaged, the cost of repair, or £1,300 per tonne of the gross weight of those goods. There was also provision for the £1,300 per tome limit to be increased by agreement. Under clause 11(2) Wincanton’s liability ‘in respect of claims for any other loss whatsoever (including indirect or consequential loss or damage and loss of market) and howsoever arising in connection with the consignment shall not exceed the amount of the carriage charges in respect of the consignment or the amount of the claimant’s provable loss, whichever is the lesser’.

Condition 13, entitled ‘time limits for claims’ provides under sub-paragraph (1) that Wincanton’s liability for damage to the whole or part of the consignment and for physical loss, mis-delivery or non-delivery of part of the consignment was excluded unless advised in writing within 7 days, and a written claim made within 14 days from the termination of transit in each case, and for any other loss if advised in writing within 28 days and a claim made within 42 days after the commencement of transit. There is a proviso to these time limits, affording DRL a reasonable extension of time if it proves that it was not reasonably possible to comply with these time limits). It provides separately under sub-paragraph (2) that Wincanton is discharged from all liability unless ‘suit is brought’ within 1 year of the date transit commenced.

Condition 14, entitled ‘lien’, under which Wincanton was entitled to a general lien for goods owned by DRL ‘for any monies whatever due’ from DRL to Wincanton, and under which Wincanton was entitled to sell the goods towards what was due and the expenses of their ‘retention, insurance and sale’.

As I have already noted, this agreement was introduced following negotiations between DRL and Wincanton with the aim of resolving historical disputes and regulating future performance. It took the form of a letter from Wincanton to DRL dated 3/5/07 which was then signed on behalf of both of them. The agreement was specified to continue until 31/12/08 whereupon it could be terminated by 12 months’ written notice not to be served before that date; the effect being to provide for a minimum duration of 2 ½ years from the date of the agreement. It provided that ‘all references to Lane shall be replaced with Wincanton’. It provided that ‘changes were to be effective from 1 May 2007’. It then set out changes to specific clauses, including the following:

Clause 2(i), under which ‘the Lane warehouse location’ specified in the original as its Rugby warehouse was changed to Wincanton’s Wolverton warehouse ‘or such other premises as Wincanton shall operate from’.

Clause 2(ii), which was simplified so that it simply read ‘stockholding in excess of 2 days’ to be charged ‘at a rate to be agreed’.

Clause 5, providing for ‘revised charges, minimum weekly deliveries and projected delivery volumes’ as set out in Appendix 1. The delivery charge was set to a sliding scale dependent on volume, less than that charged under the 2005 Agreement, and express provision was made for the minimum weekly delivery to be chargeable.

Clause 7, under which the time for payment of invoices was extended to 30 days, and under which a new procedure for the weekly submission, agreement, sign-off and content of invoices was specified. The content was required to ‘explicitly disclose’ all charges and deductions.

Clause 10, under which Wincanton was entitled to charge only 50% of the agreed charge for first time redeliveries if it achieved less than a 98% success rate as defined for the week in question.

Clause 12, under which the procedure for doorstep allowances was changed so that DRL would refund the customer allowances agreed by Wincanton but then recharge Wincanton in full for such allowances unless made for faults outside its control.

Clause 13, which introduced a new procedure for product damage. The new clause is worth setting out in full:

Appendix 2 contains a list of codes each applying to a different reason for a failed delivery, divided into (a) Wincanton ‘no fault’ reasons and (b) Wincanton fault reasons. Particular attention was devoted at trial to 2 codes in particular:

It will be appreciated that where the packaging appears undamaged, but on unpacking damage is observed, there could well be room for dispute as to whether or not that is damage which occurred during the manufacturing process or during the delivery process and, if the latter, at which point in the delivery process that damage occurred.

A new clause 15, which made Wincanton liable for lost stock at cost, introduced provision for Wincanton to record and reconcile stock movements and which provided for stock which Wincanton was unable to trace within 3 days of a gap in its transaction history to be deemed as, and treated as, lost stock.

There was also a section entitled ‘conclusion of other matters’, which recorded an agreement for Wincanton to issue DRL a credit note for £940,000 as full and final settlement for ‘all claims and stock file reconciliation up to and including 31/3/07’, allocated as to £750,000 for the period before the Wincanton share acquisition and £190,000 subsequently. It is apparent therefore that there is no question of Wincanton being liable for any claims which DRL may have had against Lane up to 31/3/07, in that any such claims were compromised pursuant to the terms of this settlement.

This took the form of a letter addressed by Mr Caunce to Mr Phillips, in the form of an offer to be accepted by signature and return by Mr Phillips, which Mr Caunce duly did. As I have already indicated, its aim was to make provision for the parties to extricate themselves from their commercial relationship, should that be what either desired (and which by then both parties realistically expected to occur), in a way which minimised the risk and damage to both parties from an acrimonious termination on disputed grounds. It provided for DRL to make a payment of £1M on account of what Wincanton asserted it was owed in respect of deliveries made before 19/1/08, in return for Wincanton agreeing not to seek to terminate the 2007 Agreement for non-payment of those charges, and for DRL to pay properly invoiced charges for deliveries post 19/1/08 without set off or deduction by close of business 2 days after receipt of the relevant invoice. It gave both parties the right to terminate on 28 days notice. It required the parties to conduct negotiations for a consensual termination and, by clause 5, that ‘For so long as DRL complies with its obligations under the Agreement and those set out in this letter Wincanton will endeavour to provide assistance to DRL in effecting the transition of the services to a third party’.

I shall refer for convenience to clauses in the various Agreement by shorthand. For example clause 2 of the 2005 Agreement becomes ‘§2/05’; clause 15 of the 2007 Agreement becomes ‘§15/07’; condition 13 of the RHA Conditions becomes ‘§13 RHA’.

Before considering the issues it is necessary to summarise the nature of and basis for the various claims advanced by DRL in the Amended Particulars of Claim, which are as follows:

Claim 1 (Paragraph 9 and Appendix 1).

Claim 2 (Paragraph 10 and Appendix 2).

Claim 3 (Paragraph 11 and Appendix 3).

Claim 4 (Paragraph 12 and Appendix 4).

Claim 5 (Paragraph 13 and Appendix 5).

Claim 6 (Paragraph 14 and Appendix 6).

Claim 7 (Paragraph 15 and Appendix 7)

Claim 8 (Paragraph 16 and Appendix 8).

Claim 9 (Paragraph 17 and Appendix 9).

Claim 10 (Paragraph 18 and Appendix 10).

Claim 11 (Paragraph 19 and Appendix 11).

Claim 12 (Paragraph 20 and Appendix 12).

Claim 13 (Paragraph 21 and Appendix 13).

Claim 14 (Paragraph 22 and Appendix 14).

Claim 15 (Paragraph 23 and Appendix 15).

Claim 16 (Paragraph 24).

Claim 17 (Paragraph 25).

Claim 18 (Paragraph 26),

With that lengthy introduction, I now turn to determine the Agreed List of Issues.

Should the Agreements be rectified in accordance with paragraph 26A of the Re-Amended Particulars of Claim?

By way of re-amendment of the Particulars of Claim DRL advanced a case, pleaded in the alternative to its case in relation to construction and estoppel, that §11/05, incorporating RHA and UKWA, and carried through without alteration into the 2007 and 2008 Agreements, should be rectified on the basis that the common intention of the parties was that the exclusions in these standard conditions should apply only in the event of a ‘major incident’, an example of which is identified as fire or theft resulting in the loss of all or a substantial quantity of a consignment of product in a vehicle whilst in transit. It is said that this common intention was expressed in discussions between Mr Keates and Mr Wilkinson prior to 14/10/05 and in a document prepared by Lane, but that by common mistake §11 failed to reflect this, and that by ‘accepting the responsibilities and obligations owed by Lane’ Wincanton is also subject to the rectification claim.

The arguments about construction and estoppel arise for determination under issue 5. Although the issue of rectification only arises if DRL is unsuccessful on the issue of construction, since I am attempting to answer the questions in the order in which they occur in the list, and given the conclusions I have reached in relation to construction, I will deal with the rectification issue first.

DRL’s case, in short, is that in negotiating the 2005 Agreement Mr Keates and Mr Wilkinson demonstrated that they shared the common intention about §11, and that in the circumstances in which Wincanton acquired the shareholding in Lane and then renegotiated the agreement in 2007 there would be nothing inequitable in ordering rectification against Wincanton as successor to Lane.

Wincanton’s case, in short, is that: (a) on an objective analysis, there was no common intention to the effect alleged; (b) there was no outward expression of accord; (c) the common intention asserted is too uncertain to take effect as a contract term; (d) Wincanton’s position can be equated to that of the bona fide purchaser for value without notice of the mistake against whom rectification ought not to be ordered.

It appears that the negotiations between DRL and Lane were conducted in some haste because Fiege, DRL’s previous logistics supplier, had gone into administration and DRL needed to find a replacement at very short notice. That may explain why there are only 2 documents in the trial bundle which pre-date the 2005 Agreement, only one of which is relevant to the rectification issue. That is the ‘Concept Document’ prepared by Lane, containing its proposal to DRL. Although a lengthy document, running to 23 pages, the only references to RHA are as follows:

The later reference to RHA is consistent with Mr Keates’ evidence, which was that he included §11 in the draft agreement which he produced and submitted to DRL in order to comply with what he understood was a legal requirement for a road haulage operator such as Lane to hold goods in transit insurance to a minimum of £1,300 per tonne, that of course being the limit on liability in §11 RHA. It was clear from his evidence that he did not appreciate that RHA did not in themselves contain any express requirement for the carrier to take out or maintain goods in transit insurance, either at all or up to any particular amount, or that they also made provision for a wide range of other matters including contractual exclusion and limitation clauses. He said that he had told Mr Wilkinson that the reason why he had put §11 into the draft agreement was to comply with this legal requirement, and that Mr Wilkinson had accepted this without argument. He agreed that he had no recollection of saying to Mr Wilkinson that RHA only applied to ‘major incidents’, or of discussing let alone agreeing what ‘major incidents’ were, or of discussing let alone agreeing whether the bespoke provisions of §13/05 overrode §11/05 and thus RHA in relation to liability for loss of or damage to products whilst being carried by Wincanton.

Mr Wilkinson accepted that he had read the whole of the draft agreement, including §11, before he agreed it on behalf of DRL. He confirmed that Mr Keates had told him that Lane insisted on §11 being in the contract to comply with the legal requirement on Lane as a road haulage operator, and that he understood that the clause was there to limit the amount of Lane’s insurance liability. He accepted under cross-examination that he had no recollection of Mr Keates saying that §11 would only apply to ‘major incidents’, nor was there any discussion about what that term might mean. Notwithstanding this, under re-examination he also confirmed paragraph 12 of his witness statement, in which he said that Mr Keates had told him that §11 was included to limit Lane’s liability ‘in the event of fire or theft of one of its vehicles where the entire load might be lost in a single incident’. He then said that Mr Keates had advised him that §11 was there to cover major incidents, and that based on what he was advised by Mr Keates he understood that this referred to one-off incidents such as referred to in paragraph 12 of his statement. He accepted that he had not read RHA before agreeing the 2005 Agreement.

There is also an (admittedly post-contractual) exchange of e-mails between Mr Caunce and a Mr Gregory of Lane on 13/12/05 where, in response to a query from the former, the latter wrote confirming that although the standard insurance cover for damage to goods was the £1,300 per tonne RHA limit, in fact Lane carried higher insurance cover of up to £60,000 per load to ensure that relatively low weight high value goods such as white goods were adequately covered. In his evidence Mr Keates confirmed that this increase in the cover limit had previously been taken out by Lane, so that it was not specific to this contract, and that he had no recollection of discussing the insurance cover limit with Mr Wilkinson before the 2005 Agreement.

I accept Mr Keates’ evidence to the effect that he explained to Mr Wilkinson that §11 was a standard clause inserted by Lane to comply with its legal obligation as a road haulage operator to maintain goods in transit insurance up to the RHA liability limit, and that Mr Wilkinson accepted this without objection. I do not however accept Mr Wilkinson’s evidence insofar as he appeared to suggest that Mr Keates told him that §11 was intended only to apply to major incidents, or that Mr Keates explained that by this he meant ‘major incidents’ such as vehicle accident or fire or theft where the entire load might be lost or damaged. His evidence in his witness statement was not consistent with his evidence under cross-examination, and his evidence under cross-examination was not consistent with his evidence under re-examination. My finding is that he has no clear recollection of what was discussed, and that his evidence on this point comes from a faulty reconstruction of events derived largely from a selective re-reading of the earlier Concept Document.

So far as the appropriate test for rectification is concerned, there is no dispute between the parties as to the relevant principles applicable to a ‘common intention’ case, which is what DRL is contending for here. Mr De Verneuil Smith has referred me to the recent re-statement of the relevant principles in the speech of Lord Hoffman in Chartbrook Limited v. Persimmon Homes Limited [2009] UKHL 38, with which the majority of the other members of the House evidently agreed. Whilst I appreciate that the question as to whether common intention rectification involves an inquiry into the objective or the subjective state of mind of the parties is one where there may be room for debate, that is not a relevant issue for the purposes of this case.

Thus the essential question in this case is whether the evidence to which I have referred demonstrates that the parties had a common continuing intention, whether or not amounting to an agreement, outwardly expressed, and that by mistake common to both of them the contract did not reflect that common intention.

It is clear in my judgment that there was not, on the facts as I have found them, any common intention that §11 should only apply to ‘major incidents’, nor any outward expression of agreement about that. The evidence discloses no more than that Mr Keates explained to Mr Wilkinson what Lane’s reason was for wanting §11 to be in the agreement, and that on the basis of that explanation Mr Wilkinson was willing to agree to §11 being included. There is no evidence to support an argument that both parties proceeded on the basis of a common intention that §11 would only apply to major incidents. The reference in the Concept Document to RHA in the context of insurance cover for major incidents does no more than to explain the nature and extent of the insurance cover being offered by Lane, and does not afford a basis for an argument that the parties had a positive common intention to limit the ambit of the whole suite of provisions contained in RHA. Indeed such an argument would involve ignoring the first reference in the Concept Document to the RHA, which states unambiguously that they should apply to the services to be provided by Lane.

What happened here does not in my judgment come anywhere near the test for granting rectification, which since it involves altering the terms of a written contract requires convincing proof. Nor, so far as relevant, do I consider that it would provide any basis for granting any other form of relief. This is not a case where for example it could have been argued that Mr Keates misrepresented to Mr Wilkinson the content or effect of RHA; to the contrary he honestly explained Lane’s motive for wanting §11 in the agreement. The fact that RHA make provision for matters other than minimum goods in transit insurance cannot afford any basis for DRL to argue that it is not bound by RHA. §11 makes it quite clear that Lane is to provide its services ‘in accordance with the RHA Conditions’ and that its liability for loss or damage to products is ‘subject always to the limitations and exclusions specified therein’. DRL cannot complain if it did not take the time or trouble to acquaint itself with RHA at the time it agreed to the 2005 Agreement.

I also agree with Mr De Verneuil Smith that there is insufficient certainty about what is meant by ‘major incidents’. It was known that Lane’s delivery drivers would be using a delivery vehicle to deliver a number of appliances in any one day. Damage to products whilst in transit could occur in a number of different ways and with varying degrees of seriousness. If it is being said that, for example, damage to more than one appliance sustained in a road traffic accident would be subject to RHA but damage to only one appliance sustained in the same way would not, that seems to me to be a hopelessly uncertain basis for distinguishing between what is and what is not a major incident. The same is true when considering what degree of damage to an appliance would be sufficient to qualify as a major incident.

Given those conclusion it is not strictly necessary for me to decide Mr De Verneuil Smith’s fallback argument that Wincanton is in the position of a bona fide purchaser for value without notice of DRL’s right to rectification. If I had needed to decide it I would have found against him on this point. Under the Sale and Purchase Agreement of 5/10/06 Wincanton merely acquired the majority of the share capital of Lane; the contract itself remained in existence between DRL and Lane. It is impossible to see how it can be said that Wincanton is in the position of a bona fide purchaser for value without notice in relation to this transaction. Whilst I appreciate that the commercial reality was that from this time onwards it was Wincanton who in substance performed Lane’s obligations under the 2005 Agreement, as Lane’s business was integrated into Wincanton, that is not sufficient in my judgment to apply the principle.

Is the position different in relation to the 2007 Agreement? Mr De Verneuil Smith submitted in paragraph 18 of his opening submissions that the effect of the 2007 Agreement was to novate the 2005 Agreement from Lane to Wincanton with variations. Although the distinction may not matter in the context of this case, given the settlement of DRL’s claims up to 31/3/07, my own view is that on a true construction of the 2007 Agreement it operated as a substitution, so that Wincanton assumed liability to DRL not just for performance of the logistics service with effect from 1/5/07 (the stated effective date) but for all antecedent liabilities of Lane under the 2005 Agreement. The reality is that the 2007 Agreement simply continued the 2005 Agreement, with Wincanton being substituted for Lane and with some amendment to its terms. There was no cut-off provision under which the parties agreed that each would have no rights or liabilities against each other in relation to the period preceding that date when Lane was still the contracting party. To the contrary, Wincanton accepted liability to give a substantial credit for liabilities pre-dating the 2007 Agreement, both before and after it took over control of Lane.

Even, however, if I was wrong and this is a true novation in the way characterised by Mr De Verneuil Smith, I would still regard it as wrong to treat Wincanton as a bona fide purchaser for value without notice. Since rectification is of course an equitable remedy I must have regard to what would be just in all the circumstances. In my judgment there is no basis for equating an arrangement such as the present, whereby the incoming party is willing to take over the benefit and burden of a contractual relationship with the party subsequently claiming rectification, with a transfer of property by a party against whom a claim for rectification may lie to a bona fide purchaser for value without notice. Whilst it is true that Wincanton was not as at 3 May 2007 on notice of any claim that the ambit of the RHA should be limited to major incidents, it is apparent that this is because at no time prior to 3 May 2007 had Lane or Wincanton ever sought to invoke the exclusions or limitations contained in RHA, so the occasion had never arisen where it has been necessary for DRL to protest about their being invoked.

It is common ground that §2(v)/05 required the ‘minimum service’ to include ‘placing the appliance in the room chosen by the customer’ and ‘product unpacking and checking’. There was no revision to this in either the 2007 or the 2008 Agreements. What this obviously means is that the delivery drivers should, having put the product where asked to do so by the customer (or his/her representative), proceed to remove the protective packaging applied by the manufacturer and then to check it to ensure that the right make and model had been delivered and that it was free from visible damage or defect.

Furthermore, given §13/05 which referred to the product being unpacked and checked by the customer, and given that under §2(ix)/05 Wincanton (Footnote: ²) was to obtain a signed POD document, it is obvious in my judgment that the delivery driver should also ensure where possible that the customer (or his/her representative) inspected the product so as to be able to confirm (and to sign the POD accordingly) that the right make and model had been delivered and that it was free from visible damage or defect.

I will deal with the vexed question of the nature of the obligation owed by Wincanton in the event that the customer (or his/her representative) was unwilling to assist in the process when considering, as I next do, the individual sub-issues under issue 2.

In his opening submissions Mr Chaisty accepted that unpack and inspect was dependent on the agreement of the customer. Given that §13/05 expressly envisaged circumstances in which the contractor might specifically request that the product should not be unpacked and inspected, that was understandable. In cross-examination Mr Caunce accepted that it was not possible in practice to achieve unpack and inspect in 100% of cases, because there would inevitably be occasions when the customer, acting perfectly reasonably, did not want the product unpacked (where for example it was intended for installation in a new fitted kitchen which was not yet ready) or where the person taking delivery of the product was a friend, relative or even neighbour of the customer who was not prepared to accept the responsibility of signing to confirm that the right product had been delivered or that it was undamaged. He also accepted that there was no contractual term as between DRL and its customers which obliged the customers to agree to unpack and inspect. This is not surprising; although it might have been possible for DRL to have included a term in its contracts with its customers that they were obliged to accept unpack and inspect, or even to have instructed Wincanton not to leave a product with a customer unless and until unpack and inspect had taken place, it is clear that neither course would have endeared it to its customers.

In re-examination Mr Caunce suggested that it was feasible to expect the drivers to offer to unpack and inspect in 100% of cases, and this was not disputed by the other witnesses in the case who were asked about this.

Although strictly speaking this evidence is not relevant to the construction of the contract, unless admissible as part of the factual matrix, nonetheless that evidence did serve to illustrate the commercial reality which I am satisfied would have been apparent to DRL and Lane in 2005 and to DRL and Wincanton in 2007. The ‘services’ referred to in §2(v) are all services which individual customers or their representatives might not want to accept for a variety of reasons, good or bad, including those given by Mr Caunce. I accept therefore that on its true construction provision of the minimum service was subject to the agreement of the customer and open to him to decline.

Equally, however, I am satisfied that the obligation required something more than the delivery driver merely asking the customer whether he wanted the product unpacked and merely asking him to inspect the product once unpacked. I am satisfied that §2(v) when read with §2(ix) and in the context of the use of a standard form of POD (as to which see issue 2(d) below) required the delivery driver to take reasonable steps to obtain the customer’s agreement to the product being unpacked, and to take reasonable steps to see that the customer inspected the product to confirm that the right make and model had been delivered and that it was free from visible damage or defect before signing the POD.

I decide therefore that §2(v), properly construed, required Wincanton’s delivery drivers: (i) to unpack the product unless specifically requested not to do so by the customer (or his/her representative) the delivery driver having taken reasonable steps to obtain the customer’s agreement to the product being unpacked; (ii) if and when unpacked, to inspect the product to confirm that the right make and model had been delivered and that it was free from visible damage or defect; (iii) to invite the customer (or his/her representative) to inspect the product to confirm that the right make and model had been delivered and that it was free from visible damage or defect and, if the customer (or his/her representative) was unwilling to do so, to take reasonable steps to persuade them to do so.

The aim of the ‘zero tolerance’ procedure was to reduce the incidence of cases where unpack and inspect did not take place. The procedure was that in any case where the customer did not, despite the delivery driver’s efforts, agree to unpack and inspect taking place the delivery driver should not simply accept that and leave the product unpacked and un-inspected, but instead should telephone a dedicated section within Wincanton’s operations centre, known as ‘Driverline’, a member of which would then call the customer whilst the delivery driver was still there and seek to persuade him to agree to the product being unpacked and inspected. If the customer still refused Driverline should report to DRL’s call centre and a DRL representative would then also telephone the customer and try again to persuade him to agree to unpack and inspect taking place. The delivery driver was expected to wait at the delivery address until this had happened. If the customer still refused to agree, then the POD should be recorded accordingly and DRL would accept that Wincanton had done as much as it could to perform its unpack and inspect obligation. In such cases, of course, DRL would then have its own proof that Wincanton had done everything that it reasonably could have done to unpack and inspect.

DRL’s position in this litigation is that where the zero tolerance procedure was followed it resulted in every case with the customer agreeing to unpack and inspect, but that Wincanton failed to follow through the procedure in all but a handful of cases. They contend that this is because Wincanton’s drivers failed to implement the procedure, probably because it involved what the drivers regarded as excessive ‘dwell time’ at the customer’s property whilst waiting for the procedure to be completed. Whether or not this case is made out is for another stage in the litigation, if necessary. The question for determination at this stage is whether or not adherence to the zero tolerance procedure ever became a contractual requirement.

There was some dispute between the various witnesses as to whether or not this had ever been introduced as anything other than a trial procedure. Mr Charnock said that there had been a trial prior to 19/6/07 involving the Wolverton depot, and that it had been ‘rolled out’ to all depots from 19/6/07. I accept that evidence, which in my judgment is consistent with the evidence of the contemporaneous bi-weekly review meetings, implemented following the 2007 Agreement, which took place on 10 and 15/5/07 (Footnote: ³) and again on 19/6/07 (Footnote: ⁴). Although it was suggested to Mr Caunce under cross-examination that his description of it as an ‘initiative’ in an e-mail dated 26/9/07 showed that he regarded it only as a trial, I do not accept that the word ‘initiative’ can be equated with a the word ‘trial’.

Mr Caunce however also accepted under cross-examination, in my judgment rightly, that this procedure was not something which was provided for under the 2007 Agreement. He also accepted that it was not something which he considered to be a variation of the 2007 Agreement:

This is consistent with the evidence of all of the witnesses who were asked about this, which is that they did not see this as a ‘contractual’ issue, which would have required amendment to the 2007 Agreement and thus the involvement of those within each company who had authority to deal with commercial as opposed to operational issues, but instead that they saw it as an operational issue introduced with the intention of making the agreement and the process work better.

I am satisfied, therefore, that the implementation of the zero tolerance procedure did not operate so as to vary the terms of the 2007 Agreement.

This issue does not necessarily stand or fall with issue 2(b), because it is conceivable – although unlikely perhaps - that I could decide (as I have done) that there was no oral variation requiring compliance with the zero tolerance policy, but that there was an oral variation that payment for delivery would only be made if the (operationally agreed) zero tolerance policy was complied with. Logically however the question of an oral variation only arises if I answer issue 3 against DRL, because issue 3 asks me to determine whether or not it was a condition precedent to payment in respect of a delivery that the Defendant had complied with the “zero tolerance policy”. Given however that I decide under issue 3 that there was no such condition precedent, I must and do deal with this point.

Although it appears that DRL’s pleaded case is that this was agreed at the meeting of 19/6/07, it is apparent from the minutes of the meeting that there was no discussion about this at the meeting, and none of the witnesses suggested that there had been.

The only contemporaneous documentary evidence relating to this is the minutes of the meeting of 5/11/07, which was a high level meeting attended by Mr Roberts, Mr Caunce and Mr Bull for DRL and Mr Taylor, Mr Flanagan, Mr Burns and a Mr McElroy for Wincanton. The minutes record that DRL had undertaken a survey to seek to ascertain the extent of compliance with the unpack and inspect obligation and that Mr Roberts was making it clear that DRL would be ‘seeking compensation from Wincanton where the contracted service had not been provided’, because it was an ‘integral part of the service the customer pays for’.

It is also clear however from the ‘action’ section that there is no suggestion that it had already been agreed that Wincanton should not be entitled to payment where it did not perform its unpack and inspect obligation. Instead it was being said that a continuing failure to achieve compliance would ‘drive requirement to address through commercials’ and that this would be reviewed at the next meeting. Even in his e-mail of 13/11/07 Mr Roberts was only contending that DRL would be entitled to pay nothing for a delivery where the contracted service has not taken place, rather than suggesting that this had already been discussed and agreed at the meeting.

Thus, what is quite clear in my judgment is that there is no suggestion whatsoever in the minutes (or indeed in any subsequent contemporaneous correspondence) or in the evidence that Wincanton ever agreed to any suggestion that non-compliance in respect of a particular delivery would justify DRL in not paying Wincanton anything for that delivery, so that there can be no question in my judgment of a variation having been agreed at this meeting. Although Mr Chaisty criticises Mr De Verneuil Smith for not cross-examining on this point, the fact is that Mr Caunce did not suggest in cross-examination that this had been agreed (as opposed to raised by Mr Roberts) and nor did Mr Roberts’ witness statement suggest that it had been agreed at this meeting, so the criticism is unjustified in my judgment.

In conclusion, I am quite satisfied on the evidence that there was no such oral variation as contended for by DRL.

§2(ix)/05 required Lane to obtain a signed POD document before leaving the customer’s premises. There was no definition of what was meant by ‘POD’ or specification as to the form or content of the document. In particular, there was no express requirement that the POD document should include some confirmation from the customer that the product has been unpacked and inspected and found to be free from damage. There was however a requirement in Appendix 1 Phase 1 item 4 that ‘a POD file in the same XML format as current Fiege file’ should be produced and uploaded in the ‘very short term’, so that it is clear that the parties envisaged that a formal document should be used. The 2007 Agreement did not make any amendments to §2(ix), but §13/07 includes the provision that Wincanton’s control of a product ends ‘upon receipt of a customer signature (either hard copy or soft copy) to accept the product undamaged’.

The first version in time is a Lane headed document, which envisages that the contractor will tick yes or no to confirm that the product has been unpacked and was received in ‘perfect’ condition before signing it. The second version is a Wincanton headed document, used after the takeover and still in use at the time of the 2007 Agreement. This envisaged that against each appliance a tick would be entered against the options ‘accepted’, refused’ or ‘not unpacked’, together with a note advising the customer that Wincanton was ‘required’ to unpack and inspect but that if the customer ‘insisted’ that it should be left unpacked he should tick against the ‘not unpacked’ option. It also required the customer to sign to confirm receipt of the items listed, that all connections had been completed and tested, that all collections had been made and that his property had been left in a satisfactory condition. There was no specific confirmation that the items had been unpacked, inspected or accepted by the customer. The third was introduced following the quarterly review meeting of 28/6/07, in which reference was made to introducing a revised form with effect from 22/7/07 in an attempt to improve the unpack and inspect success rate. This included under ‘instructions’ the words ‘deliver, unpack and inspect’, next to that the tick box against the options ‘accepted’ or ‘refused’, a note advising the customer that ‘your retailer insists that all products must be unpacked by the delivery crew and fully inspected by the consumer for any damage before signature’. Finally, opposite the space for the customer to sign appeared the words ‘By signing opposite I confirm that all products have been unpacked, I have fully inspected and accepted each product, I have received the products and services listed above, all connections have been completed and tested (if applicable) [and] my property has been left in a satisfactory condition’.

It can be seen, therefore, how the form and content of the POD was amended to seek to increase the extent of unpack and inspect compliance, and to require the customer to focus more closely on the need for this to have been done before signing the POD.

The issue as canvassed in the opening written submissions and at trial was not so much as to the form and content of the POD, because there was no evidence that there was ever any dispute between the parties as to this, but as to whether or not a signed POD was – as between DRL and Wincanton - conclusive as to the matters stated on it. DRL’s position is that the customer’s signature is not conclusive, and that it is open to it to establish that notwithstanding the signature in fact the product was, for example, not unpacked or inspected or undamaged. Wincanton’s position, by contrast, is that once it obtained a signed POD which was ‘clean’ (i.e. which recorded that the product had been unpacked, inspected and appeared undamaged) that was conclusive, regardless of whether unpack and inspect had in fact been undertaken, and regardless of whether or not the customer could thus genuinely have confirmed that it appeared undamaged, so that there could be no claim in respect of that delivery. It appears from Mr De Verneuil Smith’s closing submissions (§220) that he was prepared to make an exception where it could be established by DRL to the civil standard that the POD had been procured by fraud, but not otherwise.

In my judgment Wincanton’s argument is unsustainable in relation to the 2005 Agreement, because §13/05 provides that Lane is liable for damaged product even where reported damaged after delivery unless Lane could show not just that the customer had ‘signed and fully completed’ the POD but also that the product was unpacked and checked by the customer. It follows, in my judgment, that production by itself of a signed POD could not be conclusive. Indeed, in my judgment the proposition can be more widely stated; in the absence of a term expressly or by inevitable inference making a signed POD conclusive as between DRL and Wincanton in relation to matters such as whether or not the correct product had been delivered, whether or not the product had been unpacked and inspected and whether or not the product was in good condition, a signed POD would not have that effect. Although a signed POD would provide strong evidential proof in relation to what was stated on it, I am satisfied that it would be open to DRL to contest the accuracy of that entry. If for example the customer provided a statement that the delivery driver had not unpacked and inspection had not taken place but he had been induced to sign the POD by some misrepresentation as to its contents, and that when he unpacked he discovered that the product was damaged, I have no doubt that DRL would be entitled to rely on this in any dispute between itself and Wincanton, and that if that dispute had to be resolved by a court the court would be entitled to conclude if appropriate that this is what had happened.

Is the position different in relation to the 2007 Agreement? The major difference is the revised §13 in the 2007 Agreement. That begins by providing that Wincanton ‘accepts liability for product damaged whilst under its control’. That is entirely understandable, given that Wincanton is bailee of the products whilst under their control and thus in accordance with general principle liable for loss and damage to them unless it can prove that the damage occurred without fault on their part. It then goes on to state when Wincanton’s control begins which, reasonably enough, is the time of receipt of goods into its warehouse. It then states that it ends ‘upon receipt of a customer signature (either hard copy or soft copy) to accept the product undamaged or the return of those products to the warehouse’.

The question is whether it follows from the provision as to when control is deemed to end that DRL is prevented from arguing that notwithstanding the signed POD in fact the product was damaged before delivery? If §13 stopped there, it would be difficult in my judgment for Wincanton to argue that this was sufficiently clear to have the effect of making the signed POD conclusive. However it does not, and I must consider the whole of §13, construed in the light of the whole agreement.

§13/07 goes on to provide that ‘Wincanton shall accept liability for loss on product disposals’ differently depending on which of 3 different situations apply, namely whether there is: (1) a Wincanton fault failed delivery (in which case it must pay DRL the cost value and can retain the disposal proceeds); (2) a non-Wincanton fault failed delivery (in which case it must pay DRL 37.5% of the cost value and can retain the disposal proceeds) or; (3) ‘any collected goods then disposed’ (in which case it only has to pay DRL the amount of the disposal proceeds).

The true construction of the third situation (collected goods then disposed) is in issue in Issue 4. DRL’s argument is that it cannot have been intended to apply to damaged goods (i.e. to products successfully delivered but which, on DRL’s case, were damaged during delivery but where the customer was unaware of this due to Wincanton’s delivery drivers failure to unpack and inspect). It argues that the third situation only applies to collections of goods in an undamaged state.

By contrast, Wincanton argues that §13/07 introduces a new and comprehensive code for the allocation of risk in relation to damaged product, so that although it agreed to accept what is in substance full liability in relation to Wincanton fault failed deliveries and 37.5% of the liability even for Wincanton no fault failed deliveries, it is free from liability for deliveries where a ‘clean’ signed POD is obtained, even if it should subsequently need to be collected and disposed of due to damage which the customer was complaining was present at the time of delivery but had not been observed at the time.

It is common ground that in addition to the collection of damaged products in such circumstances there may also need to be collections of undamaged products. Although it might at first blush appear surprising that undamaged goods would ever need to be collected, in fact it is common ground that this did happen, firstly because on occasion the wrong product was delivered and this was not noticed until later, and secondly because the Consumer Protection (Distance Selling) Regulations 2000 were applicable and gave DRL’s customers the general right to cancel without penalty within 7 days of receipt. In such cases DRL would have to arrange for the product to be collected by Wincanton. It is accepted that in all such cases the instruction given by DRL to Wincanton to arrange collection was marked with the prefix ‘C/’. It is also the case that in certain cases a replacement would be delivered at the same time, and this was known as a ‘cloned order’. Thus it is DRL’s case that situation 3 only applies to this type of situation.

It is difficult however to see why this should be so. Generally, it seems to me that in each of the 3 situations in §13 there are circumstances in which collected goods might be damaged and circumstances in which they might be undamaged. Thus a number of the codings in Appendix 2 apply where the delivery has failed not because of any damage to the product. I do not consider that §13 has the effect of requiring that all collected goods should be disposed of with the consequences stated therein. On the contrary, on its express wording these scenarios 1 and 2 only apply to loss on ‘product disposals’. It seems to me that DRL would have had the option, where goods were collected in an undamaged state, to request Wincanton to use them to fulfil another contract (which the Agreement envisaged could happen, see §15 where these items are referred to as ‘excess stock’). Indeed situation 3 expressly only arises where collected goods are ‘then disposed of’. It would follow, in my judgment, that far from only applying to undamaged goods, the true position is that it was intended to apply to goods which were disposed of because they could not be re-used, and that would obviously apply to cases where the goods were damaged.

I am satisfied therefore that Wincanton is correct, and that §13/07 did introduce a new and self-contained code dealing with the allocation of responsibility for all cases of failed deliveries or subsequent collections where, due to damage or any other reason, the product cannot be re-used and has to be disposed of. If it is a failed delivery, then the financial consequences will depend on the coding allocation under Appendix 2. It should be emphasised that Wincanton is still taking a potential risk even on deliveries which fail through no fault of its own; it still has to pay DRL 37.5% of the cost value and can only break even if it is able to job the damaged product for a sum in excess of that amount. In my judgment this demonstrates quite clearly that it is not open to DRL to seek to challenge a clean signed POD so as to argue that the damage occurred before delivery and so that it should be treated as a Wincanton fault failure under situation 1.

In reaching this conclusion I accept that in the course of cross-examination Mr Chaisty managed to persuade certain of Wincanton’s witnesses to accept that they would not rely on a clean signed POD if it had been obtained by – for example – intimidation committed by one of the delivery drivers. In my judgment that evidence cannot help me in determining the issue of construction which I have had to decide.

However, does that leave DRL without a remedy if it could prove that Wincanton’s delivery drivers had obtained a clean signed POD by failing in their unpack and inspect obligation? As I have said, Mr De Verneuil Smith accepted that if and insofar as it could be established by DRL that the customer’s signature to a clean POD was procured by fraud then it would be open to DRL to challenge it. However it seems to me that it goes further than that. It seems to me that if DRL can prove a breach by Wincanton of its unpack and inspect obligation, the consequence of which is that Wincanton has the benefit of a clean signed POD, whereas had the unpack and inspect obligation been performed damage would have been discovered and the delivery would have failed, then it seems to me that DRL would have a claim for damages for breach of contract quantified by reference to the difference between the financial consequences of situation 3 applying and the financial consequences of situations 1 or 2 (whichever be applicable) applying.

In conclusion, and returning to paragraph 106, I decide in relation to this Issue that under the 2005 Agreement a signed clean POD is not conclusive and may be re-opened, whereas in under the 2007 Agreement a signed clean POD is conclusive and may not be re-opened.

This issue raises the separate question as to whether or not, on a proper construction of the Agreements and regardless of any question of variation, compliance with the zero tolerance policy was a condition precedent to payment. Since I have already found that the zero tolerance policy was an operational procedure rather than a contractual obligation, the issue can more accurately be formulated and has been argued on the wider basis as to whether or not compliance with the unpack and inspect obligation, which undoubtedly was a contractual obligation, was a condition precedent to payment, so that any failure by Wincanton to comply would justify DRL in refusing to pay any part of the agreed price for a successful delivery. Moreover, given the conclusion I have already reached in relation to the true construction of the unpack and inspect obligation, it follows that what is in question is whether compliance with the obligation to at least offer unpack and inspect (and to take reasonable steps to persuade the customer to agree to unpack and inspect) was a condition precedent to the entitlement to payment.

This is a question of construction of the contract. DRL’s case is that the obligation to unpack and inspect was an essential term of the contract, because of the importance attached by the parties to the need to ensure that everyone was satisfied that the product being delivered was what had been ordered and was in good condition (and if not why not) at the point of delivery. Wincanton’s case is that there is nothing in the Agreements which stipulates that compliance is a condition precedent to payment. To the contrary, under the 2005 Agreement specific provision was made for the circumstances in which Lane should be deprived of its service charge (§10) and for liability for damaged product where it was unable to demonstrate that unpack and inspect had taken place (§13). Wincanton also points out that the same clauses in the 2007 Agreement made specific provision for the circumstances in which it was entitled to charge at a full or reduced rate for deliveries and for the consequences of failed deliveries for a wide variety of reasons, so that categorising the obligation to comply with the unpack and inspect obligation as a condition precedent to the right to any payment would in effect drive a coach and horses through the bargain actually made by the parties, which the court should be very wary of doing.

I prefer Wincanton’s arguments on this point. It is clear that the unpack and inspect obligation was not separately identified as an independent inviolable obligation in the Agreements. Whilst I agree that the Agreements were not drafted by lawyers, they were agreements negotiated by experienced commercial men with access to legal advice if required. Furthermore, the 2007 Agreement was the subject of lengthy negotiation. If the parties were agreed at that time that unpack and inspect was such an essential part of the service that non-performance would disentitle Wincanton from receiving any payment for that delivery, one would have expected to see that introduced as an amendment under the 2007 Agreement. It cannot in my judgment be discerned from the express terms of the Agreements that the parties must objectively have intended that there should be no right to payment for a delivery where unpack and inspect did not take place. Indeed, I agree with Wincanton that it would be remarkable if a contract which provided for Wincanton to provide a package of logistics services should be construed as providing that non-compliance with only one of them should disentitle it from recovering any payment. That would be even more remarkable where if unpack and inspect did not take place but the customer was perfectly happy with the condition of the product and made no complaint, the essential purpose of the contract (i.e. the successful delivery of a product in good condition to DRL’s customer) was satisfied. If there was a problem, which only emerged later because of the failure to unpack and inspect, then the consequences were provided for by the Agreements.

The separate but connected questions as to whether or not in cases where it is established that Wincanton failed to comply with its unpack and inspect obligation DRL has a valid claim in restitution or by way of abatement for consideration under Issues 15 and 15A respectively.

I have already largely addressed this issue in answering issue 2(d), and have decided that a collection can relate to damaged as well as undamaged products. There is however one further issue which arises here, which is what happens where there is a failed delivery unrelated to damage, or where the reason for rejection is manufacturer damage, but where at the point of return to the warehouse the product has suffered damage or further damage during the course of return and/or storage.

DRL argues that this is something for which Wincanton is liable. Wincanton argues that it cannot be responsible for this damage, especially because when product has been unpacked it is extremely difficult to re-pack it in such a way as to guarantee no transit damage on return. DRL argues that it is Wincanton’s responsibility to take proper care of collected products, and that includes properly re-packing them before transit begins.

In my judgment the point does not arise in relation to failed deliveries, because if it is a Wincanton fault failed delivery DRL receives 100% of the cost price regardless of any subsequent damage and if it is a Wincanton no fault delivery DRL receives 37.5% of the cost price again regardless of any subsequent damage. If however situation 3 applies and goods are collected and then damaged during collection, the point is relevant because DRL’s recovery is limited to the proceeds of disposal achieved by Wincanton. In such a case I am satisfied that it would be open to DRL to argue that the damage sustained (a) was due to Wincanton’s failure to take proper care of the goods during collection, at which point the debate about whether the damage was an inevitable part of returning unpackaged goods or not would have to be resolved; (b) resulted in a reduced disposal value, for which Wincanton should compensate DRL. I consider that §13(1) RHS would not apply to this class of claim, and explain my reasons under paragraph 130 of this judgment. I do however consider that §13(2) RHA applies, for the same reasons as I give in answering Issue 5(d). In his further submissions Mr De Verneuil Smith contended that §11(2) RHA also applied, but in my judgment it would be §11(1) and not §11(2) which would apply to this claim and, as I say in paragraph 142, Wincanton has not sought to rely upon §11(1) as a defence in this case.

It is also at this stage convenient to refer and to deal shortly with Issue 16, which requires me to determine whether DRL is estopped from challenging the validity of collections. If, contrary to the view which I have formed, DRL is entitled to argue that a clean signed POD is not conclusive as a matter of contract, then I am unable to see any basis by which it could be argued that DRL was estopped from arguing that point.

This raises a number of separate issues, which I shall consider in the order raised in the Agreed List of Issues.

In his opening and closing submissions Mr Chaisty accepted, rightly in my judgment given the clear terms of clause 11 of the 2005 Agreement, that these conditions were incorporated into the agreements by express reference. I have already concluded that it is only RHA which are of direct relevance to this case. The real issue between the parties is as to whether, on a true construction of the agreements, RHA applied to the claims made by DRL, and if so to which ones and to what extent.

I am asked to deal separately under issues 5(c) and 5(d) with the questions as to whether on a true construction of the Agreements (1) the notification requirements of §13(1) RHA and (2) the time bar in §13(2) RHA do or do not apply to the claims made by DRL in this litigation. Issue 5(e) requires me to consider the applicability of the lien provision in §14(1) RHA and issue 5(f) requires me to consider the applicability of the exclusion in §11(2) RHA.

Since so far as I am aware there are no other relevant provisions of the RHA which are relied upon but not covered by Issues (c) – (e) or by other Issues, there is nothing as such for me to decide under this sub-issue.

DRL’s case on construction is that the detailed bespoke provisions in the Agreements as to how the home delivery service would operate in practice were inconsistent with the notification requirements of §13 RHA. I have already referred to §13(1) RHA, which imposes strict time limits for notifying and making claims. DRL’s case is that the bespoke clauses must prevail over §13 RHA incorporated, as it was, only by reference through §11/05. Wincanton disputes this.

It is useful to begin by summarising what, in my judgment, the 2007 Agreement envisaged in terms of the procedure for damaged or lost products.

In his closing submissions Mr De Verneuil Smith submitted that §13(1) RHA was not inconsistent with §13/07 or the Agreements generally. He submitted that the rule of construction that where a standard term is inconsistent with a specifically negotiated term the specific term takes precedence only applies if there is a conflict between the specifically agreed and standard terms and that the Court should seek to reconcile the two. He referred me to the observations of Langley J. in Bayoil SA v Seawind Tankers Corp [2001] 1 Lloyd’s Rep 533:

“The Courts will….seek to construe a contract as a whole and if a reasonable commercial construction of the whole can reconcile two provisions (whether typed or printed) then such a construction can and in my judgment should be adopted.”

He submitted that the evidence demonstrated that there was no reason why the time-limits in §13(1) RHA could not have been complied with. Whilst subject to the caveat in (2) above I see the force of that submission, it does not in my judgment address the point in (4) above. In my judgment there is an obvious and irreconcilable inconsistency between the stringent notification provisions of §13(1) RHA and the provisions of the 2007 Agreement under which Wincanton was to be responsible for, in effect, ‘self-certifying’ claims against itself and for then to be a process of agreeing the draft invoices containing those self-certified claims. Nor can it sensibly be argued, for example, that the proviso to §13(1) RHA can be relied on by Wincanton as providing a basis for resolving the inconsistency. This is not a case where it was not reasonably possible to notify or make a claim in time; it is one where there was no need to notify or make a claim in time because the carrier was accepting responsibility for self-notifying and self-claiming.

It follows, in my judgment, that DRL was not obliged to comply with §13(1) RHA in respect of claims of loss of or damage to products the subject of the 2007 Agreement.

For completeness I should say that I reach the same conclusion in relation to the 2005 Agreement which, although it does not contain the same procedure in relation to invoicing, does in §13/05 contain a detailed provision as to how damaged product is to be dealt with under which once damaged products are returned to Rugby they would if not returned to manufacturer be sold off by agreement with Lane reimbursing the net cost to DRL. In my judgment that provision is inconsistent with the notification and claim provisions of §13(1) RHA.

There are however, as Mr De Verneuil Smith observed in his closing submissions, potential categories of claim not covered by this analysis.

The example he gives is claims for compensation paid by DRL to its customers for damage to their property caused by Wincanton’s delivery drivers. This is claim 14 (as identified by me by reference to the claims advanced in the Amended Particulars of Claim). I agree with him that since this is not covered by the invoicing provisions of §7/07 there is no inconsistency. Since this claim fall to be addressed under issues 12 and 22, I shall deal with the impact of the notification provisions of §13(1) RHA at that stage.

By reference to the other heads of claim advanced in the Particulars of Claim and summarised above, the following claims also require separate consideration:

The same question arises in relation to the claim which I consider under Issue 4 at paragraph 115 of this judgment. I am satisfied that §13(1) RHA does not apply because the extent of the allowance for goods collected and then disposed of by Wincanton would not become known to DRL until after the invoicing procedure introduced by §7/07, including the subsequent process of agreement and sign-off, had been completed, and as I have said this is inconsistent in my judgment with the notification requirements of §13(1) RHA. As I explain later, I reach the same conclusions for the same reasons in respect of claim 15, considered later under Issue 20 of this judgment.

In my judgment it is apparent that there is nothing in the 2005 or the 2007 Agreements which is obviously or irreconcilably inconsistent with the 1 year time bar provided for by §13(2) RHA, which is thus applicable to all claims advanced under those Agreements. However DRL’s submission is that the terms of the 2008 Agreement have this effect. It follows that unless DRL can make out its case in relation to the 2008 Agreement, all of the claims made would be subject to the time bar defence, save for those claims, referred to above, which are not in truth claims but defences to Wincanton’s claims.

The starting point is the factual matrix by reference to which the 2008 Agreement falls to be construed.

It follows, I am satisfied, that as at 22/1/08 neither party had given any consideration at all to any potentially applicable time bar nor to the potential problem, so far as DRL was concerned, that if the Agreement was not terminated for some time and if in the meantime the outstanding claims and counterclaims were simply ‘parked’, it might fall foul of the applicable 1 year time bar in relation to disputed claims dating from 1/4/07. Because neither party was aware of this there was simply no discussion about it.

I am quite satisfied as a matter of construction of the 2008 Agreement that there is no conceivable basis for construing the agreement as explicitly or impliedly over-riding §13(2) RHA. Nor, for that matter, is there any question of there being a waiver or estoppel in relation to anything said or done by Wincanton in relation to the 1 year time bar. I have found the decision of Gloster J. in Fortisbank v Trenwick International [2005] EWHC 399, of some assistance in deciding this issue, being another case in which reliance on a contractual limitation bar was unsuccessfully challenged. Accordingly, I am unable to accept DRL’s case on this point.

The further question which I have to consider is the date from when the 1 year time bar period begins to run back. Is it the date when proceedings are issued, in this case 29/5/08, or the date when proceedings are served, in this case apparently 15/9/08? Unsurprisingly, Mr De Verneuil Smith contends for the latter. The words used in §13(2) are when ‘suit is brought’. Both the 2005 Agreement and RHA state that English law applies. No authority is cited to me on this point. I note however that in Chitty on Contracts (30^th edition) at paragraph 28-116 it is stated, in my judgment rightly, that ‘proceedings are started when the court issues a claim form at the claimant’s request …’. I am therefore satisfied that §13(2) only operates in this case to bar claims in respect of deliveries where transit commenced before 29/5/07.

The other point which I should mention at this juncture is that subject to any point as to the validity of any set-off, it would appear that in accordance with normal principles DRL would be entitled to rely on any time-barred claims as a defence to the counterclaim. Mr De Verneuil Smith addressed this point in some detail in his further submissions, and submitted that: (1) no such claims are currently pleaded as defences to the counterclaim; (2) whilst this principle undoubtedly applies to ‘pure’ defences, it does not apply to cross-claims subject to the operation of a contractual time-bar (Aries Tanker Corporation v. Total Transport Ltd [1977] 1 WLR 185); (3) in order to rely on a set-off in equity DRL would have to show that the cross-claim ‘impeached [Wincanton’s] title to its legal demand (Aries). In his reply Mr Chaisty challenged these propositions. However, since it is undoubtedly correct that the Defence to Counterclaim does not currently plead some or all of the claims by way of defence to the counterclaim, and since this is not a point which was included in the List of Issues or canvassed at trial or in the original closing submissions, it seems to me to be inappropriate and undesirable to make binding findings on this point at this stage. As and when and if an application is made for permission to amend to plead specific claims as defences to the counterclaim, that will have to be adjudicated upon and, in particular, whether or not the points taken by Mr De Verneuil Smith are well-founded. At this stage I prefer to express no opinion one way or the other.

I have already referred to §14(1) RHA as conferring a general lien on Wincanton against DRL as the owner of the products ‘for any monies whatever due’ from the latter to the former. It is common ground that the RHA Conditions were incorporated. There is no basis for any suggestion that anything in the terms of the 2005 Agreement or the 2007 Agreements are inconsistent with the existence of a general lien. There is no suggestion that Wincanton had any general or particular lien other than as afforded by §14(1) RHA.

Mr Chaisty submits however that the 2008 Agreement ‘clearly removed any claim to a lien which otherwise may have existed’. This appears to involve 2 logically separate but inter-related arguments, the first being that as a matter of construction the terms of the 2008 Agreement are inconsistent with Wincanton being entitled to exercise a lien in respect of products in its possession which it had agreed to transfer to the new delivery company, Expert Logistics, and secondly that as a matter of construction the effect of the 2008 Agreement was to make all monies claimed in the disputed pre-19/1/08 invoices no longer ‘due’ so that as at the date of invocation of the lien there was no basis for so doing.

So far as the first point of construction is concerned, it is clear that §4/08 does not expressly restrict Wincanton’s reliance on its lien. It only restrains Wincanton from serving notice of termination on the grounds of non-payment of invoices for deliveries pre 19/1/08. Furthermore, although §5/08 obliges Wincanton to ‘endeavour to provide assistance to DRL in effecting the transition of the services to a third party’, and although I find under issue 11 that included within this obligation is an obligation to provide assistance to DRL in delivering (or allowing collection of) DRL’s excess stock held at its warehouse, that does not seem to me to be sufficiently clear and unequivocal to prevent Wincanton from relying on its lien at any point and in any circumstances. I am not satisfied therefore that DRL has made out its case on the first point of construction.

I consider however that DRL is on stronger ground on its second construction argument. §2/08 is explicit that ‘for so long as the Agreement remains in force DRL will only pay Wincanton for all deliveries made since 19/1/08’, and §4 states that Wincanton’s ‘rights to claim for deliveries made before 19/1/08 will not be adversely affected … after termination’. In my judgment these words have to be read in the commercial context under which DRL agreed to pay Wincanton £1M on account of the asserted liability for pre 19/1/08 deliveries, and to pay invoices for post 19/1/08 deliveries within 2 days without deduction, as the ‘price’ for obtaining a guaranteed delivery service subject to at least 28 days’ notice of termination. I must also have regard to the obligation in §5 which – as I have said – included an obligation to assist DRL in the process of transferring excess stock to its new logistics supplier. In that context I consider that §2 and §4 clearly have the effect that, until termination, the remaining monies claimed under invoices for pre 19/1/08 deliveries are not to be regarded as ‘due’ so as to entitle Wincanton to rely on them as a basis for claiming a lien. Otherwise, Wincanton would be able to rely on the lien in respect of these disputed claims not only in relation to excess stock but also in relation to stock delivered to it for deliveries to DRL’s customers during the subsistence of the commercial relationship and prior to termination, which would be clearly contrary to the 2008 Agreement.

This issue is linked with issue 24, in that together they raise the question whether or not any, and if so which, of DRL’s claims are excluded either by §11(2) RHA or, for that matter, by §14/05. In his opening submissions Mr De Verneuil Smith submitted that Claims 14, 15 and 17 are excluded as falling within §14/05. I agree that these claims are potentially caught by these clauses; the question I must decide is whether they are caught by those clauses.

The first question is whether the express terms of the 2005, 2007 or 2008 Agreements are so inconsistent with §11(2) that it must be construed to be inapplicable. I am satisfied that they are not. That is because §11(1) RHA deals with claims for physical loss of, mis-delivery of or damage to products forming the consignment, where it could be argued that to limit liability is inconsistent with the regime in §7, 13 and 15/07 (Wincanton does not seek to rely on this anyway, presumably because §11(1) would not assist it here since the claims made fall within all 3 of the applicable limitations), whereas §11(2) deals with ‘claims for any other loss whatsoever (including indirect or consequential loss …)’. There is no inconsistency in my judgment between this and the regime in §7, 13 and 15/07; thus as a matter of construction it applies.

Mr Chaisty’s submission for DRL is that the claims made do not fall within the definition of “consequential losses” contained in §14/05. He relies on: (1) McGregor on Damages (18^th ed.) paragraphs 1-035 to 1-040; (2) Watford Electronics v. Sanderson [2002] FSR 19 paragraph 36; (3) British Sugar v. NEI Power Projects [1997] WLR 1104. He submits that the losses claimed by DRL all arise “directly and naturally” from the relevant breaches and are not excluded by these clauses. Mr De Verneuil Smith argues that:

Mr De Verneuil Smith does not dispute, and it is clear from the extremely helpful passage in McGregor to which Mr Chaisty refers me, that I am bound to follow well-established Court of Appeal authority to the effect that where an exclusion clause refers to ‘consequential loss’ it is referring to loss which is outside the first rule in Hadley v Baxendale, i.e. which is not loss directly and naturally resulting in the ordinary course of events from the particular breach, and that this can include losses such as increased production costs, wasted overheads and loss of profits.

Mr De Verneuil Smith seeks to argue around this by relying on the reference in §14/05 to ‘including loss and damage suffered by DRL as a result of an action brought by a third party’. However in my judgment he is unable to do so, for the simple reason that this reference appears in parentheses after the words seeking to exclude liability to ‘indirect or consequential loss’. Thus in my judgment they operate only to make clear that an item of indirect or consequential loss is still excluded even if it results from a third party action. Accordingly, I am satisfied that §14/05 does not exclude claims 14, 15 or the compensation claim element of claim 17. However, he is on stronger ground in my judgment in relation to §11(2) RHA, which seeks to limit liability for ‘any other loss whatsoever’, i.e. it is not limited to consequential loss. It limits liability to the amount of the carriage charge in respect of the consignment or the amount of the proved loss, whichever is the lesser. No issue is raised in relation to the Unfair Contract Terms Act 1977 (and it is difficult to see how this could seriously be argued anyway in the context of the incorporation of standard conditions in a contract between 2 commercial organisations each with access to in-house legal advice). It follows, in my judgment that in principle §11(2) RHA is engaged and would apply to limit liability to the amount of the carriage charge.

So far claim 14 is concerned, Mr Chaisty argues as a separate point that the claim for damage to the homes of its customers is not caught by these clauses because it arises out of a separate/collateral contract which was not the subject of these exclusions. However, as I find in relation to Issue 22, there was no such separate contract, so that the premise of the argument is not made out. In any event, I would not have been prepared to hold that even if there was a contract as contended for it could have been construed as existing independent of the Agreements as a whole, including thus the RHA.

In his further submissions Mr Chaisty takes the further point in relation to claim 14 that §11(2) RHA does not on its true construction apply to a ‘Biggin v Permanite’ claim for damages by DRL, which I hold in Issue 22 is in principle maintainable. He argues that a claim arising from damage to the dwelling of the consignee is not ‘any other loss howsoever … and howsoever arising in connection with the Consignment’, where the Consignment is defined as the goods the subject of the carriage, because damage caused by the negligence of Wincanton’s employee during unloading is outwith the scope of that wording. He makes the point that limiting the loss to the carriage charge (or, optionally, to the amount of the customer’s ‘special interest in delivery’) is not consistent with construing the limitation as encompassing such claims. In response Mr De Verneuil Smith submits that §11(2) employs broad words and that loss due to damage to the dwelling of a customer caused on delivery of the consignment falls within those broad words and is indeed loss arising in connection with the consignment. On balance I prefer Mr Chaisty’s submissions. The structure of §9 and 11 RHA appear to me to be directed at loss which is connected to the goods the subject of the carriage. Damage to other property caused by the negligence of Wincanton’s employees whilst delivering the goods the subject of the carriage is not loss arising in connection with the consignment. Accordingly, I am satisfied that there is no applicable limitation of liability in respect of claim 14.

So far as claim 15 is concerned, it seems to me that it is not caught by §11(2). That is because it falls within §11(1), being a claim for ‘damage to goods comprising the Consignment’. Wincanton does not seek to place reliance on §11(1), as I have already observed in paragraph 142 above. So far as claim 17 is concerned, compensation paid to customers for cancelled or late deliveries is clearly caught by §11(2). So far as the remainder of claim 17 is concerned, it is clear in my judgment that the loss of profits claim is caught by the specific exclusion of liability for loss of profits contained in §14/05. This exclusion is separate and distinct from the exclusion of consequential loss, and thus does take effect according to its plain meaning. Again, no point is taken under UCTA and again even if it was it is difficult to see how it could succeed. I consider that the claim for additional staff costs is not caught by §14/05. It is, however, in my judgment caught by §11(2) RHA. Mr Chaisty submits that staff costs caused by the relocation are not losses arising in connection with individual consignments. However it is clear here on DRL’s own evidence that the reality is that these costs were incurred in order to mitigate apprehended losses on deliveries to be made over the period in respect of which the costs were incurred. It would follow that they can be linked to the individual deliveries over that period and, thus, effect can and should be given to the limitation by limiting recovery to the aggregate of the delivery charges over the relevant period when staff costs were allegedly incurred. I do not accept Mr De Verneuil Smith’s further submission that the relevant period is the period of the hub move itself. Of course this conclusion is strictly academic, given my conclusion under Issue 22 that claim 17 cannot succeed in any event.

DRL’s position, as outlined in the opening submissions, is that ‘save for the reference in clause 11 of the 2005 Agreement, and the rectification issues, there was never any expression of reliance on the conditions or expectation of their application or any reliance and that further the parties conducted themselves on the basis that such had no application. Though there was very lengthy correspondence by e-mail, by many meetings and by revisions to the Agreement of 2005 and payments as reconciliations there was never any reference to the Conditions. The first reference made by D in writing was not until 28/2/2008. Before this time it is C’s contention that the parties conducted themselves without any reference/reliance on the Conditions and that neither believed the Conditions applied and that C would have acted very differently if it had ever been asserted that such applied’.

In the draft Amended Reply and Defence to Counterclaim DRL’s case in relation to estoppel by convention is pleaded thus in paragraph 8:

In his closing submissions Mr Chaisty observed that save for Mr Flanagan and Mr Lunn it was not suggested by any of Wincanton’s witnesses that they had any knowledge of RHA or that they gave any consideration to its applicability or otherwise in relation to the Agreements. He submitted that neither the evidence of Mr Flanagan nor Mr Lunn was credible when: (a) they both gave evidence to the effect that they were aware of the fact that the RHA conditions contained provisions upon which Wincanton was able to rely in response to DRL’s claims; (b) Mr Lunn said that he made reference to them in discussions with various DRL representatives; (c) Mr Flanagan said that he took the conscious decision not to raise RHA in discussions with DRL because he did not want to prejudice the ongoing relationship between Wincanton and DRL. For his own reasons, Mr De Verneuil Smith did not dissent from and positively supported this submission in closing. Regardless however of motive, I agree with both counsel’s submissions on this aspect of the case. It is quite clear from the evidence in my judgment that until Mr Phillips sat down to draft Mr Carrol’s letter of 28/2/08 in which he was concerned to explain the basis of Wincanton’s reliance on its lien, no-one at Wincanton had ever given any thought to the question of whether RHA had any relevance to the issues and disputes which had arisen between it and DRL in the course of the contractual relationship between the two companies. No-one at Wincanton had any knowledge of the terms and conditions contained in RHA (save in relation to the insurance provision for transit insurance) and thus no-one at Wincanton was aware that it was or might be entitled to rely on the exclusions and limitations in RHA to refute the claims being advanced by DRL. I am satisfied that Mr Lunn’s evidence and Mr Flanagan’s evidence was unreliable, based on subsequent rationalisation, insofar as they suggested in evidence to the contrary. I am also satisfied that Mr Lunn was mistaken when he suggested that he had raised RHA in the context of it being Wincanton’s ‘nuclear weapon’ in the course of discussions with representatives of DRL. In summary I reach these conclusions because I am satisfied that if either man had been aware at the time that RHA gave Wincanton a potential defence to the substantial claims being made by DRL then they would have raised this internally and, given the state of relations between Wincanton and DRL, it would then have been picked up and raised in meetings and/or emails. The evidence is clear that none of this ever happened.

I am also satisfied that the same is true of DRL. Mr Caunce said that he was aware from reading the 2005 Agreement at the time of negotiating the 2007 Agreement that §11/05 had incorporated RHA, but agreed that he had not read RHA until after the relationship had come to an end, and was unaware of their provisions. When asked, Mr Caunce said that he ‘understood [RHA] was there but never thought it had any relevance to our relationship going forwards’. He never suggested that he had raised the applicability or otherwise of RHA at any time during the discussions and negotiations he had with Wincanton in relation to the settlement of pre-existing claims contained in the 2007 Agreement or otherwise in relation to the various issues and disputes arising during the course of the relationship. Apart from Mr Caunce, none of DRL’s employees suggested that at any relevant time during the course of the contractual relationship they were aware of RHA, or that they ever gave any consideration whatsoever to its applicability or its provisions, or that they discussed its application with Wincanton.

I should say that I have not forgotten the evidence of Mr Keates and Mr Wilkinson, who gave evidence about the circumstances in which §11/05 was agreed but, as I have already held, I am satisfied that neither knew anything about RHA other than that it contained a clause relating to the limited insurance cover which Lane held for goods in transit. There was no suggestion by either of them that they had any positive belief that RHA did not otherwise apply to the contractual relationship between Lane and DRL or that they had any discussion to that effect.

Mr De Verneuil Smith invites me to conclude that it follows that there is no basis for a factual finding that the parties operated under a shared assumption that RHA did not apply to the Agreements, or that any such shared assumption was communicated between the parties. He submits that in such circumstances there is no basis for a finding of estoppel by convention. He relies upon the judgment of Bingham LJ in The Vistafjord [1988] 2 Lloyd’s Law Rep 343 at 352, that estoppel by convention applies where:

“(1)

parties have established by their construction of their agreement or their apprehension of its legal effect a conventional basis,

(2)

on that basis they have regulated their subsequent dealings, to which I would add

(3)

it would be unjust or unconscionable if one of the parties resiled from that convention. ”

He also relies on the speech of As Lord Steyn said in Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878, 913 E-G to show the requirement that the assumption must ‘cross the line’:

“It is not enough that each of the two parties acts on an assumption not communicated to the other.”

In contrast Mr Chaisty argued that the totality of the dealings between the parties over the relevant period demonstrated that both operated under the same assumption, namely that RHA did not apply, and that this was communicated albeit not overtly by the parties dealing with each other in relation to the issues and disputes which arose without reference to or reliance upon RHA.

I have considered the passages from Chitty on Contracts (30^th edition) relied upon by Mr Chaisty. I have been assisted by the guidance given by the Court of Appeal in the case of HIH Casualty & General Insurance Limited v Axa Corporate Solutions [2002] EWCA Civ 1253 referred to in paragraph 3-019. In that case the claimant reinsured sought to argue that the defendant reinsurers were estopped from relying on a breach of a warranty as discharging a reinsurance contract because they had received monthly risk management reports which showed that the warranty was breached, yet raised no allegation to that effect until service of the defence in the subsequent proceedings. The defendant successfully applied to strike out that allegation. The evidence before the judge demonstrated that at the time neither party appreciated that the effect of the breach was that the insurance cover was or might have been discharged. The claimants argued the case on the basis of waiver by estoppel (otherwise known as promissory estoppel) and also on the basis of estoppel by convention. The Court of Appeal upheld the judge. In so doing they held, applying what was said by Lord Goff in The Kanchenjunga (1990) Lloyds Rep 391, 399), that:

They also accepted that:

So far as estoppel by convention was concerned they held that again what was required was that the parties had proceeded on the basis of an underlying assumption on which they had conducted their dealings (paragraph 31) and, again, that mere silence, inactivity or failure to take a point cannot be enough to found an estoppel by convention, especially in circumstances where neither party was aware of the legal right about which it is said that the common assumption relates (paragraph 32).

In my judgment an application of the relevant principles to the facts of this case demonstrates that DRL’s case in relation to estoppel by convention cannot succeed. Here, the position is that neither party gave any thought to the applicability of RHA or the relevance of any of the limitations and exclusions contained in RHA to the issues and disputes that arose between them. There was no common assumption that RHA did not apply, because neither party ever gave any consideration to the question as to whether or not it did apply. There was no agreement or convention between them by which the parties regulated their dealings in a way inconsistent with the application of the RHA limitations or exclusions. There was no communications between them which demonstrated that they both held this common assumption. The most that can be said is that there were occasions when it would have been open to Wincanton, had it been aware of the applicability and relevance of certain of the RHA conditions to the issues and disputes it was dealing with, to have sought to rely on those conditions and to notify DRL that it was so doing. Its failure to do so cannot be treated as anything other than silence, inactivity or failure to take a point. They never communicated, whether by words, conduct or otherwise, that they would not raise any ‘contractual’ defences which were available to them under RHA. Nor was anything said or done by DRL, to the effect that it considered that there was no basis under RHA for disputing its claims, from which it might be possible to infer that Wincanton had a duty to tell DRL if they were intending to reserve their rights in that regard.

Even if I was wrong about that, in my judgment the necessary detrimental reliance on DRL’s part cannot be demonstrated. The evidence discloses that DRL never gave the applicability of RHA a moment’s thought when deciding to enter into the 2007 Agreement, when continuing its relationship with Wincanton, or when entering into the 2008 Agreement. Although DRL’s position was that they acted detrimentally by entering into the 2007 Agreement and/or by continuing with the 2007 Agreement rather than terminating it and, if necessary, accepting a liability to pay damages for breach of the minimum order term for the remainder of the contract period, there is no evidence that at the time any consideration was ever given to not entering the 2007 Agreement or to terminating the 2007 Agreement unless DRL’s claims were accepted in full. Indeed, when one considers it analytically, what DRL is really complaining about is the notification and time bar provisions of §13 RHA. However, the reality is that on the view that I have taken in relation to construction the only potential detriment to DRL in §13(1) RHA is the notification and claim provisions other than in relation to loss of or damage to the products, when those claims formed by far the largest element of the claims being advanced by DRL at all relevant times right up to virtually the end of the relationship. Thus it is difficult to see on an objective analysis how DRL could contend that it would have acted differently had it been aware that the only prejudice in continuing with the Agreements was that it would have to comply with §11(1)(b) in relation to notification of other loss claims, and to comply overall with §11(2) in relation to commencing any legal process. Even if I was wrong about that, given the way in which the parties operated by electronic communication there would, so far as I can see, have been no particular difficulty on DRL’s part in complying with the notification provisions had they been aware that they needed to do so, especially in circumstances where there is the ‘reasonable extension’ proviso to cover cases where, for example, DRL was unaware of damage to the customer’s property until the customer himself had later reported it. There is even less reason why they could not have complied with the 1 year time period. I regard it as implausible in those circumstances that DRL would have exposed itself to huge commercial and legal risks either by refusing to continue the relationship with Wincanton in 2007 or by breaching the Agreements and exposing itself to huge claims simply to avoid having to comply with these requirements.

Accordingly, in my judgment the estoppel by convention defence fails.

In the Amended Reply and Defence to Counterclaim DRL’s case in relation to promissory estoppel / estoppel by representation is pleaded thus:

It will be apparent from the conclusions I have already reached in relation to the estoppel by convention issue that I am satisfied that DRL cannot succeed by this alternative means of putting its case. It faces the formidable difficulties adverted to by Tuckey LJ in the HIH Casualty case. Here, as I have already held, the evidence shows that at no time did either party have any awareness that there were rights available to Wincanton arising out of the incorporation of RHA which it was entitled to assert in response to the claims advanced by DRL at various times over the duration of the contractual relationship. This is not a case of an express representation. It is a case where DRL relies on representations by conduct or silence. However none of the allegations of conduct referred to by DRL could possibly be said to carry with them an apparent awareness that Wincanton had rights under RHA nor, since DRL was equally unaware of those rights, could it be said that DRL could have understood DRL’s conduct as amounting to a representation that it was giving up those rights. All that can be said by DRL is that: (i) Wincanton did not assert that it had rights under RHA which it was invoking as a defence to the claims; (ii) instead, in 2007, it dealt with and settled those claims via the 2007 Agreement; (iii) thereafter Wincanton did not assert those rights as a defence until after the termination of the relationship. It is clear that this is not enough to found an estoppel. There is no evidence to support an allegation that this is a case where Wincanton was under a duty to speak; there is no evidence that anything was said or done by DRL which leads to the conclusion that Wincanton came under a duty to speak to correct a misapprehension.

In fairness to DRL, the impetus for the addition of this alternative formulation of the estoppel claim was the evidence of Mr Flanagan which, if accepted, might have led to a conclusion that he was aware of Wincanton’s rights under RHA and, knowing of those rights and knowing that DRL was unaware of those rights, deliberately said nothing about them so as to ensure that DRL did not seek to terminate the logistics service agreement which, although not particularly profitable to Wincanton, nonetheless was potentially profitable if volumes could be increased and, moreover, the termination of which significantly affect the bottom line of the whole Wincanton home delivery operation. Having concluded that this was not Mr Flanagan’s state of mind, the basis for this argument falls away.

I am therefore satisfied that this alternative estoppel argument must fail as well.

Under §2(vi)/05, carried through unchanged into the 2007 Agreement, one of the logistics services which Wincanton agreed to provide on request by DRL was to connect items such as washing machines and dishwashers to the water inflow and outflow connections. That attracted an agreed charge: £8.50 under the 2005 Agreement, increased to £8.78 under the 2007 Agreement. §10/05, revised under the 2007 Agreement but not materially so far as this issue is concerned, provided that Wincanton should not be entitled to charge for (inter alia) connections which fail for any reason other than those set out in §8 above. §8/05, left unaffected by the 2007 Agreement, contains a list of reasons for failed deliveries, all of which are cases where Wincanton is not at fault, including for example where the customer is not at home so long as Wincanton has followed an agreed call ahead procedure first.

One of DRL’s complaints is that Wincanton has charged for this service even where it did not take place. Wincanton’s case is if there was a no-fault delivery (for example because the customer was not at home at the agreed time) where connection or disposal had been booked, it is entitled to charge the agreed fee regardless.

In my judgment it is clear that the parties expressly provided in §2(vi), 8 and 10/05 for the circumstances in which Wincanton should be entitled to charge for failed connections. These clauses remained in place in the 2007 Agreement. In my judgment the changes made to §10 by the 2007 Agreement do not impact on Wincanton’s entitlement to charge for failed connections for cancelled deliveries. Accordingly, in my judgment Wincanton is correct in its argument that as a matter of construction it is entitled to charge for failed connections. As Mr De Verneuil Smith submits, that is the only basis of challenge to these claims (see claim 11), thus on the claim as pleaded there is no basis for contesting these connection charge claims.

At trial there was also some discussion as to whether or not Wincanton had, if it needed it, an alternative argument to the effect that if it was unable to deliver a product and thus make a connection due to customer cancellation, it was entitled to recover the connection fee on a ‘loss of opportunity’ basis. I am satisfied that this alternative argument cannot succeed, because: (i) there is no basis for a suggestion that the failure by one of DRL’s customers to allow access for delivery and connection could amount to a breach on the part of DRL; (ii) there was no satisfactory evidence before me either that Wincanton incurred additional expense in arranging for appropriately qualified personnel to be present who would not otherwise have been present anyway; (iii) there was no satisfactory evidence before me that Wincanton booked less jobs per day as a result of scheduling for connections than it did if there were no connections. If I was wrong about (i), then in relation to those cases where the delivery was not re- scheduled (i.e. because the customer cancelled permanently) then it might be argued that Wincanton had a claim for loss of profit on the basis that the full charge represented pure profit to Wincanton because all costs had already been incurred.

I have already referred to §2/08, under which ‘for so long as the Agreement remains in force’ DRL agreed to pay Wincanton ‘sums properly invoiced for such deliveries (without set off or deduction) by no later than close of business on the second business day following receipt of the invoice’. Wincanton submits that this operates to prevent DRL from relying on any set off in respect of its unpaid invoices rendered in respect of deliveries made in the final 2 weeks of the agreement, amounting it would appear to £579,631.68.

In his closing submission Mr Chaisty submitted that:

In his closing submission Mr De Verneuil Smith submitted that:

In my judgment the true position is, as submitted by Mr Chaisty, that if DRL can establish that Wincanton was guilty of a repudiatory breach in withholding delivery of excess stock to Expert and if DRL can establish that it elected to accept that breach as repudiatory before close of business on 28/2/08 then it would be entitled to contend that the obligation to pay the invoice without set off or deduction did not crystallise and thus that it should be entitled to rely on any defences by way of set-off or counterclaim properly available to it. If however it cannot establish either of those two issues, then it cannot challenge §2/08. I consider and determine these issues under issue 17A.

In his closing reply Mr Chaisty also submitted that the claim for these unpaid invoices was not an issue before the Court at this stage and that in any event ‘issues of stay would arise’. It seems to me however that if there are no specific defences to these invoices, or if any specific defences do not go to the whole of the amount claimed, and if I decided against DRL on repudiation, then the result would be that Wincanton would be entitled to apply for judgment on these invoices or the indisputable amount and I would then have to consider any application for a stay on the merits.

This issue must be considered at 2 separate points in time.

The first is as at 26/2/08 when it is alleged by DRL that Mr Taylor of Wincanton demanded that DRL pay a further £250,000 towards the liability for pre 19/1/08 deliveries failing which Wincanton would not release any further stock to Expert. For the reasons I have given in answer to issue 5(e), I am satisfied that the answer to that question is that it did not have a legal right to exercise a lien over the Claimant’s units at that time, because (i) on a true construction of the 2008 Agreement there were no monies due to Wincanton from DRL in respect of deliveries pre 19/1/08; (ii) Wincanton do not contend that any monies were due to it from DRL in respect of deliveries post 19/1/08.

The second is at 28/2/08, when Wincanton wrote to DRL, referring to its statement that it would not be paying the invoice due for deliveries for the previous week, purporting to accept that as a repudiatory breach, and notifying DRL that it was exercising its lien over DRL’s goods in its possession or control. As to this, the issue can only be decided once the repudiation issues are decided under issues 17 and 17A.

There was no specific form of invoicing required by the 2005 Agreement. It will be recalled that clause 7 made provision for invoices to be raised weekly and paid within 21 days ‘without deduction, set off or counterclaim’ other than in relation to items the subject of a ‘bona fide dispute’. Clause 7 was amended by the 2007 Agreement so as to provide for payment within 30 days, and so as to introduce specific requirements in relation to the content of the invoices, namely that: (a) they should contain details of weekly deliveries and service charges (plus applicable storage charges); (b) they should contain and ‘explicitly disclose’ details of (i) required deductions for damage liability under clause 13, (ii) stock loss liability under clause 15 and (iii) doorstep damage allowance under clause 12. Clause 7 also provided that ‘the content of the invoice should be agreed and signed off by relevant members of staff for both Wincanton and DRL’.

Mr De Verneuil Smith submits, and I agree, that the obligation in clause 7 of the 2005 Agreement to pay without deduction save for bona fide disputed items was not completely superseded by the amendments to clause 7. However, in my judgment, it necessarily follows from the scheme introduced by §7/07 that DRL would be entitled to rely on deductions, set-offs or counterclaims arising under §12, 13 and 15/07 even where such allowances had not been included by Wincanton in its weekly draft invoice or asserted by DRL but not agreed and signed off by Wincanton. Otherwise, Wincanton could fail to comply with its express obligation under §7/07 to ‘self-certify’ these contra-charges and then seek to rely on the ‘no set-off’ provision in §7/05 to avoid the consequences of its own failure, which would on any view defeat the intentions of the parties as expressed by the amendments made by the 2007 Agreement.

It is DRL’s factual case that Wincanton failed to comply with the requirements of clause 7 in relation to many of the invoices raised, not least because they did not include any details of the required deductions and allowances. It is their legal case (paragraph 28 Reply and Defence to Counterclaim) that DRL was under no contractual obligation to pay sums claimed under non-compliant invoices.

The issue of factual compliance is not for determination. Wincanton’s witnesses appeared to accept that towards the later part of 2007 their invoicing ceased to comply with the requirements of clause 7. According to them they began to experience problems with reaching agreement with DRL in relation to the draft invoices which they submitted, particularly in relation to the required deductions and allowances. The invoices in G17 tend to support this, in that the wording of the invoices begins to change from ‘as per agreed KPI’s’ to ‘as per first submission KPI’s’. KPIs is short for key performance indicators, and this is a reference to a document, according to Wincanton’s witnesses submitted weekly, which summarised the deliveries made in that week, and provided information as to the number of successful deliveries, details of additional charges such as connections, the number of and reasons for unsuccessful deliveries, and the charges levied in each case. It also identified the success rate achieved and the details of any volume rate reduction.

So far as the consequences of non-compliance are concerned, the issue is whether compliance was a condition precedent to DRL’s obligation to pay. There is no express provision to that effect, thus the question for determination is whether on a true construction that is nonetheless the effect of the relevant clause read against the agreement as a whole and in the relevant factual matrix.

It is clear that the 2007 Agreement required Wincanton to submit what were in effect draft invoices containing the relevant details, and the extended payment period was to allow DRL time to check and then to agree the invoices. There was provision for DRL to withhold bona fide disputed items. It is obvious that if Wincanton failed to comply with the requirements of clause 7 then that would place DRL in difficulties both in terms of agreeing the invoice and in terms of having the information available to identify items of bona fide dispute. However, as Mr De Verneuil Smith submitted, since the terms of the contract did not impose an obligation on DRL to pay the amount of the draft invoice without deduction even in the event of a bona fide dispute, the consequences of non-compliance by Wincanton with its obligation to provide invoices with a particular content are not so serious as to justify construing compliance with that obligation as a condition precedent to Wincanton’s right to payment. It must also be remembered that leaving aside the obligation in relation to the form and content of invoices Wincanton also had other obligations in relation to the supply of management information, so that it could not be said that without this information appearing on the invoices DRL simply had no way of knowing whether or not the invoiced claims were – or might be – the subject of a bona fide dispute.

Accordingly, I am satisfied that compliance with the requirements of clause 7 of the 2005 Agreement was not a condition precedent to the right to payment. I am satisfied, however, that DRL was entitled to challenge non-compliant invoices, either by way of bona fide disputes in relation to individual items or by way of asserting contra-claims arising under §12, 13 and 15/07.

A claim for an account is pleaded. Mr De Verneuil Smith objects that although §2(x)-(xii)/05 and §15/07 imposed contractual obligations on Wincanton to provide information to DRL, and although it would follow that in principle if not provided (Footnote: ⁵) Wincanton could be ordered to provide that information, the contractual relationship between the parties was not one of principal / agent such that an order for an account could be made.

In his closing submissions Mr Chaisty has not asserted any grounds for contending that the basis for the remedy of account properly so called is made out. Having considered the relevant section in Snell’s Equity (31^st ed.) paragraph 18-03 and following, I am satisfied that there is no obvious basis for the remedy of account here. Although it appears that this is an arid debate, because any information which DRL needs can be obtained either under the specific contract terms mentioned or by ordinary disclosure and, if not provided, appropriate inferences can be drawn, nonetheless the answer strictly speaking appears to me to be that there is no duty to account.

The wording of §5 of the 2008 Agreement requires Wincanton, so long as DRL complies with its obligations under the Agreement, to ‘endeavour to provide assistance to DRL in effecting the transition of the services to a third party’.

Mr De Verneuil Smith submits that the words ‘endeavour’ and ‘assistance’ are too vague and uncertain to provide contractual rights. I disagree. Where words are used in a document which it is intended should have contractual effect I consider that the court should proceed on the basis that those words are – objectively – intended to have effect and the court should strive, where possible, to give them legal effect. That is especially the position here, where it is a document intended to regulate the parties’ dealings pending termination at a time when they are already in dispute. I agree however with Mr De Verneuil Smith that the words are not apt to impose absolute unqualified obligations on Wincanton. I am satisfied that what Wincanton was agreeing to do in §5/08 was to use reasonable endeavours to assist in the transfer of the logistical services to DRL’s chosen replacement. It is not an absolute and unqualified obligation; it is to do what is reasonable in the circumstances.

Mr De Verneuil Smith submits that it is not capable of including an obligation to deliver excess stock to Expert. Consistent with my decision as to the proper construction of §5/08 I am satisfied that there was no unqualified obligation to deliver excess stock, but I am satisfied that there was an obligation to use reasonable endeavours to make excess stock available for collection for transfer to Expert or, at the very minimum, not to impede the collection of excess stock for that purpose. As I have already held, I agree with Mr De Verneuil Smith that these words by themselves would not be sufficient to displace any right of lien which Wincanton may have had, which is another reason for holding that §5/08 should not operate to impose an absolute unqualified obligation.

In reaching this decision I am particularly influenced by some of the terms of the 2005 Agreement as amended by the 2007 Agreement, against which the terms of the 2008 Agreement must be construed:

I also have regard to the factual matrix in existence at the time of the 2008 Agreement, as known to both parties, particularly that Wincanton was holding substantial quantities of stock for DRL, and in particular was holding stock awaiting delivery and excess stock awaiting a suitable replacement order as well as damaged stock. Indeed at this time Wincanton was seeking to persuade DRL to agree to a charge for stockholding. It is obvious therefore that the parties must have intended that the obligation to provide assistance to effect the transition of services must have extended to transferring this excess stock.

It is also relevant to note that within a week of DRL giving notice of termination there was a meeting between Mr Bull of DRL and Mr McElroy of Wincanton at which, per the former’s subsequent e-mail of 7/2/08, it was agreed that Wincanton would ‘provide warehouse resource and trunking’ to transfer the excess stock to Expert on the footing that Wincanton would be paid for delivering the stock to Expert. On 12/2/08 Mr McElroy e-mailed to say that he was ‘comfortable with the contents’. There is no dispute but that during the week ending 23/2/08 Wincanton did begin the process of delivering excess stock to Expert, and under cover of Mr Lunn’s e-mail of 26/2/08 [F3/1168] it submitted 2 invoices dated 25/2/08 to DRL. The first comprised Wincanton’s charges for transferring 9 loads in the week ending 23/2/08 and the second for transferring a further assumed 3 loads in the next week.

It would appear to follow that the parties had moved beyond the general agreement in the 2008 Agreement to a specific agreement that in return for payment Wincanton would not just make the excess stock available for collection but would actually deliver it to Expert. In the circumstances, any argument along the lines that Mr De Verneuil Smith has raised simply cannot succeed. Indeed, even if I was wrong in my earlier conclusion about any lien in respect of pre-2008 Agreement invoices being excluded because on a true construction of the 2008 Agreement those invoices could no longer be described as ‘due’, I would have been inclined to hold that once Wincanton had specifically agreed to transfer this excess stock to Expert that would have operated as an implied waiver of any right to exercise a lien in relation to invoices which were due as at that date. This is challenged by Mr De Verneuil Smith in his further submissions on the basis that any such implied waiver could only arise by necessary implication, which cannot be said to arise merely from an agreement to deliver the excess stock to Expert. I disagree; in my judgment it is clear when set against the background to this further agreement that to seek to rely on a lien arising under an earlier overarching agreement is necessarily inconsistent with agreeing for reward to transfer the only remaining stock over which the lien could be exercised to a third party.

For completeness I should say that I agree with Mr De Verneuil Smith that the parties’ contemporaneous subjective understanding as to what §5/08 meant is irrelevant, although given my conclusions and given what actually happened that understanding is not surprising.

This issue is closely connected with issue 22, which I will deal with at the same time.

It is common ground that there was nothing in the Agreements themselves which made provision for how claims by customers for damage to their homes or other contents caused during the delivery process should be resolved.

The evidence at trial demonstrated, in my judgment, that what happened in practice was that all such claims were referred by DRL to Wincanton, whereupon they would either be dealt with internally by Wincanton if they fell within the excess in place between itself and its public liability (PL) insurers, or passed by Wincanton to its PL insurers to be dealt with by them if not. Those claims would then be dealt with on their merits, so that if considered valid in relation to the occurrence of damage, Wincanton’s responsibility for it and the amount claimed they would be accepted and paid, whereas if there was any issue as to any one or more of those points they would be further investigated and either a negotiated settlement reached or the claim rejected and the customer left to pursue it as thought fit. It appears that this regime was only abrogated, unilaterally and without notice by Wincanton on the instruction of Mr Taylor, at the end of the relationship when he was concerned about the amount of what he believed to be DRL’s unpaid liability to Wincanton and resolved not to deal with or pay any existing or further claims unless or until that had been resolved to his satisfaction.

In my judgment the arrangement which was in place until abrogated by Mr Taylor all makes perfect sense. If damage was caused to the customer’s property, then legal liability for that damage would lie with Wincanton as the company vicariously responsible for the negligence of its delivery drivers. It is I suppose also possible that the customer might be able to assert a claim against DRL on the basis that it was under a contractual obligation to exercise reasonable care and skill in the performance of its services which: (i) included delivery, and (ii) was non-delegable. However from a practical point of view, especially since at the time no-one (as I have found) was aware of, let alone gave any thought to, the potential impact of RHA, it would have been obviously sensible for the claim to be passed to, dealt with and handled by Wincanton.

However, what happened in practice does not, in my judgment, by itself demonstrate or establish the existence of any contractual obligation. On any view it cannot impose an obligation to accept, settle or pay for the claims; all that Wincanton did was to take the claim over and deal with it on its merits. Can it demonstrate an obligation to take over and deal with the claim, including an obligation to pay the claim if justified? Whilst I have some sympathy for DRL’s position, I am unable to see how the implementation of a sensible and practical arrangement for these claims to be dealt with can be elevated into a contract, supported by consideration, whereby Wincanton bound itself contractually to DRL to do so. If this had been regarded as a contractual arrangement of importance, then it would have been recorded in the 2007 Agreement. There is no evidence that it was expressly discussed and agreed, and there is no sufficient basis in my judgment for finding a contract by conduct.

The absence of a contract does not matter if DRL is able to advance this claim on the basis that as between itself and Wincanton there was an implied term that Wincanton would provide its services with reasonable care and skill, that this was breached where damage was done to customer’s properties, that DRL acting reasonably settled the claims made against it by its customers, and that as a result it is entitled to recover these sums as damages as a Biggin v Permanite type claim. Although it may be said that this is not the way in which the claim has been advanced, it does not – at least to me – appear that presenting the case in this way involves any consideration of evidence not already adduced or examined at trial. Mr De Verneuil Smith submitted that it would be necessary for this claim to be pleaded. Strictly speaking this would appear to be correct, although it could be argued that the way of approaching the case was at least hinted at in the closing sentence of paragraph 22 of the APOC. In any event, subject to such an amendment being made it appears to me that such claims are in principle maintainable, and I do decide.

The first objection, which would apply to the claim as advanced either under the collateral contract or on a Biggin v Permanite basis, is the defence founded on the limitation of liability under §11(2) RHA and/or §14/05. I have now held under issue 5(f) that neither §14/05 nor §11(2) RHA apply to a claim advanced on this basis and, thus, this objection fails.

I must also consider the impact of the notification and claim provisions in §13 RHA. In the absence of a binding contract, collateral to the Agreements, that Wincanton would deal with these claims themselves, it cannot be said that there is any inconsistency between §13 RHA and the contractual relationship so as to exclude the application of the former. However, on the evidence before me it would appear that there would be a strong case for arguing an estoppel by convention or a waiver by estoppel in relation to §13 RHA. The parties had proceeded on the basis of a common understanding or a representation by words and conduct by Wincanton that it would take over and deal with all such claims without regard to the strict legal position. Whilst I accept that this could still be said to be subject to the objection that a party cannot be estopped if both parties are unaware of the legal position, here in my judgment there is the significant difference that there was positive conduct by Wincanton consistent with an acceptance of liability to deal with these claims and detrimental reliance by DRL in not dealing with the claims directly and/or not complying with the requirements of §13 RHA.

Thus my finding is that this claim is in principle valid, and neither limited by §11(2) RHA or §14/05 nor barred by the notification or claim provisions in §13 RHA. I accept that the burden of proving the reasonableness of the settlement lies upon DRL; this of course can only be considered as part of the factual investigation in due course.

In my judgment this raises 2 separate questions, namely: (1) whether the coding applied by Wincanton is susceptible to challenge by DRL; and if so (2) who bears the burden of proof in the event of a challenge.

So far as question (1) is concerned, Mr De Verneuil Smith accepts that whilst the Agreements contain no express provision for the coding applied by Wincanton to be challenged or re-coded, nonetheless it is open to DRL to establish in any particular case that the coding applied by Wincanton was not in accordance with the contract. I agree that the coding applied by Wincanton cannot be determinative. I am quite satisfied that: (a) clear words would be needed to prevent one contracting party (in this case DRL) from contending that the unilateral determination by the other contracting party (in this case Wincanton) as to whether a particular failed delivery fell within the Wincanton fault category or the Wincanton no-fault category was incorrect, when the effect of such determination would determine the contractual allocation of financial responsibility for that incident; (b) there is no attempt whatsoever in the 2007 Agreement to achieve this expressly, and there is no basis for implying such a restriction of DRL’s rights into the Agreement.

So far as question (2) is concerned, it appears that DRL’s contention is that because the product remains with Wincanton at all times it bears the burden of proof in any individual case of proving that its coding is correct, whereas Wincanton’s position is that if DRL seeks to challenge the coding it bears the burden of proof.

Before considering this issue in the context of the terms of the Agreements, it is instructive to consider what the position would be at common law. In circumstances where the damage may have occurred before the product came into Wincanton’s possession (if due to manufacturer damage) or where it may have occurred subsequently during storage or delivery by Wincanton, there would be no presumption that the burden of proof lies upon Wincanton as a bailee to prove that the damage occurred without fault on its part. As I have said, DRL submits that this conclusion is unrealistic and unfair because it never had control of the product at any time, and had no way of knowing whether what Wincanton asserted was true or untrue. However, as Mr De Verneuil Smith submits, that ignores the facts that: (i) under §2(xii)/05 Wincanton’s obligation to provide management information to DRL included ‘reasons for failed deliveries’; (ii) as envisaged by §2(viii) & (x)/05 and Appendix 1/05, DRL had ‘real time’ access to the information entered by Wincanton on the order enquiry document; (iii) DRL had access to its customer for information in the event, for example, of an issue as to whether the damage was consistent with manufacturer or delivery damage; (iv) DRL also had access to the returned products so that it could check whether, for example, the damage was consistent with manufacturer damage or transit damage. Therefore, I am satisfied that the burden of proof does lie on DRL.

In §221(a) – (b) of his closing submissions Mr De Verneuil Smith submitted that the coding is prima facie binding on DRL, who bears the burden of proof on the balance of probabilities of establishing that the coding applied is in breach of the Agreement. Having regard to the factors referred to above, I agree with this, although for the avoidance of doubt all that ‘breach’ means in this context is that the reason why the delivery failed was not the reason given by Wincanton by reference to the coding applied by it.

In sub-paragraph (c) of his closing submissions Mr De Verneuil Smith also submitted that Wincanton is not bound by any operational allocation of ‘liability’ that occurred during the returns process. What he is referring to is the operational procedure whereby returned damaged product coded B5 by Wincanton was following return stored at Wincanton’s warehouse and in due course inspected to ascertain whether or not the damage was indeed manufacturing damage or whether it was transit damage. Mr Charnock in particular gave evidence that a procedure developed whereby it was agreed that whilst Wincanton would job Wincanton fault failed delivery products, DRL would job Wincanton no fault failed delivery products, including in particular B5 coded failures. He said that to facilitate this, products accepted by Wincanton as Wincanton fault failed delivery products would be put into a separate section of the warehouse. He said that returned products were often inspected by Wincanton staff before being inspected by DRL staff, either alone or together with Wincanton staff, and that even before products were examined by DRL staff they could and would often be re-allocated by Wincanton staff from a B5 to a B4 coding, and then put into the section for products awaiting jobbing by Wincanton. This evidence finds some support in that the minutes of one of the review meeting minutes (18/9/07) appears to record Chris Bolton (of Wincanton) acknowledging that of 300 such products only around 50 were put in for joint inspection, thus implying that the remainder were unilaterally re-coded by Wincanton. However those involved on the Wincanton side at operational level who gave evidence, Ms Goward, Mr Flanagan and Mr Lunn, all appeared to me to be genuinely surprised by the suggestion – which was not included by Mr Charnock in his witness statement – that this was or became an agreed procedure, and on balance I do not consider that it was ever formally agreed even on an operational basis. I did not understand Mr Chaisty to contend as a result of Mr Charnock’s evidence that there had been some variation to the 2007 Agreement whereby the procedure described by Mr Charnock supplanted §13/07. There was no application to amend the Particulars of Claim to raise this as an issue, or to include it for determination as one of the Agreed Issues. The difficulty of arguing that a change introduced operationally varied the Agreement has already been addressed. It follows that in my judgment Wincanton could only be said to have become bound by a coding change if and when that change had been entered onto the system. Otherwise, it appears to me that the best DRL could do on Mr Charnock’s evidence is to suggest that there was a tacit acceptance by Wincanton’s staff that the coding should be changed, but this cannot be binding on Wincanton.

In sub-paragraph (d) and (e) of his closing submissions Mr De Verneuil Smith also submitted that DRL may not challenge the coding of a collection as ‘/C’ or a POD save in relation to fraud. I have already dealt with this at issues 2(d) and 4. He goes on however to invite the court to indicate that forensic analysis of DRL’s customer call logs cannot satisfy the requirement of fraud, and that evidence from a customer is required. He accepts however that it may not be possible for the court to do so given the scope of the trial and the evidence which has been adduced. I agree: I cannot at this stage indicate in the abstract what evidence would suffice to discharge the burden of proof on DRL to go behind a clean POD.

It is trite law that conversion can only occur where one party (in this case Wincanton) acts inconsistently with the rights of the true owner (in this case DRL). Here, the 2007 Agreement made certain provision for what is to happen to products in certain cases. Thus:

These clauses are not altogether easy to understand; for example it is difficult to see how in scenario 3 in §13 damaged product could be included in an invoice unless it had already been sold by Wincanton. It would appear that the only obvious answer would be that Wincanton would have implied authority from DRL to sell the goods on its behalf. However, in my judgment the structure of this agreement is such that the only circumstances in which it could be said that Wincanton had converted products (as opposed for example to acting in breach of contract in disposing of damaged product without including allowance in invoices for that damaged product as appropriate under §13) would be if it disposed of undamaged or re-discovered goods without DRL’s knowledge or consent (including a case where it did so in wrongful reliance on a purported lien).

It is clear from the way this claim is pleaded (paragraph 24) and from the way it is put in DRL’s opening that the starting point for DRL’s primary case so far as restitution is concerned is its argument that it was a condition of the Agreements that payment would only be due if Wincanton had performed its unpack and inspect obligation. I have already found against DRL on this point (issue 3). DRL’s factual case in relation to restitution is its allegation that Wincanton failed to perform its unpack and inspect obligation in approximately 35% of cases, amounting to approximately £2M of delivery charges. Whether that factual allegation of breach is made out is an allegation which is not for determination in this trial. DRL asserts that it paid the delivery charges relating to those estimated 35% of deliveries where unpack and inspect was not performed in the mistaken belief that Wincanton was performing its unpack and inspect obligation. DRL alleges that in such circumstances it is entitled to recover on a restitutionary basis the full amount of the delivery charges paid for deliveries where unpack and inspect did not take place. Its alternative case is that it is entitled to recover in restitution such proportion of the delivery charges which represent the unpack and inspect obligation. Paragraph 24 concludes: ‘The Defendant acted in breach of the said Agreements and is not entitled to be paid sums representing a price agreed on the basis of full contractual performance on its part’. In its opening it contends (paragraphs 41 – 43) that it is entitled to the return of money paid based on mistake and/or on the basis of what it contends was Wincanton’s breach, or ‘at the very least to an abatement of the price in the circumstances where the relevant element of the unpacking and inspection was not performed’.

In its opening Wincanton denies that DRL was mistaken, because it says that DRL always knew or at least suspected that Wincanton was not performing its unpack and inspect obligation. It also denies that restitution is possible where it cannot be said that there has been a total failure of consideration in relation to all of the services provided by Wincanton in relation to the deliveries. It contends that in any event no restitutionary relief is possible because Wincanton changed its position in reliance on the payments by not terminating the Agreement for non-payment. It contends that if DRL has any claim it can only be for damages.

In response to the issue of knowledge v. suspicion, DRL argues in its closing submissions that there is a difference between a suspicion that Wincanton was not performing its unpack and inspect obligations, in circumstances where DRL says that when it raised its concerns it was re-assured by Wincanton that it was achieving unpack and inspect, and positive knowledge or belief that Wincanton was not performing its unpack and inspect obligations. It says that whilst it had the former, it never had the latter. DRL also submits that all payments were made essentially on account because of Wincanton’s failure to follow the correct procedure in relation to invoicing, and that the final payment of £1M under the 2008 Agreement was expressly paid reserving its rights.

Wincanton’s position is that suspicion is enough to prevent a successful claim in restitution. In its closing it submitted (at paragraph 228) that:

In relation to the point about there being no total failure of consideration Wincanton said (paragraph 233):

DRL’s closing submissions in reply said that (paragraph 79):

DRL also submitted (paragraph 81) that:

Finally, in relation to the change of position defence, DRL submitted (paragraph 82) that:

As I have already indicated, DRL accepts – rightly in my judgment – that at all relevant times it suspected that Wincanton was not performing its unpack and inspect obligation in all cases. Thus in cross-examination Mr Caunce accepted that DRL suspected that Wincanton was not achieving 100% unpack and inspect. He said that DRL addressed it with Wincanton at various times, who re-assured DRL that it was happening, but customers would call DRL and suggest it was not. He made the point that it was difficult for DRL to ascertain the true position because of course it had no representative present at the point of delivery.

It is apparent from the minutes of meetings that the question of Wincanton’s compliance with the unpack and inspect obligation was a recurrent issue. Indeed, the changes to the form and wording of the POD was clearly an attempt by the parties to ensure that the delivery drivers did comply with the unpack and inspect obligation. It is clear that by October 2007 DRL was sufficiently concerned about Wincanton’s compliance that Mr Charnock spent a day with a number of customers observing deliveries, and his e-mail of 11/10/07 demonstrates clearly that according to him it was obvious that the delivery drivers were still not complying. As I have already mentioned, the question of compliance was raised as a major issue at the meeting of 5/11/07, and it appears that at the meeting Wincanton was not disputing that in a substantial proportion of cases unpack and inspect was not occurring, although it was disputing the extent of non-compliance. DRL stated that it intended to commission a survey to support its case as to its non-compliance. It did so, and it is the results of that survey, produced on 23/1/08, on which it relies to support its 35% assessment of non-compliance. (I emphasise that it is no part of my function at this stage to decide whether or not DRL’s case in this regard is made out, and given the findings I have already made as to the true nature of the unpack and inspect obligation it is pertinent, as Mr De Verneuil Smith observed at trial, that the survey did not ask customers whether or not the delivery drivers had offered to unpack and inspect, only whether or not it had taken place).

I am satisfied that the evidence shows that at all relevant times DRL suspected that Wincanton was not performing its unpack and inspect obligations in every case, but equally that in relation to individual cases it simply had no means of knowing whether or not Wincanton was complying. It is clear that over time its suspicion hardened so that by the meeting of 5/11/07 it firmly believed in my judgment that despite all of the efforts made to achieve 100% compliance unpack and inspect was still not being performed in a significant number of cases. It is clear from the minutes of the meeting that Wincanton accepted as much, albeit that it did not accept the full extent of non-compliance. I consider that after that meeting the state of mind of Mr Roberts and Mr Caunce was such that Wincanton could properly be said to believe that in a significant proportion of cases Wincanton was not performing its unpack and inspect obligation.

The question therefore for me is whether, following as I do the approach indicated by Lord Hoffman in the Deutsche Grenfell case, it can be said that by making payments in such circumstances both before and after that meeting DRL was, viewed objectively, taking the risk that Wincanton was not performing its unpack and inspect obligations.

In my judgment, it cannot be said that it was. Under the terms of the 2007 Agreement the agreed procedure was that all claims, including all allowances, should have been identified in the draft invoice and then agreed whereupon payment would be made. If this had happened, then unless at the time of payment DRL had expressly and appropriately reserved its rights in respect of some or all of the payments it may well have followed that it would be regarded as taking the risk that it might subsequently be established that Wincanton was not performing its unpack and inspect obligations. However, that is not what happened here. Instead DRL never agreed the draft invoices, and instead made payments which were clearly understood to be based upon a broad assessment of what might be due and only on an ‘on account’ basis. Although it does not appear that at any time DRL stated in terms when making the payments that it was reserving a right to seek repayment of any overpayment should it transpire that Wincanton was not performing its unpack and inspect obligations, it does not seem to me that it could be said in those circumstances that DRL was, objectively speaking, taking the risk by making these payments. The position in my judgment is even stronger when one considers the payments made after the 5/11/07 meeting, from when it was obvious to Wincanton that DRL was reserving the right to seek redress should it be established from the survey that the unpack and inspect obligation was not being met.

Thus, on this aspect of the claim, I am satisfied that DRL’s state of mind when making payments was not such as to prevent it from making a claim for restitution, assuming the other necessary constituent elements of the claim are made out.

Given my conclusion in relation to issue 3, DRL cannot in my judgment successfully advance a claim in restitution for repayment of the whole of the delivery charges paid in relation to transactions where it can establish that Wincanton failed to comply with its unpack and inspect obligation. It is quite apparent that the charge per individual delivery constituted the agreed payment for the performance of a whole series of logistics services, only one small element of which was the unpack and inspect obligation. It follows that it cannot be said that there was a total failure of consideration in respect of that individual delivery. I agree with Mr De Verneuil Smith that it would produce a thoroughly unfair result if DRL could recover the whole payment made for a delivery where, even if unpack and inspect did not occur, nonetheless there was no subsequent complaint from the customer and thus, it may be inferred, the product was delivered in perfect condition.

What about Mr Chaisty’s argument that the unpack and inspect obligation can be severed so that a restitutionary claim can be brought for that part of the price which represented the unpack and inspect obligation? The insurmountable objection to that argument, in my judgment, is that the parties did not separately apportion a separate price for the performance of the unpack and inspect obligation. This is in contrast to the separate charges for connections, collections and scrap collection and disposal. Nor is there any evidence that at any time the parties agreed a notional value for the unpack and inspect obligation, whether – if admissible - during the course of negotiations leading up to the conclusion of the 2005 Agreement or the 2007 Agreement or at some other time. It does not seem to me to be possible for the court, in the context of a restitutionary claim, to separate out some notional element of an indivisible fee and treat it as a separate payment for the performance of a separate promise so as to allow a party to recover that notional element in a restitionary claim.

I am satisfied, therefore, that on this ground the claim in restitution must fail.

So far as Mr De Verneuil Smith’s change in position defence I would not, had I needed to determine the point, have been inclined to agree with that, because it does not seem to me that anything which it did was on any objective analysis (or even, if relevant, on a subjective basis) such as to allow it to claim that it would now be prejudiced in having to repay sums to which it was not entitled. However, that is immaterial because in my judgment the restitution claim must fail.

This was first identified as a specific claim in DRL’s written opening. In its written closing Wincanton submitted that:

In its response DRL submitted that there is a valid claim for compensatory damages where the value to the recipient of goods or services is diminished due to the provider’s breach of contract. It submits that the contract in this case is not merely a contract of carriage.

I am satisfied that it is possible in principle to advance, not as a claim for abatement strictly so called but as a claim for damages for the defective performance of a contract for services, a claim for the difference between the price contracted for and the real value of the work done: see Mondel v Steel (1841) 8 M&W 858, 870 (per Parke B). Whether DRL will be able to establish any such difference as and when its claim for damages falls to be tried is a matter about which I cannot speculate at this stage. However, I agree with Mr De Verneuil Smith that such a claim would fall within §13(1)(b) RHA. This is because the basis for such a claim is not connected in any way with the invoicing procedure contained in the 2007 Agreement and thus the reasoning leading up to my conclusion in paragraph 125 of this judgment does not apply in this case. I also agree with him that such a claim would also fall within §13(2) RHA, because the conclusion in relation to Issue 5(d) equally applies here.

I am also satisfied that it is possible in principle for DRL to advance a claim for compensatory damages. I accept that it is difficult to see how there could be any loss where the customer made no complaint about the product. However, contrary to Mr De Verneuil Smith’s second submission, it seems to me – as I have already indicated in relation to issue 2(d) above at paragraph 107 of this judgment - that in principle it would be open to DRL to advance a claim for damages where the customer did return a damaged product on the basis that had Wincanton properly performed its unpack and inspect obligation the damage would have been discovered at the time and the delivery treated either as a Wincanton fault or no fault delivery under §13/07 with the consequences provided for by that clause, so that there would be a genuine loss represented by the difference between the actual loss suffered and the loss had that clause been applied. On further consideration I do not consider that such a claim would fall within §13(1) RHA. This is because it is of the essence of such a claim that initially there would be no failed delivery, subsequently the customer would complain of damage, and then the product would then be collected. In such a case, whilst it is likely that it would soon become apparent to DRL that the complaint of damage was being made in the face of a clean signed POD, nonetheless under the invoicing procedure established by the 2007 Agreement it would be for Wincanton in the first instance to make and disclose the appropriate deduction upon disposal, with the expectation that any disagreement as to which financial option under §13/07 should apply being agreed and the invoice signed off. By the same process of reasoning as leads up to my conclusion in paragraph 125 of this judgment, I am satisfied that this is inconsistent with the notification procedure in §13(1) RHA. However I do agree with Mr De Verneuil Smith that, for the reasons given under Issue 5(d), §13(2) RHA would apply to this claim as it applies to all other claims made under the 2005, 2007 and 2008 Agreements.

I have already held in relation to issue 4 that there is no basis for an estoppel.

The issues which fall for determination in relation to issues 17 and 17A are as follows:

The answer to these issues involves a close consideration of the events of February 2008.

On 1/2/08 DRL gave written notice of termination as required by the 2008 Agreement, the 28 days expiring on close of business on 29/2/08, a Friday, which would therefore be the last day when Wincanton would make deliveries to DRL’s customers. DRL made arrangements to transfer the delivery service to a company known as Expert Logistics with effect from the following Monday 3/3/08.

Within the notice period DRL instructed Wincanton to move its stock of DRL products to Expert. I have already (under issue 11) referred to the subsequent e-mails of 7/2/08 and 12/2/08 relating to this, and to the undisputed facts that Wincanton began delivering excess stock to Expert, and subsequently raised invoices on 25/2/08 both for the deliveries made thus far and the anticipated deliveries to be made the following week.

On 26/2/08 Wincanton raised its invoice for payment for deliveries to DRL’s customers made the previous week which, in accordance with the terms of the 2008 Agreement, was due for payment by close of business on 28/2/08.

On 26/2/08 Mr Taylor spoke to Mr Caunce and told him that Wincanton was only prepared to continue delivering stock to Expert if DRL paid £250,000 against the amount alleged to be outstanding to Wincanton for invoices already rendered. This was followed up by an e-mail the same day which read:

It is important to note that this was not a question of Wincanton demanding payment of invoices rendered since the date of the 2008 Agreement, because these had all been paid up to date as at this time; it was a demand for a payment in relation to invoices pre-dating the 2008 Agreement which, as Wincanton well knew, were disputed and which the parties had agreed to ‘park’ under the terms of the 2008 Agreement. Mr Caunce told Mr Taylor that he would have to discuss this with DRL’s board, at least one of whom was out of the country at the time.

On that same date Wincanton’s vehicles containing stock destined for Expert were diverted instead to one of Wincanton’s depots. Insofar as there is any dispute about this, I accept the evidence of DRL’s witnesses that this is what happened. Thus the threat was immediately carried into effect. Mr Caunce told me, and I accept, that the stock in question included some excess stock in pristine condition which DRL had allocated for deliveries to customers to be made by Expert in the w/c 3/3/08, and that it also included some stock delivered to Wincanton by manufacturers in preceding weeks which DRL had also allocated for deliveries to customers in that week. Accordingly, it is clear that the non-delivery of that stock would have an immediate impact on DRL, in that in order to meet its agreed delivery schedule in the w/c 3/3/08 it would have to obtain replacement stock at short notice.

On 27/2/08 Mr Caunce spoke to Mr Carrol, who made a contemporaneous file note of the conversation. According to his file note Mr Carrol was demanding that DRL pay the amount requested by Mr Taylor to obtain the release of the stock, and also that DRL agreed to pay the delivery charges for the w/e 29/2/08 on 29/2/08. Mr Caunce’s evidence is that in that conversation Mr Carrol increased the amount demanded from £250,000 to £300,000. This is disputed by Mr Carrol, although I note that this was the amount mentioned by Mr Caunce in the first telephone call between the 2 men the following day. Given this contemporaneous reference, and given that I am able to place very little if any weight on Mr Carrol as a credible witness of fact, I am satisfied that the amount demanded was indeed increased to £300,000.

I should however say that I am satisfied, insofar as the contrary is suggested, that at this point there was no threat by Mr Carrol to halt the deliveries to be made by Wincanton to DRL’s customers that week, and it is common ground that deliveries were made by Wincanton on 27/2/08.

In his lengthy e-mail of 27/2/08 (F3/1171) Mr Caunce referred to DRL’s outstanding claims, and said that ‘we now have no alternative other than to reorder stock due to your refusal to release the product to our new provider’, but then said that he would call Mr Carrol to ‘discuss the way forward’.

On 28/2/08, which was the day for payment of the invoice dated 26/2/08, Mr Carrol sent an e-mail that morning to say that unless he heard from Mr Caunce soon he would be ‘forced’ to stop all remaining deliveries that day and all deliveries the next day. Mr Caunce accepted in cross-examination that Mr Carrol was concerned to know whether or not DRL would be paying the 26/2/08 invoice that day. Although it appears that there would have been no justification for implementing that threat, in fact contact was made so that the issue never arose. Thus later that morning there was a telephone conversation between Mr Caunce and Mr Carrol, which was secretly recorded by the former, and a transcript of that recording, the accuracy of which is not issue, has been provided. Mr Carrol also made a contemporaneous note of the conversation, which although of course shorter also appears accurate.

Mr Carrol stated that unless Wincanton received payment that day he would ‘stop delivering’ and ‘hold the stock back’. It is clear in my judgment that Mr Carrol was not just referring to the invoice of 26/2/08, but was also referring to the sum demanded by Mr Taylor the day before as part of the pre-19/1/08 delivery invoices, not least because he made express reference to the fact that DRL owed Wincanton £1.4M. When Mr Caunce protested that this was contrary to the terms of the 2008 Agreement Mr Carrol replied ‘forget the agreement, let’s start again here’. Mr Carrol claimed that Wincanton had a lien over the stock. There was no suggestion by Mr Carrol that Wincanton was willing to release the stock so long as DRL paid the 26/2/08 invoice. Mr Caunce said that he had already begun ordering alternative stock because he believed that Wincanton would carry out its threat not to deliver the stock. The call ended with Mr Caunce agreeing to go back to the DRL board to obtain a final decision

Having done so, there was a further telephone call later that day, also recorded by Mr Caunce and also noted by Mr Carrol in which Mr Caunce conveyed DRL’s position, which was that because of Wincanton’s conduct they had lost faith in Wincanton, and because they had had to buy in stock to replace the stock held by Wincanton they were not prepared to pay any money to Wincanton, including the 26/2/08 invoice. Mr Carrol said that he would come back to notify Mr Caunce of his response to this, but it is clear that Mr Caunce already anticipated that Wincanton would refuse to make any further deliveries the following day.

It was suggested to Mr Caunce that DRL had already decided not to pay the 26/2/08 invoice or to pay for deliveries in the w/e 29/2/08 even before Mr Taylor’s demand of 26/2/08. He denied this. I am satisfied on the evidence that this was not the case, and that if Mr Taylor had not made that demand and if Mr Carrol had not refused to withdraw it DRL would have paid the 26/2/08 invoice on 28/2/08.

There was then a third and final telephone call that day, in which Mr Caunce confirmed that DRL would not be paying the 26/2/08 invoice and Mr Carrol confirmed that Wincanton would not be delivering the next day.

Matters then concluded that day with Mr Carrol sending an e-mail to Mr Caunce sometime before close of business, in which he asserted that DRL was in repudiatory breach in failing to pay the 26/2/08 invoice, and that this was accepted by Wincanton as bringing the agreements between the parties to an end with immediate effect, so that there would be no further deliveries and Wincanton was relying on its lien over all DRL’s stock in its possession or control.

In accordance with both parties’ stated positions, there were therefore no further deliveries made by Wincanton to DRL’s customers on 29/2/08, Wincanton made no further stock deliveries to Expert, and DRL made no further payments to Wincanton. Correspondence continued between the parties, in which each re-stated their respective positions, but none of that correspondence is of any particular assistance to me in resolving the issues raised here.

I have already decided under issue 11 that §5/08 did impose an obligation on Wincanton to use reasonable endeavours to make excess stock available for collection for transfer to Expert or, at the very minimum, not to impede the collection of excess stock for that purpose. It is clear that prior to 26/2/08 Wincanton had complied with that obligation and that it was proceeding on the basis that it would continue to do so in the final week of the contract. I have also already decided under issue 5(e) that on a true construction of the 2008 Agreement during the continuation of the relationship Wincanton was not entitled to exercise any lien on DRL’s products in reliance on unpaid invoices for pre-19/1/08 deliveries. I am satisfied, therefore, that Mr Taylor’s demand on 26/2/08, followed by the suspension of deliveries to Expert on 26/2/08, and by Mr Carrol’s re-statement of Wincanton’s position and increase of the sum demanded to £300,000 on 28/2/08, all amounted to breaches of the 2008 Agreement by Wincanton.

Mr De Verneuil Smith argues however that these breaches were not repudiatory breaches. He submits that they did not deprive DRL of substantially the whole benefit which the parties intended that DRL should obtain as the consideration for performing its further undertakings (applying the test stated by Diplock LJ in Hongkong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 66). He submits that the breaches related only to the delivery of the remaining excess stock, not to delivery to DRL’s customers during the continuation of the Agreement. He submits that as at 26-28/2/08 it was clear to DRL that Wincanton was continuing to deliver to its customers and would continue to do so down to and including 29/2/08 so long as DRL paid its invoice dated 25/2/08 and regardless of whether DRL paid the £250,000 or £300,000 also demanded.

Mr Chaisty replies that these were illegitimate demands in relation to a matter covered by the 2008 Agreement and which fundamentally undermined that Agreement.

I have found this a difficult question to determine. It is clear, as I have found, that §5/08 did impose an obligation on Wincanton in relation to the transfer of excess stock. The breach was quite unjustified and a flagrant attempt to impose improper commercial pressure on DRL to pay a further significant sum which the parties had agreed should be frozen pending termination of the commercial relationship. As against that, Wincanton had performed, and was indicating that it was willing to continue to perform, its fundamental obligation under the 2008 Agreement to continue to deliver to DRL’s customers up to and including 29/2/08, so long as DRL complied with its fundamental obligation to pay for those deliveries within 2 working days of delivery of the weekly invoices for those deliveries. It had already performed its obligation to deliver in the previous week in respect of which it had rendered its invoice dated 25/2/08, and even on 28/2/08 it was continuing to do so. By 26/2/08 it had already delivered a substantial element of excess stock to Expert. It is clear that by the time of the second telephone conversation of 28/2/08 DRL had already taken steps to buy in replacement stock to replace the excess stock which Wincanton was refusing to deliver to Expert, so that in fact DRL was not being placed in insuperable difficulties so far as the performance of its own delivery obligations to its own customers in the following week through Expert was concerned.

On balance, I conclude that Wincanton’s conduct, although improper and unjustified, was not a repudiatory breach in that it was not such as to justify DRL in refusing to perform its own continuing obligations, i.e. to pay the invoice of 25/2/08 and the further invoice for deliveries performed that week.

It follows that I am satisfied that DRL was not entitled to elect to treat the Agreement as discharged as at 28/2/08 and thus it was not entitled to refuse to pay Wincanton’s invoice dated 25/2/08. I am also satisfied that Mr Caunce’s clear statement in the second telephone conversation of 28/2/08 that DRL would not be paying that invoice by the due time and date, i.e. by close of business that day, was itself a breach of contract, and in the circumstances was itself a renunciation which Wincanton was entitled to treat as repudiatory, and that Wincanton notified DRL that it had elected to do so by its letter of 28/2/08. I am satisfied that DRL was not entitled to suspend payment of the invoice of 25/2/08, and that there was no need for Wincanton to wait until after close of business on 28/2/08 before it became entitled to treat DRL’s conduct as repudiatory or electing to treat the Agreement as discharged.

It follows from the conclusions which I have already reached that Wincanton was in breach in this regard from 26/2/08 down to 28/2/08. Thereafter I am satisfied that it was entitled to refuse to deliver because post-termination it was entitled to treat the invoices for pre-19/1/08 deliveries as due once more and thus to rely on its lien.

In their written submissions both counsel agree that this raises the same issue as issue 6, which I have already determined.

It appears from Mr Chaisty’s opening and closing submissions that this issue relates to Claim 15, being the claim for recovery of compensation which DRL says it has paid its customers for damage to products only notified after delivery because, says DRL, Wincanton’s delivery drivers failed to comply with the unpack and inspect obligation. In his opening submission he submitted that failure to unpack and inspect was a breach of contract and, had that procedure been follows, it would have revealed damage and thus led to a Wincanton fault failed delivery with the consequences set out in §13/07. He submits that the presence of a clean signed POD is not binding.

In his closing submissions Mr De Verneuil Smith submits firstly that a failure to unpack and inspect is not necessarily a breach, referring back to issue 2(a). Whilst I agree, as I have held under issue 2(a) a failure to offer unpack and inspect or a failure to take reasonable steps to have the customer (or his/her representative) inspect the product to confirm that the right make and model had been delivered and that it was free from visible damage or defect would amount to a breach of contract.

Secondly he submits that any claim is barred by a signed POD. Whilst I agree, as I have held under issue 2(d), that a claim under §13/07 for a Wincanton fault failed delivery cannot be made in the faces of a clean signed POD, that does not in my judgment prevent DRL from making a claim for damages which may include a claim that but for Wincanton’s breach the damage would have been observed on delivery and that this would have led to consequences as provided for by the terms of the Agreement.

Thirdly he submits that these claims cannot fall within §12/07 (the ‘doorstep allowance’). I agree that these claims cannot be made as claims for breach of §12. However, for the same reasons as given above, for the purposes of the quantification of any damages claim which DRL may have I consider that if it were proved that the damage to the product was so limited that §12/07 as opposed to §13 would have been engaged, then damages may in my judgment in principle be awarded on the basis that had Wincanton complied with its obligations it would then have agreed a doorstep allowance which DRL would have paid and been able to recharge to Wincanton.

Next Mr De Verneuil Smith submits that these claims are excluded by §14/05, because they are losses suffered by DRL at the action of a third party. I have already considered and rejected this argument under issue 5(f) and 24.

It also appears that Wincanton would argue that these claims are caught by §13(1) and 13(2) RHA. I am satisfied that §13(1) does not apply, because this is a claim which would have been expected to have been resolved as part of the invoicing and subsequent agreement and sign-off provisions of the 2007 Agreement. I am satisfied however that §13(2) does apply.

Finally, he submits that even at its highest DRL has not established on the balance of probabilities that no unpack and inspect offer was made in each case. However that was never the purpose of the trial once the sample claims were agreed to be left over to a further date, therefore that argument is for another day.

One of the logistics services to be provided by Lane under the 2005 Agreement was, by §2(i)/05, e to receive pre-assigned consignments of goods at its Rugby warehouse prior to separating and consolidating the products for onward trunking and delivery. Under the 2007 Agreement it was said: ‘The Location shall change to [Wincanton’s Wolverton warehouse] (or such other premises as Wincanton shall operate from)’.

In is accepted that in June 2007 Wincanton notified DRL that it was planning to move its hub warehouse from Wolverton to a new warehouse at Rugby – a project described somewhat mysteriously as ‘Project Bubble’. The evidence is that the immediate impetus for this was that the lease on the Wolverton warehouse was to expire, and also because it would be possible to provide better facilities at the new warehouse. It is clear that DRL was immediately alert to the possibility of disruption due to the move, and wanted to be involved in the process; thus the action list from the review meeting of 28/6/07 records that ‘DRL need[s] to be involved in Project Bubble’. The minutes of the 21/8/07 meeting recorded that the ‘consultation phase [was] underway. No concerns currently identified’. The notes of the 4/9/07 record DRL stating that ‘the timing of the move was not good due to peak but DRL would work with Wincanton to mitigate risks’. DRL’s evidence, which I accept, is that they were unhappy that the planned move would coincide with their busy pre-Christmas period, but that it was clear that Wincanton had made up its collective mind that this was when they were going to move regardless of DRL’s concerns, so that their only option was to do their best to work with Wincanton to minimise the risk of disruption. It appears that the move took place during October 2007. On 30/11/07 Mr Bull sent an internal email recording that the hub relocation had taken place and had caused difficulties, with delivery service levels falling to 80%. It does not appear, however, that there was any reference to this at the high level meeting of 5/11/07, although I accept that Paul Bull remained concerned that the move was still causing difficulties through November 2007 (see his e-mail of 22/11/07).

The claim as originally pleaded appeared to contend that Wincanton was contractually obliged to maintain its Wolverton warehouse. I have no doubt that this is inconsistent with the proviso in §2(i)/07, and that there is no basis for DRL to contend that the move was itself a breach of contract. When this objection was taken in the Defence, in its Reply DRL sought to argue around that by contending for an implied term that there should be no move without reasonable notice and that DRL would be consulted (including about the timing of the move) and its views taken into account. In response, Wincanton submits that the test for implication of such a term is not satisfied. I agree with Wincanton. The location of Wincanton’s warehouse hub is not something of any direct concern to DRL, whose commercial interests are protected by the detailed contractual obligations imposed on Wincanton in terms of its delivery obligations. In the same way the timing and implementation of the move are of no direct concern to DRL for the same reasons. Whilst I accept that DRL would have wanted to be informed and consulted so as to be allowed to make representations and be involved in the process, and indeed that Wincanton would also have wanted to inform, consult and involve, desirability is not sufficient to justify implication of a contractual term, necessity is required and there is no need for such a term to be implied.

I also agree with Wincanton that even if there was an implied term, it cannot be said that it was broken. There clearly was advance notification and consultation, and if – which I doubt – it could be said that there was a further implied obligation to ‘take DRL’s views into account’, there is no evidential basis for a suggestion that Wincanton did not do so. It is clear that Wincanton, for its own commercial reasons, decided to move its central hub, and it cannot be said in my judgment that in so doing it acted in breach of contract.

Finally, I have already considered and dealt with the impact of the clauses on which Wincanton rely in relation to notification, claim timing and consequential loss exclusion on this claim under issue 5 above.

I have already decided this issue under issue 12 above.

It is common ground that the court cannot at this stage rule on the quantification of the unpaid invoices counterclaim. What is envisaged is that the court should rule on DRL’s argument that Wincanton’s alleged failure to comply with the requirements of the 2007 Agreement in relation to the content of its invoices means that it is unable to assert that DRL was in breach of contract in failing to pay them. This issue is closely connected with issue 9, where I have already made findings as to the proper construction of §7/07 and as to whether compliance with §7/07 was a condition precedent to non-payment.

It is also worth observing that:

In his closing submissions Mr De Verneuil Smith invited me to find that DRL was liable to pay Wincanton’s unpaid invoices in the sum claimed in the Re-Amended Counterclaim on the basis there was no dispute as to the amounts claimed and that no set-off was permissible. In his response Mr Chaisty submitted that it was no part of the function of this trial to make a finding that one party was liable to the other for a specific sum.

The position seems to me to be that if, as a result of my findings in this case, Wincanton can demonstrate: (i) that in relation to the amount claimed under its invoices for delivery / service / storage charges there is an irreducible amount as to which there is, or can result of this judgment, be no dispute; (ii) that the maximum value of DRL’s contra-charges claimed under §12, 13 and 15 which have been advanced and are properly maintainable as a result of this judgment is less than the irreducible amount in (ii); then it would be entitled to apply for judgment for the amount of the difference in advance of the resolution of all remaining disputed items. I will of course hear further argument if and when such an application is made as to the correctness of this, given that (as I accept) it is not part of the Agreed Issues for me to determine in the abstract whether Wincanton would be entitled to judgment on this hypothesis. In his further submissions Mr De Verneuil Smith submitted that on the basis of the finding which I have made Wincanton is entitled to judgment in relation to the unpaid invoices submitted under the 2008 Agreement, on the basis that there is now no possible defence to this claim and that ‘all lien proceeds have been allocated to sums due under the 2007 Agreement’. Mr Chaisty objects that Wincanton has not proved its case in relation to the claim under the 2008 Agreement and that issues arise in relation to quantum and the lien point. In my judgment the correct approach is that if Wincanton wish to make an application as a result of this judgment for a summary judgment or an interim payment then they must do so on notice with evidence if necessary in the usual way, so that it can be addressed and responded to by DRL. I consider that this may conveniently be done as part of the post judgment process, as to which see the end of this judgment.

I have already decided this issue under 5(f) above.

The only counter-argument raised by DRL to the application of §8(2) RHA, which permits the carrier to charge interest on overdue amounts at 8% above base, is to argue that RHA was not incorporated. I have already found against DRL on this point and, accordingly, I am satisfied that Wincanton is entitled to charge interest at the contractual rate.

This relates to the claim advanced in paragraph 80 of the Counterclaim which, when read with supporting Schedule 5, is a claim for storage charges for the product the subject of the lien asserted by Wincanton post-termination, i.e. from w/e 8/3/08. The claim is advanced on the basis of a charge per item per week of £0.80. It is pleaded as arising under §7 RHA or §6 UKWA, but in his opening and closing submissions Mr De Verneuil Smith placed particular reliance on §2(ii)/07, providing that ‘stockholding in excess of 2 days will be charged at a rate to be agreed’. It is clear from §2(ii)/05 that the reference to ‘stockholding’ is a reference to storage of items in excess of Wincanton’s agreed obligation to store 2 days delivery stock, inclusive of ad hoc returns and interim transit collections.

In order to rely on §2/07 it is necessary for Wincanton to establish that a rate for stockholding was agreed. Its case in opening was that Mr Bull agreed a rate of £0.70 on 8.10.07 and an uplift to £0.80 on 4/12/07. The e-mail from Mr Bull of 8/10/07 does indeed confirm that he regards the rate of £0.70 to be ‘appropriate’, the only remaining issues were (1) how the number of units to be charged for would be arrived at; (2) Wincanton’s proposal to increase the rate to £1.00. It is clear from the correspondence that this was all directed to ‘bulk storage’ of products by Wincanton at DRL’s request. The minutes of the meeting of 4/12/07, held between Mr Caunce and Mr Taylor, record that ‘a rate of £0.80 had previously been agreed for the bulk’. In his closing submissions Mr De Verneuil Smith referred me to the evidence of Mr Caunce and Mr Bull under cross-examination from which it appeared that they had very little recollection of the detail of events, and did not dispute the accuracy of those notes. Whilst it is true that Mr Caunce said that Mr Bull would not have agreed this rate without his prior agreement, and that he was sure that he had never agreed this, I do not accept his recollection on this point. Mr Caunce is not someone who in my view would have been likely to have accepted something unless he was satisfied that it had happened. In this case I am satisfied that at the time of the meeting he was satisfied that the rate of £0.80 had been agreed by Mr Bull and that he had no quarrel with it. In my judgment therefore Wincanton has established its case that these rates were agreed.

However, Mr Chaisty argues in his closing submissions that §2(ii)/07 has no application to the claim actually made, which is a claim for storage whilst exercising a lien. I agree with this submission; it is clear in my judgment that what §2(ii) envisages is a charge for stockholding beyond the contracted for 2 days at DRL’s request. It cannot apply in my judgment to a claim for storage charges in the exercise of a lien, where of course it was at all material times DRL’s position that there was no legitimate basis for a lien and that Wincanton was wrongfully withholding delivery to Expert Logistics of these products. It follows, I am satisfied, that to succeed Wincanton must establish an entitlement under RHA or UKWA.

I have already held that Wincanton was entitled to assert a lien post-termination. §14 RHA entitles Wincanton to sell the consignment and ‘apply the proceeds towards the monies due and the expenses of the retention, insurance and sale’. That would permit Wincanton to argue that these expenses should be deducted from any sale proceeds which it has used to discharge in part what it says is due from DRL, but here it appears that Wincanton is asserting a positive claim rather than asserting a deduction. Furthermore, the amount of the ‘expenses’ would need to be determined. §7 RHA makes provision for a carrier to sell undelivered or unclaimed stock and, again, to deduct ‘all outstanding charges in relation to the carriage and storage’ of the products. That does not however, it seems to me, entitle Wincanton to make a positive claim as it seeks to do in paragraph 80 of the Counterclaim. §6 UKWA, even if applicable, cannot assist Wincanton because it simply provides that ‘storage charges’ (which are obviously the contracted storage charge for warehousing) shall continue to accrue on goods the subject of a lien.

It also appears to me that, in any event, Wincanton cannot seek to charge DRL for any products which it ought, under the terms of the Agreement, have jobbed or otherwise disposed.

It follows, in my judgment, that the claim as advanced cannot succeed.

I express the hope that as a result of this first trial process the parties now have sufficient perception as to the strengths and weaknesses of their respective cases to be able to settle the outstanding issues by some form of ADR.