Dany Lions Ltd v Bristol Cars

This action arises out of the decision of the Claimant, Dany Lions Limited, to purchase a Bristol 405 motorcar with the registration number NOR11. As I understand it, that motorcar was produced in about 1955 and is one of a very small number of such cars ever produced. The suggestion in the material before me is that perhaps only 43 were ever produced and it is unclear how many of those 43, in addition to the vehicle which has given rise to this action, still survive.

The vehicle in question was acquired by the Claimant from the administrators of a company which had, during its effective operational life, been called Bristol Cars Limited. I am not sure that it was the same company as the company which produced the motorcar with the registration number NOR11 in the first instance, but that, perhaps, does not matter terribly much. A phoenix company came into existence following the original Bristol Cars Limited -- by which I mean the one from the administrators of which the Claimant acquired the car -- ceasing to exist, and the new Bristol Cars Limited is the Defendant in this action.

The case for the Claimant is that it entered into a contract, to be found in email exchanges between the parties, under which Bristol Cars Limited agreed to undertake fairly radical works to the car with the registration NOR11 at a price not exceeding £153,000. Part of the works included adapting the vehicle so as to accommodate an automatic gear box. As matters turned out, the Defendant did not do any work to the vehicle, and consequently this action was commenced on behalf of the Claimant seeking damages by reason of the alleged breach of contract of the Defendant in relation to undertaking the work.

There are two applications before me. Each of these is an application for summary judgment. The elements in respect of which summary judgment are sought relate to aspects of the Claimant’s claim against the Defendant, but it is not one of those applications for summary judgment which is seeking, as it were, judgment in respect of the entirety of the claim.

The first application before me for summary judgment was issued on 9^th May 2013 and sought this relief: (1) an order declaring that on its proper construction it was a term of the works contract referred to in paragraph 19 of the Particulars of Claim that the price for the work should not exceed £153,000 inclusive of VAT, pursuant to Part 24 of the Civil Procedure Rules, because the Defendant has no real prospect of successfully defending this issue and there is no other compelling reason why this issue should be disposed of at a trial. Alternatively, second: ordering that paragraphs 13(1) and (5) of the defence be struck out pursuant to Part 23.4 of the Civil Procedure Rules: because these paragraphs disclose no reasonable grounds for defending the issue that the price for the works would not exceed £153,000 inclusive of value added tax.

The second application before me was issued, I think, on 20^th June of this year and by that application notice the relief sought is set out as follows: first, an order that the Claimant be granted summary judgment under Part 24 of the Civil Procedure Rules in relation to the following issues raised in the defence, because the Claimant believes that on the evidence, the Defendant has no real prospect of succeeding on these issues and there is no other compelling reason why these issues should be disposed of at trial, 1.1: the issue at paragraphs 15(3) and 31.(1) of the defence, that the works contract was void: common mistake. The mistake being the party’s erroneous belief of the possibility of performing the works, and 1.2: the issue at paragraph 31(2) of the defence, that the works contract was frustrated and the party’s rights and obligations thereunder were discharged, because of an extraneous change of circumstances, which was not the fault of either party. The change of circumstances being an appreciation on the part of the Defendant following the making of the works contract of the impossibility of converting the car to automatic transmission whilst retaining its full functionality. Alternatively, secondly: striking out paragraphs 15(3); 31(1) and (2) of the defence, pursuant to part 3.4 of the Civil Procedure Rules, because these paragraphs disclosed no reasonable grounds for defending the claim.

It is, not, I think, necessary for present purposes to refer specifically to any part of the Particulars of Claim. The thrust of the Claimant’s claim I have already sufficiently indicated. It is, however, appropriate to refer to the paragraphs in the defence which are identified in the application notices to which I have already referred. Paragraph 13 of the defence was a pleading as to what was alleged at paragraph 17 of the Particulars of Claim and sub paragraph (1) is in these terms:

“It is denied that the email dated 5^th July 2011 constituted a contractual offer. It constituted an acceptance of the offer contained in the email dated 30^th June 2011, referred to above, purportedly giving rise to a contract between the parties on the terms and conditions referred to therein.” (Quote unchecked)

Then at sub-paragraph (5):

“It is denied that the said terms provided that the price for the works would not exceed £153,000, including value added tax. It is not possible accurately to predict the cost of restoration works to vintage vehicles of the kind involved in relation to the car. The said sum was an estimate, which was subject to alteration depending on what came to light while the works were being carried out. The fact that it was an estimate is evidenced by the email dated 30^th June 2011 referred to above, which provides for the payment of an unspecified balance of invoice price on completion. The Claimant’s email dated 5^th July 2011, referred to above, was an acceptance of the Defendant’s terms and conditions and was incapable of adding to or varying them.” (Quote unchecked)

Paragraph 15 of the defence was a plea to the allegations in paragraph 19 of the Particulars of Claim and sub-paragraph 3 provided:

“The said purported agreement was entered into on the basis of a fundamental shared mistake between the parties, that it was possible to convert the car’s transmission to automatic whilst retaining the car’s full functionality. It would not in fact have been possible to do so. The car has a high-revving engine, which is not suitable to conversion to automatic transmission. The works were therefore impossible to perform and the agreement was void for common mistake. The matters set out in the rest of this defence are without prejudice to the said contention.” (Quote unchecked)

Then paragraph 31: a plea to paragraph 43 of the Particulars of Claim, which was denied, it was said, for the following reasons, of which sub-paragraph (1) was:

“The works contract was void for common mistake” -- paragraph 15(3) above is repeated -- “the parties therefore, had no rights and obligations under the works contract as at 4^th May 2012. Sub-paragraph 2: alternatively, the impossibility of converting the car to automatic transmission whilst retaining its full functionality was an extraneous change of circumstance which was not before either party. When the said impossibility arose, the works contract was frustrated and the party’s rights and obligations thereunder were discharged. The matters referred to in the rest of this defence are without prejudice to the said contention.”(Quote unchecked)

I have already indicated that it was common ground before me that the contract between the parties, if indeed a contract had been concluded, was to be found in an exchange of emails. The relevant emails, I think, begin with that which is identified in the defence: the email of 30^th June 2011 sent by the Defendant to the Claimant. It was actually addressed to Mr Andrew Olins of the Claimant. The heading was “Bristol 405 drophead coupe automatic” and what the email said was this:

“At last I have pleasure in confirming our engineering proposals and terms and conditions concerning the conversion of your Bristol 405 Saloon into a Bristol 405 drophead coupe with an automatic gearbox.

“As you know the finished car will be the only one of its kind in the world and will have the benefit of several important upgrades during the course of its remanufacture.

“During this process the following will take place: the body and chassis to be stripped to bare metal; all damaged areas to be removed and replaced with new metal; the upper body to be removed and structural A, B and C pillars constructed in wood to be removed and custom made steel replacements fitted; the car to be converted to a two-door convertible body as in a 405 drophead coupe; interior to be stripped and fully restored and replaced, including soundproofing, carpets, chairs, all leather work and dashboard; manufacture all new hood irons and latching mechanisms; make a hood cover in longlife fabric; we build the engine and accessories and upgrade the specification with enhanced power and torque to fit the automatic gearbox; fit a modern alternator to replace the dynamo; fit an electric fan; adapt the automatic gearbox to suit the Bristol engine and match the transmission points as required; fully rebuild the suspension steering mechanism and rear axle; fit uprated dampers; fit front disc brakes; optimise the suspension geometry; renovate the wheels and fit with Michelin radial tyres; finish may be in a colour of your choice, this also applies to the leather interior and carpet.

“And now, for the painful bit: the additional cost of making your car into a 405 drophead coupe will add an additional £30,000 to the cost over and above the quoted figure for a two-door, long wheelbase coupe, which was £138,000. The total figure would therefore be £168,000.

“It is worth mentioning that I shared a table at last year’s centenary celebrations with a couple who own a standard 405 drophead coupe, for which they had received an offer of over £135,000: this offer was rejected. And now for the sweetener: the quoted price included a donor vehicle, which you are, of course, providing.

“We will have to make a relatively modest additional charge for the considerable work involved in making your car into an automatic. We are therefore prepared to make an allowance of £15,000 against the final price, which would be a total of £153,000. The finished car would be unique, highly desirable and in true Bristol cars tradition, totally bespoke.

“Terms and conditions: to place an order in order for restoration to begin: £50,000. On completion of structural body and mechanical restoration: £40,000. On completion: balance of invoice price. During the restoration and remanufacture of your car we will, of course, be in regular contact with reports on the car’s progress and will maintain a photographic record of the work in progress. In effect your baby will be our flagship.

“I know Toby is looking forward to personally overseeing this project, particularly the engineering side of things where his superb technical skills will be given full rein.

“We are also fully aware of your wish to have your new car on your birthday next year. Be assured we will do our level best to achieve this. Please do not hesitate to contact me if you have any further questions.” (Quote unchecked)

Now pausing at this point: as it seems to me, the email of 30^th June 2011 amounted to an offer on the part of the Defendant to undertake the work described for the price of £153,000. Mr Head, who appeared on behalf of the Defendant, submitted, I think, that it was at any rate in the nature of an offer, but he submitted that there was no fixed price; consequently perhaps no agreed price at all. He submitted that that reference in the part of the document under the rubric “Terms and Conditions” to the balance payable on completion being the balance of invoice price, meant that it was a number which had not been ascertained.

With great respect to Mr Head, one can only reach that conclusion by ignoring the sentence which appears roughly one inch above the relevant line specifying the amount to be paid on completion and the material page, because that says:

“We are prepared to make a total allowance of £15,000 against the final price, which would be a total of £153,000.” As it seems to me the only possible interpretation of this document is that it is an offer to carry out the work for the sum of £153,000. (Quote unchecked)

The response of the Claimant to that offer was an email that -- which was sent on 1^st July 2011 by Mr Olins to the writer of the email which I have just quoted, Mr Antony Steevenson, at 10.29 in the morning. What Mr Olins said was this:

“Thank you for your email and I note the proposed cost for restoring the car and making it a two-door convertible with automatic transmission. With the £20,000 that I have already paid for the car the total cost will be £173,000, which is £50,000 more than I had anticipated. Perhaps you would let me know whether the price intimated in your email is your best price. Further, I need to know whether there is VAT to pay on top. I believe that VAT on repairs is recoverable, but I am not sure whether VAT is also recoverable on restoration. Do you happen to know?

“Finally, could you ask Toby whether it is possible for a semi-automatic transmission to be fitted and how this would impact on the price?

“I now need to go and grovel to my very best friend in the entire world, to whom I am also sending this email. I look forward to hearing from you.” (Quote unchecked)

Now, conceptually, against the background of the well established principles of the English law of contract, that email could have amounted to one or other of, I think, four possible things: it might have amounted to an acceptance of the offer in the email of 30^th June, but, in my judgment, it plainly was not that; it might have amounted to a rejection of the offer in the email of 30^th June, but again, in my judgment, it plainly was not that; it might have amounted to a counter offer and a counter offer would have involved a rejection of the original offer, but again, in my judgment, it was not that. What it was was the fourth in the range of possibilities, which was a request for information. The significance of a request for information is that it has no impact on the offer; in particular it does not cause the offer to cease to exist or to cease potentially to be accepted by the offeree.

The next document in the sequence to which it is material to refer, I think, is an email also on 1^st July from the Defendant to the Claimant; again actually from Mr Steevenson to Mr Olins, and what the Defendant said was this:

“Thank you for your rapid response to my email of yesterday.

“The answer to your questions is good news. Firstly, we are able to invoice you for repairs rather than restoration. The VAT can then be recovered by you, which effectively reduces the overall cost by £25,500. Toby does not think a semi-automatic gearbox would save any money. However, has suggested fitting a clutchless system of changing gear. This is often used in manual gearbox cars adapted for use by some disabled drivers. You would still select the gear you wish to use without the need to use the clutch, which is controlled electronically. The major advantage of this system is that the engine would not need the extensive modifications required if you opt for a fully automatic gearbox.

“The cost savings would be £5,000. If you opt for this slightly less expensive route the final figure reduces to £148,000, however, the reduction offered by claiming back the VAT means you will only really be paying £123,000. I believe I can hear you saying: ‘That is much more like it’ when you receive this. Please also bear in mind the likely value of the finished car alluded to in my earlier email.” (Quote unchecked)

Now that document, on the face of it, provides information in response to the request for information in the earlier email of 1^st July 2011. However, it seems that it also includes a new offer: the new offer being to supply a clutchless system of changing gear rather than a fully automatic gearbox at a saving of £5,000.

Mr Olins replied on behalf of the Claimant, still on 1^st July 2011, this time at 7.52 in the evening. He said to Mr Steevenson:

“Thanks for that. What I was looking for was a semi-automatic similar to the one that I have on my Smart 44. I believe that there is an Alfa Romeo that has a similar system. My suggestion was not intended to be a cost-saving measure. I am naturally pleased about the VAT. Obviously the invoices will need to state that the works are repairs, but I think we can go ahead on this basis.” (Quote unchecked)

That I think was not clearly an acceptance of any particular offer, but it was a response to the earlier email from the Defendant of 1^st July 2011.

Acknowledging your second email of Friday; that is to say the later email of the Claimant of 1^st July 2011 and Mr Steevenson, again on the behalf of the Defendant said:

“In reply your question of which semi-automatic gear changing system will work best with the engine, I would suggest Toby, with his engineering background, is well aware of your overall aim and we will, of course, stay in close contact and consultation during the course of choosing the best system for your car.

“In order to get things underway with the aim of having your car ready for your birthday next year, the bank and parent company details for the first payment are as follows.” (Quote unchecked)

And they were then set out in the email and I do not think it is necessary to refer to anything else in that email.

The response from the Claimant, again by Mr Olins, was an email of 5^th July 2011 sent at 10.01 in the morning. Mr Olins said:

“Thank you for your email yesterday. On behalf of my company, Dany Lions Limited, I can now give you a formal instruction to proceed with the proposed works to the vehicle. This is on the understanding that costs of the works will not exceed £153,000 inclusive of VAT and it will be appropriate for you to render VAT invoices detailing the works as repairs, so that the VAT can be recovered.

“I have made arrangements for £50,000 to be transferred to Camcourt Auto Croft Limited’s bank account and the money should reach the account today. I have given the transfer a reference of NOR11 so your colleagues in the finance department will be able to identify the transfer.” (Quote unchecked)

The final email to which it is necessary to refer was one from the Defendant, also sent on 5^th July 2011, where Mr Steevenson, on behalf of the Defendant said:

“Thank you for your kind email confirming your order. I have forwarded it to Fraser Nash so they are aware of the likelihood of your first payment for repairs. When I return from Holland I will prepare a proper invoice which will show the VAT.” (Quote unchecked)

Again, I think need not read the rest of that email.

The primary case for the Claimant was that the email which the Claimant sent on 5^th July 2011 was an offer to retain the Defendant to undertake the works described in the email of 30^th June, at a price not to exceed £153,000 and that offer, it was contended, was accepted by the email which the Defendant sent in response on 5^th July 2011.

The alternative case for the Claimant was that the email which the Claimant sent on 5^th July 2011 was actually an acceptance of the offer contained in the Defendant’s email of 30^th June 2011. For practical purposes it did not matter which of these alternatives was established, because the important point was that under either version the price agreed to be paid was not more than £153,000.

As it seems to me, a more conventional analysis of the emails through which I have just been, is that the email, which the Claimant sent on 5^th July 2011, was an acceptance of the offer -- the still extant offer -- set out in the Defendant’s email of 30^th June. However, I recognise that if the Claimant’s preferred alternative is correct, one achieves the same practical result by a slightly different route. What I think is entirely plain is that the Defendant’s case that there was no agreed price or agreed maximum, is wholly unsustainable and consequently, in relation to the first of the applications before me I find that it was a term of the contract between the Claimant and the Defendant that the price for the works, I would say, set out in the email of 30^th June 2011, was agreed at £153,000.

I turn to the question that is raised by the second application before me. It is, I think, important to recognise that by the contract which I have found established the Defendant agreed to adapt the automatic gearbox to suit this Bristol engine and match the transmission points as required. It did not agree to see if it could do that; it did not agree to consider whether it could do that: it agreed to do it. Consequently the starting point in considering the allegations of mistake and frustration is that the Defendant assumed a positive liability to achieve a result.

The Defendant’s case is not that that result could not have been achieved. The Defendant’s case is that achieving that result would have had other consequences: in particular it would have affected the full functionality of the car. That may well be so, but it did not, in my judgment, relieve the Defendant of the obligation of performing its contractual liability. If it had performed its contractual liability then there may have been other questions as to responsibility for the consequences of the automatic gearbox having been supplied and fitted.

It is, I think, material to remind myself of the elements of common mistake, which were set out in Great Peace Shipping v Tsvarliris Salvaging Ltd [2003] QB Reports, page 679; at page 703 in paragraphs 75 and 76: at paragraph 75, what was said was:

“75.

Just as the doctrine of frustration only applies if the contract contains no provision that covers the situation, the same should be true of common mistake. If, on true construction of the contract, a party warrants that the subject matter of the contract exists, or that it will be possible to perform the contract, there will be no scope to hold the contract void on the ground of common mistake.”

I pause before reading on in paragraph 76. In my judgment, that is exactly the position here. On a proper construction of the email of 30^th June 2011 the Defendant has warranted that it would be possible to perform the relevant contractual obligation, which is to fix an automatic gearbox. Paragraph 76 of the material passage goes on:

“76.

If one applies the passage from the judgment of Lord Alverstone CJ in Blakely v. Muller & Co. 19 Times Law Reports 186 (sic), which we quoted above to a case of common mistake, it suggests that the following elements must be present if common mistake is to avoid a contract: (i) there must be a common assumption as to the existence of a state of affairs; (ii) there must be no warranty by either party that that state of affairs exists; (iii) the non-existence of the state of affairs must not be attributable to the fault of either party; (iv) the non-existence of the state of affairs must render performance of the contract impossible; (v) the state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible.”

Now, looking at those elements in the context of the issues in the present action: was there a common assumption as to the existence of a state of affairs such as to give rise potentially to a mistake? I think the answer obviously is no. The position simply was that the Defendant assumed a contractual obligation to supply and fit an automatic gearbox.

Turning to the second element, there must be no warranty by either party that that state of affairs exists. There is some difficulty, as it seems to me, in describing as a state of affairs a situation which, at best, was no more than the Defendant believing that it could supply and fit an automatic gearbox to the car with the registration number NOR11. However, if and insofar as it is possible to describe that as a state of affairs, then, as it seems to me, the Defendant warranted to achieve that result by entering into a contract in the terms in which it did.

It is not, I think, necessary to consider the third element identified in paragraph 76, but the fourth element: “The non-existence of the state of affairs must render performance of the contract impossible,” is obviously important, because that was not the situation in the present case. Even assuming that the ability, or not, of the Defendant to supply and fit an automatic gearbox in the car amounted to a state of affairs, and even assuming that there was a common assumption as to the existence of such a state of affairs, the inability of the Defendant to perform its contractual obligation without adverse consequences for the performance of the car did not render performance of the contract impossible. The greater part of the contract was wholly unaffected by whether the automatic gearbox could be supplied and fitted or not. The supply and fitting of the automatic gearbox was but one element in a much more extensive range of works which the Defendant agreed to undertake.

And then one comes to the fifth element identified in paragraph 76 in the Great Peace:

“The state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible.”

The supply and fitting of the automatic gearbox was obviously an important part of the work, but it was not fundamental to the whole contract such as to render impossible the performance of the contractual obligations of the Defendant, other than in relation to the supply and fitting of the automatic gearbox, even assuming in favour of the Defendant that that was actually the position. Consequently, as it seems to me, the matters needed to be demonstrated in order to justify the conclusion that the contract was void on the ground of common mistake have not been demonstrated.

The question of frustration I think I can take quite shortly, because Mr Head accepted on behalf of the Defendant that the relevance of the frustration alternative line of defence was simply this: that mistake was based upon the assumption that there was an existing state of affairs at the date of the conclusion of the contract, whereas frustration was based upon essentially the same matters, but on the basis that the existence of that state of affairs only came into force at some point after the actual making of the contract.

The Defendant submitted, by Mr Head, that it was inappropriate in the circumstances of the present case for me to consider the applications for summary judgment at all, because the determination of the answers to the questions which I have already identified and stated depended upon evidence which could and should be led at trial.

It is obvious from the judgment which I have so far delivered, that I have taken a different view. The view which I take has been informed by the guidance very helpfully set out in Federal Republic of Nigeria v. St Helena Invoice Corporation [2007] EWHC 437 Ch, a decision of Lewison J. The guidance which he gave and which I have followed is this:

“(i)

The court must consider whether the defendant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 2 All ER 91;

(ii)

A "realistic" defence is one that carries some degree of conviction. This means a defence that is more than merely arguable: ED & F Man Liquid Products v Patel[2003] EWCA Civ 472 at [8]

(iii)

In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman

(iv)

This does not mean that the court must take at face value and without analysis everything that a defendant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]

(v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;

(vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;

(vii)

Although there is no longer an absolute bar on obtaining summary judgment when fraud is alleged, the fact that a claim is based on fraud is a relevant factor. The risk of a finding of dishonesty may itself provide a compelling reason for allowing a case to proceed to trial, even where the case looks strong on the papers: Wrexham Association Football Club Ltd v Crucialmove Ltd[2006] EWCA Civ 237 at [57].

It is, I think obvious, from the reasons which I have given for the conclusions which I have reached that, in my judgment, the issues raised by the application notices before the Court were essentially entirely questions of law, which depended upon facts about which there was no dispute and consequently it was appropriate for me to consider the applications and to reach the conclusions which I have.