Edge Tools & Equipment Ltd v Greatstar Europe Ltd, Court of Appeal - Queen's Bench Division, February 02, 2018, [2018] EWHC 170 (QB)

Issuing Organization:Queen's Bench Division
Actores:Edge Tools & Equipment Ltd v Greatstar Europe Ltd
Resolution Date:February 02, 2018
 
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Case No: HQ15X04693

Neutral Citation Number: [2018] EWHC 170 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 02/02/2018

Before:

MARTIN CHAMBERLAIN QC

(Sitting as a Deputy High Court Judge)

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Between:

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Ms Sarah McCann (instructed by Wright Hassall LLP) for the Claimant

Mr Michele de Gregorio (instructed by Trethowans LLP) for the Defendant

Hearing dates: 21-24 November 2017

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JudgmentMartin Chamberlain QC:

Introduction and summary

  1. Edge Tools & Equipment Ltd (``Edge'') is a family-owned company. Mr Ian Clarke owns 85% of its shares. The remainder are owned by Mrs Debra Clarke and their sons Henry and Jack. Edge designs, manufactures, develops and sells, amongst other things, professional and DIY grade diamond blades. There are many diamond blades on the market. To the untutored eye, they look similar, but they differ in the precise composition of the diamond grit used in their manufacture and also in the pattern and design of their cooling holes. These features in combination determine a blade's longevity and its suitability for cutting particular materials. Mr Clarke developed a business relationship with a Mr Hua, the owner of the Danyang Huachang factory in Jiangsu, China (``Danyang''). He travelled there often in the early 2000s to develop diamond blades with the right attributes for the UK market. Initially, Edge sold these blades only under its own ``Edge Diamond'' brand. In 2004, however, while continuing to sell blades under its own brand, it obtained a licence from the construction equipment company JCB to manufacture and sell diamond cutting and drilling products and bonded abrasives under JCB's internationally recognised brand. This licence expired at the end of 2012.

  2. In 2011, Edge began working with an Indian company, Master Alloys, with the aim of developing a range of diamond blades for the Indian market. Master Alloys placed a significant order with Edge in about April 2012, but a dispute then developed between Mr Clarke and Mr Pawan Parolia of Master Alloys. It led to a comprehensive breakdown in the relationship between Edge and Master Alloys. During the course of this dispute Mr Atkinson of JCB asked Mr Clarke to introduce a Mr Mark Lane to Master Alloys. Mr Lane was the Managing Director and majority shareholder of Greatstar Europe Ltd (``Greatstar'') and G2 Products Ltd (``G2''). Their business was the supply of hand tool and power tool accessories, in particular to major retail multiples, such as B&Q. G2 had acquired a licence to supply JCB-branded hand tools and bench top power accessories. By January 2013, G2 acquired the JCB licence previously held by Edge.

  3. As the dispute between Edge and Master Alloys developed, there were discussions between Edge and Greatstar/G2 about a possible joint venture. Mr Clarke had technical expertise in the design and development of diamond blades. Greatstar/G2 had an experienced sales team and a record of success selling to retail multiples. From October 2012, various drafts of an agreement between Edge and Greatstar/G2 were exchanged. On 21 March 2013, Mr Clarke signed and emailed to Mr Lane a four-page document entitled ``Exclusive supply and Trading Agreement'' (``the Agreement'') by which G2 agreed to source its diamond cutting and diamond drilling products, bonded abrasives, petrol saw and power tool accessories exclusively from Edge. The third and fourth pages of this document had the heading ``Heads of Terms'' and the sub-heading ``Outline Points''. The first of these provided that the Agreement was to be valid for five years from the date of commencement or for the duration of G2's legal licence with JCB. Point 5 provided that G2 and Greatstar were to be responsible for all sales, marketing and invoicing to customers in category A (largely retail multiples) and Edge was to be responsible for all sales, marketing and invoicing for customers in category B (industrial and construction customers). There were points dealing with profit-sharing and commission. The eighth point provided that a ``contract and trading agreement'' was to be drawn up by a date that, by the time Mr Clarke signed the Agreement, had already passed. On 20 May 2013, Mr Lane countersigned the document and emailed it to Mr Clarke.

  4. Edge and Greatstar/G2 traded for some months after the Agreement was signed. In late 2013 difficulties arose which led to a meeting on 12 December 2013. It was agreed at that meeting that Greatstar/G2 would deal directly with the Chinese factories which Edge had previously used, but would otherwise continue on the same profit-sharing and commission terms. There is a dispute about what else was agreed at that meeting.

  5. By late 2014, the relationship between Edge and Greatstar/G2 had deteriorated. This claim was issued on 10 November 2015. Edge alleges that Greatstar/G2 breached the Agreement by failing to pay commission due under it and/or by purporting to terminate it before the end of the five-year term by their solicitors' letter of 13 February 2015. It claims sums due under the Agreement and damages to be assessed following an inquiry and/or the taking of an account.

  6. Greatstar/G2 say that the Agreement was not contractually binding: the intention was that the terms would become binding when incorporated into the formal ``contract and trading agreement'', but not until then. They accept that the parties' subsequent conduct gave rise to a contract incorporating some of the Heads of Terms, but not the five-year term. Their primary case is that Edge was in repudiatory breach and that they accepted the repudiation in a letter of 13 February 2015. Alternatively, they say that the contract was terminable on reasonable notice and that Greatstar/G2 lawfully terminated it by giving notice in their solicitors' letter of 13 February 2015.

  7. Edge denies any repudiatory breach and, in the alternative, contends that Greatstar/G2 elected to waive their right to bring the contract to an end and/or affirmed it.

  8. Greatstar/G2 counterclaim in respect of sums they say are due from Edge and for damages pursuant to s. 2(1) of the Misrepresentation Act 1967 (``the 1967 Act''). They say that, but for false representations made by Edge, they would not have entered into the Agreement and that, as a result, they have suffered loss and damage.

    The issues

  9. It is agreed that the claim raises the following issues:

    Issue 1: The terms of the contract

    a. Was there a contract between the parties on the terms set out in the Heads of Terms, including clause 1 as to the duration of that contract?

    Issue 2: Implied term as to reasonable notice

    b. Was there an implied term that such contract as did exist could be terminated on reasonable notice and, if so, what period of notice was reasonable?

    c. If Greatstar were permitted to terminate the contract on reasonable notice when was such notice given and, accordingly, when did the contract come to an end?

    Issue 3: Alleged breaches by Edge

    d. Was Edge in repudiatory breach of contract entitling Greatstar to bring the contract to an end? If so, when was termination effected?

    Issue 4: Alleged breaches by Greatstar

    e. Was Greatstar in repudiatory breach of contract entitling Edge to bring the contract to an end? If so, when was termination effected?

    Issue 5: Basis of damages

    f. What rate of interest is payable on the admitted invoices?

    g. What are the ``relevant sales'' which attract commission under the Agreement?

    h. What is the basis upon which commission should be calculated under the Agreement?

    i. If Edge is entitled to damages on sales after termination should those damages be calculated on an ex ante or ``ex post'' basis?

    The following additional issues arise on the counterclaim:

    Issue 6: Misrepresentation

    In respect of each representation relied upon by Greatstar/G2:

    1. Was the representation made?

    2. Was is false?

    3. Was it relied upon by Greatstar/G2 in entering into the Agreement?

    4. Can Edge show that it had reasonable grounds for believing, and did believe, that it was true?

    Issue 7: Damages

    n. On what basis should damages be assessed?

    The evidence

  10. The oral evidence of fact was heard over four days. For the Claimant, I heard evidence from Mr Clarke, Mrs Debra Clarke (his wife and assistant), Mr Nick Barber (who initially worked for Greatstar and subsequently for Edge) and Mr Philip Mist (who worked with Mr Clarke developing and testing diamond blades until 2011). I also considered the witness statements of Ms Siobhan Earlam and Mr Jinjun Hua, hearsay notices having been served in respect of those statements under s. 2 of the Civil Evidence Act 1995.

  11. For the Defendants, I heard evidence from Mr Adrian O'Nion (Commercial Director of Greatstar), Mr Mark Lane, Mr Scott Harrison (Director of UK Sales for Greatstar) and Mr Norman Tenray (Chief Executive Officer of OBAS UK Ltd, which distributed JCB diamond blades on behalf of Edge). I also considered the witness statements of Messrs Bei Yuhong and Wufeng Jiang, in respect of which hearsay notices were also served.

  12. At the start of the trial, there were various applications to admit evidence. Ms Sarah McCann, for the Claimant, applied for permission to adduce written and oral evidence from Ms Linda Parkinson. I gave that permission subject to conditions designed to ensure that Greatstar/G2 would have a proper opportunity to respond to it. In the event, however, Ms Parkinson did not attend to give evidence. Because no explanation was given, I declined to admit a summary of her evidence. Mr Michele de Gregorio, for the Defendants, applied for permission to adduce in evidence certain emails. I admitted those which were in the nature of contemporaneous evidence. But I declined to admit an email from JCB which had been prepared for the purpose of these proceedings. I was told that it was JCB company policy not to give formal evidence...

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