CIVIL APPEAL NO. CBV0009 OF 1997S
(Fiji Court of Appeal Civil Appeal No. ABU0016/96S)
The Rt. Hon. Lord Cooke of Thorndon
The Hon. Sir Anthony Mason
Hearing: 16 March, 1998
JudgmentMarch, 1998
Counsel: J.A. Strahan Q.C., H.K. Nagin, Gin, G.P. Lala for the Appellant
J. Howard, Ms M. Chan for the Respondent
JUDGMENT OF THE COURT
On 16 September 1992 the plaintiff (Saville Heaton), a wholesale garment company based in Yorkshire commenced in the High Court of
Fiji an action against the defendant (United Apparel), a Suva garment manufacturing company. Over a period from September 1989 to
January 1990 the plaintiff ordered from the defendant supplies of garments manufactured by the defendant. It was found at the trial
and is no longer challenged that before the orders were given the defendant had informed the plaintiff that such goods made in Fiji
could be imported into the United Kingdom duty free. In particular the defendant’s London agent, Jitendra Thakorlal, said in
the course of a fax to the plaintiff, dated 18 May 1989, in which prices and other terms were also set out, ‘For your information
all clothing manufactured in Fiji has quota and duty-free excess (sic) to all EEC countries. This is based under the "Lome III
Agreement".’
About a year after the plaintiff had accepted and paid for the goods, H.M. Customs in England claimed duty on them. It emerged that
they were not duty free. The plaintiff’s claim in the action, so far as its claim still survives, is for the amount of the duty
that the plaintiff was required to pay. The action was tried by Scott J., who received much documentary and oral evidence. In a judgment
delivered on 9 April 1996, in which he had occasion to make some quite severe criticisms of the defendant’s witnesses, the Judge
gave judgment for the plaintiff in the sum of the Fiji dollar equivalent as at 1 July 1991 of £27,711.74 together with interest and
costs. In a judgment delivered on 14 November 1997 the Court of Appeal (Barker, Thompson and Savage JJ.A.) dismissed an appeal by
the defendant, save for a variation as to costs. The defendant now appeals to this Court.
There can be no doubt that the statement that the goods were duty free was the major reason for the plaintiff’s placing the orders
with the defendant rather than with manufacturers in Taiwan and elsewhere who had provided the plaintiff in the past with goods of
a satisfactory standard but on which duty was payable in the United Kingdom.
The plaintiff’s case was based in tort on negligent misrepresentation and further or alternatively on breach of contract. It
is the tort claim on which the plaintiff has succeeded so far. As will appear, we are satisfied that the Courts below reached the
correct and just result, but unfortunately the case became unnecessarily complicated, partly in consequence of two misapprehensions.
The first misapprehension is to be found in the trial Judge’s reason for holding that the statement that the goods were duty
free was not a term of the contracts. The plaintiff’s case in contract was pleaded as follows in an amended statement of claim
dated 31 January 1996-
"17. Further or alternatively, it was an express or implied term of the said contract or contracts between the Plaintiff and
Defendant that all goods purchased would qualify for quota and duty free access into the United Kingdom.
18. In breach of contract, the goods did not qualify for quota and duty free access into the United Kingdom."
The reason given for rejecting that claim was that to attempt to incorporate an obligation resting on the defendant to ensure duty
free access would have been to attempt the legally impossible, since it is H.M. Customs which raises the duty or decides to waive
it, not either of the parties.
The obligation alleged, however, was not to ensure duty free access, which certainly was beyond the defendant’s power. The words
of the pleading, and the reality of the dealing between the parties, are entirely consistent with, and in our view point to, a contractual
undertaking amounting to a warranty by the defendant that the supplies would be duty free. Warranties of such matters as the nature
or quality of goods, the existence of appropriate export or import licences and compliance with other legal requirements are not
uncommon features of international commercial contracts. If the warranty is broken, the party who gave it is liable notwithstanding
that he could do nothing to change the position. In other words the warranty is absolute. Similarly, on a more general level, in
Effort Shipping Co. Ltd. v. Linden Management S A (The Giannis N.K. ), [1998] UKHL 1; [1998] 1 All E.R. 495, the House of Lords has held that in contracts of carriage of goods by sea there is an absolute warranty by the shipper that the
goods are not dangerous.
We are satisfied that the statement that the clothing was duty free was a particular absolute warranty. It was a fundamental basis
of the contracts. There was no overall written contract, nor any series of written contracts complete in themselves. It was an instance
of the familiar practice of orders being issued from time to time for sale and purchase on prevailing standard terms, the relevant
term in this case being set out in the fax of 18 May 1989. On this footing the plaintiff was entitled to succeed in contract. No
problem then arose as to the measure of damages.
The second misapprehension was apparently shared by the trial Judge and the Court of Appeal. It related to the argument for the defendant
on the measure of damages. In both Courts it was argued that the plaintiff had failed to prove any loss recoverable in tort for negligent
misrepresentation inducing a contract : all that had been proved had been the payment of duty, which was not enough to show that
the contract was unprofitable for the plaintiff. The argument was by no means prominent in the defendant’s case in either Court
and may not have been developed as clearly as it was in this Court by Mr Strahan Q.C., who put it in the forefront of his submissions.
As formulated by Mr Strahan, the argument is that in tort the measure of damages is the amount of money needed to restore the plaintiff
to his position before the negligent statement was made, that is to say before the making of each contract. There was no evidence
that the plaintiff was worse off after the contracts than before. Indeed, while accepting that this Court could not reach a definite
conclusion on the point, counsel suggested that such evidence as there was tended to indicate that, even with duty paid, the contract
was still profitable for the plaintiff. The proof that a contract is not as profitable as it would otherwise have been is not, so
the argument goes, enough for damages in tort for negligent misrepresentation, though it would be enough to establish damages for
breach of contract.
The argument was supported by citation of a passage in the speech of Lord Hoffmann in Banque Bruxelles S.A. v Eagle Star Insurance Co. Ltd [1996] UKHL 10; [1997] A.C. 191, 216 -
"The measure of damages in an action for breach of a duty to take care to provide accurate information must also be distinguished
from the measure of damages for breach of a warranty that the information is accurate. In the case of a duty of care, the measure
of damages is the loss attributable to the inaccuracy of the information which the plaintiff has suffered by reason of having entered
into the transaction on the assumption that the information was correct. One therefore compares the loss he has actually suffered
with what his position would have been if he had not entered into the transaction and asks what element of this loss is attributable
to the inaccuracy of the information. In the case of a warranty, one compares the plaintiff’s position as a result of entering
into the transaction with what it would have been if the information had been accurate. Both measures are concerned with the consequences
of the inaccuracy of the information but the tort measure is the extent to which the plaintiff is worse off because the information
was wrong whereas the warranty measure is the extent to which he would have been better off if the information had been right."
A concise proposition to the same effect by Mason J. in Shaddock & Associates Proprietary Ltd v Parramatta City Council [1981] HCA 59; (1981) 150 C.L.R. 225, 255, was also cited by Mr Strahan. An earlier and somewhat fuller similar statement and application of the principle, with citation
of authorities, will be found in Scott Group Ltd v McFarlane [1977] NZCA 8; [1978] 1 N.Z.L.R. 553, 585-89, per Cooke J.
This branch of the law, however, is not free from controversy. Negligence law is still developing, particularly in the field of pure
economic loss. As regards negligence there may be a tendency to assimilate tort and contractual duties of care and their incidents.
For all these reasons, it is neither necessary nor desirable for this Court to embark now on an excursion into the tort measure of
damages and its application to the present case, when the contractual measure entitles the plaintiff to recover. We leave the tort
measure question open.
When the difficulties associated with the tort measure had become clear, Mr Howard for the plaintiff (the respondent in this Court)
took an opportunity afforded to him at the end of his argument to submit that his client should now be entitled to fall back on contract.
Mr Strahan naturally opposed this; but we consider that the claim in contract can fairly be disposed of and upheld on the evidence taken at the trial, without prejudice
to the defendant except in one respect as to costs. Manifestly the defendant could not call any further evidence which could answer
the claim.
Accordingly, we dismiss the appeal, with costs in this Court, but on a different ground from that relied on by both Courts below.
The plaintiff should still have the costs of the trial as fixed by the Court of Appeal. The proceedings in the Court of Appeal were
largely wasted, and we think that shortcomings in the argument for the plaintiff were probably responsible for that to a significant
extent. The order for costs in that Court will therefore be reversed : the defendant (the appellant) will be awarded for costs in
the Court of Appeal $2,500 and disbursements.
Sir Timoci Tuivaga
Lord Cooke of Thorndon
Sir Anthony Mason
Solicitors:
Sherani & Company, G.P. Lala & Associates, Suva for the Appellant
Howard’s, Suva for the Respondent
CBV0009U.97S
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