[2002] 1 All ER (Comm) 737
Court of Appeal
Marks and Spencer who had done business with Baird 30 years suddenly gave Baird notice that it would cease doing business with them from the end of that current production season. Baird commenced these against M&S, contending that M&S was precluded by both contract and estoppel from determining such arrangements without reasonable notice. The issues before the court were whether Baird has a real prospect of succeeding on its claim based on (1) contract, and (2) estoppel.
Sir Andrew Morritt V-C
Introduction
[1] Baird Textile Holdings Ltd (Baird) had been one of the principal suppliers of garments to Marks and Spencer plc (M&S) for 30 years when, on 19 October 1999, M&S, without warning, determined all supply arrangements between them with effect from the end of the then current production season. On 10 January 2000 Baird commenced these proceedings against M&S, contending that M&S was precluded by both contract and estoppel from determining such arrangements without reasonable notice. M&S applied under CPR 24.2 for summary judgment against Baird on the ground that it had no reasonable prospect of succeeding on either claim. On 29 June 2000 Morison J dismissed the claim in so far as it was based on contract but directed that it proceed to trial in so far as it was based on estoppel. Each party appeals, with the permission of Morison J, from that part of his order which is against it. Accordingly the issues which arise are whether Baird has a real prospect of succeeding on its claim based on (1) contract, and (2) estoppel, or, if not, whether there is some other compelling reason why that claim or issue should be disposed of at a trial.
Contract
[13] In para 11 of the particulars of claim Baird alleged that the summary determination of the relationship between it and M&S was in breach of the contract pleaded in para 9. The judge did not agree. He summarised the arguments of counsel and described the principles to be applied as:
'(1) A court will only imply a contract by reason of the conduct of the parties if it is necessary to do so. It will be fatal to the implication of a contract that the parties would or might have acted as they did without any such contract. In other words, it must be possible to infer a common intention to be bound by a contract which has legal effect. If there were no such intent the claim would fail.
'(2) All contracts, to be enforceable must be sufficiently certain to enable the courts to give effect to the parties' intentions rather than to give effect to a contract which the court has had to write for them. On the other hand it can be said that the Courts do not incline to adopt a "nit-picking" attitude to such matters and will endeavour, where possible, to construe the obligations in a way which gives effect to the parties' bargain. There is a line to be drawn between a generous attitude to making contracts work and striking them down on grounds of uncertainty.'
[14] In his application of those principles to this case the judge said:
'13. On this head of the claim I am satisfied that Baird's case in favour of an implied contract cannot succeed. In the first place, it would be unlikely that one could properly imply a contract when it is the pleaded case of Baird that M&S deliberately refrained from concluding any express contract because it could achieve greater flexibility without one. To imply a contract against such a party would seem to me to offend against the principle that the parties' conduct must show an implied common intention to create legal relations by contract.
In any event, the alleged terms are far too imprecise to be capable of being enforced. [After referring by way of analogy to Australian Blue Metal Ltd v Hughes [1962] 3 All ER 335, [1963] AC 74, Morison J continued] Mr Field [counsel for Baird] could not say that so long as the implied contract continued with Baird, M&S were prevented from appointing principal suppliers. And I cannot understand how the various factors listed by him would work in practice. If M&S's future requirements were for fewer and more expensive garments of a type which Baird was unable or unwilling to produce at an acceptable cost, what then? There is, in my judgment, no firm base upon which one could ascertain either a particular quantity or a particular share which should be attributed to Baird in the future. Were the alleged contract to have legal effect then the court would, to all intents and purposes, be making a bargain for the parties rather than seeking to enforce a bargain which they themselves had made.'
[20] For M&S it was submitted that it would be odd if the principle for the implication of a contract at all should be different or less onerous than the principle for the implication of a term in a contract. Reliance was placed on Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal, The Hannah Blumenthal [1983] 1 All ER 34, [1983] 1 AC 854 and Mitsui & Co Ltd v Novorossiysk Shipping Co, The Gudermes [1993] 1 Lloyd's Rep 311. The former concerned the question whether a contract to abandon an arbitration might be implied from conduct, or more precisely lack of conduct. Lord Brandon of Oakbrook considered ([1983] 1 All ER 34 at 47, [1983] 1 AC 854 at 914) that an actual abandonment, as opposed to an estoppel precluding an assertion of continuance, required proof of conduct of each party, as evinced to the other party and acted on by him, as 'leads necessarily to the inference of an implied agreement' between them to abandon the contract. Lord Roskill referred ([1983] 1 All ER 34 at 54, [1983] 1 AC 854 at 923) to 'the only possible inference [being] that the agreement to arbitrate has been rescinded by mutual consent'. Though Lord Diplock made no similar observation, both Lord Keith of Kinkel and Lord Brightman agreed with Lord Brandon and Lord Roskill. In The Gudermes the cargo owner sought to establish a further contract with the shipowners arising out of arrangements made to cope with the situation arising from an unauthorised diversion to Malta rather than Ravenna. The judge, Hirst J, held that the appropriate test was that described by May LJ in The Elli 2 [1985] 1 Lloyd's Rep 107 at 115. The Court of Appeal upheld that direction. Staughton LJ giving the judgment of the court considered ([1993] 1 Lloyd's Rep 311 at 320) that-
'it is not enough to show that the parties have done something more than, or something different from, what they were already bound to do under obligations owed to others. What they do must be consistent only with there being a new contract implied, and inconsistent with there being no such contract.'
[21] In my view the judge did not adopt the wrong test for the implication of a contract from conduct. It is apparent that the statements in The Aramis are not confined to the limited circumstances with which that case was concerned and are reflected in one form or another in the Blackpool and Fylde case, The Hannah Blumenthal and The Gudermes.
[24] The crucial point, in my view, arises from the third issue, namely whether the obligations arising from the alleged implied contract would be sufficiently certain to be contractually enforceable...
[26] Any debate about certainty of contractual terms and implications of reasonableness to avoid uncertainty must start with the decision of the House of Lords in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, [1932] All ER Rep 494. In that case the question was whether an option to buy '100,000 Standards for delivery in 1931' was sufficiently certain against the background of a contract concluded and performed the previous year for the purchase of '22,000 standards softwood goods of fair specification over the season 1930'. The House of Lords concluded that the contract was sufficiently certain...
Lord Wright referred ((1932) 147 LT 503 at 517, [1932] All ER Rep 494 at 508) to the legal implication of reasonableness running through modern English commercial law and supplying the requisite degree of certainty in appropriate cases. The distinction between those cases in which the implication of reasonableness provides for certainty and those in which it does not appears most clearly from the speech of Lord Thankerton. He distinguished ((1932) 147 LT 503 at 513, [1932] All ER Rep 494 at 501) between cases where the contract provides for an objective standard which the court applies by ascertaining what is reasonable and those where, there being no such standard, the test of reasonableness is being used to make an agreement for the parties which they have not made for themselves. He was impressed by the consideration that a commercial matter was involved and the parties themselves thought that they had made a contract.
[30] I agree with the conclusion of the judge. The alleged obligation on M&S to acquire garments from Baird is insufficiently certain to found any contractual obligation because there are no objective criteria by which the court could assess what would be reasonable either as to quantity or price. This is not a case in which, the parties having evidently sought to make a contract, the court seeks to uphold its validity by construing the terms to produce certainty. Rather it is a case in which the lack of certainty confirms the absence of any clear evidence of an intention to create legal relations. The allegation in para 9.28 also confirms the lack of intention to create legal relations, for if there had been the requisite certainty because of the objective criteria, then to that extent there would have been a detailed contract and a loss of flexibility. It cannot be said, let alone with confidence, that the conduct of the parties is more consistent with the existence of the contract sought to be implied than with its absence. The implication of the alleged contract is not necessary to give business reality to the commercial relationship between M&S and Baird. In agreement with the judge, I do not think that Baird has a real prospect of success on its claim in contract.
Estoppel
[34] Counsel for M&S submits that the judge was wrong. He contends, amongst many and varied arguments, that a conclusion to that effect does not involve the reconciliation of numerous cases but the recognition that this court is, as the judge was, bound by three decisions of the Court of Appeal to conclude that the estoppel claim has no real prospect of success either. The three decisions and the propositions they respectively established are: (1) a common law or promissory estoppel cannot create a cause of action (Combe v Combe [1951] 1 All ER 767, [1951] 2 KB 215); (2) an estoppel by convention cannot create a cause of action either (Amalgamated Investment and Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1981] 3 All ER 577, [1982] QB 84); and (3) accepting that a proprietary or equitable estoppel may create a cause of action it is limited to cases involving property rights, whether or not confined to land (Western Fish Products Ltd v Penwith DC [1981] 2 All ER 204 at 217).
[35] Counsel for Baird did not dispute that those cases established the propositions for which M&S contended. Rather, he submitted, it is wrong to categorise particular types of estoppel and then impose limitations in each category not applicable to one or more of the other categories. He suggested that English law permits some cross-fertilisation between one category and another. He contended that English law should follow where the High Court of Australia has led in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and Commonwealth of Australia v Verwayen (1990) 170 CLR 394 and permit estoppel to create causes of action in non-proprietary cases. In reply counsel for M&S conceded that if the Australian cases, to the effect that promissory estoppel extends to the enforcement of voluntary promises, represent the law of England then the judge was right and the cross-appeal must fail.
[36] Warnings against categorisation have been given by Robert Goff J and Lord Denning MR in the Amalgamated Investment case [1981] 1 All ER 923 at 935, 936 and 584, [1982] QB 84 at 103, 104 and 122, by Scarman LJ in Crabb v Arun DC [1975] 3 All ER 865 at 875, [1976] Ch 179 at 192, 193 and by Lord Bingham of Cornhill in Johnson v Gore Wood & Co [2001] 1 All ER 481, [2001] 2 WLR 72. But dicta to the contrary effect are to be found in First National Bank plc v Thompson [1996] 1 All ER 140 at 144, [1996] Ch 231 at 236 per Millett LJ, McIlkenny v Chief Constable of West Midlands Police Force [1980] 2 All ER 227 at 235, [1980] 1 QB 283 at 317 per Lord Denning MR and in Johnson v Gore Wood & Co [2001] 1 All ER 481 at 507, 508, [2001] 2 WLR 72 at 99 per Lord Goff of Chieveley.
[37] As in the case of the contractual claim, it is important to appreciate exactly what is being alleged and why. The material allegation in para 15 is that M&S is estopped from denying that 'the relationship with BTH could only be determined by the giving of reasonable notice'. But by itself this claim, which has undoubted echoes of Hughes v Metropolitan Rly Co (1877) 2 App Cas 439, [1874-80] All ER Rep 187 and Central London Property Trust Ltd v High Trees House Ltd (1946) [1956] 1 All ER 256, [1947] 1 KB 130, does not lead to the relief sought. For that purpose it is essential to establish an obligation by estoppel that, in the words of para 12, 'during the subsistence of the relationship Marks & Spencer would acquire garments from BTH in quantities and at prices which in all the circumstances were reasonable'. As counsel for Baird put it in their written argument, 'BTH contends that an equity generated by estoppel can be a cause of action'. They rely on a series of dicta as pointers in that direction contained in Amalgamated Investment and Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1981] 1 All ER 923, [1982] QB 84, Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1981] 1 All ER 897, [1982] QB 133, Habib Bank Ltd v Habib Bank AG Zurich [1981] 2 All ER 650, [1981] 1 WLR 1265, Pacol Ltd v Trade Lines Ltd, The Henrik Sif [1982] 1 Lloyd's Rep 456, Holiday Inns Inc v Broadhead, Holiday Inns Inc v Yorkstone Properties (Harlington) Ltd (1974) 232 EG 951, Re Basham (decd) [1987] 1 All ER 405, [1986] 1 WLR 1498 and Gillett v Holt [2000] 2 All ER 289, [2001] Ch 210.
[38] In my view English law, as presently understood, does not enable the creation or recognition by estoppel of an enforceable right of the type and in the circumstances relied on in this case. First, it would be necessary for such an obligation to be sufficiently certain to enable the court to give effect to it. That such certainty is required in the field of estoppels such as is claimed in this case as well as in contract was indicated by the House of Lords in Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] 2 All ER 271, [1972] AC 741 and by Ralph Gibson LJ in Troop v Gibson [1986] 1 EGLR 1 at 6. For the reasons I have already given I do not think that the alleged obligation is sufficiently certain. Second, in my view, the decisions in the three Court of Appeal decisions on which M&S rely do establish that such an enforceable obligation cannot be established by estoppel in the circumstances relied on in this case. This conclusion does not involve the categorisation of estoppels but is a simple application of the principles established by those cases to the obligation relied on in this. I do not consider that any of the dicta in the line of cases relied on by Baird could entitle this court to decline to apply those principles.
[39] Counsel for M&S was, at one stage, inclined to concede that if we considered that the House of Lords, after the facts had been found at a trial, might adopt the propositions formulated by Mason CJ, Wilson and Brennan JJ in the Waltons Stores case, then it might be said that there was a real prospect of succeeding on the estoppel issue so that judgment under CPR 24.2 should not be given at this stage. In reply he submitted that the possibility that the House of Lords might adopt those propositions was an inadequate reason for allowing a trial. I agree. If I am right in believing that English law, as it now stands, does not permit the enforcement of an estoppel in the form alleged in this case then it is the duty of this court to apply it, notwithstanding that it may be developed by the House of Lords, who are not bound by any of the cases relied on, in the future...
[40] In all these circumstances I do not agree with the judge that the estoppel claim has a real prospect of success. Nor do I agree that there are good reasons why this issue should be tried. I have accepted that there is a real prospect that the allegations will be established but if there is no real prospect that if established they will give rise to the relief claimed then there is no reason, compelling or otherwise, why they should be established at a trial. It follows that there can be no compelling reason for only disposing of the contract claim at a trial either.