SW Tubes Limited v Owen Stuart Limited

A claimant must take reasonable steps to avoid loss caused by breach of contract. Where a supplier offers a cost-free temporary replacement for defective equipment, and it would allow operations to continue pending repair, reasonable conduct ordinarily requires acceptance. Damages are then limited to loss up to the date when the replacement should have been installed. Mitigation does not remove the claimant’s entitlement to judgment where breach is established and damages have not yet been assessed. Under the Sale of Goods Act 1979, safety is an aspect of quality. A second-hand machine with an unguarded rotating blade may therefore be of unsatisfactory quality, even if it had previously operated without guards.

SW Tubes Limited contracted with Owen Stuart Limited for machinery used in manufacturing cardboard tubes. The trial judge found that the supplied saw had an inadequate flexible drive, amounting to breach of contract, but held that Tubes had failed to mitigate by refusing an offered replacement saw. He therefore gave judgment for Owen with costs. Tubes appealed on mitigation, the absence of guards, and the form of the order. Owen challenged the finding concerning the drive but abandoned that challenge when its representative accepted that the drive was inadequate. The central issues were whether Tubes’ refusal was unreasonable, whether the unguarded saw was of satisfactory quality, and what order should follow.

Appeal allowed. Lord Justice Aldous delivered the principal judgment, with Sir Christopher Slade agreeing.

1. Mitigation. The ordinary contractual rule required Tubes to take reasonable steps to avoid loss. The offered replacement saw was a standard item, would have cost Tubes nothing, and there was no evidence that it would not operate satisfactorily while the defective flexible drive was investigated. Tubes should therefore have accepted it. Their refusal was unreasonable, and damages were limited to loss incurred until the date when the replacement should have been installed.
2. Form of judgment. A finding that a claimant failed to mitigate did not extinguish the underlying breach or prevent judgment in its favour. The hearing had determined liability, and the evidence did not establish that Tubes’ loss was merely nominal. The judge should therefore have ordered judgment for Tubes, with damages to be assessed if not agreed, rather than judgment for Owen.
3. Guards and satisfactory quality. Tubes conceded that the second-hand saw fell outside the 1992 Regulations. That did not determine the statutory issue. Under the Sale of Goods Act 1979, safety was an aspect of quality. The saw was unsafe without guards, and practicable guards could have been fitted. Its previous operation without guards did not make it safe. Supply of the saw therefore breached the implied term of satisfactory quality.
4. Costs. The order below was set aside. Each party was ordered to pay its own costs below because Owen had lost on two substantial issues. Owen was ordered to pay 75 per cent of Tubes’ appeal costs, including the respondent’s notice, subject to detailed assessment, with an interim payment of £3,000 within 21 days.

1. Court of Appeal (Civil Division): In [2002] EWCA Civ 854, the appeal was allowed. The county court order was set aside, judgment was entered for Tubes, and damages were to be assessed if not agreed.
2. Taunton County Court: On 25 October 2001, His Honour Judge O’Malley found a breach concerning the defective drive but gave judgment for Owen with costs.