Filobake Ltd v Rondo Ltd & Anor

An express performance warranty must be construed as a whole. Where equipment is warranted to produce a specified product to an attached recipe and at stated rates and dimensions, the warranty may extend beyond producing a sheet with those physical characteristics. It may require the product to possess the essential characteristic necessary for its intended use, while allowing processing contemplated by the contract. The statutory fitness-for-purpose obligation under the Sale of Goods Act 1979 is construed consistently with that purpose. Breach must be proved by evidence addressing the contractual specification. Tests using a materially different recipe or product specification may not establish breach. An appellate court may refuse a late amendment introducing a new damages basis where it would require a further trial and unfairly burden the defendant.

Filobake purchased pastry-production equipment from Rondo, with a separate oven and cooler supplied by Frampton. The quotation stated that the equipment would produce samosa to an attached recipe at specified speeds, dimensions and weights. After production problems, Filobake claimed rejection of the equipment, repayment and damages. The Technology and Construction Court dismissed the claim against Rondo and awarded nominal damages against Frampton: [2004] EWHC 695 (TCC). On appeal, the issues concerning Rondo were the construction of the performance obligation, breach, compatibility with the Frampton equipment, loss of profits and a proposed wasted-expenditure claim.

The Court of Appeal, Chadwick LJ giving the judgment of the court, dismissed the appeal unanimously.

1. Construction. The performance warranty had to be read as a whole. It required the Rondo equipment, together with a suitable oven and cooler, to produce samosa pastry to the attached recipe at the specified speed, width, thickness, cutting and weight specifications. It was not limited to producing a sheet with those physical characteristics. The pastry also had to be capable of use in making samosas, including folding without cracking. It did not have to be saleable without further heat treatment or cooling, because those processes were contemplated by the contract. The statutory fitness-for-purpose obligation under the Sale of Goods Act 1979 reinforced the relevance of the intended purpose.
2. Recipe and breach. The recipe was a list of ingredients and proportions, rather than complete instructions. Appropriate choices concerning flour, oil, mixing, temperature and resting time had to be supplied. The evidence did not establish breach. The tests relied on a different finished-product specification and, in one expert’s case, altered the oil content. Evidence from a comparable line and from Mr Ives supported the finding that satisfactory samosa pastry could be made with appropriate processing.
3. Compatibility. The court did not decide whether Rondo owed a duty to ensure compatibility with Frampton’s oven and cooler. Even assuming such a duty, there was no evidence that those items were unsuitable, so the claim could not succeed.
4. Damages and procedure. The finding that Filobake had lost or waived any right to reject the equipment was unappealed. The loss-of-profits claim lacked credible evidence of projected sales, and the judge was entitled to reject it. The court refused an amendment introducing a wasted-expenditure claim at the appellate stage because it would require a further factual hearing, unfairly burden Rondo and be disproportionate. In obiter discussion, the court considered the election between lost profits and wasted expenditure in Cullinane v British “Rema” Manufacturing Co [1954] 1 QB 292 and Anglia Television v Reed [1972] 1 QB 60, the damages principles discussed in C&P Haulage v Middleton [1983] 1 WLR 1461, the burden of proof accepted in CCC Films (London) Ltd v Impact Quadrant Films Ltd [1985] 1 QB 16, and the contract-as-a-whole approach in Bowlay Logging v Domtar [1978] 4 WWR 105.

Formal order: appeal dismissed.

• Court of Appeal (Civil Division): In [2005] EWCA Civ 563, the court dismissed Filobake’s appeal against dismissal of its claim against Rondo. The appeal concerning nominal damages against Frampton had earlier been dismissed by consent on 6 October 2004.
• High Court, Technology and Construction Court: By order dated 21 April 2004, the court dismissed the claim against Rondo and awarded nominal damages against Frampton: [2004] EWHC 695 (TCC).