Westbrook Resources Ltd v Globe Metallurgical Inc

A contractual obligation to screen goods over a specified screen requires the stipulated screening process, but does not necessarily require the seller to achieve a particular proportion of undersize material. Where the contract specifies no quantitative result, the court should not imply one from industry expectations or the buyer’s intended use. A refusal to accept conforming contractual performance may amount to repudiatory breach, particularly where it is made in bad faith to escape an unwanted commitment. For damages under section 50 of the Sale of Goods Act 1979, the market-price rule is prima facie only. Where there is an available market and a reasonable substitute sale, the difference between the contract price and the substitute sale price may provide the appropriate measure. Subsequent decisions affecting the substitute transaction do not ordinarily result directly from the original breach.

Westbrook agreed to sell Globe approximately 30,000 metric tonnes of manganese ore from Large, Pennsylvania. The contract required the ore to be screened over a half-inch screen at the Defence Logistics Agency site. Screening was delayed by adverse weather and the physical condition of the ore. When the first barge was tendered, testing showed that approximately 25 per cent passed through a half-inch screen.

Globe refused to pay or accept the material, asserting that the contract required the removal of undersize material and that the ore was unsuitable for its intended use in producing silico-manganese. Westbrook treated Globe’s refusal as repudiatory, terminated the contract and claimed damages. Globe counterclaimed, alleging breaches by Westbrook concerning screening, delay, independence of testing, available quantity and resale activity.

The central issues were the construction of the screening term, whether either party repudiated the contract, and the proper measure of Westbrook’s loss.

Judgment for Westbrook. Globe’s counterclaim was dismissed. Damages were to be assessed or agreed.

1. The term requiring material to be screened over a half-inch screen required Westbrook to carry out a genuine screening operation. It did not require the operation to achieve a specified result, such as removal of all but 10 per cent of material below the screen. The contract contained no such quantitative criterion, and the words “properly and effectively” could not be given sufficiently precise contractual content. The screening had been carried out properly and diligently in the prevailing conditions: paras [43]-[46].
2. Globe’s refusal to accept material containing less than half-inch material was inconsistent with the proper construction of the contract. In the circumstances, and having regard to Globe’s lack of good faith and its attempt to escape a contract for which it had no further use, the refusal was repudiatory. Westbrook was entitled to accept that repudiation: para [73]. The reasoning was supported by Woodar Investment Developments Limited v Wimpey Construction UK Limited [1980] 1 WLR 277.
3. Westbrook’s delay did not amount to repudiatory breach. Globe had waived any right to reject late commencement, acquiesced in waiting for better weather, and did not treat completion by 30 April as essential. A likely shortfall in material from Large would likewise not have deprived Globe of substantially the whole benefit of the contract. Westbrook could have sourced conforming material elsewhere or paid damages for any shortfall: paras [74]-[84].
4. The testing report was independent. The fact that a company connected with the screening operator owned a minority shareholding in the testing company did not establish lack of independence or knowledge of such lack of independence by Westbrook: paras [75]-[78].
5. For damages, the sale to OM Materials on 12 May 2005 was the best evidence of the available market price. Under section 50 of the Sale of Goods Act 1979, the market-price measure is prima facie only and does not exclude additional loss naturally caused by the breach. The later changes to the substitute transaction, including altered delivery terms, reduced quantities and cancellation, were independent decisions and did not affect the recoverable loss: paras [85]-[86]. The approach was consistent with Bem Dis A Turk Ticaret v International Agri Trade [1999] 1 All ER (Comm) 619, while Paula Lee v Zehil [1983] 2 All ER 390 was distinguishable.