Lowe & Anor v W Machell Joinery Ltd

For a buyer dealing as a consumer, goods supplied by a business must be of satisfactory quality and reasonably fit for any particular purpose made known to the seller. Where compliance with Building Regulations is essential to that purpose, the implied obligations include compliance when the goods are installed and used. Goods made to the buyer’s design may therefore breach those obligations if they cannot lawfully be used for the known purpose. The possibility of minor modifications, or mitigation of loss, does not remove the breach or defeat the common-law right to reject. Statutory repair and replacement remedies do not displace that right unless invoked. A pleaded case may be relied on for the first time on appeal where it was not abandoned, the necessary findings are available, and no further trial or unfair prejudice is required. The appeal was allowed by a majority, with Rix LJ dissenting.

Mr and Mrs Lowe bought a bespoke oak staircase from W Machell Joinery Ltd for installation in a barn being converted into a residence. They paid before delivery and rejected the staircase shortly afterwards. The trial judge found that the staircase, if installed as designed, would not comply with the Building Regulations and that this amounted to a breach of contract. He nevertheless held that the breach did not justify rejection because the design could readily be modified, dismissed the claim for repayment and damages, and ordered indemnity costs against the claimants.

On appeal, the claimants relied on the statutory implied terms of satisfactory quality and fitness for purpose pleaded under the Sale of Goods Act 1979, although those terms had not been addressed in counsel’s closing submissions at trial. The central issues were whether the statutory terms applied and were breached, whether the possibility of modification defeated the right to reject, and whether the pleaded case could properly be relied on for the first time on appeal.

By a majority, Lloyd LJ and Lewison J allowed the appeal.

1. Building Regulations. The trial judge was right to find that installation of the staircase as supplied would fail to comply with the Building Regulations 2000. The 100 mm sphere requirement in paragraph 3.3 of Approved Document K applied to the gallery balustrades through Part K2. Although failure to follow an Approved Document did not itself create civil or criminal liability under section 7 of the Building Act 1984, it was powerful evidence that building-control approval would not be obtained.
2. Statutory implied terms. The purpose of the staircase had been made known to the seller and the buyers had reasonably relied on its skill and judgment. The terms implied by section 14(2) and section 14(3) of the Sale of Goods Act 1979 therefore applied. Fitness for the known purpose included lawful installation and use where regulatory compliance was essential. The staircase was consequently not reasonably fit for purpose and was not of satisfactory quality. The possibility of minor modifications did not alter the position at delivery.
3. Rejection and remedies. The breach was a breach of condition and entitled the buyers to reject. The reasonableness of refusing modified goods and mitigation of loss were irrelevant to the basic right to reject, although mitigation could affect consequential damages. Section 15A concerned non-consumer transactions, and the consumer repair and replacement provisions in Part 5A did not displace the common-law right to reject unless those remedies were invoked.
4. Point taken on appeal. The statutory case was expressly pleaded before trial. It had not been expressly abandoned, and the conduct of the trial was not incompatible with reliance on it. The defendant had notice of the issues and could have adduced evidence on them. The trial judge’s findings were sufficient, so no further trial was required. The case was therefore not a new case on appeal. The majority distinguished Broad v Mullarkey [2009] EWCA Civ 2 and applied the approach illustrated by Slack & Partners Ltd v Slack [2010] EWCA Civ 204.
5. Dissent. Rix LJ would have dismissed the appeal. In his view, the statutory case had been abandoned in the conduct of the trial and its merits were not inevitable on the existing findings. Allowing it to be resurrected could require further evidence and a further trial, contrary to the appellate principles governing new points and unfair to the respondent.

The points in the Respondent’s Notice were rejected. The claimants were entitled to repayment of the price.

1. Court of Appeal (Civil Division) — By a majority, allowed the appeal, rejected the points in the Respondent’s Notice and held that the claimants were entitled to repayment of the price: [2011] EWCA Civ 794.
2. Leeds County Court, Technology and Construction Court list — His Honour Judge Cockcroft found a breach of contract arising from non-compliance with the Building Regulations but held that the breach did not justify rejection, dismissed the claim and awarded indemnity costs against the claimants. Judgment was delivered on 2 August 2010.