Goknur Gida Maddeleri Enerji Imalat Ithalat Ihracat Ticaret VE Sanati A.S (Goknur) v Organic Village Ltd

False contractual or statutory misrepresentations do not, without more, establish dishonesty or absence of honest belief. Under the Misrepresentation Act 1967, damages are assessed on a tortious basis and do not include contractual loss of profits.

For contractual loss, the ordinary market measure applies unless the goods were specially manufactured or the contract was a string contract. Where substitute goods could reasonably have been obtained, lost profits are not recoverable. The party alleging failure to mitigate bears the burden of proof. Benefits caused by the breach must be brought into account, but an independent business activity undertaken after the breach is not sufficiently caused by it.

Organic Village Ltd counterclaimed against Goknur for supplying fruit juices said to contain added water, contrary to contractual descriptions that they were not-from-concentrate and contained no added water. The counterclaim included breach of contract, misrepresentation under the Misrepresentation Act 1967, deceit, lost profits and other consequential losses.

The claimant’s original claim for the price of six batches had been struck out for failure to comply with a costs order. The court determined liability and the disputed heads of loss remaining on the counterclaim, including whether cherry juice was defective, whether Goknur lacked an honest belief in its representations, the recoverability of lost profits, mitigation, and credits for benefits received.

1. Late evidence. The court applied the three-stage test in Denton v T.H. White Ltd [2014] 1 WLR 3926 and refused applications to rely on a very late witness statement and hearsay evidence. The breaches were serious and significant, the explanations were inadequate, and admission would prejudice the opposing party’s ability to investigate and challenge the evidence.
2. Liability. On the expert evidence, all relevant juices except cherry contained added exogenous water when supplied. The court rejected the suggestion that the samples had been tampered with. It found that the contractual and “NFC” representations were false, but that Goknur honestly believed them to be true; falsity did not itself establish deceit or recklessness. Cherry juice conformed to the contractual description and could not found a claim.
3. Misrepresentation damages. Damages under the Misrepresentation Act 1967 are assessed on the tortious basis, putting the claimant in the position it would have occupied had the representation not been made. Lost profits were therefore unavailable under that claim.
4. Contractual loss of profits. The court applied the ordinary market measure described in Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 QB 459, as confirmed in Euro-Asian Oil SA v Credit Suisse AG [2018] EWCA Civ 1720. The goods were not specially manufactured and the agreement was not a string contract. Organic NFC juice could have been sourced on the market, so lost profits, including future lost profits, were not recoverable.
5. Mitigation and benefits. Goknur bore the burden of proving failure to mitigate. The court found that Organic Village had made insufficient efforts to obtain alternative supplies and to sell stock later destroyed. It had to credit both the value of goods sold without payment and the profit made on their resale. It did not have to credit consultancy fees because they resulted from an independent decision to undertake consultancy work, rather than being caused by the breach. The court applied the causation principles discussed in Fulton Shipping Inc of Panama v Globalia Business Travel SAU [2017] 1 WLR 2581.
6. The counterclaims for breach of contract and misrepresentation succeeded. Certain claimed heads were disallowed, while French legal costs were allowed. The parties were invited to make further submissions on the appropriate damages award.

This was a first-instance trial. The judgment records that an earlier appeal from Master Kay QC’s refusal to admit further expert evidence was dismissed by Lavender J on 20 June 2017.