Endcape Limited v Musgrave Generators Limited

The claimant sued for damages and other remedies for alleged breaches of contract and trespass to goods. The trespass claim was settled between the parties and is not further considered.

The court applied ordinary contract law principles on formation and certainty and considered statutory fiduciary duties of company directors under sections 171 to 178 of the Companies Act 2006. On the facts, the judge rejected the claimant's pleaded case about an agreed profit split in respect of the Interpower stock and dismissed that limb of the claim.

However, the judge found that there was a concluded oral agreement that, where the claimant (by Mr Roland Hudson) introduced a customer who then placed a profitable order with the defendant, profit would be split 50:50. The profit was to be calculated by deducting the defendant's materials and labour costs and the claimant's shipping costs from the sale price, and splitting the balance. Contemporaneous documents and witness credibility supported that finding. The court awarded 50% of the proved profit on the Babcock contract, plus VAT and interest under the Late Payment of Commercial Debts (Interest) Act 1998.

Background and parties

• The claimant, Endcape Limited, supplies high-end generators and spare parts. Interpower International Limited, a related company run by members of the Hudson family, went into liquidation in 2017. The defendant, Musgrave Generators Limited, acquired Interpower's assets from the liquidator.
• The claimant advanced three causes of action: (1) an alleged agreement concerning Interpower stock (the Interpower stock claim); (2) an alleged profit-share arrangement in relation to customer introductions, primarily the Babcock International Limited contract (the Babcock claim); and (3) a trespass to goods claim (which was settled pre-trial).

Relief sought and procedural posture

• The claimant sought damages and other remedies for breach of contract and trespass; the judge conducted a first-instance trial on the remaining contractual disputes. Trial took place over three days in February 2022 and judgment was handed down on 30 November 2022.

Issues for decision

1. Whether there was a binding agreement in respect of the Interpower stock and, if so, its terms and whether it was vitiated by any breach of directors' duties.
2. Whether there was a binding profit-share agreement in respect of customer introductions, and if so its terms and the amount due in respect of the Babcock contract.

Evidence and findings on credibility

The judge evaluated oral and documentary evidence and found credibility to be decisive. The Hudson family witnesses were largely accepted as credible, although with imperfect memories. The court was critical of Mr Buckman's evidence for the defendant, finding it unreliable on key matters and inconsistent with contemporaneous documentation. The judge accepted that Mr Roland Hudson introduced the Babcock opportunity to the defendant and that the defendant supplied the quotation on its letterhead because the manufacturer accreditation required by Babcock made direct contracting with the claimant impractical.

Reasoning and conclusions

• Interpower stock claim: the claimant's evidence did not establish on the balance of probabilities a concluded agreement in the terms pleaded. That limb of the claim was dismissed.
• Babcock claim: the court found there was a concluded oral profit-share agreement such that where the claimant introduced a customer who placed a profitable order, profit would be split 50:50. The agreed method for calculating profit excluded the defendant's materials and labour costs and the claimant's shipping costs. The judge relied on contemporaneous emails, invoices and earlier conduct under the agreement (Jamaica and Bangladesh contracts) to support the finding. The defendant's alternative account that Power Continuity (Mr East) introduced Babcock was rejected.
• Remedy: the judge accepted the claimant's calculations for the Babcock profit. The total profit after allowable deductions was found to be £134,636.77; the claimant's 50% share was £67,318.38 plus VAT of £13,463.68, totalling £80,782.06. Interest under the Late Payment of Commercial Debts (Interest) Act 1998 was awarded at the pleaded rate.

Wider observations

The court noted deficiencies in the defendant's documentary narrative and criticised reliance on late text and email material from a key third party (Mr East) who was not called to give evidence. The judge observed that contemporaneous documentary evidence and consistent conduct between the parties were material in assessing formation and terms.

First instance: the court partly upheld the claimant's case. The Interpower stock claim is dismissed for want of sufficient evidence of the pleaded agreement. The Babcock profit-share claim succeeds: the court found a concluded oral 50:50 profit-share agreement for customer introductions by the claimant, with profit computed by deducting the defendant's materials and labour costs and the claimant's shipping costs from the sale price. The claimant's entitlement on the Babcock contract was quantified and interest awarded.