Trinsic Collagen Limited v Procoll Limited

In a supply contract requiring testing by an agreed Product Tester, “Product Testing” meant the contractual testing process, not merely compliance with a standard. A result clearly below the limit was sufficient; an ambiguous result meant that the goods had not passed and required retesting. A supplier failing to provide replacement goods after a failed test remained liable under the replacement regime, but negotiated exclusions barred loss-of-profit claims absent deliberate default.

A contractual deeming clause operated at delivery and did not remove an 18-month fitness warranty. Exclusions of statutory terms, lost profits and liability were reasonable under Unreasonable Contract Terms Act 1977 on the facts. Restitution failed where the contract remained subsisting and the buyer had received the contractual benefit.

Trinsic claimed damages exceeding £7 million from Procoll for supplying collagen which allegedly exceeded the contractual microbiological specification, was not validly tested, or was unfit for use in nutraceutical drinks. It also claimed late-delivery fees and restitution of sums paid.

Procoll relied on the contractual testing regime, exclusions and limitations of liability, and alleged failures by Trinsic to handle or mitigate the product properly. The central issues concerned the effect of ambiguous or failed testing, fitness for purpose, deliberate default, the reasonableness of the exclusions under the Unreasonable Contract Terms Act 1977, restitution for failure of basis, and set-off.

Disposition. Trinsic established limited contractual breaches but recovered no net sum. Procoll was entitled to set off £30,000 due for the November Order against the £3,000 Late Delivery Fee payable for the March Order.

1. Product Testing. The contractual term referred to the process carried out by the agreed Product Tester, rather than merely to the applicable testing standard. Testing by another laboratory could not establish failure of contractual Product Testing. Clearly compliant results were not invalidated merely because the method might have been inconclusive at higher levels. Results recorded as greater than 300 cfu/g were ambiguous and established breaches of clauses 8.8 and 8.9 for the April, August, September and October Orders.
2. Replacement and exclusions. The March result of 6,900 cfu/g engaged clause 8.11. Procoll should have supplied a replacement batch as soon as possible. Trinsic’s prior use of the batch and later non-payment did not defeat the accrued obligation, and the Late Delivery Fee was not an exclusive remedy. The court treated deliberate default as intentional breach, including assumed blind-eye knowledge of a firmly grounded suspicion, applying Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] UKHL 1. It found no deliberate default, so loss-of-profit claims arising from testing were excluded.
3. Fitness and UCTA. Reformation made affected product unsuitable for mixing into nutraceutical drinks. Clause 8.10’s deeming provision operated at delivery, while its second sentence supplied an 18-month warranty, subject to the agreed storage and transport conditions. The exclusions of statutory implied terms, loss of profits and liability were fair and reasonable under the Unreasonable Contract Terms Act 1977. The court applied the commercial approach in Watford Electronic Ltd v Sanderson CFL Ltd [2001] EWCA Civ 317.
4. Restitution. A restitutionary claim required the subsisting contract to have been discharged. The Agreement had not been discharged. Although a sale of goods contract could be divisible and a collateral benefit might coexist with total failure of basis, Trinsic had received and used the contractual benefit. The claim therefore failed. The court relied on Deveaux v Connolly (1849) 8 CB 640, Barnes v Eastenders Cash and Carry Plc [2014] UKSC 26 and BP Oil International Ltd v Vega Petroleum Ltd [2021] EWHC 1364.
5. Set-off. Clauses 9.8, 14.1 and 14.2 did not require payment for unmanufactured or unavailable Standing Orders. The October balance was not payable because the goods had not passed Product Testing. The November invoice was payable and could be set off.