B2/2001/0625
Neutral Citation Number: [2001] EWCA Civ 1517
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM OXFORD COUNTY COURT
(HIS HONOUR JUDGE KING)
 
                                  Royal Courts of Justice
                                  Strand
                                  London WC2
 
                             Thursday, 4th October 2001

B e f o r e :

LORD JUSTICE JONATHAN PARKER

‑and‑

MR JUSTICE BODEY
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(1) BERNARD BRIAN WARD
(2) ANNIE ELIZABETH WARD
Claimant/Respondent

‑ v ‑

NFU MUTUAL FINANCE LTD
Defendant/Appellant

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(Computer Aided Transcript of the Stenograph Notes of
Smith Bernal Reporting Limited
190 Fleet Street, London EC4A 2AG
Telephone No: 020 7421 4040
Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

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MR D CASEMENT (instructed by Walker Smith & Way, Chester CH1 2PQ) appeared on behalf of the Appellant
MR N VINEALL (instructed by Messrs Froggatt & Co, Northampton NN1 5QJ) appeared on behalf of the Respondent
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J U D G M E N T
Thursday, 4th October 2001
1.	LORD JUSTICE JONATHAN PARKER: This is an appeal by NFU Mutual Finance Ltd, the defendant in the action, against an order made by His Honour Judge King in the Oxford County Court on 2 March 2001. By his order, the judge entered judgment for the claimants, Mr and Mrs Bernard Ward, in the sum of £76,784.88 plus interest, making a total sum of £107,030.88. Leave to appeal on a limited issue was granted by Robert Walker LJ on the papers on 10 May 2001.
2.	The appellant appears by Mr David Casement of counsel (who did not appear before the judge); the respondents, Mr and Mrs Ward, appear by Mr Nicholas Vineall of counsel (who did appear before the judge).
3.	In the action, Mr and Mrs Ward, who are farmers, claim damages against the appellant in respect of a TM200 crawler tractor sold to them by the appellant in 1993 and which they claim was not of merchantable quality. The judge found liability to be established, and there is no appeal on that issue. The appeal relates solely to the question of the quantum of the damages for which the appellant should be held liable.
4.	In their claim form Mr and Mrs Ward pleaded particulars of loss and damage as follows:
“By reason of the matters aforesaid [that is a reference to the alleged non‑merchantablity of the TM200] the Claimant has suffered loss and damage.
Particulars
(a) in 1994 the Claimants had to pay a contractor to complete fifty acres of drilling which the TM200 was incapable of performing, at a cost of £587.50.
(b) by 1995 the Claimants realised that the TM200 was not capable of performing reliably all the functions they had intended it to perform. In January 1995 they bought a Massey Ferguson 3655 wheeled tractor to pull their harrow and drill equipment at a cost of £50,258.75
(c) in August 1996 the Claimants purchased for £10,340 a Gregoire Benson semi‑mounted plough in the hope that use of a semi‑mounted plough... would ease the load on the TM200 and allow the TM200 to pull it. It did not. In 1997 they sold the plough for £9,000, a loss of £1,000.
(d) in 1997 the Claimants hired a New Holland tractor to do the ploughing work of the TM200 at a cost of £2,527.08.
(e) in early 1998 the Claimants laid up the machine and in August 1998 the Claimants replaced the TM200 with a steel track Caterpillar D5 and... a trailer to transport it, together costing £18,800.00.
(f) total repair and replacement parts for the TM200 have amounted to £3,861.55. Had the machine worked properly and been of merchantable quality replacement parts and repairs in the first 1000 hours of use would have been modest and would not have exceeded £250. The loss is £3,611.55.” 
5.	Items (a), (c), (e) and (f) were conceded by the appellant, and (subject to one qualification) no issue arises in relation to them. Items (b) and (d) are, however, challenged on appeal. The qualification to which I refer is that by an application notice dated 3 October 2001 (that is yesterday) the appellant seeks to argue additionally that the award of damages should not contain any VAT element, on the footing that the Wards were registered for VAT and could accordingly recover that element of the damages. On the figures, if the point is a good one, that would result in a reduction of the total damages figure of some £11,201.
6.	The relevant factual history, as found by the judge, can be shortly summarised. In October 1993 the Wards took delivery of a TM200 trawler tractor which is a 200 horse‑power machine operating on rubber, rather than metal, tracks. The TM200 was supplied to them by the appellant for a total purchase price of some £70,361. The Wards' primary purpose in purchasing the TM200 was to acquire a machine which could operate equally well on heavy and light land, and which could carry out harrowing and drilling as a single process. Had the TM200 been of merchantable quality, it would have met the Wards' requirements. In the event, however, the TM200 did not work properly and was not of merchantable quality. So much is no longer in dispute.
7.	In 1995 the Wards bought a Massey Ferguson 3655 tractor (“MF3655”) for £50,258.75 70 (including VAT), part exchanging one of their existing John Deere tractors (for which they were allowed £25,850). The judge found that the MF3655 was purchased to carry out functions (specifically harrowing and drilling) which the defective TM200 should have been able but was in fact unable to perform. He concluded that it was not to be treated as a replacement for the John Deere and awarded damages accordingly (subparagraph (b) of the Particulars of Loss and Damage which I quoted earlier). The appellant challenges that conclusion on this appeal, contending that the purchase of the MF3655 should be left out of account altogether in assessing the Wards' damages since it was, on analysis, merely a replacement of a different tractor by a superior machine.
8.	In 1997 the Wards hired a New Holland tractor to do the ploughing which the TM200 was unable to do. The cost of hiring the New Holland machine is included as subparagraph (d) of the Particulars of Loss and Damage in the sum of £2,527.08 (including VAT). The judge allowed this claim and awarded damages accordingly. The appellant contends in the alternative that if (as the judge found) the MF3655 replaced the defective TM200, then there was no basis for including this item. Further or alternatively, the appellant contends that the MF3655 was only in part a replacement of the defective TM200 (being in part a replacement of the John Deere) and that accordingly the judge should have awarded damages limited to the excess of the purchase price of the MF3655 over the part‑exchange price for the John Deere (giving a figure of £24,408.75).
9.	Finally, by way of background, I should record that in 1998 the Wards purchased a secondhand Caterpillar tractor for £18,800. This is the machine referred to in the particulars of loss and damage as D5, and it is particularised in subparagraph (e) of those particulars. It is not the subject of further dispute.
10.	I turn next to the judge's judgment. Having made his findings and reached his conclusions on the issue of merchantable quality, the judge turned to the issue of quantum of damages, asking himself the question: “What loss have the claimants suffered?”
11.	He continued:
“Their loss is the cost of repairs to the TM200. The cost of hire of alternative tractors or contract work when necessary at that particular time, and the cost of replacement tractors to fulfil the functions that the TM200, if it had been of merchantable quality, would have been itself fulfilling.
Assuming liability, Mr Goodbody [counsel for the appellant appearing before the judge] does not dispute items A, C, E and F of the Particulars of Loss and Damage.
I am satisfied that if the TM200 had been operating in a proper manner it would have been capable of pulling both the power harrow and drill. It would also have been able to operate on both heavy and light land. It failed to do so and its failure to do so was in my judgment a result of its many defects and not because the claimants had unreasonable expectations of it. These functions are the very functions to be expected of a powerful 200 horseback crawler tractor with rubber tracks, apparently designed for such conditions. 
Because of the TM200's failure to meet these standards, the claimants have been forced to acquire other tractors to perform these functions. The TM200 now has only a scrap value.
In 1995 the claimants purchased a Massey Ferguson 3655 to pull the harrow and drill, at a cost of £50,258.75. At the same time they part‑exchanged a John Deere 30/50 for £25,850. In addition, in 1997 the claimants hired a New Holland to do the ploughing that the TM200 was unable to do at that time, and it early 1998 they purchased a steel track Caterpillar D5 and a trailer at a cost of £18,800 to perform the other functions otherwise to be expected of the TM200.
Mr Goodbody for the defendants argues that the Massey Ferguson 3655 was in fact a replacement for the John Deere 30/50 which was part‑exchanged. I do not agree. The Massey Ferguson was purchased to perform the functions which should have been carried out by the TM200. The part‑exchange was the means of financing that purchase. If they had not part‑exchanged they would still have a perfectly good John Deere to use or to sell separately and to realise its value for themselves in cash terms.
I have considered whether the claimants should have taken other steps to mitigate their loss but I have come to the view that applying the Bank of Portugal v Waterloo case that the steps taken by the claimants were reasonable remedial measures and were in my judgement necessary steps in each case, flowing directly from the defendants' breach of contract.” 
12.	Accordingly, the judge found for Mr and Mrs Ward in full under each head of damage pleaded, with interest.
13.	I turn next to the arguments (leaving aside for the moment the question of VAT which Mr Casement seeks leave to raise).
14.	As to the purchase of the MF3655 Mr Casement submits that the judge's finding that it was not a replacement of the TM200 was contrary to the weight of the evidence. He relies in particular on the witness statement of Mr Ward in which Mr Ward refers only to the Caterpillar D5 tractor as being a replacement. His difficulty, however, is that we have not been provided with transcripts of the oral hearing and accordingly it is impossible for us to identify or to form any view as to the evidence which the judge heard upon which he based his clear findings of fact. Moreover, in referring to the Caterpillar D5 as a replacement, Mr Ward was making a statement which a lay person might easily make and indeed literally it is correct. But the judge had to address the question: “What loss flowed from the fact that the TM200 was not of merchantable quality?” It was in that context that he had to consider the question of replacement. In the event, he addressed the question directly and answered it adversely to the appellant. It seems to me that that was preeminently an issue for the judge and I cannot, for my part, see any basis for interfering with his conclusion. Had the judge found, for example, that the John Deere had for some reason become redundant so that it required to be placed in any event, then there might have been some foundation for the appellant's argument. But the judge made no such finding; rather, he found to the contrary.
15.	As to Mr Casement's argument that if item (b) is allowed then item (d) (the hire of the New Holland machine) should be excluded: as Mr Vineall has pointed out in his helpful skeleton argument the MF3655 was purchased for the purposes of harrowing and drilling, whilst the 1998 machine was bought for the purpose of ploughing, and (for that matter) the secondhand tractor was bought in 1998 to perform “the other functions otherwise to be expected of the TM200.”
16.	It is also relevant to note the judge's finding that the steps taken by the Wards to mitigate their loss were reasonable steps. Once again, I am, for my part, unable to discern any basis upon which the Court of Appeal could interfere with that finding.
17.	Accordingly, in my judgment, subject only to the question of VAT, the appeal must be dismissed.
18.	So far as the VAT point is concerned Mr Casement, as I indicated, sought leave to argue it. Mr Vineall opposed that on the basis that, to put it crudely, his clients were being mucked about, and he pointed to the difficulties of any litigant in these courts. He submitted that if Mr Casement were allowed to argue the point the door would be open to any litigant seeking to introduce a point at a very late stage. However, in the exercise of our discretion we concluded that it was appropriate in the circumstances that Mr Casement should be allowed to argue this point. There was, as Mr Vineall conceded, no prejudice to the Wards, and if and to the extent that the point was a good one the judge's award of damages would, to that extent, be based upon an error of law. Accordingly, we allowed Mr Casement to argue the point. Following our ruling Mr Vineall very properly conceded the substantive point.
19.	Accordingly, the appellant succeeds on the new point in relation to VAT but fails on all the other points in the appeal.
20.	MR JUSTICE BODEY: I agree.
(Appeal dismissed; appeal in relation to VAT allowed; appellants to pay Wards' costs summarily assessed in the sum £5,375.10).