AIC Ltd v ITS Testing Services (UK) Ltd; The Kriti Palm

[2006] EWCA Civ 1601, [2007] 1 All ER (Comm) 667, [2007] 1 Lloyd's Rep 555, (2006) Times, 21 December, [2006] All ER (D) 381 (Nov)

Court: CA

Judgment Date: 28/11/2006

Case History

Cases considered by this case

Catchwords & Digest

In April 1996, the defendant issued a certificate in respect of a cargo of gasoline due to be loaded onto a vessel for carriage to New York. The sample analysed was a composite derived, before loading of the vessel, from four shore tanks at a refinery in England. The fuel had been sold to the claimant on terms fob the refinery. The certificate described a large number of properties of the gasoline, the test methods applied and the results. The Colonial Pipeline Specification (CPS) on which the gasoline was sold, and for which the defendant had been instructed to provide a certificate of quality, required, inter alia, that the gasoline's Reid Vapour Pressure (RVP) should be a maximum 9 psi as found by test method ASTM D5191. In error, the defendant tested the RVP by an alternative method, ASTM D323. The certificate stated that, as tested by ASTM D323, RVP produced a result of 8.22 psi. The certificate went on to state that the fuel met specification. The fuel was loaded onto the vessel. The claimant on-sold the cargo on an ex ship basis New York harbour. The on-sale contract's quality clause stated that the cargo met CPS, and guaranteed RVP 9.0 psi. Tests at the discharge port revealed that the fuel had an RVP above 9.0 psi. It emerged that the defendant had used the wrong test for the purpose of its certificate. A retest undertaken by the defendant (the Cooper retest) by method ASTM D5191 on samples taken from the shore tanks showed a calculated result of 9.33 psi. On 17 April 1996, a telephone conversation took place between W, a trader at the claimant, and L, the defendant's general manager. In that conversation it was common ground that for the purposes of the certificate the defendant had tested RVP by the wrong method. During the conversation W said: 'Well I have a quality certificate from you that says it is on specification.' L replied: 'We will be standing by that certificate.' At first instance, the judge found that in that remark, and in the conversation as a whole, L had been guilty of deceiving W, rendering the defendant liable to the claimant in the tort of deceit. He found that implicit in what L had said was a representation that the certificate was good and valid, or good and reliable, and given that he had known of the Cooper retest results, L was reckless as to the truth of that implied representation. He therefore found that the defendant was liable for all the financial consequences of the claimant's reliance on the certificate in a dispute with the purchaser of the cargo. The defendant appealed. The first main issue on appeal was whether the judge had been wrong in making that finding of deceit. The second main issue arose out of the fact that the claimant had commenced proceedings more than six years after the telephone conversation. The effect of that was that the claimant was time-barred in respect of any of its other causes of action (apart from deceit) for breach of contract or duty unless it could bring itself within s 32 of the Limitation Act 1980, and in particular s 32(1)(b). In that respect, the claimant complained that the defendant had deliberately concealed the Cooper retest and its results until the latter's disclosure in the instant proceedings in June 2004. An issue arose as to whether the defendant had been under a duty to the claimant to reveal the existence and content of the Cooper retests. The judge had found that the defendant had been under such a duty, and that it had deliberately concealed those retests and their results.

Held - The appeal would be allowed in part.

(1) In the circumstances of the case, the judge had not been entitled to come to the conclusion which he had in relation to deceit. The representation found had been imprecise and, in an action for deceit, unfairly so. The representation that the certificate was and remained 'good and valid' or 'good and reliable' had not been expressly or even impliedly made; but had been derived as a matter of overall impression. The terms valid and reliable were not prima facie coterminous. If one was seeking an overall impression of the conversation between L and W, one would have been bound to conclude that whatever 'we will be standing by that certificate' might mean or have been intended to mean, L was making it plain that he did not know whether or not the certificate was accurate, and that he did not know how the two tests co-related. If that was what he had been saying expressly, it was impossible to derive from anything which L had said any implied or derived representation that the certificate was good and valid or good and reliable in the manner relied on by the claimant in the deceit claim. L had not made the representation which the judge had found him to have made; and in any event the judge had not found with sufficient clarity a representation of fact which was false in a sense which the claimant had sought to make the basis of its claim in deceit. It followed that the case in deceit had to fail.

(2) (Rix LJ dissenting) The defendant had been under a duty to reveal to the claimant the existence and content of the Cooper retests. The accuracy of a certificate to buyers and sub-buyers was clearly important. Not only as a matter of law, but also commercially, it challenged reality to think that a certifier, armed with tests that suggested that the tests used to complete the certificate had or might have produced incorrect results, could none the less simply do nothing about it; and in particular could properly say nothing about those tests to those who had employed him to certify. In the instant case, for the purposes of s 32 of the 1980 Act, the judge had been entitled to find that the defendant had deliberately concealed the Cooper retests and the results of those tests. Moreover, the information concealed was relevant to the causes of action other than deceit.

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