CA-2024-001949 & CA-2024-001935 - [2025] EWCA Civ 1212

As explained above, the judge found that on 14^th June 2020 Hitex had available the 2 million masks which were due for delivery on that day, that it would have been able to deliver those masks if Majlan had turned up to collect them on behalf of Uniserve, and therefore that Uniserve repudiated the contract on 17^th June 2020 when Mr Stead (on behalf of Uniserve) told Mr Popeck (on behalf of Hitex) that the supply contract was over.

The position which arises in the event of a wrongful refusal by one contractual party to perform its obligations was described by Lord Ackner in The Simona [1989] 1 AC 788, 799:

‘When one party wrongly refuses to perform obligations, this will not automatically bring the contract to an end. The innocent party has an option. He may either accept the wrongful repudiation as determining the contract and sue for damages, or he may ignore or reject the attempt to determine the contract and affirm its continued existence.’

As Lord Ackner went on to explain, citing Frost v Knight (1872) LR 7 Ex 111, if the contract is kept alive, it is kept alive for all purposes. This means that the innocent party ‘remains subject to all his own obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstance which would justify him in declining to complete it’. It follows that, if the contract is kept alive, but the innocent party then fails to perform its obligations, the party which was in wrongful repudiation may have another opportunity to terminate the contract.

The importance of the decision in The Simona was the rejection of any theory, said to be derived from the decision of this court in Braithwaite v Foreign Hardwood Co [1905] 2 KB 543, whereby the innocent party faced with a repudiation is absolved from continuing to perform the contract unless and until the repudiating party gives notice that it is once again able and willing to perform:

‘I therefore conclude that the decision in Braithwaite [1905] 2 KB 543 is not an authority for the proposition advanced by the appellants, alternatively if it is, then it is wrong. When A wrongfully repudiates his contractual obligations in anticipation of the time for their performance, he presents the innocent party B with two choices. He may either affirm the contract by treating it as still in force or he may treat it as finally and conclusively discharged. There is no third choice, as a sort of via media, to affirm the contract and yet to be absolved from tendering further performance unless and until A gives reasonable notice that he is once again able and willing to perform. Such a choice would negate the contract being kept alive for the benefit of both parties and would deny the party who unsuccessfully sought to rescind, the right to take advantage of any supervening circumstances which would justify him in declining to complete.’

In the present case it is apparent (and is common ground) that Hitex did not communicate any acceptance of the 17^th June repudiation to Uniserve. Accordingly the contract remained alive and Hitex remained under an obligation to comply with the revised delivery schedule. This meant that in addition to the 2 million masks which had been due for delivery on 14^th June, it had to have 3 million masks available for delivery on 21^st June, another 5 million on 28^th June and another 5 million on 5^th July 2020. These totals were cumulative because, while time was of the essence of Hitex’s obligation to have the goods ready for delivery, that was not so in the case of Uniserve’s obligation to collect the goods. Accordingly, unless and until Hitex served a notice making the time for collection of the essence, which it never did, it remained under an obligation to have the 14^th June shipment available for delivery in addition to the 21^st June shipment, and so on.

Mr Parsons for Uniserve submitted that Hitex was in breach of this obligation, with the consequence that Uniserve had validly terminated the contract on 11^th July 2020 when Mr Stead reiterated that the supply contract was finished.

Mr Parsons advanced two submissions in this respect. The first was that Hitex could not be said to have performed its obligation when it did not tender performance by notifying Uniserve or Majlan that the masks were available and ready for collection. This gave rise to some debate whether, in an ex works contract, the seller is obliged to notify the buyer that the goods are available for collection. Benjamin’s Sale of Goods, 12^th Ed (2024) states that:

‘Ex works, etc. contracts

Where goods are sold “ex-works”, “ex-factory”, warehouse”, “ex-store” or other similar terms, there is some uncertainty when the property passes, for the exact terms of such contracts are somewhat indefinite. In some situations the property may pass when the goods have been appropriated by the seller and placed at the disposal of the buyer at the designated works, factory, etc. provided the buyer has been given reasonable notice as to when the goods will be at his disposal. In others, it may be necessary that the buyer should have subsequently assented to the appropriation, or that the goods should have been delivered to him or to a carrier, before the property will pass.’

While this passage refers to appropriation of particular goods which are placed at the disposal of the buyer and to the need for reasonable notice to be given, it is dealing with the passing of property rather than the duty to have goods available for collection. There can be no question in the present case of property having passed or of delivery having taken place. Hitex’s complaint is that Uniserve failed and refused to take delivery of these shipments, while Uniserve’s position is that goods are not made available unless the seller tells the buyer that they are available.

A further passage in Benjamin, para 21.003, suggests that the seller is under an obligation to notify the buyer when the goods are ready for collection and to indicate where they are to be collected:

‘Goods to be delivered from seller’s works

An ex works (or EXW) or ex store contract is, in a sense, not an overseas sale at all, but goods may be sold to an overseas buyer on the terms that they are to be delivered from the seller’s works. In such a case the normal rule applies, that the place of delivery is the seller’s place of business and the seller performs his duty to deliver by allowing the buyer to collect the goods. The expenses of and incidental to putting the goods into a “deliverable state” must be borne by the seller; he must provide such packaging as is customary, including, if the goods are sold for export, any special packing required for export. This appears to follow from the definition of “deliverable state” in s.61(5) to mean “such a state that the buyer would under the contract be bound to take delivery of them [the goods]”. The seller must also notify the buyer when the goods are ready for collection and indicate where they are to be collected. The buyer must pay in accordance with the terms of the contract.’

I doubt, however, whether the requirement of notice is an inflexible rule. I can see, for example, that if collection is to take place on a fixed date, notification that the goods will be available on that date may be unnecessary, although the position may be different if the buyer needs something from the seller in order to be able to collect the goods. In my judgment the question whether in any particular case the seller under an ex works contract is obliged to give notice to the buyer that the goods are available for collection must depend on the terms of the contract and all the circumstances of the case.

It was not suggested that the terms of the supply contract provide the answer to this question in the present case, but it appears that the practice on those shipments which were performed was for Hitex to notify Majlan by email that the shipment was ready and to send an invoice and packing list so that payment could be made. That suggests that the parties worked on the basis that notification that the goods were ready was a necessary aspect of tender of performance by Hitex. That would not be surprising in view of the difficulties experienced by Hitex in supplying in accordance with the original delivery schedule. It would therefore make sense, once the revised schedule was agreed, for Hitex to notify Uniserve that the goods were available as shipments fell due. If that is right, Hitex did not at any stage tender performance of the shipments which were due on 21^st June, 28^th June and 5^th July 2020, which would mean that Uniserve was entitled to terminate the contract on 11^th July.

However, I would prefer not finally to decide this issue because it appears that this was not the way in which Uniserve put its case at the trial, or at any rate it did not do so distinctly, as Mr Parsons candidly acknowledged. The primary focus of Uniserve’s case was that Hitex simply did not have enough masks available for collection to fulfil its obligations. That was Mr Parsons’ second, albeit principal, submission on this issue.

The point here is that, according to Hitex’s own evidence, 15% of its stock was reserved for the Jordanian government, and that the judge failed to take account of this when calculating the quantity available for delivery to Uniserve. The witness statement of Mr Ashraf Khader, Hitex’s Operation and Export Manager stated that:

‘On 18 February 2020 Hitex had received a letter from the [Jordanian Food and Drug Authority] (which I have been referred to for the purposes of recalling the date for this statement) stating that we were allowed begin [sic.] production but that we had to keep or sell 15% of production for local market. The Jordanian government were also able to make special requests, depending on the needs of the local market. I have been referred to a letter dated 26 March 2020 from the Ministry of Health which required personal approval from the Minister of Health for any sale or export of masks. Hitex would retain about 15% of production across the warehouses to keep available in case the Ministry of Health came and said they wanted to take for government and military use.’

Mr Khader was asked about this in cross examination, by reference to the figures shown in the Production Reports:

‘Mr Walsh: Now, it’s right, isn’t it, that all the stock that you had – so that was recorded in this final column –

Yes.

Q. – about 15 per cent had to be retained in case the Jordanian Ministry of Health came and said that they wanted it for government or military use?

A. Yes. Regarding the 15 per cent, when we are looking at any quantity available in the warehouse, we are reserving always a 15 per cent of that quantity in case the Jordanian government came and they asked to collect quantities for –

Judge Thompsell: So does that mean that quantity was – the Jordanian share was reflected in the “Sold” figure, or was it taken off the top before the starting number?

A. No, it was just reserved. Whenever they are coming to ask quantity, it will be calculated from the quantity available. Then when it’s taken out, it will be reflected on the second day on the “Sold” –

Judge Thompsell: Right. So if we look at page 1777 –

A.

610.

Judge Thompsell: -- the number there, 86,984, is a number that might have been reduced if the Jordanian authorities had said “can we have our 15 per cent please”?

A.

Yes.

Judge Thompsell: But until they ask that, you’re regarding it as being available for sale?

A.

Yes.

Mr Walsh: Do you have your witness statement there? If you just put the other file to one side for the moment. If you go on to paragraph 42 of your witness statement, you deal with this in the final sentence. You say:

“Hitex would retain about 15% of production across the warehouses to keep available in case the Ministry of Health came and said they wanted to take it for government or military use”.

That’s right, isn’t it?

A. Yes.

Q. They could come at any time and ask for that, couldn’t they?

A. Yes.

Q. So you kept 15 per cent in reserve?

A.

Yes.’

Mr Khader’s evidence in his witness statement, confirmed in the initial questioning by Mr Walsh, was clear: 15% of Hitex’s stock was reserved for the Jordanian government and therefore was not available to be supplied to Uniserve. Consequently, the figures shown in the Production Reports have to be reduced by 15% in order to calculate the quantity available on any given date to be supplied to Uniserve.

It appears that the judge misunderstood this evidence, suggesting in his own questions to Mr Khader that all of the quantities shown in the Production Reports were available to supply to Uniserve, unless and until the Jordanian government asked for its 15%. Indeed, what the judge put to Mr Khader directly contradicted what Mr Khader had just said. Although Mr Khader agreed with what the judge put to him, a not uncommon response to judicial questioning, the judge did not make clear that he was inviting Mr Khader to contradict both his written evidence and what he had just said. It seems unlikely that Mr Khader understood this. At all events, it was immediately clarified by Mr Walsh’s further questions that the position was indeed as Mr Khader had described it in his witness statement. That position was also confirmed in cross examination by Mr Samer Al Ghrabili, Hitex’s Chief Executive Officer and General Manager.

The quantities which Hitex had available as shown in its Production Reports, and the quantities which it was required by the contract to have available between 14^th June and 11^th July 2020 were as shown in the following table:

As can be seen from this table:

On the basis of these figures, and its own evidence, Hitex was in breach of its delivery obligations on 21^st June and 5^th July 2020; the time for performance of those obligations was of the essence of the contract; and Uniserve was therefore entitled to terminate the contract on 11^th July 2020.

The judge did not address the 15% point. The closest he came to doing so was at para 335(iv) of the judgment where, responding to a submission that the Production Reports made no allowance for masks which may have been sold forward otherwise than to Uniserve or which may have been needed to meet legal requirements in Jordan to supply customers in Jordan, he said:

‘If there had been an occasion when Uniserve had turned up to collect masks and masks that were in the warehouse were unavailable for one of these reasons, then there might be something to this point. However, without having tested this point in that way, Uniserve cannot demonstrate that masks that were shown as available in the Production Reports were not in fact available to it. Hitex might have dealt with the requirements of other customers and of the Government of Jordan out of the reduction in the number of masks in the warehouse that we see in the table above between 31 May and 7 June. Hitex anyway might have preferred to let down other customers rather than its biggest customer, Uniserve. If Uniserve’s case is that Hitex could never have met the contract because its stock was being requisitioned by the Government of Jordan, it has not done enough to establish that case.’

In my judgment there was no rule of law which prevented Uniserve from relying on Hitex’s own evidence that 15% of its stock was reserved for the Jordanian government and this speculation was not open to the judge. There was no evidence that Hitex had dealt with the requirements of the Jordanian government in other ways. The evidence was clear that 15% of Hitex’s stock was reserved for the Jordanian government and, as a result, not available for supply to Uniserve. If the judge had meant to disbelieve the evidence of Mr Khader on this issue, despite treating him elsewhere as a reliable witness, he would no doubt have said so and given his reasons. The fact that Uniserve did not seek to collect the goods does not prevent it from relying on Hitex’s own records.

Mr Lewis sought to avoid that conclusion in two ways. First, he submitted that Mr Khader’s evidence had been that all of the quantities shown in the Production Reports were available to supply to Uniserve, unless and until the Jordanian government asked for its 15%. But that only repeats the judge’s misunderstanding of Mr Khader’s evidence which, when taken as a whole as set out above, is clear.

Second, Mr Lewis submitted that the Production Records cannot be an accurate record of what was actually produced on each day. For example, the records show an increase in stock from 5.6 million to 11.3 million masks between 21^st and 22^nd June, which cannot represent a single day’s production. Building on this, Mr Lewis submitted that the records do not prove that Hitex had insufficient stock available on 21^st June 2020 because it is likely that millions of masks more were available than shown in the records; and that there may be a similar explanation for the deficiency on 5^th July 2020, taking account of the increase from 16.1 million to 18.8 million between 6^th and 7^th July 2020.

I would reject this submission. This explanation did not feature at the trial, where it could have been investigated with the witnesses, but was advanced for the first time in Mr Lewis’s oral submissions during the hearing of the appeal. Moreover, it was contrary to Hitex’s case at the trial, which was that the Production Records comprised reliable contemporary evidence of the quantities which were in the warehouse on any given day. It was Mr Khader’s evidence that, once the goods were produced, there were formalities to be completed, such as obtaining a certificate of origin and an export licence, before they were available for delivery to Uniserve, and that this process would generally take two days. It was not the case, therefore, that Uniserve (or Majlan on its behalf) could simply turn up at Hitex’s factory and take whatever masks had been produced. In the circumstances it is too late for Mr Lewis’s explanation of the figures shown in the Production Records, which is not based on the evidence.

For these reasons the judge should have held that Uniserve was entitled to terminate the supply contract on 11^th July 2020.