Judgment – Geraint Webb QC & Harrison Denner – Dana UK Axle Ltd v Freudenberg FST GmbH

The TCC (Mrs Justice Joanna Smith) has handed down Judgment in Dana UK Axle Ltd v Freudenberg FST GmbH [2021] EWHC 1751 (TCC) following a trial in May 2021.  The Claimant’s claim succeeded in full, resulting in judgment in the sum of £11.2m together with a declaration for an indemnity in respect of the ongoing loss caused by the Defendant’s breaches of contract.

Following the Defendant’s failure to beat the Claimant’s Part 36 offer (£6.2m) made in mid-2019, the Claimant also obtained an order for interest at 10% and costs on an indemnity basis from that date, together with the additional £75,000 award provided by CPR r36.17(4)(d).

Geraint Webb QC and Harrison Denner, instructed by Crowell & Moring LLP, represented the Claimant at trial.

The claim arose out of the Defendant’s supply to the Claimant of pinion seals between 2013 and 2016, which seals were installed by the Claimant into vehicle rear axles and then supplied to Jaguar Land Rover for installation in its vehicles.  The pinion seals experienced a higher than normal premature failure in service. By reason of these failures, the Claimant had been obliged to reimburse Jaguar Land Rover and it was recovery of these sums that were sought by the Claimant in its claim.

The Defendant denied breach of contract, but did not plead a positive alternative cause of the premature failures.  It also asserted that the claim was time barred by reason of the application of German law (arising from its terms and conditions).

The Court heard expert evidence on production data, engineering issues and polymer science, as well as on German law.  The Court also heard evidence from 8 factual witnesses.  The entire trial was heard remotely over Microsoft Teams.

The Court determined the battle of the forms issue in favour of the Claimant, both on its primary case, that the relevant contract was formed in 2012 on the Claimant’s terms, and, in the alternative, on its secondary case that the contract was formed in 2003 on the Claimant’s terms.  Nevertheless, the Court went on to consider, obiter, the Defendant’s case that the claims would be limitation barred under German law if the Defendant’s standard terms (which provided for German law) had been incorporated; the Court rejected that contention, finding that even if German law had applied, the Claimant had succeeded in suspending the limitation period by giving appropriate notice of the issues giving rise to the claim.

During the course of the trial the Claimant made an application to exclude the Defendant’s three technical experts from giving evidence on the basis, amongst other things, of an inadequately supervised flow of information between the Defendant and its experts, including during the period between expert meetings and the signing of the joint statement.  This application was granted by the Court ([2021] EWHC 1413 (TCC)), see here.  Accordingly, the Court only heard evidence from the Claimant’s technical experts.

The Court considered that it was “telling” that the Defendant had elected to call no factual evidence about its relevant production processes and accepted the Claimant’s submission that the Court could infer that the failure to call such key factual evidence was a strategic election to avoid cross examination about those procedures (paragraph 36(a)).  The Defendant had “manipulated” production data that it had supplied to the Claimant during the root cause investigation and the Judge stated that she was “extremely surprised and concerned” that the Defendant had not provided any proper explanation of this “serious incident involving attempted deception of [the Claimant]…” (paragraph 36(c)).

The Court rejected the Defendant’s argument that the Claimant had to rule out all other potential causes of the premature failures and that it was impossible to say, on balance, what had caused the failures unless all other causes were excluded; the Judge rejected the Defendant’s contention that this case was akin to Rhesa Shipping Co v Edmunds, The Popi M [1985] 1 WLR 948. Instead, the Court agreed with the Claimant that the reasoning in the conjoined appeals of Ide v ATB Sales Ltd and Lexus Financial Services T/A Toyota Financial Services UK Plc v Russell [2008] PIQR P251, which considered competing defect and causation arguments in the context of claims under the Consumer Protection Act 1987, was equally applicable when dealing with breach of contract cases, including claims brought under the Sale of Goods Act 1979; the Court agreed with the Claimant’s submission that the Claimant did not have to prove the precise mechanism of the premature failure.

As to quantum, a variety of points were taken by the Defendant in respect of the manner in which the Claimant was seeking to prove its loss, including the absence of forensic accountancy evidence; each of the Defendant’s contentions on quantum was rejected by the Court. The Court agreed with the Claimant that this was not a case which required forensic accountancy evidence and accepted that the appropriate course was to apply the principle of proportionality in accordance with the guidance from the Supreme Court in Sainsbury’s Supermarkets Ltd v Mastercard Inc [2020] UKSC 24 when it came to assessing the quantum of the loss.

The Defendant’s claim of contributory negligence was rejected.

The final order included judgment in the full sum claimed of £11.2m, plus an indemnity for on-going losses.