Presbar Diecastings Limited v GW Atkins & Sons Limited & Anor

This is my judgment on the trial of the claim and counterclaim arising out of an Asset Purchase Agreement (“ APA ”) made on 19/8/20 between: (a) the Claimant (“ Presbar ”) as seller; (b) the First Defendant (“ Atkins ”) as purchaser; and (c) the Second Defendant (“ Shield ”) as guarantor and indemnifier for Shield. In short, Presbar was selling assets used in its high-pressure aluminium diecasting business (“ the Presbar business ”) to enable Atkins to take over the Presbar business as a going concern.

Presbar sues for the unpaid balance of the stated purchase price of £2,275,538 payable under the APA. Atkins only paid the first instalment due on the completion date (7/10/20) and has not paid the remainder, totalling £1,875,538, which was due to be paid in the 24 month period after completion.

Atkins seeks to justify its non-payment by relying on its counterclaim for various breaches of various warranties given by Presbar under the APA. It also advances separate counterclaims arising out of two connected agreements, one for the decommissioning of various items of machinery sold by Presbar under the APA and the other for the sale of some scrap metal by Presbar to Atkins. References to the “ DCC ” are to the Re-Re-Re-Amended Defence and Counterclaim, being the most recent iteration of the Defendants’ case.

Since there is no difference of substance between the position of Atkins and the position of Shield as defendants, and since in 2022 Atkins sold its assets and business to another Shield group company, I shall refer to Atkins and Shield compendiously as “Shield”, save where it is necessary to differentiate between the two.

The warranty claims relate primarily to the warranties given by Presbar in relation to what was described as the order book (“ the order book warranty claims ”). There are also separate warranty claims relating to alleged defects in the machinery (or “assets”) transferred under the APA (“ the machinery warranty claims ”). These are the two most substantial of the claims made by Shield in this case.

The principal actors are: (a) Mr Jeffrey Wrinch as sole owner and principal director of, and negotiator and decision-maker for, Presbar; and (b) Mr Christopher Shield as significant ultimate owner and principal director of, and negotiator and decision maker for, Atkins and Shield.

Presbar’s high-pressure aluminium diecasting business comprised the high-volume repeat production (referred to as “ series production ”) of components (referred to as “ parts ”), achieved by forcing aluminium metal alloys under high pressure into a mould cavity. Presbar’s foundry was based within what is now known as Manchester’s Northern Quarter. This is now a largely – and increasingly - residential and leisure based area but, around 50 years ago (when the business was founded by Jeffrey Wrinch’s father Peter Wrinch) it was still a largely industrial area. By April 2020 Presbar was facing significant short term problems, principally due to the twin impact of foreign competition and Covid and was also suffering from declining turnover and increasing losses. It also had the long-term problem that it would either have to relocate its business away from its existing premises or continue to operate within the increasingly tighter environmental regulation of that changing part of Manchester.

Shield’s business was similar to that of Presbar, albeit that it was based in the East Midlands rather than in Manchester. Presbar and Shield were not in direct competition with each other. Before the transaction the subject of this case Shield had already grown its business by several acquisitions of complementary businesses. As at the date of the APA, one of its foundry businesses was sited at Burton Latimer near Kettering, Northamptonshire, from which a group company known as Bridge Aluminium operated as well as Atkins.

By April 2020 Jeffrey Wrinch had decided that he was willing to consider selling the Presbar business and was introduced to Christopher Shield as someone who was interested in acquiring that business as an addition to Shield’s existing business.

Discussions and negotiations continued under the cover of a non-disclosure agreement, the purpose of which was to ensure that Presbar’s staff, customers and suppliers did not become aware that Jeffrey Wrinch was planning to sell its business and close its foundry. This, however, also meant that Shield’s ability to undertake detailed research was limited. Indeed, Jeffrey Wrinch anonymised the customer details in the information provided. Shield’s representatives were given the opportunity to visit the foundry, but only at a time when it was not operational and no staff were present.

Christopher Shield was nonetheless able to and did research publicly available documents, including Presbar’s filed accounts for the year ending 31/10/18 Corrected management accounts for this period were provided on 27/4/20.

Within a relatively short time, by 10/5/20, the parties had agreed terms in principle (in the form of a letter of intent (“ LOI ”) based on a consideration of £2.6 million. At this stage, this excluded the business of one customer, where the intention was for that customer to transfer to a new company to be set up by Jeffrey Wrinch’s son, Tim Wrinch. In the end, however, that did not happen, and that customer – as well as other smaller customers not previously identified – were added to those the subject of the transaction.

At trial, a great deal of time and attention was focussed on the circumstances in which, in the run-up to the LOI: (a) Jeffrey Wrinch had produced and sent to Christopher Shield on 22/4/20 what was described at the time as a “production information spreadsheet”, which he described as containing “product information by part” and “listing the bulk of the order book”, and which was the forerunner of what became the “order book” at Sch. 6 to the APA (respectively “ the production information spreadsheet ” and “ the order book ”); (b) Christopher Shield had produced and sent to Jeffrey Wrinch on 1/5/20 his worked out analysis of the total value of Presbar based on the production information spreadsheet and his comparison of what Jeffrey Wrinch was seeking (£2.6 million) with various indicative offers based on various alternative transactional options (“ the offer valuation ”). The use to which these documents may be put must be considered with care because such documents, produced as they were during the negotiating process, are not normally admissible as regards the construction of the resultant agreement, whereas they are relevant in relation to the quantification of the order book warranty claims.

Following on from the LOI solicitors were duly involved by both parties and, three months later The reason for the delay was not explored in evidence and is not said to be relevant of any of the issues in the case.

Whilst I shall need to refer in some detail to the terms of the APA, one point which may be emphasised at this stage is that according to Christopher Shield he had always proceeded on the basis that Shield’s protection against agreeing to buy the Presbar business largely “blind” was to secure appropriate warranties from Presbar.

The APA (clause 8.1) permitted the customers to be contacted from the date of the APA onwards to ensure a smooth transition during what was defined as the “interim period” to completion, which was to occur once the TUPE employee notification and consultation process had been completed. In the event, completion took place on 7/10/20.

The first post-completion instalment payment was due on 16/3/21, but was not paid, with Christopher Shield identifying certain “issues which have arisen” on 18/3/21.

There was an 18-month longstop date for claims notifications expiring on 7/4/22, which is when certain claims were subsequently notified. There is however a time extension for claims in certain circumstances, which I shall have to address in due course as necessary.

Proceedings for payment of that first instalment were issued in the Manchester Business and Property Court on 23/6/21. The claim has been amended since to include the further instalments as each fell due but was not paid.

No out of court resolution having been achieved, the parties requested the court to give substantive directions, which were duly given by District Judge Banks on 28/11/23 with a view to the case being tried in autumn 2025.

The trial took place before me over 12 days. Presbar was represented by Ms Anderson KC and Mr McEntee and Shield was represented by Mr Clegg and Mr Myers Where in this judgment I refer to the submissions of Ms Anderson KC or Mr Clegg that is to be taken as including the contributions of Mr McEntee and Mr Myers and I also record that Mr McEntee conducted the cross-examination of Mr Turner.

The order book warranty claims .

The new work warranty claims .

These are the most substantial of the order book warranty claims and arise in relation to customers known as SMR, Thorn, Parker and Lemac. These are dealt with in section 6 below. In each case the essential complaint is that the order book recorded what was described as “new work” which, Shield contends, on a true interpretation of the APA gave rise to a warranty that that there was a purchase order or other contractual commitment from each customer for this new work, whereas in fact that was not the case.

Presbar contends that it did not warrant that there was an order for new work, only that it genuinely expected that it would receive an order for this work, which it did believe was the case at all relevant times up to the date of the APA.

The question of what was warranted by the order book in relation to new work lies at the heart of this claim.

Shield’s case as to the financial effect of these new work warranty claims .

Shield contends that it valued the order book at approximately £4.2 million, based on the order book total revenue figure and its contemporaneous assessment of the gross profit margin, additional costs and risks and application of a suitable multiple. It contends that the subsequent discovery of inaccuracies meant this valuation was grossly overstated. It contends that the order book as warranted did not record the true position, including as to the supposed existence and profitability of key customer orders and that it is entitled to recover the difference in value between the as-warranted and the true-value position and to set off the same against the unpaid instalments, thereby extinguishing any liability.

It accepts that it cannot recover any amount more than the purchase price actually paid to Presbar and it also does not pursue alternative pleaded claims for loss of profits.

The other order book warranty claims .

There are three such claims in relation to SMR and one in relation to Meritor, referred to as: (i) the SMR secret rebate claim; (ii) the SMR pre-delivery inspection claim; (iii) the SMR scrap rate claim; and (iv) the Meritor alloy claim (another claim in relation to Meritor - the dual sourcing claim - was not pursued in closing submissions, sensibly given the evidence at trial). They are addressed in sections 8-11 below.

The machinery warranty claims .

The APA included warranties by Presbar that so far as it was aware the specified warranted assets: (a) were in good working order and would continue to be capable of doing the work for which they were designed; and (b) had been regularly and properly maintained and were not in breach of any safety regulations for the purposes of health and safety legislation. It also included a warranty in relation to the remaining non-warranted assets that so far as it was aware, they were fully operational and fit for purpose (save for any furnace linings).

Shield advances certain claims in relation to seven items of machinery, none of which fall within the category of warrantable assets. Presbar denies these machinery warranty breach claims for various reasons which will need to be examined in relation to each of the claims.

The decommissioning contract claims .

The scrap metal contract claims .

Under this agreement, Shield agreed to purchase certain amounts of metal alloy LM24, LM6 and EN47100 scrap at a total price of £100,166. It alleges that the scrap was of unsatisfactory quality and/or unfit for purpose (or did not correspond with its description) because a proportion of the scrap contained excess zinc and claims it has suffered loss in the form of the scrapping of the rejected material, the shutting down of its furnaces, and other consequential costs.

Presbar does not admit breach and challenges the quantum of the claim.

Conclusions – in summary .

2 . The evidence .

The evidence comes principally from three sources: (a) the contemporaneous documents; (b) the factual witness evidence; and (c) the expert evidence.

In deciding this case I apply the well-known and well-established approach in Business and Property Court cases to fact-finding. In such cases: (a) it is almost always important to have particular regard to the contemporaneous documents As well as the absence of contemporaneous documents which one might expect one party to have been able to produce.

Some reference was also made to the content of later documents, such as subsequent emails, where one or other party had obtained information from persons who were not called as witnesses about their recollection of events at the time. Some witnesses also referred to what they said they had been told by other persons who were also not called as witnesses. I treat this retrospective evidence, not confirmed by witness statement from the person whose recollection is sought to be relied upon, with appropriate caution.

The contemporaneous documents .

There was an obligation in the APA for Presbar to provide what were defined as the “Records” on completion. These comprised all records and storage media containing or relating to “Business Information”, in turn defined as “all information, know-how and techniques (whether or not confidential and in whatever form held) which in any way relate, wholly or partly, to the Business”. I am prepared to accept that this, effectively, required Presbar to provide all its business records to Shield on completion.

However, there was no contemporaneous complaint (to which I have been referred) or pleaded case that this obligation was not complied with, so that save insofar as was clearly stated and established that relevant information ought to have been, but was not, provided, I do not consider that I can or should simply assume an allegation of breach of this obligation to be true or otherwise take it into account in determining particular issues.

That is particularly so because there was a complaint made by Shield about the disclosure given by Presbar. At an earlier contested interlocutory hearing before me I accepted this complaint and directed Jeffrey Wrinch to provide a detailed witness statement as well as further disclosure insofar as it transpired full disclosure had not been made. That order was complied with and there was no subsequent application for further disclosure and nor was a case made out to the effect that there had still been widespread or significant non-compliance as at the date of trial.

Ms Anderson KC was also able to point to a lack of disclosure of relevant documentation by Shield, especially in relation to the quantification of many of the claims advanced by Shield, most significantly in relation to the order book and machinery warranty claims.

The factual witnesses

The key factual witnesses were Christopher Shield and Jeffrey Wrinch. I summarise my view of the reliability of each of their evidence as follows.

Christopher Shield was the first and most significant witness statement to be called by Shield. He was scheduled to give evidence for two and a half days and did so. He stood up to rigorous and sustained cross-examination from Ms Anderson KC over that time. He is clearly an intelligent and hard-working businessman who had, by 2020, accumulated considerable experience in acquiring and incorporating the business of companies complementary to his existing business and in running those businesses with the aid of a small team.

He seemed to me to be generally a straightforward and an honest witness.

He was, however, convinced that Jeffrey Wrinch had not been open and transparent with him about the Presbar order book, and he attributed this as being the cause of many of the problems experienced by Shield post-purchase in obtaining or retaining the former Presbar customers. However, it became quite clear to me from the evidence that, whilst this may have been one cause of the problems, other causes included: (a) Shield’s own production problems; and (b) Shield’s robust approach to customer negotiations with Presbar’s former customers, some of whom proceeded to take their business elsewhere. Further, it became clear in the run-up to trial that Shield had in fact lost less business than had first been identified in its pleaded case and in its initial round of evidence. I have no doubt that his firm belief that he had bought a business with significant existing problems which Jeffrey Wrinch had concealed influenced his recollection and his evidence to a significant extent.

He was also prone to giving evidence in unqualified terms on certain elements of the claim when, on probing, it became apparent that he had little or no direct knowledge of the matters in question. His principal witness statement did not fully comply with the requirements of Practice Direction 57AC concerning witness statements in Business and Property Court cases (“ PD57AC ”); there were sections of that statement which contained statements of opinion and belief and comment on documents which ought not to have been included had it complied with PD57AC.

In all the circumstances, I do not place significant weight on his recollection where inconsistent with the contemporaneous evidence or where otherwise in my assessment inherently improbable and contradicted by other reliable witness evidence.

Jeffrey Wrinch was the first and most significant witness to be called by Presbar. He gave evidence for two days, as scheduled. He is an engineer by training. By 2020 he was the sole shareholder and company chairman, with a full-time managing director (Mark Wilson) who he tended to meet once a week, as well as several other working directors, all of whom undertook the day-to-day activities of the business.

As with Christopher Shield, his witness statement also contained reference to documents going beyond the proper scope of PD57AC as well as to matters about which, on investigation, it became clear that he had no direct knowledge. He plainly found the process of giving evidence an ordeal, as he made clear early on in his cross-examination. There were times where he argued the case against Mr Clegg and other times when he lost concentration. On one occasion, remembering the time when he had to inform his fellow directors (and longstanding Presbar employees) that he had secretly negotiated a sale of the Presbar business the effect of which would be to close the Manchester foundry with the probable loss of all of their jobs, he became visibly emotional.

He was cross-examined about the decision to enter into the APA on the basis that the minutes, signed by him, of the board meeting which authorised the transaction did not fit what really happened at the meeting, since it was in reality a formality without the directors undertaking any detailed consideration of the APA or the other documentation referred to as having been read and considered. He acknowledged that the minute was untrue in these respects. Although this is relied upon by Mr Clegg as showing a propensity to be untruthful, I do not accept this. In my judgment what he did, signing what were clearly pre-prepared minutes as a businessman and not a lawyer, cannot be regarded as demonstrating a propensity to be untruthful in cross-examination in court. To the contrary, he was in my assessment in the main an honest witness, sometimes almost painfully so when he admitted to various mistakes he had made in connection with the APA, as well as generally reliable. Although Mr Clegg put to him on several occasions that he was not telling the truth, I do not accept that he demonstrated any pattern of giving deliberately false evidence. It also seemed to me that, within the limits of his knowledge and his recollection of the detail of events, he was generally – although not always - reliable.

I refer to the other witnesses as and where relevant. They were all honest witnesses, albeit that some had a better knowledge and recollection than others and some appeared more willing than others to agree points unfavourable to the case advanced by their former employer (in Presbar’s case) and their current or former employer (in Shield’s case). Presbar was also able to call four completely independent witnesses, two of whom were employees of former customers, the third the owner of what had been a competitor company, and the fourth was an independent contractor, all of whom were impressive and had no obvious animus against Shield. Overall, I am prepared to place weight on the evidence each witness gave save where it contradicts the contemporaneous documentary evidence, where it is internally inconsistent, where in my view it does not accord with the inherent probabilities, or where I prefer the evidence of other factual witnesses on the point in issue.

The expert evidence.

The industry experts.

Mr John Lyons for Presbar and Mr Andrew Turner for Shield were similar in that they both had hands on experience over many years in the foundry business and had also both had extensive experience in consultancy in the same industry more recently. Unsurprisingly, given the niche nature of the business, neither had been regularly involved in producing independent expert reports for use in legal proceedings or in giving evidence in court in that capacity. This in some ways made a refreshing change from the type of report and approach to giving evidence that one sees from “expert” expert witnesses, but it did also mean that their reports and their joint statement were both less conventional in style than those more frequently encountered.

Both experts were knowledgeable, genuine and helpful. There were some justified criticisms of each, in particular that in his report Mr Lyons had rather trespassed into decision-making rather than limiting himself to giving his expert opinions, and that in his report Mr Turner had stated a number of conclusions based on an inadequate investigation, but I do not consider that the evidence of one can confidently be preferred to the evidence of the other on all issues. Instead, I take their evidence into account where relevant and where I consider it soundly based.

The accountancy experts.

Presbar instructed Mr Mark Fairhurst and Shield instructed Mr Phil Southall. Since the latter had to make the running in relation to Shield’s counterclaim it is convenient to refer to his evidence first.

He was given very specific instructions as to the approach he should take in relation to his valuation exercise, which he set out in detail in his report.

He was subject to criticism in cross-examination, repeated in closing submissions, by Ms Anderson KC for accepting those instructions and producing a report on the basis of those instructions when, it was suggested, he ought to have appreciated both that these instructions were inconsistent both with the conventional instructions to be given to an accountancy expert when valuing a breach of warranty claim and that they required him to undertake little more than an arithmetical exercise as opposed to an exercise of independent accountancy expertise and opinion.

It does not seem to me that this is a fair criticism of Mr Southall. I do not myself consider that his overriding duty to the court as an independent expert required him to do either of the two things suggested that he should have done, namely either to decline to accept instructions on such a basis or to proffer his opinion on wider valuation issues even in relation to issues outside of his instructions. There may be some extreme cases where an expert is bound to refuse instructions where, for example, they require the expert to assume certain facts or certain propositions which are plainly untrue or inappropriate. Here, Mr Southall was instructed by reputable solicitors and his instructions, whilst certainly more limited than would be normal in a case such as this, did not obviously require him to assume facts or propositions which he knew or should have known were untrue or inappropriate. I do not accept that his report was simply an arithmetical exercise. He was completely transparent in his report and in his evidence about what he had been instructed to do and what he had done. It cannot seriously be considered in my judgment that he was obliged to do either of the things suggested of him.

The only respect in which I thought that his report was subject to some justified criticism was where he had included a section seeking to support the multiple adopted by Christopher Shield in his offer valuation, since: (a) he had not – at least so far as was apparent from his instructions as recorded in his report - been instructed to do so and, more importantly: (b) it was of limited value, since it did not provide a full analysis of the comparable transactions to which he referred or a full analysis as to what weight could reasonably be put on them.

He was also cross-examined on the basis that in the joint statement of experts he had criticised some of the conclusions reached by Mark Fairhurst in his principal report, in circumstances where Mr Southall had not addressed the subject matter of those conclusions in his principal report (due to his limited instructions as noted above). The suggestion seemed to be that it was improper for him to criticise Mark Fairhurst on issues on which he had not opined in his report. I do not accept this criticism. I appreciate that it might give the appearance of criticism without responsibility, and might have been seen as something of an ambush, but I do not think that this was his fault or that he was not entitled to engage with the substance of Mark Fairhurst’s report and to criticise Mark Fairhurst’s conclusions if he considered that appropriate. He was entitled to consider and to discuss the content of Mark Fairhurst’s report and to state his opinions in the joint statement.

I do however consider that his opinions on these points should be accorded less weight than those of Mark Fairhurst, given the previously limited scope of his investigation and analysis.

3 . Legal principles .

There are several important issues as to the correct interpretation of the APA. The relevant principles are now well-settled and not disputed. There are many summaries at appellate level which are frequently cited at first instance.

Presbar’s counsel referred me to a conveniently succinct summary in the judgment of Birss LJ in Assia v BT [2023] EWCA Civ 451 at pars. 17-20, which I gratefully adopt and apply. As he said, the court undertakes “a unitary process to ascertain what a reasonable person with all the background knowledge reasonably available to the parties at the time would have understood the parties to have meant” ( Assia , par. 18).

In closing submissions Mr Clegg referred to the evidence given by Christopher Shield and Jeffrey Wrinch as their subjective understanding of the meaning of Sch. 6 (the order book). As he accepted, this is plainly irrelevant and inadmissible for the purposes of interpretation, although I accept that their evidence may be relevant in relation to the background knowledge available to the parties and also that the evidence of Jeffrey Wrinch may be relevant to the particular question of wilful misconduct and/or wilful concealment.

The general position in relation to background knowledge was summarised in The Interpretation of Contracts by Sir Kim Lewison 8 th edition chapter 3 section 17 – Background – as follows:

“In construing any written agreement, the court is entitled to look at evidence of the objective factual background known to the parties or reasonably available to them at or before the date of the contract. This principle applies even if the contract appears to be unambiguous. There is no conceptual limit to background. It can include anything relevant which would have affected the way in which the document would have been understood by a reasonable person. However, this does not entitle the court to look at evidence of the parties’ subjective intentions; nor to ascribe to the words of the contract a meaning that they cannot legitimately bear.”

At 3.163 Sir Kim referred to two decisions of Hildyard J which are of some relevance to the instant case: (i) the first being Challinor v Juliet Bellis & Co [2013] EWHC 347 (Ch) at par. 277; and (ii) the second being Lehman Brothers v Exotix Partners [2019] EWHC 2380 (Ch) at pars. 109 - 117, where he referred to his earlier summary in Challinor and added some further pertinent observations.

The summary in Challinor is worth repeating and is as follows:

“(1) At least where there is no direct evidence as to what the parties knew and did not know, and as a corollary of the objective approach to the interpretation of contracts, the question is what knowledge a reasonable observer would have expected and believed both contracting parties to have had, and each to have assumed the other to have had, at the time of their contract;

that includes specialist or unusual knowledge which only parties entering into a contractual engagement of the sort in question might reasonably be assumed to have; and it also includes knowledge which it is to be inferred, from the nature of the actions they have in fact undertaken, that they had or must have had;

however, it does not include information that a reasonable observer would think that the parties merely might have known: that would open the gate too far to subjective or idiosyncratic speculation;

the fact that material is readily available or notorious may support an inference as to what the parties actually knew;

but (subject to (6) below) where it is demonstrated that one or more of the parties did not in fact have knowledge of the matter in question such knowledge is not to be imputed; nor is the test what reasonable diligence would or might have revealed: in either case, that would be inappropriately to introduce impermissible concepts of constructive notice or a duty (actionable or otherwise) to make inquiries or investigations;

the exception is that a reasonable person cannot be assumed to be in ignorance of clear and well known legal principles affecting or incidental to the contractual engagement in question.”

“Evidence of pre-contractual negotiations is not generally admissible to interpret the concluded written agreement. But evidence of pre-contractual negotiations is admissible to establish that a fact was known to both parties; … and to elucidate the general object of the contract. Evidence that parties negotiated on the basis of an agreed meaning is only admissible in support of a claim of estoppel or rectification.”

This is a claim in contract for damages for breach of a warranty of quality where, as Lewison LJ observed in Karim v Wemyss [2016] EWCA Civ 27 , the measure of damages is the difference between the true value of the asset and its value with the quality as warranted (par. 23). He went on to explain that in such a case the claimant can recover damages based on his loss of bargain.

In the context of a sale of shares the editor of McGregor on Damages (22 nd edition) at 30-008 observes that the same approach applies:

“Where the shares are in some way not up to the promised standard this is in the nature of a breach of warranty of quality and the normal measure is of value as warranted less value in fact. That normal measure reveals the objective difference in value between what a reasonable person would have paid for the shares as warranted and what the shares are actually worth and it disregards any particular preferences of the buyer or seller other than as evidence of what reasonable people would think and be prepared to pay based on the warranty.”

In the authority cited in the text for this principle, Millbrook Healthcare Bidco Ltd (formerly Cairngorm Acquisitions 9 Bidco Ltd) v Croll [2023] EWHC 290 (Comm) (Bright J) at par. 138 the two values are conveniently described as the Warranty True value and the Warranty False values. Bright J observed that: (a) the quantum is to be measured on the basis of the hypothetical, reasonable willing buyer and the hypothetical, reasonable willing seller, rather than being bound by the subjective views of the actual buyer and seller (par. 139); (b) whilst it is important not to be unduly affected by hindsight (par. 140), the thinking and conduct of both parties at around the time of the SPA can in principle be relevant to this inquiry (par. 141); (c) the difference will depend on the impairment to the Warranty True value that a hypothetical reasonable willing buyer would have established in negotiations, if such hypothetical reasonable willing buyer had known that the sellers were in breach of warranty, but had nevertheless remained willing to buy. As long as the Warranty True value exceeds the impairment, the quantum of the impairment represents the quantum of the claim (par. 142).

As McGregor continues, this warranty of quality basis was distinguished by Lord Hoffmann in Lion Nathan v CC Bottlers [1996] 1 W.L.R. 1438 HL from a due care warranty, where the measure of damages would “prima facie have been the difference between what the shares would have been worth if the earnings had been in accordance with the warranty and what they were actually worth” (1441G).

The usual starting point for the Warranty True valuation is the purchase price. However this is no more than a starting point, as was implicitly recognised by Cockerill J in 116 Cardamon Ltd v Macalister [2019] EWHC 1200 (Comm) at par. 132, and as was explicitly stated by HHJ Keyser QC sitting as a High Court Judge in MDW Holdings Ltd v Norvill [2021] EWHC 1135 (Ch) at par. 285(1), where he pithily observed that “the price paid may be a guide but it can be no more than that. Bargains can be good or bad; they are not always just right” (not doubted on this point on appeal at [2022] EWCA Civ 883 ). The commentary in the textbook “ Fraud and breach of warranty: buyer’s claims and sellers’ defences ”, 2 nd ed. (Salzedo, McIntyre and Shaw) at 8.49, referring to both cases as well as to others, is to similar effect.

4 . The AP A – the meaning of uncompleted orders .

The express terms of the APA in relation to new work .

Initial conclusions based solely on the terms of the APA without reference to the factual background .

potentially relevant admissible communications “crossing the line” ;

potentially relevant admissible facts not “crossing the line” .

does the relevant and admissible factual background change the position ?

The express terms of the APA in relation to new work .

The APA is a detailed and professionally drawn agreement, negotiated between legally represented parties.

There is an introductory definition clause together with a further 28 operative clauses together with six schedules (which, by clause 1.5, are stated to have equal status to the operative clauses).

Clause 3.1 succinctly summarises the essential purpose and effect of the APA, stating that “the Seller shall sell the Assets … and the Buyer, with a view to carrying on the Business as a going concern, shall purchase the Assets .. with effect from the Effective Time”.

The assets are defined by reference to Sch. 1. They include the Presbar Diecasting name and Presbar’s goodwill. Otherwise, they comprised specified physical assets (including the equity in the Lombard lease assets identified in Sch. 7). The physical assets were divided into the warrantable assets (listed in Sch. 8 as comprising two Buhler Econoline machines and five Mazak machining centres) and the remaining non-warrantable assets. Various identified assets were excluded (cl. 3.2), which reflect the fact that not all of the assets were included (and specifically not the premises or book debts or stocks) and that Shield was not taking on the liabilities.

Thus, the assets as defined did not specifically include the contents of the order book which appears at Sch. 6 and which is defined as “the list of uncompleted orders from customers as listed in Sch. 6 together with any additional orders received by the seller from customers in accordance with clause 8”. Nor is there any definition of “orders” or of “uncompleted orders”.

This raises the significant issue of interpretation as to what is meant by “uncompleted orders” in context of the warranties given in relation thereto, which I now address.

The definition of “contracts” was “all contracts, engagements or orders entered into on or before the effective time [the completion date] by or on behalf of the seller with customers as referred to in the order book”.

It follows that it was envisaged that Presbar might have entered into contracts, engagements and orders with customers. It is obvious from a legal perspective that an order for the supply of goods will, once accepted without qualification, result in a legally binding contract. However, an engagement may or may not, in ordinary parlance, also amount to a legally binding contract.

Customers were defined as being the customers listed in the order book. However, since by par. 3.4 of Sch. 5 Presbar warranted that there were no customers whose details were not included in the order book, it is clear that the order book was intended to comprise all of its customers.

Even though the contracts (as defined) were not specifically identified as assets, it is clear from clause 17, providing for all contracts to be assigned on completion insofar as possible or – if not – held in trust for Shield, that their benefit was to be passed to Shield who, by clause 17.1, was also obliged to perform the contracts post completion.

Mr Clegg submitted that this showed that all contracts, even orders and engagements, had to be contracts in the legal sense, otherwise they could not have been assigned. Insofar as it matters – and I do not think that it does - I do not accept that this necessarily follows. That is because there is nothing in the APA which indicates that all “contracts” must be assignable. Nonetheless, I am prepared to accept that because “engagements” fall within the overall definition of “contracts”, it follows that any engagement which is not a legally binding contract would not fall within that definition.

Clause 8 was headed “stock” and “tooling products” and deals primarily with how stock, including the production of further stock, was to be dealt with pre and post-completion. Stock was defined in conventional terms but there was no separate definition of tooling. The closest definition in the Oxford English Dictionary, which fits the way in which “tooling products” are referred to as a noun in clause 8, is the collective noun for machine tools designed and supplied for the manufacture of products. That is because clauses 8.11 and 8.12 made separate provision for how tooling products “manufactured, sampled and approved” pre completion, and those manufactured but not sampled and approved pre completion, were to be dealt with. In short, it was recognised that in the former case Presbar could either sell the tooling to the “relevant customer” itself or require Shield to do so on its behalf, whereas in the latter case Shield was to conduct or arrange for the tooling’s sampling and approval and sell the tooling on Presbar’s behalf (subject to a profit share).

I have referred to clause 8 at some length, not because it is directly relevant to the issues in this case, but because it is the only reference to tooling in the APA other than in the order book and, hence, is of some importance in showing what the parties had in mind in the contract when they referred to tooling. What emerges from a reading of this clause together, if necessary – as it would not be to someone involved in the diecasting business – with reference to a standard dictionary, is that Presbar’s business model included conducting, or arranging for, the manufacture, sampling, approval of tooling and its sale to customers in connection with the sale of the stock.

I now turn to the order book itself.

From the definition of order book as a list of uncompleted orders one would expect to see a schedule which contained a list of orders with information provided against each order, such as the customer, the order date and reference, the product part(s) the subject of the order, together with the agreed price(s) and delivery time(s) and the quantities and amounts already supplied and invoiced.

Although the order book is indeed in the form of a detailed spreadsheet, with some accompanying notes at the bottom, and whilst it does include some of the categories of information referred to above, it is different both in the information which it contains and which it does not contain from what one might expect if it was only a list of uncompleted orders. I attach a copy to this judgment, albeit that it is a little hard to read in A4 size, hence I will attempt a description and refer to the most important text.

There are twenty-six columns running horizontally. Each column has a heading. Most, when read with the entry against each row, are self-explanatory.

Thus, from left to right the first three columns are for identification of the product or order in question, so that: (i) “part” is the number of the particular product manufactured by Presbar for a particular customer; (ii) “customer” is the name of the customer for each part; and (iii) “sector” is the sector in which the customer operates, those identified being automotive, trucks, lighting, white goods.

The next three columns provide key financial information in relation to each product or order in question.

The first (“17-18 revenue”) is not however divided by part and only shows the total figure for each customer for the part in the 17-18 year (Presbar’s year end was 31 October).

The second (“18-19 revenue”) does show a figure for each part for what are described in the notes at the bottom as the top five customers (A (SMR); B (Meritor); C (Holophane); D (Thorn); and E (Parker) The reference to A-E is explained by the fact that in the original version of this order book the customers were anonymised.

The third column is headed “new work”, where specific sums are entered in relation to specific customers. There are new work entries for the customers SMR, Thorn and Parker, all of which are the subject of new work warranty claims along with Lemac – the last of the remaining 11 customers. Only in relation to Parker is a part number entered against the new work item.

This column is also used to identify “other” revenue for the 18-19 accounting year, which the note at the bottom explains is the remaining 10% of the parts supplied to these top five customers. However, the note against the “other” figure for SMR states “Other – Hungary is work transferring from Spain. Production has stopped, we are waiting for the lockdown to end before transfer can happen”. Whilst the meaning of this is not necessarily completely clear when read in isolation, it is reasonably easy to see (especially given the absence of any reference to quantities sold and the other details found against the specified parts) that this does not represent actual sales.

The next cell is headed “18-19 quantity sold”. In relation to the five major customers, figures are entered against all the rows where part numbers are given, but not against the new work items, where the figure is stated to be “nil” in relation to SMR, Thorn and Parker and there is no entry against Lemac.

Towards the bottom of the spreadsheet the 17-18 and the 18-19 revenue for the customers is then totalled, as is the new work. Each total is separate. The text inserted in the cell immediately next to the total figure for new work reads “expected sum of new work (tools with us or imminent)”.

Immediately below the total for the new work are two further rows below the new work total – both titled “plus” (and hence referred to at trial for convenience as the “two plus” entries) – which contain further amounts for new work in relation to Thorn and SMR respectively. The cell next to Thorn reads “tooling order placed, start production autumn” and the cell next to SMR says “start production 2021, tooling order currently on hold waiting the customer deposit”.

It is common ground that the “new work” entries would on first reading – and, says Shield, on last reading as well - appear to be the uncompleted orders. I shall return to this key argument, but it is first worthwhile making some short observations on the 18-19 revenue column.

Shield submits that, because of the definition of the order book, the figures under 18-19 revenue (and, by the same logic, under 17-18 revenue) must also be included as uncompleted orders. It is not immediately obvious how this ties in with the wording used. The word “revenue” has a straightforward meaning, i.e. monies received or, possibly, at least invoiced. In this case the obvious meaning is thus the revenue from sales of the relevant part in the relevant accounting period. If this was intended as a reference to orders dating from either financial year which remained uncompleted, at least in part, it would be unclear whether the figure entered was the original order value, or the revenue received from the order in the relevant financial year, or the value of uncompleted work at the end of each financial year. The reference in the notes to “total sales” and “sales figure” would appear to indicate that these are the total sales figures rather than the value of uncompleted work. This would also appear consistent with the fact that there appears to be a broad equivalence between the figures and the total of the 18-19 quantity sold multiplied by the next column, current price The small differences are probably explained by the fact that the current price as at the date of the APA is probably not the price which prevailed throughout the 18-19 year.

Whilst no separate claim is made in relation to these items, the point illustrates that it is not immediately obvious that the order book is intended only as a list of uncompleted orders and, instead, it would appear to be something more than that. Indeed, the warranty that it is an exhaustive list of Presbar’s customers tends to indicate that it would appear to have a wider meaning and effect. This is also supported by the warranty in Sch. 5 par. 3.3 (referred to in more detail below), under which Presbar warrants that “the details in the order book show an accurate representation of the historic levels of orders from customers for the time period stated therein”. Historic levels of orders are obviously a different thing from uncompleted orders.

As I have said, there is no definition of “new work”. Presbar submits that the meaning is made clear, in context, by the adjoining cell (which it refers to as the “ qualification ”), on the basis - it submits - that it qualifies what might otherwise be the unqualified apparent intention that these are intended to be uncompleted orders. Shield, however, submits that this cannot be allowed to detract from the overring identification in the definition of the order book as comprising the list of uncompleted orders. It also contends that the descriptions of the two plus items support its case in this respect.

Before addressing this key issue, I should refer to the remainder of the table comprising the Sch. 6 order book, because the column entries and information are also of some relevance to this issue and are also relevant to other claims made in the case.

The final eighteen columns provide detailed financial and production related information in relation to each separate part. Thus, as well as the “18-19 qty sold” and the “current price”, there is the “alloy”, its “mass” and the “metal price”. (I shall have to refer to what is meant by “current price and metal price below under the SMR metal rebate issue). Finally, there follows more detailed production and costing information in relation to each part including the particular machine, die cavity and foundry used, the various production processes with – in some cases – costs set against each such process in relation to some of the parts, including the costs of painting / anodising or impregnating, and also identifying the delivery method / cost. However, there is no such equivalent information set against the new work items.

It is apparent that, whilst this information does not in itself provide everything which even a knowledgeable purchaser would need to work out the precise production details and all of the costs, especially overheads, it does provide a reasonable information base to assess the likely profit net of the direct costs of production but gross of overheads.

Initial conclusions based solely on the terms of the APA without reference to the factual background .

I immediately acknowledge that the orthodox approach to interpretation does not require me to undertake this as the first of a separate two stage process and, indeed, positively requires me to undertake one exercise in interpretation by reference to the terms of the written agreement read with the relevant admissible factual background. This is what I have done. However, in the context of this case, I have found it to be a useful approach, first because it helpful to reach an initial view as to whether the contractual meaning is clear from a literal reading of the words used alone, and second because there has been some dispute in submissions as to the scope of the admissible relevant factual background and, if Shield is right, the question of interpretation ought to be determined solely by reference to the four corners of the APA.

As I have said, Presbar – in my view rightly – accepts that the new work items must, on first reading, be treated as uncompleted orders. It also accepts – again in my view rightly – that this must also refer to orders which have been accepted by Presbar and, hence, which amount to contracts between Presbar and the relevant customer. There is no reason to treat uncompleted orders as only including part completed orders, so that the term could include orders which have been placed but where no production or deliveries has yet occurred. Although it is possible from the wording alone that these orders might also include tooling orders, the amounts involved (ranging from £200,000 to £1,491,000) are a reasonably strong indicator that they are unlikely to be solely tooling orders.

What about the qualification?

In her written and oral closing submissions Ms Anderson KC submitted that: (a) the words “expected sum of new work” means both that the work is “expected”, as is the “sum” to be received from it; (b) there is an obvious difference between something which is only an expectation and something which is a certainty; (b) the words in brackets confirm that the work and the amount involved cannot be certain, because the words in brackets “tools with us or imminent” make clear that if the tooling is not already with Presbar it is obvious not only that no parts can already have been manufactured but also that the QA approval process has not yet been completed for part production to begin.

In his closing submissions Mr Clegg submitted that these words could not bear the weight which Ms Anderson KC sought to place on them, and that the reference to “tools with us or imminent” could only be intended as a reference to tools to be transferred from an existing supplier.

In my view the words “expected sum of new work” cannot in themselves make clear that there is no purchase order or other contract for the new work.

I accept that they are making it clear that there is no guarantee about the sum to be received from the new work. That, in one sense, would be obvious anyway to anyone in business. That is because there can rarely be any guarantee about future revenue even where a contract has been concluded because, to take an obvious example, the customer might cease trading and enter insolvency before delivery in full and/or payment. There may also be other reasons. If it is a long-term contract there may be a price variation clause, and it is common ground that there would be such a clause in relation to the metal price if it was a long-term contract. Indeed, the APA itself refers to the Mid-Point Metal Bulletin, being the industry publication used for such purposes, albeit not in this context. It is also at least possible that if it is a long-term contract the customer has qualified its quantity commitment to give itself the right to vary the total number of parts ordered.

However, this is very different from the situation where there is no binding contract at all. In my judgment, that meaning cannot be read from these words alone.

What then, about the words in brackets – “tools with us or imminent”? In the context of the APA itself it seems to me that all this can mean is that the tooling which is needed to manufacture the parts is already in Presbar’s position or is imminently to be so. That could mean that the tooling has already been manufactured and supplied or that completion of this process is imminent or, given the indication in clause 8 that the tooling will belong to the customer once manufactured, that it has already been transferred by the customer to Presbar or that this is imminent.

I do not accept Mr Clegg’s submission that it ought to be read only as a reference to the situation where existing tooling is to be transferred from an existing supplier, first because there is no compelling reason to limit its meaning in this way and, second, because of the reference in the “two plus” new orders below the line to “tooling orders”. If that had been the intention, then it would have been more natural to have expressly referred to “tools transferred to us or transfer imminent”.

In my view it can be discerned from the APA alone, at least to anyone with a basic knowledge of the diecasting business, as the parties to the APA plainly did, that parts cannot be produced without tooling, so that if the tools are only “imminent” then series production cannot have taken place. Further, as I explain below, in my view this reference is far more likely to be reflecting the different timelines which each project had achieved (i.e. tooling with us or imminent is obviously further along in the project than tooling order placed or on hold). That is especially when one has regard to the common background knowledge to which I refer below, but in my view, it is also reasonably discernible from the actual terms of the APA alone.

However, it is simply not possible in my view to spell out from these words, read in the context of the APA, anything more from that. In particular, it cannot be discerned from the APA itself that in this market sector no series purchase order would ever be placed unless and until the tooling had been received by Presbar, let alone that the tooling has not only been received but also that it has been used to make samples which have passed the QA process to allow series production to commence.

Nonetheless, in my judgment there are a number of compelling reasons why the wording of the qualification, when read with the other differences between the rows with part numbers and the new work items, makes clear that: (a) these words are being used purposefully to differentiate this new work from uncompleted orders; and (b) this is because there are no purchase orders for these new works from which figures could be given to populate the other columns.

The first point appears from a combination of: (i) the fact that these detailed explanations have been provided, without any further reference or explanation in Sch. 6 or the remainder of the APA as to why they are there; (ii) the absence of any obvious reason why they should have been inserted unless there was some good reason for doing so; (iii) the fact that in my view the obvious reason for their insertion is to explain why the new work is not to be treated in the same way as the 18-19 revenue. If it was intended to refer to uncompleted orders, one might reasonably ask why the column heading did not say “19-20 revenue to date” or “19-20 orders to date” or similar.

If the indications are that these words in these cells have been inserted for a purpose, then it does not seem to me to be sufficient simply to argue – as Mr Clegg does – either that they have no real purpose of any importance or that such apparent purpose cannot prevail against the definition of the order book in the APA itself. That is particularly so when it is clear from a comparison of the body of the APA with Sch. 6 that the former is drafted by lawyers whereas the latter bears all the hallmarks of having been produced by the businessmen who have reached the agreement and who are likely, therefore, to have a better knowledge of the significance of the words used in the context of this particular APA than are the lawyers. The mismatch between the apparently exhaustive definition of the order book and its actual – and far greater - content is a compelling indication that the lawyers did not obtain clear instructions on their intended purpose and effect. If they had, then the overwhelming likelihood is that on Shield’s case these surplus and potentially confusing words would have been deleted, whereas on Presbar’s case their intended meaning and effect would have been expressly inserted into the APA.

In my view this is, therefore, one of those cases in which: (a) the lawyers draft the body of the agreement, whereas the clients produce one or more of the incorporated schedules; (b) insufficient consideration is given as to whether or not there is a complete alignment of the definitions and other terms in the body of the agreement when read against the details inserted by the parties in the schedules; (c) the schedules include a number of implicit definitions and common assumptions, with which the parties themselves are familiar, which are not expressly spelled out either in the body of the agreement or the schedules. In such circumstances, the court must do its best to understand from the entirety of the contract what the parties were intending to achieve and not, simply, to give up on the basis that the schedules have not been drafted with the same precision as the body of the agreement

The second point is that if purchase orders for parts had already been placed, even if no parts had been produced or supplied, then it would still have been possible – and indeed desirable – to have included the same details for all of the new work, not just for Parker, as was provided in relation to the other parts, i.e. part number, current price, alloy, mass, and metal price, even if it might not have been possible until production actually began to include the remaining details (although if the work had been quoted for and ordered even that seems unlikely).

All of this drives the inescapable conclusion in my judgment that it was being made clear in the APA that, although tooling had already been either obtained, or was imminently to be obtained, no purchase order or other contractual commitment for the supply of the parts had as yet been entered into such as would allow these details to be provided, so that they were not intended to be regarded as uncompleted orders.

These conclusions are consistent in my judgment with the descriptors applied to the “two plus” new work items, in respect of which Shield has also pleaded the same case in relation to breach of the new work warranties. This in my view illustrates the commercial unreality of Shield’s analysis, because in relation to both Presbar was making it clear that the start of production was even further away, in one case not until autumn and in the other not until the start of 2021. In the same way, the fact that there must have been a reason for including this information, and the absence of other information indicating that a purchase order had been placed, supports the same or a similar conclusion.

Ms Anderson also submitted that another indicator is that the amounts involved are rounded to the nearest £1,000 (£750,000 for SMR, £200,000 for Thorn and £250,000 for Lemac), on the basis that this tends to confirm that they are not the subject of an existing purchase order. The difficulty with that argument in my view is that the figure for Parker is more specific - £1,491,000. In any event, it is equally consistent with the actual volume not being guaranteed.

Although I see the force of Shield’s overriding submission that the order book is defined as “the list of uncompleted orders”, in my judgment this cannot, objectively, be a controlling descriptor in relation to each and every item found in Sch. 6, given that: (a) there is no definition of uncompleted orders; (b) the words “uncompleted orders” are not even found in Sch. 6 itself; (c) there is no definition of “new work”; and (d) whatever else it is, Sch. 6 is not simply one list of uncompleted orders with information showing how and to what extent they are uncompleted. Further, the columns for 17-19 revenue and 18-19 revenue are not themselves self-evidently only lists of “uncompleted orders” but, if they are, the key difference between the 18-19 revenue and the new work column is that there are no figures for actual sales, let alone for current prices and the other financial and production information, listed against the new work items (save in relation to Parker).

There is, therefore, no compelling reason why they should be treated as if they were uncompleted orders in the same way as the 18-19 revenue column may be. I am, therefore, not satisfied that they are to be read as if they fall within the “list of uncompleted orders” in the order book which are therefore warranted as being by Presbar as being “contracts” as defined by the APA.

Instead, in my view it is readily apparent to the informed reader that the order book was – and was intended to be - a reasonably detailed summary, in spreadsheet format with supporting notes, of the existing work and the expected new work, the right to both of which was intended to be sold to Shield, either by way of assignment of existing contracts or – more generally, and particularly in relation to expected new work – by the sale of the combination of the Presbar business name, the goodwill and the assets needed to make the parts, together with the benefit of the non-competition provisions also included in the APA by clause 13. That does not mean that each item of new work was being expressly warranted as being the subject of uncompleted orders, whether on the basis that it was the subject of an existing contract, an existing engagement or an existing purchase order.

Further, and importantly, it is to be noted that this interpretation cannot be objected to on the basis that it deprives Shield of all rights or remedies in relation to the new work. Thus, the paragraph 3.2 warranty still requires the information provided in the order book, without limitation, to be “true, accurate, complete and not misleading in any material respect”. This still provides Shield with full contractual protection insofar as what is said in relation to the new work in the order book is proved to be not true, or inaccurate, or incomplete, or misleading in a material respect. It does not, however, enable Shield to succeed on a breach of warranty claim simply by saying, as it has done in this case, that the simple absence of a purchase order or other contractually binding contract for the supply of this new work means that the warranty has been breached.

Finally, this interpretation in my view also makes more sense of the paragraph 3.3 warranty, which can then be more readily construed as referring to the details in the order book in relation to the 17-18 and 18-19 revenue details, even if they are not to be treated as uncompleted orders.

In short, if I had to determine whether the entirety of the new work is to be regarded as uncompleted orders, where orders means that a purchase order has been placed and accepted for these parts to these values, solely based on the APA itself I would conclude that it did not. I fully accept that this would be a fine point of construction, and that there are respectable arguments either way but, in the end, I would have been satisfied that this is the case.

The relevant background facts .

Potentially r elevant a dmissible communications “crossing the line” .

There is very little such material and most of it does not, ultimately, seem to advance matters much, if at all. I include it however for completeness, but also because some of it is also relevant to the issues of quantification of the breach of the new work warranty claims in any event, so that it is helpful to see it in its proper chronological context.

The first emails following the mutual introduction and initial conversation between Jeffrey Wrinch and Christopher Shield were both sent by Jeffrey Wrinch on 9/4/20. They are relevant insofar as: (a) Jeffrey Wrinch acknowledges that Christopher Shield had already made clear that Shield’s interest was in Presbar’s “order book” (i.e. its acquisition was the ultimate objective of the proposed transaction); (b) Jeffrey Wrinch was willing to and did disclose (albeit on an anonymised basis) “sales by customer” for the financial years ending 31/10/18 and 31/10/19, which also included details of some “new business (order received)” from four identified customers. The total sales for 18/19 were stated to be £7.828 million plus the new business. Thus, it may be said in Shield’s favour that even at this early stage, Jeffrey Wrinch was equating “new business” with “orders received”, albeit that the nature of such orders was not identified.

On 22/4/20 Jeffrey Wrinch sent the first version of what became the order book, which he described as comprising: (a) “product information by part”; and (b) a “production information spreadsheet [which] lists the bulk of the order book”. The reference to “the bulk” is because it only included the top five customers which, including the new business, showed 18-19 revenue of £8,077,185 for those customers. This included what became the “new business” from (what is now known was) SMR, Thorn and Parker, but it was not identified as such or separately and the qualification wording did not appear. The two plus plus items also appeared with substantially the same descriptors next to them.

On 27/4/20 Jeffrey Wrinch emailed some further information in relation to Parker, including reference to Presbar having what was described as a “letter of engagement” and, in relation to Thorn, including reference to “the parts are not yet in production” and “tooling orders have been placed”. The first appears to be the only reference to an engagement which might shed any light as to the reference to engagements in the definition of contracts in the APA. The second appears to be the only reference to a sequence of events involving tooling orders being placed before parts are being produced, but it is not explained further.

Jeffrey Wrinch also included the management accounts for the y/e 31/10/18, corrected to reflect an (inferentially recently completed) audit, in response to Christopher Shield’s email earlier that day asking for the most recent management accounts so that he could “assess the gross margin / overhead contribution of the components ... as the key information to feed into our calculations if we are valuing the order book of the business”. This is relevant to quantification, because it indicates that without this up-to-date information it was not possible to produce a reliable valuation, yet Jeffrey Wrinch was unwilling to provide the most up to date management information at this stage. The fact that, as will be seen, Christopher Shield had to produce his offer valuation without this information tends to indicate that even at the time it must have been known that his offer valuation could not have been regarded as entirely accurate.

On 1/5/20 Christopher Shield sent his worked out offer valuation of the total value of Presbar based on the production information spreadsheet provided on 22/4/20. I refer to this in more detail below in relation to the discussion on quantification of the new work warranty claims.

Potentially relevant admissible background facts not “crossing the line” .

I can begin with the key uncontentious factual background within which the APA sits, before turning to matters which are in dispute. Because both parties operated within the same sector there was considerable common knowledge as to how the sector operated. Perhaps inevitably, given the different cases being advanced, there was some disagreement at trial about the precise details. However, given that the metal foundry diecasting business is not a self-contained industry, and nor is it separately regulated or professionally policed, it is not surprising that practices and business arrangements will vary widely between company and between the different categories of work done and the different customers for whom it is done. What I say below represents my assessment of the core common knowledge of both parties as to the general practices and business arrangements in that part of sector in which both Presbar and Shield operated.

Diecasting means making (“casting”) specific products (“parts”) in a foundry, using specialist tooling (“dies”) designed and set to cast the part in question in conjunction with the permanent machinery in the foundry.

The evidence of Christopher Shield, Jeffrey Wrinch and Darrell Cook (supply chain director) was largely all to the same effect and was not subject to contradiction from any other witness or source and establishes the following common background knowledge of those operating principally in what has been described as the series production sector.

Whatever that may mean in other contexts, all that it means in this context is that the supplier will typically produce a relatively large number of specialist parts in a series of production runs for their customers, who will typically proceed to incorporate those parts into a larger assembly which they will then supply up the production chain to their customers. One example related to this case is the production of a bracket by Presbar for a customer, which then incorporated it into a car wing mirror, which it then supplied onwards up the chain, either direct to the car manufacturer for assembly into the car in question or to what is referred to as an OEM (original equipment manufacturer) which itself supplied the product to the car manufacturer.

The production of these parts typically requires the use of specialist tooling to work with the permanent machinery in the supplier’s foundry. In general terms, therefore, it tends to be in the interests both of the supplier and of their customers to have a closer and a longer-term relationship with each other than might otherwise be the case. That is because of the specialist nature of the parts, which tend to be subject to exacting QA requirements, and because the customer will want the assurance of knowing that the supplier is ready, willing and able to supply the parts which it requires on a repeat basis in accordance with their price and production requirements. That obviously could not be done conveniently unless the supplier had (and retained) physical possession of the tooling in question.

Because the tooling is so specialist it tends to be commissioned and paid for by the customer from the supplier foundry, which may either make it using its in-house tooling department or sub-contract its manufacture to a specialist tooling manufacturer. Either way, the end result of the process is that the customer owns the tooling but permits the supplier to retain and use it in its foundry for so long as the relationship subsists. If the relationship breaks down the customer will instruct the supplier to allow it to be collected for use by the replacement supplier. If the production of a new part is being contemplated then it will require new tooling anyway, so that no question of transfer arises.

Sometimes, the customer may wish to dual source, i.e. obtain parts from more than one supplier, in which case it will need to source two tooling sets and allow each supplier to use one set. This can of course also happen when for whatever reason the customer wants to change from having just the one supplier to two or more suppliers.

Although I reject any suggestion that there is any “standard” way of doing business in what is such a disparate business sector, typically there is a process along the following broad lines where a customer is interested in using a particular foundry to manufacture and supply a part for the first time.

First, the customer will issue a request for a quotation. In the case both of the development of a new part (where by definition there will be no existing tooling) and where the customer is seeking to move into a dual sourcing arrangement (where the existing supplier will need to keep the existing tooling), the request will typically seek a quotation both for the supply of the requisite tooling and for the supply of the required parts using the tooling once produced. The customer would usually have no interest in obtaining separate quotations at separate stages, because its ultimate objective is to get the one supplier to produce the parts using the tooling, rather than obtaining the tooling and then seeking quotations from the parts from more than one supplier but where there is only one set of tooling.

Second, the supplier will provide a quotation. Again, in such cases, the quotation will typically include for both the tooling and the parts, albeit they will be separately described and priced.

Third, if the customer wishes to proceed it will typically first issue a purchase order for the development and manufacture of the specialist tooling. Once that tooling has been produced, the customer will then typically issue a purchase order for the manufacture and supply of some sample parts using the tooling for approval. Once the sample parts are approved, the customer will then typically issue a purchase order for the first series of parts.

The time and cost involved in these steps can be considerable. As Christopher Shield said in his witness statement, “most tools usually take around 6-12 months to manufacture and prepare samples”. It follows, as I am satisfied both Jeffrey Wrinch and Christopher Shield knew, that if a customer had got as far as placing a purchase order for tooling, in the absence of some serious and insurmountable problem (for example, the supplier being unable to demonstrate that the sample parts meet the customer’s QA requirements, or for example in relation to some fundamental contractual or commercial issue), the likelihood was that the customer would go on to place a series purchase order for the parts with the supplier.

Because of the exacting QA standards, it is common for the supplier to provide for approval by the customer a Part Production Approval Process (“ PPAP ”) document, which sets out the supplier’s proposed production process to demonstrate how it will meet the required specification for the part in question.

Jeffrey Wrinch, Mark Wilson and Scott Wilson all took the view that by winning the tooling order they had won the project. Although Christopher Shield said that the project was only secured when PPAP approval was obtained and a series purchase order was obtained, he was prepared to agree that it would give the supplier a “decent likelihood” of getting the work. Obviously, all projects are different, but I have no doubt that it was well known in the sector, and well known to both Presbar and Shield in particular, that a supplier who won the tooling order would have a reasonable expectation of winning the series purchase order unless something went seriously wrong in the meantime. This evidence was echoed by Darrell Cook, Jonathan Griffith and Stephen Gill as independent witnesses, the first two as very experienced customers in the sector and the third as an equally very experienced supplier in the sector. Tellingly, when it was put to Mr Cook that just because a supplier had reached the development phase that did not mean that it would always receive a series production order, he agreed that this was the case, but added that in his six years with SMR he could not remember an occasion when anyone failed the development stage or was not awarded the series production.

In my judgment this evidence also clearly demonstrates that there was a well-known and well understood difference between a tooling order and a series purchase order, and that the typical process for a supplier to supply a new part using new tooling (or to dual-supply an existing part) would involve the sequence of quotations, followed by tooling order, by tooling production, by approval of sample part using new tooling and PPAP approval, with the final step being the series production purchase order.

I accept that this evidence was not specifically directed to the different case where the customer was transferring tooling from an existing supplier to a new supplier. In such a case there would obviously be no need for a separate tooling order. It is not clear, and was not explored in evidence, whether in such a case the customer would still require the supplier to produce samples and for the samples and the PPAP to be approved before any series purchase order was placed. It would appear likely that something along these lines would still be required, given the importance of the parts complying with the customer’s QA requirements and the fact that the supplier would need to be able to demonstrate that it could produce parts to the required specification using the tooling for the first time in its existing foundry and with its existing machinery and processes.

In addition to, or separate from the above, it may also be the case that the customer will issue a document in the form of a letter of intent or framework agreement (also referred to as a “ sourcing agreement ”) setting out the contractual framework for what is envisaged to be a long-term supply agreement.

If issued, this would typically include a projection of the number of parts involved and the time period over which they are to be supplied. It would also typically include the agreed pricing structure as well as the customer’s standard terms and other requirements.

The precise nature and terms of these sourcing agreements will naturally vary from customer to customer. As would be expected, a customer will typically seek to extract binding commitments from the supplier in relation to such matters as price and production requirements, whilst offering either no or the bare minimum in terms of guaranteed purchase obligation, whereas the supplier will typically seek to extract a long term guaranteed commitment from the customer and to seek to avoid giving very onerous contractual warranties.

There will also be a variation between how the sourcing agreement will provide for the ordering and delivery of individual orders. It may be envisaged that they will be by way of the issue of formal purchase orders, which will contain agreed prices and delivery schedules. Or it may simply be envisaged that individual orders would be placed informally by way of call off of a specified number of parts in accordance with a delivery schedule provided by the customer.

It would always be possible that the contract negotiation process might drag on but for the customer’s immediate part requirements to be satisfied by placing individual orders in the meantime.

None of these different contractual variants are at all unique to this sector.

Although Jeffrey Wrinch tended to downplay the use of sourcing agreements in his witness statement, suggesting that this was “very rare” and generally only in specific cases, he accepted that one such very case was that of Parkers, i.e. one of the customers in issue in this case.

Again, although Christopher Shield sought to emphasise the use of sourcing agreements in his witness statement, he also accepted that this practice was not in any sense standard or ubiquitous, and he accepted that instead there might simply be the issue of a series of formal purchase orders.

However, even in such cases it would also follow that there would be the same separation between the process for the production and approval of the tooling, including the samples and the QA process, and the subsequent process for the placing of series purchase orders or whatever other form of order was placed to produce parts.

Does the relevant and admissible factual background materially affect or support the position?

As already stated, in my judgment it does. Armed with such evidence, I can be even more confident as to the correctness of the conclusions I have already reached as to the significance which the parties applied to the wording of the qualification in respect of uncompleted orders and new work. For the reasons I have explained, whilst even without that evidence it is possible to understand that tooling is required to make parts and, thus, that until that tooling is with Presbar it cannot make the parts, it is now even easier to understand the true meaning of the order book with a fuller appreciation of the typical different stages of the placing of the purchase order for the tooling, the provision of the tooling, and the part sampling and QA approval process and, finally, the placing of series production purchase orders.

Once that typical sequence is understood as objective factual background known to the parties as at the date of the APA, it becomes even clearer that the reason for inserting the cells immediately to the right of the total for new work and the “two plus” entries is to make it clear at what stage the relevant new work had reached.

It therefore makes it even clearer that: (a) the “expected sum of new work (tooling with us or imminent)” can only be understood as clarification that the new work is still only “expected”, both in terms of whether it will materialise as a firm purchase order and as to amount, once the tooling has been used to make samples and the customer is ready to place series production purchase orders following the approval of those samples and the QA / PPAP process; and (b) the “two plus” items are even further behind the timeline, because although in both cases tooling orders have been issued, in relation to both the tooling has not yet been obtained and, it follows, neither can part samples have been made and approved.

In my judgment this is something which, on an objective basis, must have been known to and understood by both Jeffrey Wrinch and Christopher Shield in the context of the series production purchase order diecasting business with which they were both so intimately familiar. It explains even more clearly why these descriptors were placed where they were.

As already indicated, on Shield’s case it is difficult - if not impossible - to ascribe any real meaning to these words in the order book. Simply providing some sort of running update on the current stage each project had reached is something which would have been the subject of a separate email or verbal update and would have no legal significance because, on Shield’s case, their inclusion in the order book as part of the APA signified clearly and unambiguously that they were the subject of an existing legally binding purchase order for the parts themselves and not just the tooling.

In contrast, on Presbar’s case they are important because, objectively, they are making clear that these items of new work are not yet the subject of any purchase orders for the parts themselves.

Again, this is also consistent with the heading of the column being “new work”, rather than being “19-20 revenue” or “19-20 orders”.

Other relevant provisions of the APA, including the warranties .

The warranties were defined as those set out in clause 10 and Schedule 5.

By clause 10.1 Presbar warranted to Shield that “each warranty is true, accurate and not misleading on the date of this agreement”, i.e. 19 August 2020. This was repeated and extended by Sch. 5 par. 1, which stated that “all information contained in this agreement is true, accurate and complete in all material respects and is not misleading” (emphasis added).

Clause 10.5 stated that “warranties qualified by the expression so far as the Seller is aware (or any similar expression) are deemed to include an additional statement that they have been made after due and careful enquiry”.

Clause 10.6 provided that “each of the warranties is separate and, unless otherwise specifically provided, is not limited by reference to any other warranty or any other provision in this agreement”.

Clause 10.7 provided that “no information of which the Buyer, its agents or advisers has knowledge (in each case whether constructive or imputed), or which could have been discovered (whether by investigation made by the Buyer or on its behalf), shall prejudice or prevent any Claim, or reduce the amount recoverable under any Claim”.

It is common ground that this clause is effective in accordance with its terms. Presbar did not seek to persuade me that this does not apply to information of which Shield had actual knowledge or that actual knowledge would amount to a defence to a claim for breach of warranty. However, Ms Anderson did challenge Mr Clegg’s argument that this clause had the effect that the “in-breach” valuation should be conducted on the basis that the value could not be reduced by reference to any information of which Shield had knowledge or could have discovered. I agree with her submissions on this point. The in-breach valuation is, by definition, concerned with the true open market value of the assets in their actual condition. This is an objective valuation which is concerned with the true value of the assets in their actual state, hence the references in the authorities to the price which the hypothetical purchaser with full knowledge of the true position would be prepared to pay. Clause 10.7 is not intended to, and does not apply to, this exercise. Instead, it is concerned with the knowledge which Shield, its agents or advisers had or could have discovered. That is different from the knowledge to be attributed to the hypothetical purchaser who, by definition, is aware that the facts and matters the subject of the warranties are not as warranted.

Schedule 5 included a number of specific warranties.

Paragraphs 3.2 and 3.3 relate to the order book.

By paragraph 3.2 Presbar warranted that “the contents of the order book are true, accurate, complete and not misleading in any material respect and subject to any changes in the ordinary course of business between the date of exchange of this agreement and the completion date”. Thus, it is to substantially the same effect as paragraph 1. Although it is qualified by reference to any changes in the ordinary course of business between the date of the APA and of completion, that qualification is not of relevance in this case.

It follows that in relation to the order book the warranty: (a) applies to the entirety of the content of Sch. 6, not just to matters relating to “uncompleted orders”; but (b) as with paragraph 1 the requirement that it is not misleading is subject to a requirement of materiality.

By paragraph 3.3 Presbar warranted two things. First, that “the details in the order book show an accurate representation of the historic levels of orders from customers for the time period stated therein”. Second, that “subject to the impact of COVID-19, the seller has no reason to expect, if the seller was still in ownership of the business, that following completion the level or nature of orders from customers nor margins achieved on products sold would be materially different, save for a reduction in the sale price of the Parker single head products”.

The first warranty which, given the reference to the “time period stated therein”, must refer to the 17-18 revenue and 18-19 revenue, thus operates as a warranty of the accuracy of these revenue figures. However, no complaint is made by Shield in this regard.

The second warranty is more complex. It is a warranty that following completion there will be no material difference in orders and margins, but it is qualified in three relevant respects, namely that: (i) it must be shown that Presbar had reason to expect the difference; (ii) it must be shown that the difference is material; (iii) this is on the assumption that Presbar still owned the business, so that changes in orders or margins due to any difference in the way in which Shield may conduct the business going forwards are not caught.

Otherwise, the question is whether post completion: (a) the level or nature of customer orders; or (b) the margins achieved on product sales is different.

It is perhaps difficult to see what extra advantage a claim under the first limb of paragraph 3.3 would have over a claim under paragraph 3.2. Given clause 10.6, it cannot be argued that paragraph 3.3 can operate in any way as to limit the ambit of paragraph 3.2.

Paragraph 5 related to the warrantable and the non-warrantable assets.

As regards the former, Presbar warranted that so “far as [it] was aware [they]: (i) are in good working order and will continue to be capable of doing the work for which they were designed; (ii) have been regularly and properly maintained and are not in breach of any safety regulation …”. Schedule 18 identified these as two Buhler machines (the 540 and the 840) and 5 Mazak machining centres (“ M/Cs ”). Of these, the Buhler 540 and four of the five Mazak M/Cs were on finance to Lombard and were relatively new machines.

No claims are made in relation to these items of machinery, so that the only relevance of the warranties given in relation to them is to assist in the interpretation of the warranties given in relation to the non-warrantable assets.

As regards the non-warrantable assets, Presbar warranted that “so far as [it] was aware [they] are fully operational and fit for purpose save for any furnace linings”.

Given the different treatment of warrantable and non-warrantable assets, it is clear as a matter of interpretation that “fully operational” must means something different to (and less exacting a standard than) “in good working order”, and the same must also be true as regards “fit for purpose” compared to “capable of doing the work for which they were designed”. Something which is capable of being fully operated may still not be in good working order. The words “fit for purpose” must, in the context of this case, mean no more than that the non-warrantable machinery is capable of being fully operated for the purpose which it is intended to be used, which is to play their part in the manufacturing processes required to produce the various parts in the order book. The exclusion of furnace linings from the warranty is a recognition that these are sacrificial items and will need regular replacement.

Shield also pleaded that the terms implied by the Sale of Goods Act 1979 as to satisfactory quality, fitness for purpose and correspondence with description were incorporated into the contract in relation to both categories of asset. This was denied by Presbar, which pleaded that there was “no room for the implication of terms in circumstances where the parties have made full provision for their respective obligations in the express terms of the APA”. This was not the subject of further pleading or submissions, doubtless because the parties sensibly recognised that it would make no difference to the result one way or another, especially given that: (i) the precise ambit of the satisfactory quality and fitness for purpose will be governed by the relevant express terms of the contract, as to which see above; and (ii) it is difficult to see how the correspondence with description obligation can add anything in the context of the sale of the specific ascertained goods which Shield was able to inspect pre-APA.

Warranty claims were limited by cl. 11 in various ways, including: (a) a lower limit of £10,000 per claim and £50,000 in aggregate Although Presbar pleaded this limitation (at par. 12.3 of the DCC) it did not plead a positive defence by reference to these limitations in relation to any of the specific claims.

However, these limitations do not apply “if and to the extent that a Claim arises or is delayed as a result of dishonesty, fraud, wilful misconduct or wilful concealment by the Seller”.

In his opening submissions Mr Clegg referred me to De Beers v Atos [2010] EWHC 3276 (TCC) , where Edwards-Stuart J stated at par. 206 that: “Wilful misconduct refers to conduct by a person who knows that he is committing, and intends to commit a breach of duty, or is reckless in the sense of not caring whether or not he commits a breach of duty (see Romer J in Re City Equitable Fire Insurance Co Ltd [1925] Ch 407 ). Deliberate default means, in my view, a default that is deliberate, in the sense that the person committing the relevant act knew that it was a default (i.e. in this case a breach of contract). I consider that it does not extend to recklessness and is therefore narrower than wilful misconduct (although the latter will embrace deliberate default)”. I apply that approach here.

Clause 5.3 provided that: “the Purchase Price shall be deemed to be reduced by the amount of any payment made to the Buyer for a breach of any Warranty”. Shield’s counsel submit that this is a express set-off provision. I do not accept this submission. In my judgment the word “deem” and the word “made” are clear indications that this provision is inserted to provide for the tax consequences of any such payment, rather than to confer any independent right of set-off.

However, this does not affect the result, since: (a) I accept that as a matter of general law Shield would be entitled to set off any warranty claim against the unpaid instalments; and (b) even if no set-off is available as a matter of law the order consequential on this judgment would be for a net sum to be paid by reference to the overall success of the parties on the claim and the counterclaim.

A question has arisen as to the consideration payable under the APA. The answer ought to be straightforward, but is complicated by the separate provisions for payment of what is defined as the purchase price (clause 5.1) and, separately, the provisions in relation to the Lombard debt (defined as £700,000 to be paid on completion for Shield to obtain title to the Lombard assets and as further provided for by clause 4). Clause 5.1 is straightforward, because the aggregate of the payments referred to in that clause amounts to £2,275,538 (of which £50,000 is stated to be the “balance of the initial payment”). Clause 4 identifies the initial payment as £400,000 to be paid by Shield to Presbar as at the date of the agreement, of which £350,000 is to be paid back to Shield to allow it to pay Lombard that sum, in addition to the further sum of £350,000, in respect of which the same provisions apply, which is identified as “the deposit”. However, these are not included in the sums identified as the purchase price in clause 5, unless the initial payment of £350,000 is the same £350,000 as either the balance of the initial payment or the deposit.

The new work warranty claims .

There are four separate such claims, which I shall address in order.

As I have already indicated, each of these claims is pleaded on the same basis, namely that Presbar had warranted that the work the subject of the new orders had been “contracted or otherwise secured by [it] as uncompleted orders”, whereas in fact Presbar “had never contracted or otherwise secured any commitment from [the customer] for the supply to them of any such work”. In its reply to Presbar’s defence to counterclaim it clarified that its case as to “otherwise secured any commitment” meant that it was “the subject of a legally binding commitment by the customer to purchase the manufactured goods in question”, because “a non-binding commitment was worthless”. As explained in the written closing submissions, its case was that no orders had been placed, whether legally binding or otherwise. This is a material change of case, which has not been the subject of an amendment, but in the context of this case makes no difference given the essential cases as advanced by Shield and Presbar respectively.

In contrast, Presbar’s pleaded case is that: (a) “the inclusion of an entry in the “new work” column is true, accurate, complete and not misleading if … [it] had at the time of the APA reasonable grounds for believing that the relevant customer would proceed to purchase the indicated volume of additional work”; (b) and that in each case it did have such reasonable grounds.

In its closing submissions it submitted that: “it warranted, in respect of any of these orders, that matters had progressed as far as tooling either having been placed or being anticipated and that this is reasonably to be construed as meaning progressed only that far. Provided that Presbar in fact continued reasonably to believe that the work would materialise (such that it could be said to be “expected”), the absence of an order for series production would not falsify the warranty”.

The question as to whether the customer had issued a series purchase order or other legally binding commitment for the supply of the parts or, as expanded by Shield in closing, had issued any order for the supply of the parts, is essentially a straightforward question of fact. It is common ground that none of the customers in question did so in this case. However, given my interpretation of the order book warranty, I am satisfied that Shield cannot succeed on this basis.

Shield has not pleaded or advanced an alternative case to the effect that even if Presbar was right on its interpretation of the relevant warranties it was still in breach of those warranties. Strictly speaking, therefore, I do not need to consider whether in relation to each of the four new work items of which complaint is made: (a) what was stated in the order book was either untrue, inaccurate, incomplete or misleading in any material respect as at the date of the APA; (b) Presbar had any reason to expect, if it was still in ownership of the business, the level or nature of orders or margins achieved on products sold would be materially different. However, given the evidence adduced, it is convenient to do so in any event.

The SMR new w ork claim .

By way of background, it is common ground that SMR (short for Samvardhana Motherson Reflectec) is and was a specialist wing mirror manufacturer, with plants around the world, supplying products to automotive manufacturers such as Nissan and Jaguar, and that it was an established and valuable customer of Presbar, generating £1.66 million of revenue in 18-19.

The order book identified £750,000 as new work for SMR, described as“expected sum of new work (tools with us or imminent)”, and a further £140,000 for SMR as one of the two plus items, described as “start production 2021, tooling order currently on hold waiting the customer deposit”.

The £750,000 new work item .

In closing submissions Shield summarised its claim as relating to the £750,000 on the basis that: “(i) There is no purchase order within the disclosure for series production; and (ii) although Mr Mark Wilson explained that SMR orders could be placed via an online portal, he confirmed that no such order had been placed”.

In his witness statement (at pars. 38-39, 42) Jeffrey Wrinch stated as follows:

“38. SMR had given Presbar a commitment for the purchase of two batches of new work, [the first] being a total of £750,000/a to be transferred from a supplier in Spain called Molfisa who had fallen out with SMR … The annual value of the work to be transferred from Molfisa totalled £750,000 per annum; this is calculated by multiplying the annual volume of each part stated by SMR, by the part price. The work was made up of mirror brackets for 7 different vehicles. The annual volumes for these vehicles were stated in emails from SMR for all but the Audi A3NF which was given in a quotation by Mark Wilson of Presbar on 19.6.19. These emails from SMR are from Abigel Klenota on 23.7.19 and 7.8.19 and from Bogdan Mehir on 4.6.19. The quote was erroneously not attached to the email when disclosed and so, I attach it to this statement now.

Unusually, Presbar did not quote for these parts, SMR told us the current volumes and prices and asked us to accept these prices which we did. There appears to be no official acceptance of the Presbar quote, probably due to the big rush caused by Molfisa falling out with SMR; acceptance can only be implied by SMR transferring the tooling. Tooling for the Molfisa project was transferred to Presbar in the spring of 2020. I have learned from a telephone conversation with Darrell Cook of SMR that SMR did not give official acceptance of quotations for transferred work, only for new tooling.

We have been working for SMR for many years. Like most customers, Presbar are deemed to have ‘won’ the business with SMR when we are told so by the customer and an order is placed for tooling or tooling is transferred. New tooling is usually accompanied by a sourcing agreement. In the light of the claims made by Shield that the work was not there, I telephoned Bogdan Mahiar, a member of the buying team for SMR who managed the Molfisa transfer project, on 13 March 2025. I asked Bogdan to confirm that, had Presbar not shut, he would have expected to buy the quoted quantities from Presbar as had happened with previous projects. Bogdan confirmed that this was the case”.

The emails have been produced, and confirm that: (i) on 4/6/19 SMR emailed Presbar in relation to a “business transfer”, setting out the parts for the transfer and the target prices and saying “we might need to do this immediately”. On 23/7/19 SMR requested a quotation from Presbar for a transfer of an already running programme in relation to a number of parts for Daimler; (ii) on 7/8/19 SMR requested another quotation for a transfer of an already running programme in relation to a number of parts for Audi; (iii) an email from Presbar to SMR date 6/1/20 records that the process of tooling transfer was already underway.

In his witness statement, confirmed in evidence, Mr Cook of SMR confirmed Jeffrey Wrinch’s evidence.

The £140,000 two plus items .

As regards the £140,000, as already noted this was one of the two plus items where it was stated “start production 2021, tooling orders currently on hold waiting the customer deposit”.

On 12/3/20 SMR issued what was described as a “sourcing commitment” to Presbar for a project referred to as JLR XCL X391, where: (i) JLR is short for Jaguar Land Rover; and (ii) XCL X391 is a reference to the vehicle and part.

The opening paragraph made clear that this was a sourcing agreement along the lines described above in relation to the factual background. It included the supply of tooling as well as parts. The issuing of a series purchase order was conditional on a number of things, most importantly satisfactory performance of the design phase as well as the signing of the sourcing agreement as a supplier agreement. It identified the part numbers and prices over three years, as well as the tooling prices and agreed minimum capacity. It also identified the relevant project milestones, including what is referred to as the “SOP date” as being 4 January 2020, where SOP obviously means “start of production” and 2020 is a typo for 2021.

The document was signed by two representatives of SMR on 12/3/20 and by Scott Wilson and Mark Wilson for Presbar on 16/3/20.

On 13/5/20 SMR issued a tooling purchase order to Presbar in relation to this project, where the total price for the tooling was £168,401, indicating the financial investment which SMR was making.

A chain of emails on 7/7/20 shows that that the project was “on hold” from SMR’s end but that it was expecting “kick of end of month” (plainly a typo for “kick off”).

The position was confirmed by Jeffrey Wrinch in his witness statement at pars. 40 onwards.

The Parker new work claim .

Shield complains that the order book recorded that Presbar had customer orders for a lucrative new project with Parker relating to the Euro 6 emissions compliance programme in the amount of £1,491,100 per annum. It contends that Presbar had not received any such order from Parker to supply the Euro 6 components, having failed cleanliness tests required for production, having been unable to produce the part to the required standard and having not agreed the required contractual terms.

As early as 27/4/20 Jeffrey Wrinch emailed Christopher Shield to explain that: (a) Presbar had a “letter of engagement” for 130,000 parts p.a. over three years; (b) the project start had been delayed from Nov. 19 due to the need for additional plant to comply with an additional cleanliness specification, but samples had been submitted to confirm compliance; (c) Parker was keen to get supplies started from Presbar.

In cross-examination, Christopher Shield said that he believed from the email that Presbar was “going through the quality approval process”. This would be inconsistent with Presbar having received series purchase orders, as I am satisfied he must have appreciated at the time. In such circumstances, it might be thought surprising for Shield to advance a claim based on a breach of a warranty that there were series purchase orders already issued with a firm commitment to £1,491,100, when it is plain that he knew before the entry into the APA that this was not the case. However, as already stated, that case fails on the contract interpretation issue anyway.

In closing submissions Shield submitted that there was no order for series production at the time of the APA for three reasons.

The first was that a formal contract was required before a purchase order for series production could be placed and that contract was yet to be agreed. The evidence does indeed confirm that there had been a draft in circulation for some time and that it had not yet been fully agreed or executed. However, I accept Mark Wilson’s evidence to the effect that there was no particular reason to think that this was seen at the time as a fundamental obstacle to progression to a series purchase order and, as Mr Griffith (a former general manager at Parker) observed in his evidence, it was not unusual for discussions between prospective supplier and customer of this kind to take up to a year.

The second was that a cleanliness requirement of the OEM was not yet met. It was accepted that Mr Griffith had stated that there was a degree of confidence that the samples would nonetheless be acceptable to the OEM, but it must also be noted that he had confirmed that there had been no formal request made of the OEM for approval. Again, however, I accept that there is no evidence or basis for believing that this was seen at the time as being a fundamental obstacle to progression to a series purchase order.

The third was that the results of a vibration test requested on 25/6/20 were still outstanding at the time of the APA and that, in fact, the sample parts failed that vibration test because of cracking, with Parker indicating by email dated 17/9/20 that the failure was “a showstopper” for the project. Again, however, the evidence of Mr Griffith confirmed the evidence of the Presbar witnesses that this was a problem, but not an insuperable one, especially given that it was a crack in a non-functional area. Again, therefore, I accept that there is no evidence or basis for believing that this was seen at the time as being a fundamental obstacle to progression to a series purchase order.

The Thorn new work claim .

In the order book a sum of £200,000 was identified as new work and a further sum of £750,000 comprised one of the two plus items.

Shield complains that in relation to the £200,000 it transpired that there was no order for such work. It accepts that it later obtained work from Thorn but says that this is irrelevant as this was independent of the projects listed in Presbar’s order.

It is common ground that no series purchase order was placed by Thorn in relation to either the £200,000 or the £750,000.

However, it is also clear that Thorn issued two tooling orders to Presbar.

The first was provided on 28/10/19 in response to Presbar’s quotation dated 16/10/19 for tooling and parts in respect of parts known as an AFM body and AFM cover, where the total tooling cost was for approaching £100,000.

An argument was taken by Shield during the trial that if the cost per part was multiplied by the annual quantity the total was £187,600 not £200,000. However, that was not introduced as a separate fallback pleaded claim and, even if it was, it is questionable whether this would have amounted to a breach of warranty and, in any event, there is no evidence of the value of this claim as a freestanding claim (or that it exceeded the minimum claim value of £10,000).

The AFM parts were also covered in Jeffrey Wrinch’s email of 27/4/20 to Christopher Shield, providing detailed information in relation to the parts but emphasising that there are “quoted figures only as the parts are not yet in production [but] tooling orders have been placed, expected start of production is autumn”.

Again, in the circumstances it is a little unedifying that Shield has made a claim on the basis that this was warranted as the subject of a series production order.

However, having regard to all the evidence, there was nothing untrue, inaccurate, incomplete or materially misleading in the statement in the order book and nor is there any basis for alleging any breach of any other warranty. On the evidence adduced by Presbar, including the evidence from Mr Nixon, there was no reason to consider that the work would not have materialised had Presbar continued to run the business.

As regards the £750,000 new work item, again there was a tooling purchase order, this time dated 9/4/20, in response to a quotation for the tooling and the parts.

The Lemac new work claim .

Shield complains that the order book recorded new work from Lemac of £250,000 p.a. but that this was wrong, because Presbar had only submitted quotations to Lemac with no order from Lemac for production of the part in question.

The work is the subject of a quotation from Presbar dated 20/6/19 for part costs and tooling costs, where again the tooling costs are substantial – around £116,000 – and became the subject of a purchase order dated 10/7/19. Again, it is accepted that there was no series purchase order, but an email from Lemac dated 6/7/20 confirms that its trial had gone very well. Mark Wilson confirmed in evidence that there was no reason not to expect that a series purchase order would be forthcoming.

Quantification of the new work claims

As already indicated, I am dealing with this claim on the assumption that Shield had persuaded me that its construction of the order book was correct and, as was not challenged, that in fact there was no series production purchase order or other binding commitment Where I refer to series production purchase orders I am including the reference to other binding commitments.

I refer to and follow the principles identified in section 3 above in relation to the valuation of such claims.

What is the proper approach to the as-warranted valuation in terms of the likelihood that Shield would have obtained the full value of the new work had it been the subject of series production purchase orders?

I do not accept Shield’s submission that damages should be assessed on the basis that it was warranted that there were series production purchase orders which guaranteed that post completion Shield would in fact be able to secure turnover in the quantities stated in the order book.

It is clear in my view that no such guarantee could have been expected. Leaving aside the obvious risk of customer insolvency or termination for breach by the supplier, it is apparent that customers may well have required that Presbar enter contractual arrangements which included provisions which were inconsistent with any legitimate commercial expectation of a firm guarantee for the works.

Thus, in relation to SMR, as already noted it issued a sourcing commitment for the JLR XCL X391 project on 12/3/20 which: (a) required Presbar to sign a Supplier Agreement before the “Open Purchase Order [for] Series Production” would be issued; (b) contained and referred to a number of its requirements, including acceptance of SMR’s terms and conditions. Whilst there is no indication of what the Supplier Agreement, Open Purchase Order or terms and conditions would have contained, it can reasonably be inferred that they would have contained provisions which would have been relevant to any commercial expectation that Presbar (and Shield) would have obtained the whole of the work for the whole of the expected term.

In relation to Parker: (a) the initial letter of nomination from Parker dated 26/4/18 made specific reference to a material change of ownership clause, which would have entitled Parker to terminate the relationship in the event of such a change; (b) the draft procurement agreement from Parker sent 23/3/20: (i) gave Parker the right to cancel any outstanding purchase orders in the event of any failure by Presbar to “demonstrate a commitment to the [very widely expressed] Foundation Tenets or any other portion of this Agreement”; (ii) made clear that there was no commitment by Parker to buy the specified goods at all or in the specified quantities; (iii) imposed stringent quality requirements upon Presbar; (iv) incorporated Parker’s standard terms.

In relation to Thorn, the tooling purchase order contained reference to what appears to have been its parent company’s general purchasing conditions, which it may be presumed would also have applied to any series production purchase order and may well have contained terms relevant to the commercial expectation of a guarantee of the work going forwards.

In relation to Lemac, its terms and conditions applicable to any purchase order included various provisions which would have been relevant to Presbar’s commercial expectations, specifically: (a) a widely drafted “Lemac remedies” clause and indemnity clause; (b) a right of termination in the event of insolvency or change of control; and (c) a right of termination for convenience with no notice, subject only to an obligation to pay reasonable compensation for work in progress.

The full value valuation .

As regards the full value valuation, Mark Fairhurst valued the new work on the basis of the new work figures (excluding the two plus items – as Christopher Shield had done), multiplied by 22.2% (his assessment of the proportion which the stated purchase price bore to the total turnover in the APA). He also however discounted the resultant figure by between 10% and 30% to reflect the fact that the gross profit margin of 27% taken by Christopher Shield was not a warranted figure and there was no supporting documentation.

As Mark Fairhurst accepted in principle in cross-examination, on the evidence the 22.2% should in fact be 29% if I was to find – as I have – that the total consideration (i.e. including the payments to Lombard under clause 4 of the APA) should be taken rather than the purchase price as stated in clause 5 of the APA. This is not a criticism of Mark Fairhurst, who was entitled to assume that the purchase price was what was identified in clause 4, but it does mean that his figures would need to be adjusted appropriately.

However, his general approach seems to me to be sound. As he made very clear in his report, the appropriate discount to reflect the uncertainties is primarily a matter of assessment by the court, rather than the exercise of a hard-edged accountancy expertise. This is because it is an exercise in seeking to put a figure on what is not capable of being valued with any accuracy. It is however of some relevance that Christopher Shield’s contemporaneous valuation (referred to below) included a number of quite significant reductions, so that in my judgment a reduction of 10% for the risk related to the gross profit margin – which he does not appear to have built in to his contemporaneous valuation - does not seem to me to be unreasonable.

the no minimum value valuation .

As regards the no minimum value valuation, it seems to me that what must then be discounted from the above £700,000 is a suitable percentage to reflect the risk that the revenue from the new work would not have been guaranteed, based on the available evidence as to the risks that: (i) the customer might go into insolvency; (ii) the customer might terminate the contract for cause; or (iii) the customer might cancel work for convenience under the terms of the relevant contract.

Mark Fairhurst has valued this as justifying a further discount of 10% if the supplier was reasonably confident that the full quantity of the new work would materialise and of up to 30% if not. Again, he rightly made it clear that ultimately this is a matter for the court’s assessment rather than of accountancy expertise. It does however seem reasonable to me as a broad range of estimates. In my judgment the lower discount of 10% is more appropriate in this case, bearing in mind that the starting point would be that the customers have placed firm series production purchase orders, no doubt on the basis that they had orders from their customers up the line, and all would have wanted the project to succeed.

On this basis, which in my view is the correct basis if I had found for Shield on its key case on the interpretation of the APA, the value of the new work as warranted would have been £630,000.

The unconditional commitment valuation .

The reasonable expectation valuation .

As regards the reasonable expectation valuation, this reflects the in-breach valuation on Presbar’s case, if I had found in Shield’s case on the contract interpretation point, because it reflects the reality of what Presbar says the position was at the time of the APA even if there were no actual series production purchase orders.

In contrast, Shield submits that the correct approach is that since there was no new work it should not have appeared in the order book as warranted.

It submits by reference to clause 10.7 that the underlying position as to the parts to which the new work related cannot therefore be considered to prevent or prejudice the claim or to reduce the amount of the claim. However, I have already rejected that submission.

It also submits that the context of the warranties was that Shield could not contact Presbar’s customers prior to the APA and so were reliant upon Presbar’s warranties, as Christopher Shield had explained in oral evidence.

However, as I observed in closing submissions, whilst that was obviously right in terms of what happened, which is why – as Christopher Shield explained – he consciously placed value on the warranties when entering the APA, that does not mean that the in-breach position is to be undertaken on the same basis. Instead, it is to be undertaken based on the hypothetical knowledgeable, prudent, reasonable and willing purchaser, who would have had available to them all the information which that hypothetical purchaser would reasonably be expected to have, knowing that the sellers were in breach of warranty: see the summary in Millbrook referred to above.

On that basis, the hypothetical purchaser is to be treated as having known that there were no series production purchase orders in relation to the new work. In this counter-factual world, Shield asks me to assume that this is all that the hypothetical purchaser knew and would not have sought or obtained any information as to the actual situation in relation to the new work in question. That is plainly unrealistic in my judgment, given that I am considering the position of the hypothetical knowledgeable, prudent, reasonable and willing purchaser who would, I am satisfied, have wanted to ascertain the likelihood of the expectation that this new work would materialise.

It is obvious that they would have sought information from Jeffrey Wrinch. Jeffrey Wrinch already had a good knowledge of the position from his involvement in the business. He would also have been able to obtain further information from Mark Wilson and Scott Wilson in particular and to pass that on, including for example the quotations and tooling purchase orders and the SMR sourcing commitment and the Parker letter of nomination and draft procurement agreement. I must bear I mind that even though Jeffrey Wrinch, for good reasons, did not want to alert his team to the prospect that he was discussing a sale of the business, he was nonetheless able to obtain a reasonable amount of information about these ongoing projects without doing so. I accept that he would have been resistant to identifying the customers, or allowing the purchaser to approach them, for the same reasons as he gave Shield at the time. He would, nonetheless, have been willing and able to give warranties in relation to the information which he provided.

Further, and significantly, the overwhelming likelihood is that any hypothetical purchaser would have had a good existing knowledge of the foundry series production business – since it is difficult to imagine anyone who was not already active in the sector being interested in the acquisition. It follows that they would know that it would be unlikely that these customers would not want to progress to a series production purchase order, having already invested the time and money in getting to tooling stage (or, in SMR’s case, in preparing for a transfer), assuming that they could be confident that the incoming supplier would provide them with the same service level as Presbar.

As against that, it is obvious that there was a limited pool of potential purchasers. In evidence Jeffrey Wrinch said that there were some others who were interested, and there was some contemporaneous reference to that, but there has been no disclosure of such material (albeit it was not, so far as I am aware, an issue for disclosure) and no detail as to who was interested and their previous knowledge of and involvement in the business.

I also accept, as I have already said, that Jeffrey Wrinch did not have a strong negotiating position, given the difficulties of trying to sell this business in the first Covid lockdown, given the financial problems which Presbar faced, and given the financial implications to him – in terms of having to introduce short term and long term funding – if he decided not to sell.

However, Shield’s case that Christopher Shield was thus in an extremely strong negotiating position should not be exaggerated. After all, as Mark Fairhurst emphasised, Presbar was also an attractive prospect to Christopher Shield and others like him because of the financial savings (referred to as “synergies”) which could be obtained by acquiring the order book and the assets but making substantial savings on wages and overheads by relocating the business to an existing foundry.

Mark Fairhurst again – and rightly – says that all this is a matter for the court. He also says that he has insufficient information to allow him to assess the degree of expectation and uncertainty and, thus, to state what degree of discount may be appropriate. However, again he provided a range of between 10% and 30%.

It seems to me that this range is too low. First, it is not clear that this was intended to be on top of the existing reductions. Second, it fails sufficiently to reflect the caution the hypothetical purchaser would have exercised given the inability to verify the position with the customers. Third, it fails fully in my view to reflect the comparative bargaining position of the parties.

Although Mark Fairhurst was cross-examined on the basis that the hypothetical purchaser would place little or no value on these items, on my reading of his cross-examination he did not agree with this as a proposition, only that it would depend on whether the hypothetical purchaser believed that there was likely or unlikely to be any work resulting from this business opportunity.

In my judgment the difference between the full value valuation and the reasonable expectation valuation, where the latter is the in-breach valuation, is a total 35% discount, which produces a net valuation of £455,000 (i.e. £700,000 less 35%).

Should the as-warranted value of Presbar be the actual consideration or Christopher Shield’s higher contemporaneous valuation ?

Presbar’s valuation is based on the usual starting point that the agreed sale price, negotiated between the actual seller and the actual buyer, is the best contemporaneous evidence of the open market value of the business as sold with the benefit of the warranties.

Shield’s valuation is based on its case that Presbar’s circumstances at the time were such that Jeffrey Wrinch was willing to and did agree to a sale price at below open market value and that the true open market value was higher than the agreed sale price.

The key contemporaneous evidence for Shield is that, unusually, he shared his open market valuation and his essential workings with Jeffrey Wrinch under cover of his email dated 1/5/20 by way of his added notes to the bottom of the then current version of the production information sheet.

His valuation of £2,923,223.60 was based on: (a) total revenue of £8,077,185, comprising the 18-19 revenue, including the figures for what became new work in the order book, but excluding the two plus items; (b) reduced by 20% to reflect “current environment” and “possible delays to new projects” (which was shorthand for the impact of COVID); (c) with a 28% gross margin applied to the balance (this being assessed by Christopher Shield from the metal and production costs identified in the order book); (d) with a deduction of £300,000 for the increased overhead costs at Shield to serve the additional Presbar business; (e) with a 2.5 year multiple applied to the resultant net margin; and with (f) two further deductions of (i) £350,000 for the costs of transferring the Presbar business to Shield; and (ii) £500,000 for the risks of “losing a customer, machine repairs and management time etc”. This produced the resultant “total value” of £2,923,223.60.

In cross-examination Christopher Shield was unable to provide any reasoned explanation for the various discounts or for his choice of a 2.5 multiple. There was no contemporaneous internal documentation or correspondence about this, even though it appeared from his evidence and the documentation that it had been shared and discussed with and agreed by his fellow director Jon Cooper. In reality, it seemed to me that it was based on little more than his commercial assessment of the value of the business. The primary purpose for including the various amounts and reductions seemed to me to use the information provided in the production information spreadsheet to get to a point where he could justify offering £2.6 million as a deal value.

This can be seen from the further information he provided in this document because, below the £2.935 million valuation, he referred to several “issues”, which were clearly intended to identify further risks to Shield and, hence, provide a justification for reducing the valuation further down to £2.6 million. These included: (a) “deal with customers” which, read in context, clearly referred to the risk that some existing customers might not be willing to transfer their business; (ii) “customer E new job concerns over machining costs and rates”. This was a reference to Parker, and the substantial new work claim for £1,491,000. Although the precise nature of the issues is not as clearly expressed as it might have been, they clearly indicated concerns in relation to a large item of what became new work.

Indeed, Christopher Shield went further and stated a “realistic deal target in current market” of £2.4 million (without Timco) based on payment by instalments.

It is true, as was submitted on Shield’s behalf, that against this the valuation made no express allowance for the prospective turnover from the two plus new work items.

However, taking everything into account, it is simply not possible in my judgment to attach the same weight to this as if it had been a carefully prepared and researched objective valuation. It was, in my judgment, little more than a negotiating tactic to justify the offer which Christopher Shield was willing to make.

It is also worth noting, given the submission made by Shield that this valuation should be increased to reflect the additional turnover subsequently disclosed, that by the time of the APA Jeffrey Wrinch had produced a revised version of the production information sheet which included additional revenue from the smaller customers not included in the previous version and which became Sch. 6.

In his witness statement (par. 28) Christopher Shield states that he undertook a similar exercise to his previous version based on the higher turnover in the order book, which produced a higher starting point of £10,373,466. He said that he “valued the order book as follows:

“(I) I took the total revenue figure of £7,681,733 and added this to the new work figure of £2,691,100 and applied a 25% reduction for commercial risks and uncertainties surrounding COVID which came to £7,779,624.75;

I then applied the 27% gross profit margin as provided by Jeff and also factored in an additional anticipated overhead increase of £350,000 which totalled a contribution per annum of £1,750,498.68;

I then applied the 2.5 times multiplier which equalled £4,376,246.71; and

I deducted an estimated transfer cost of £400,000 and £500,000 for risks such as management time or machine repairs which came to a total valuation of £3,476,246.71”.

If he had used precisely the same approach and figures to the figures in his earlier shared valuation the figure would have been £4,208,786.48.

Christopher Shield was cross-examined on the basis that there was no evidence or independent support for his assessment of his estimated gross margin or of his 2.5 multiple. These are valid criticisms.

As against this it must be observed that there was no push back at the time from Jeffrey Wrinch and Mark Fairhurst has not provided any alternative calculation.

Further, Shield also rely on Christopher Shield’s evidence in cross-examination that he had previous experience of the valuation process, having undertaken a number (around 20 he said in cross-examination) similar transactions over the last 25 years, and he considered the Presbar deal as somewhere in the middle between the acquisition of the business of a blue chip company and a company in administration.

However, in my judgment there is no good reason to rely on his own internal calculations as justifying a higher valuation than the actual consideration, based on the £2.6 million has was prepared to offer at that time.

As to the difference between the two valuations, the first dating from 1/5/20 and the second being his retrospective valuation based on the updated data in the order book, Christopher Shield was not cross-examined on the difference between the two valuations. He had said in his witness statement that Jeffrey Wrinch was “aware that I valued the order book at £3,476,246.71 as I shared my calculations with him based on the details within the Orderbook including profitability/ contribution from the different product lines”. However, whilst he did share the previous valuation on 1/5/20, there is no basis for his suggestion that he produced or shared the later valuation at the time, since it does not appear anywhere in the contemporaneous documentation and would, in any event, have been superfluous in the absence of any evidence that anyone was interested in renegotiating the purchase price which had already been agreed.

Shield relies on the fact that there was this significant increase in the total overall turnover between the original figures and the order book figures, and yet Jeffrey Wrinch did not seek to renegotiate the price upwards, so that I ought to accept Christopher Shield’s evidence that the true as warranted open market value of the business was higher than the amount as agreed on the basis of the original figures and was as high as £4,208,786.48.

The SMR rebat e claim .

The complaint is that Presbar failed to disclose a “secret rebate” arrangement, under which an element of the revenue received at the current price recorded on the order book was in fact accrued as a rebate for SMR and not retained by Presbar, thus materially overstating its profitability.

Presbar admits that it did not disclose the existence of the rebate agreement, but contends that this did not amount to a breach of the warranties and that the order book was not misleading because the true profit was not adversely affected by the rebate agreement

As already stated, in relation to SMR (as in relation to each of the other major customers) the order book identified against each part: (a) the “current price”; (b) the “alloy” used to produce it; and (c) the “metal price” of that alloy. It is apparent from the remaining costs shown on the row for the part that the alloy metal price is by far the single largest cost element of the production of each part, so that the difference between the current price and the metal price is the first step in identifying the likely profit of such supply. It is common ground that, as was common practice (see the section addressing the factual background above) the metal price and, thus, the current price would be adjusted on a regular basis to accord with movements in the price of metal as shown in the Metal Bulletin.

It is also not disputed by Presbar that there was a longstanding arrangement between SMR and Presbar, which was referred to variously as a “tooling rebate” and a “tooling fund agreement”.

Having heard the evidence, including the evidence of Darrell Cook as SMR’s former supply chain director and having read the email from Mr Maghiar of SMR dated 22/2/21 in which he explained the position, there was nothing in any way corrupt or otherwise improper in the arrangement.

I am satisfied that the true position as regards the arrangement was as follows: (a) in accordance with standard practice in the sector, SMR owned the tooling which Presbar used to make parts for it; (b) as was normal, the tooling required regular maintenance and repair work and occasional small investments which SMR, as owner of the tooling, would need to authorise and fund; (c) SMR as a group was not very good at promptly authorising expenditure for such tooling works, which was a source of frustration to its representatives who had to deal with Presbar at local level, not least because delays were liable to cause or exacerbate part production issues; (d) in order to address this difficulty, an agreement was reached between Presbar and SMR at local level whereby the metal price was set at a level higher than it would otherwise have been, with the consequence that the current price was also set at a consequentially higher level; (e) the surplus received by Presbar between the price which it would otherwise have charged and the price which it did charge was held as a separate notional fund by Presbar which was used to pay for tooling works sanctioned and undertaken during the course of that year; (d) at the end of the year a reconciliation would be undertaken; (e) if that reconciliation showed that the fund was in surplus then Presbar would rebate (i.e. re-pay or credit) the surplus to SMR.

It is therefore the case that this arrangement did not result in any secret profit to Presbar or, indeed, involve any loss to SMR, let alone any secret payments to SMR at local level. It was, however, secret in the sense that it was not disclosed to SMR at head office, but the reason for that was only to ensure that the relationship between Presbar and SMR worked efficiently at local level and that tooling works were undertaken promptly for the overall benefit of SMR.

It is also worth observing that it would have been apparent to any moderately careful and financially literate reader of the order book that the metal price for the two alloys stated for SMR was significantly higher than that of the same two alloys stated for the other major customers. However, perhaps surprisingly, this does not seem to have been observed by Christopher Shield at the time, whose evidence is that he simply took the current price at face value and used the 18-19 revenue to calculate his valuation of the Presbar business (see section 7 above) without reference to the fact that the metal price was also inflated.

The problem for Shield arose when it discovered post-completion that SMR expected Shield to continue with the same arrangement. Christopher Shield refused to do so, apparently on the basis that he considered that Shield should be entitled to charge SMR the same higher price but to retain as additional profit the difference between the metal price as shown and the (lower) price he could obtain it for on the open market, without continuing with the rebate arrangement. Unsurprisingly, it might be thought, SMR declined to agree to this proposal. There was some debate in cross-examination of Christopher Shield as to whether this was the real reason for the post completion difficulties in the relationship between Shield and SMR. Since there is no longer any claim pursued for damages for loss of profits, that is something which it is not necessary to investigate, although it does seem surprising to me at least that Shield should have adopted this commercial equivalent of risking cutting off its nose to spite its face. It appears to be a paradigm example of Christopher Shield’s hard-nosed approach to business.

This claim is thus premised on the basis that: (a) the metal prices for SMR as shown in the order book were neither true or accurate and/or that the contents were not complete as regards the relationship between Presbar and SMR, and/or were materially misleading; (b) the consequence was that the net profit on each transaction was less than appeared from the order book, according to Christopher Shield by some £206,936.20 p.a. based on 18-19 turnover.

It was put to Christopher Shield in cross-examination that, because the metal price and the current price were both increased by the same rate, and would continue to move upwards or downwards at the same rate in accordance with changes in the Metal Bulletin, there was no difference between the true profit margin achieved and, it followed, there was no actual difference between the financial position as it actually was and the financial position as was shown in the order book. Although Christopher Shield did not accept this, in my view it is plainly right. Shield’s real complaint was that because it chose to use a standard gross profit margin percentage figure for all turnover from all sources when valuing the business, rather than starting with the current price and the metal price as they appeared on the order book and then deducting other costs and overheads, Presbar’s apparent profitability on that basis was overstated.

In closing submissions Presbar accepted, as it had to, that the current prices and metal prices as shown in the order book for the SMR parts were at the very least misleading in a material respect, in that they did not reveal that the true current price and metal price as adjusted at year end was proportionately less in each respect.

The question which Presbar posed was: “whether the as-warranted position is to be taken as a composite of the information in the relevant line of the Order Book, in which case there is no difference between the as-warranted position and the actual position; or whether the as-warranted position is to be approached on the basis Presbar is to be taken as warranting each individual piece of information individually, such that the as-warranted position can be taken as the delta between the sale price taken in isolation and the actual cost of the metal required to manufacture the relevant part”. It submitted that this question was to be answered by reference to the common background knowledge in the sector as to the practice in relation to variations in the metal price by reference to fluctuations in metals market prices in accordance with the Metals Bulletin.

Ingenious though the argument was, in my judgment it cannot be accepted. The fact is that both the current price and the metal price as stated in the order book were both materially misleading, because neither of them revealed the true position. It follows, in my judgment, that there was a breach of the paragraph 3.1 warranty. I do not, however, accept that there was a breach of the paragraph 3.2 warranty, because that is only breached if Presbar had reason to expect if it was still in ownership of the business post completion that the margins achieved would be significantly different. If Presbar had been in ownership post completion the same arrangement would have continued and there would have been no difference.

The real question, in my judgment, is what the consequences of that breach are, in circumstances where the court has to consider whether there was any difference between the as-warranted and the in-breach value of the assets.

I start by examining the loss as asserted by Christopher Shield, noting that Mr Southall as Shield’s accountancy expert was not asked to give any opinion on this issue and, hence, could not assist on the point.

He began in his witness statement (par. 42) by claiming that Presbar had warranted a gross annual profit margin of £387,141.26 on the basis that since Presbar had warranted the 18-19 quantities sold the correct approach was to multiply the 18-19 quantities sold by the current price and then multiplying the difference by 27% as being Presbar’s gross profit margin as stated to him by Jeffrey Wrinch.

He continued (par. 43) by valuing that benefit in a broadly similar way to his valuation of 1/5/20, i.e. by taking a multiple of 2.5 and then making two specific discounts to reach a figure of £653,300.88 The figure is pleaded as being £653,178.

He then compared that with the actual position, which includes what is identified as a figure of £206,935.20 in relation to this element of the claim based on what he describes as “the metal difference”. This, it appears, is his valuation of the difference between the metal price which he assumed he could obtain the metal for and the metal price as stated in the order book and which is pleaded as being an “additional cost, and so loss of profit”.

On his analysis of the position, Shield had suffered no loss because the margin was the same, since the current price and the metal price were both inflated. As he said at par. 5.69, there would only be a loss had Shield assessed the value of the business taking the current price as stated but not taking the metal price as stated and substituting instead the actual metal price they could have acquired the metal for. There is, however, no evidence that this is what Shield did.

In any event, adopting Mr Lyons’ figures for the relevant metal prices, the relevant figure was not £206,935.20 but £145,912.

Further, and finally, adopting Mr Lyons’ figures for the enhanced metal price escalation when compared with the rebate repayable to SMR revealed that the position was more profitable to Presbar than as warranted.

In my judgment however the most fundamental objection to this claim is that articulated in par. 82 of Presbar’s opening submissions. In short, the essential basis for the claim as articulated is that Shield should be entitled to rely on the current price as warranted but should also be free to take, for the purposes of calculating loss, a different metal price to that which was warranted. As is submitted, such an approach ignores the point that Presbar did not warrant – and cannot be treated as having warranted - that a lower metal price than that stated on the face of the order book could be obtained.

The real point in my view is that what the court is required to ascertain in the “in-breach” position is the actual value of the assets based on a knowledge of the true position. Knowledge of the true position involves knowledge of the rebate arrangement which, in turn, involves knowledge that both the current price and the metal price are equally inflated. Such knowledge would mean that the informed hypothetical purchaser would not apply a 27% gross profit margin to the current price as stated in the order book, because they would know that this was artificially inflated. Insofar as they chose to use the gross profit margin approach to value the SMR claim they would use the current price net of rebate. In such circumstances, there is no basis for considering that there would be any difference between the warranty true and the warranty false valuations. Insofar as the informed hypothetical purchaser chose to take the starting point as the gross margin taking the current price less only the metal price the same result would be reached.

In short, even though I accept Shield can make out a breach of warranty claim on the basis that the information provided as to the current price was not correct, what they cannot do is obtain damages for breach of warranty on the basis of an artificial approach to the in-breach position which involves an entirely artificial approach to the assessment of any resultant diminution in value.

The SMR pre-delivery inspection claim .

Shield complains that SMR required Presbar to provide a 100% pre-delivery inspection (“ PDI ”) process on all parts, which was a non-standard, costly and labour-intensive process, and was not reflected in the costings on the order book.

Presbar admits that it operated a 100% PDI system, but denies that this was a requirement of its contract with SMR, denies that it was non-standard in the sector and denies that it was something which it was required to include as a separate cost item or otherwise disclose in the order book

This claim is pleaded on the basis that: (i) SMR had required that all parts supplied to it had to be inspected by Presbar pre-delivery to SMR; (ii) that this was a non-standard requirement, because a standard rate of PDI is no more than around 1% of products which ought to have been disclosed to Shield as a further process cost item in the order book, and (iii) in the circumstances Presbar knew that the order book was not true, accurate and/or complete and/or was misleading.

As a preliminary observation, it is not immediately apparent to me on what basis Shield argues that it is relevant to this breach of warranty claim either that this 100% PDI rate was an SMR requirement or that it was a non-standard PDI rate. I have already referred to the warranties which were given. There is nothing in the APA which has been identified which would impose any specific disclosure obligation in either respect.

It seems to me that for this claim to succeed Shield would have to establish that the failure to include this as a separate production element and cost in the order book made the order book untrue, inaccurate, incomplete or misleading in a material respect.

However, the immediate difficulty is that there is nothing which has been identified in the APA which would impose any specific disclosure obligation in this respect. It would have been easy enough, for example, to have included a warranty that all material production elements and costs in relation to each part in the order book have been included in the order book. Given the limited definition of the order book as “the list of uncompleted orders from customers”, it is not possible to conclude that the order book was somehow required to include all material production elements and costs in relation to each part in the order book. A warranty that the contents of the order book are true, accurate, complete and not misleading in any material respect cannot, on the face of the information actually provided in the order book, be construed as a warranty that every relevant cost incurred by Presbar in the production of each part, whether direct production cost or overhead cost, is included in the order book.

It is not at all obvious that the columns headed “machine” through to “CNC” record cost information or information in such a way as it would be possible to estimate the actual production costs associated with each column item. It is noteworthy that there was no attempt by Christopher Shield to do so in his contemporaneous valuation. Although costs are inserted against the final three column entries, and an indication of delivery costs is given, these are self-evidently limited costs in contrast to the whole of the production costs.

Further, there is clearly no attempt in the order book to include any overhead items. In my view it is well known that there is always scope for differing approaches as to which cost elements are to be included as direct production costs (i.e. those which are liable to vary in relation to the volume of production and the particular product manufactured) and which are to be included as overhead costs (i.e. those which are not liable to vary). It cannot be said, for example, that the costs of PDI must be variable production costs which, thus, ought to have been included as a separate production element and cost, instead as a part of the overall labour overhead.

Shield has adduced no evidence from which it could confidently be concluded that the production elements and costs included in the order book comprise an exhaustive list of all such costs, save for PDI costs, whereas all other costs can only be overhead costs.

In the circumstances I am satisfied that this case falls at this first hurdle.

It may be that if Shield had been able to adduce convincing evidence to support a case that a 100% PDI rate was unknown across the sector, whereas a 1% PDI rate was standard, such a striking discrepancy might have justified a different analysis. However, it has not done so, either through its industry expert or otherwise.

Mr Turner was unable to say either that a standard rate of PDI was around 1% or that a 100% PDI inspection rate was non-standard. He did say that he would expect the parts to be 100% visually inspected by the machine operator “and then subject to order specified checks on material, dimensions and crack detection”. Thus, the real difference was whether the 100% visual inspection was to happen at the end of the production process or during the course of the production process at the machines, with a further inspection process at the end.

All that Christopher Shield said in his witness statement [#45] was that “as this was a wing mirror product, we did not envisage the level of inspection to be 100%, and it is not common in the industry for a product such as this”. Again, that is very far from establishing the pleaded case.

Although Shield said in its written closing submissions that Presbar had admitted in its statement of case that a 100% PDI inspection rate was “not industry standard”, that must be read in context. Shield’s pleaded case was that a 100% inspection process prior to supply to the customer was non-standard, the standard practice being no more than about 1%. It did not say anything about inspection processes at the machine stage. Presbar pleaded that industry standard was to inspect “most if not all” the castings at the machine stage, whereas its approach was to inspect all of the casings at the end of the process. It accepted that this was “an optional and rare ancillary operation” and not a part of production which would be reflected in the order book operations.

Mr Turner did say that in his opinion “inspection rates and levels on castings are normally set as part of the purchase contract and would be higher during the sampling and early production runs of the parts. For safety critical parts especially in the automotive sector the inspection requirements for new production, including any changes to the standard operation could be 100% visual, along with material specification and properties, on a batch basis”. Again, however, he was not suggesting that any of this was invariable or standard practice.

Further, in my judgment the evidence does not demonstrate that 100% PDI was required by SMR. The Presbar produced document entitled “process flow – control documentation” (referred to as the control plan), which contains details of the production process operation by operation for a particular part, does include various specified tasks for “operators”, “patrol” and “audit”, and also specifies that one such operator task, entitled “100% view (viewline)”, includes a process for visual standards and for records.

Although there was a certain amount of conflicting evidence about this, there was a consensus that once the customer had signed off on the supplier’s PPAP it would become an agreed document. However, the question as to whether or not the supplier was contractually obliged to comply with every part of the PPAP even where – as in this case – the particular part of the PPAP did not specify a particular quality standard which each part had to meet, in contrast with the internal processes which the supplier would undertake to test that it was meeting that standard, did not seem to me to have a clear or industry wide answer. That is not surprising in the absence of, for example, some well-established relevant British Standard or equivalent.

The evidence of Mr Cook of SMR was that no 100% end-of-process inspection had been insisted upon by SMR and that how quality standards were to be delivered was something which SMR left to the supplier unless quality issues manifested themselves. This evidence does not seem to me to be at all surprising and I accept it.

In the end, it seemed to me that the key point was that Presbar had, for its own perfectly good reasons, chosen to adopt a non-standard inspection process of 100% visual inspection at the end of the process, whereas Shield adopted the industry standard 100% machine visual inspection process. It appeared from Christopher Shield’s evidence that the parts were visually inspected by the machine operator as they left the diecasting machine as well as by a team of patrol inspectors, but that these patrol inspectors would only inspect around 1% of the parts at the end of the process. Christopher Shield obviously regarded this as a far more cost-effective approach than the 100% PDI end of process which Presbar adopted. He was far more focussed on cost efficiency than Jeffrey Wrinch, who was prepared to accept the increased costs of having a dedicated inspection team undertake a 100% PDI process as the price for minimising QA issues. The difference between the two approaches is not one which, on a proper interpretation of the APA and a proper analysis of the order book, one which Presbar was obliged to include in the order book to prevent it from being in breach of warranty.

In the circumstances, this breach of warranty claim fails.

For completeness, it was also pleaded in the alternative (par.31(5)) that the fact that the machinery used for manufacturing the SMR parts required a 100% PDI process rendered Presbar in breach of the asset warranties. There is no evidence, factual or expert, to support this allegation, and I reject it. A similar claim is pleaded in relation to Parker product 32E but, insofar as pursued, I reject it on the same basis.

As to the quantum of the claim, it is set out in an amended version of the order book to which Shield has added a standard inspection cost per part, but there is no evidence or explanation, documented or otherwise, as to how that cost is arrived at. In his report Mark Fairhurst noted the absence of supporting information and was unable to comment further. When asked, Christopher Shield’s evidence was that it was produced by “I think probably Jim alongside myself, with Jim's input and the production team's input”, but that is clearly an inadequate way to seek to establish the amount of an extra cost of £119.060.70 which feeds into a breach of warranty claim.

In the circumstances I would not have been able to make any valuation of this head of claim with any degree of confidence even had it been made good on the evidence.

The SMR scrap rate claim .

The complaint is that Presbar did not disclose an excessive scrap rate of around 20%, which SMR says is far above industry norms. It is premised on the factual assertions that: (a) the production of these parts for SMR involved a scrap rate of around 20%; whereas (b) a standard scrap rate is no more than 5%; and that (c) this differential had a significant impact on the profitability of these orders.

Presbar contends that: (a) its actual average scrap rate was in the region of 10% and that this was not in any way far above industry norms; (b) in any event, it was not something which it was required to include as a separate cost item or otherwise disclose in the order

Again, Shield’s complaint is that this meant that the order book was not true, accurate and/or complete and was misleading.

In the same way as with the 100% PDI claim this claims faces, and in my judgment fails, on the obstacle that on a true analysis of the order book and the relevant warranties there is no basis for a conclusion that even if the factual case was established this was something which was required to be disclosed in the order book. Indeed, the case is even stronger in this respect, since it cannot be said that the scrap rate is itself a separate production element or cost which would have been expected to have been included in the order book, given that – as I have stated – the order book did not purport to comprise an exhaustive list of all production costs.

Christopher Shield’s evidence was based upon his own view that he would have expected the scrap rate for the SMR parts to be around 3-6%, whereas his evidence was that Dave Harris told him that Danny Dobson had told him that the scrap rate at Presbar was around 20%, so that in his view it should have been included in the order book as a non-standard production cost item.

The only documentary evidence for this is an email from Dave Harris to Christopher Shield on 2/5/22 in which he volunteered the information that “the reject rate at Presbar for SMR products was 20%”. He provided no further details in the document and Dave Harris was not called to give evidence about it.

Danny Dobson was cross-examined about this. He disputed that he had said this and agreed with the position as recorded in the scrap rate data produced by Presbar (addressed below). Although he was a little monosyllabic in his answers, he did not seem to me to have any obvious grudge against Shield. To the contrary, he had been offered employment at the Kettering foundry and had worked there for two years post APA. His evidence was that he had left simply because he did not want to move permanently and was fed up with the weekly commuting. In the end, therefore, it appears that all that he would have told Dave Harris is that Presbar planned for a 20% scrap rate and that this was misunderstood and thus misrepresented by him to Christopher Shield.

Although Christopher Shield also said in evidence that since the scrap rate “ was running at 20 per cent with us, it was probably running at 20% with Presbar”: (i) there is no documentary or witness statement evidence as to the scrap rate at Shield – which he accepted in cross-examination was an error on his part; and (ii) there are other reasons why Shield might have struggled initially with what was, to them at least, the production of new parts using new tooling. Insofar as the suggestion appeared to be that the high scrap rate was a consequence of deficiencies with Presbar’s tooling, there was no expert or other detailed credible evidence to this effect.

Mr Turner’s evidence in his report was that it was difficult to generalise as to the levels of scrap for particular products. He did however say that “under normal running”, one might expect a scrap rate of 5 - 10%. That is higher than the figure of no more than 5% contended for by Shield. Mr Lyons stated that he would have expected a scrap rate of 10% in relation to the SMR parts.

Presbar’s case and evidence was that: (i) it had always budgeted for a scrap rate of 20%, but this was simply a prudent cost budgeting exercise, given that there would be occasions, especially with new parts and new tooling, where at first the scrap rate could approach 20%, rather than a recognition that 20% was an average scrap rate; (ii) when it had undertaken the exercise of assessing the actual scrap rate in relation to part production for the period 5/10/20 to 14/12/20, that had revealed an average scrap rate of 10%, with a range from 3% on some parts to 18% on others.

Although Jeffrey Wrinch was cross-examined on the basis that his explanation about the 20% scrap rate was implausible, he explained that this approach had the benefit of allowing Presbar to ensure that it always had enough stock to meet its contracted requirements and also to build up a buffer against further orders. That explanation seemed to me to be entirely plausible, given the evidence that Presbar was run in a rather more old-fashioned and less cost-driven way than the companies operated by Christopher Shield, to whom such apparent inefficiency must have seemed anathema. His email of 24/8/20, on which Shield relied to demonstrate that this explanation was not the one he gave at the time, is not in my view inconsistent with his evidence in this respect. He was referring there to current scheduled sales and explaining that to meet this would require around 30,000 shots (i.e. individual castings) per week “including losses of 20%”. That seems to me to be entirely consistent with this being a production planning process rather than a statement that a 20% scrap rate would in fact occur.

As to point (ii), Jeffrey Wrinch was cross-examined on the basis that there was no documentary back-up to this spreadsheet. Whilst this is true it did - unlike Shield’s similar documentation - contain the underlying information, broken down by part and by week, with the actual totals for the amount inspected and the amount scrapped. It also seemed to me that the document was reliable because it identified a wide range of scrap rates per part, with an explanation given in relation to two of the higher scrap rate parts that this was explained because they were a “new part, poor design, not yet developed”.

In the circumstances, I am satisfied that Shield has not proved that Presbar was in fact running a 20% scrap rate on SMR parts. There is no evidence to back up an assertion that a 10% scrap rate is non-standard in the industry (whatever that may mean in the context of a wide variety of different parts being produced in different conditions and with different tooling) and nor, therefore, is there any basis for a contention that Presbar was obliged to include it in the order book as an additional production cost.

Again, the alternative pleaded case based on a breach of the asset warranties fails on the evidence, if pursued.

The Meritor alloy claim .

The complaint is that the order book recorded that Presbar wrongly identified the metal alloy required to produce part 1B as LM6, whereas in fact it was EN47100, which was operationally inefficient for Shield because it did not already use that metal alloy.

Presbar admits that the alloys used were incorrectly recorded in the order book, but contends that: (a) this was a simple mistake, communicated to Shield before the APA was concluded, so that it should be rectified; (b) in any event, the alloy used was actually less expensive than that identified in the order book and it should not be held liable for the fact that Shield had not previously used EN47100

In its claim for rectification Presbar relies on the fact that in his email of 24/4/20 Jeffrey Wrinch expressly drew the error to Christopher Shield’s attention. However, it is Christopher Shield’s evidence that, although he obviously saw and acknowledged the email, he did not consciously pick up on or action the point raised by Jeffrey Wrinch, which is why he did not respond or otherwise do anything about it at the time or a little later when he came to prepare his financial calculations to support his offer. He says that by the time, over three months later, that the APA was finally executed - with the information in what was the production information spreadsheet and was now the order book not having been updated by Jeffrey Wrinch in the meantime - he still had no conscious awareness of the mistake, because no-one had again drawn it to his attention. Accordingly, says Shield, the (demanding) requirements for a successful plea of rectification are not satisfied because, in short, there was never any communicated shared intention between Presbar and Shield that the different alloy or price should be inserted and nor did Shield know of Presbar’s mistake or take advantage of it when the APA was executed.

Whilst again it is not particularly edifying for Shield to make this claim in these circumstances, where it accepts that it was made aware of the mistake but failed to pick it up or address it at the time, if it has a good legal basis for the claim then that legal right must be upheld.

I accept Christopher Shield’s evidence in cross-examination on this point. His evidence, which there is no basis for disputing or rejecting, is that the difference in the alloy used had an impact on Shield above and beyond any difference in margin, so that if he had consciously noted the import of what Jeffrey Wrinch was telling him he would not simply have ignored it. That is because it made a difference to Shield’s production process, since whilst Shield already used LM6 in its existing processes it did not use EN47100 and, hence, it would have been more expensive to have to done so just for this part run. As he says, therefore, if he had picked up the point, he would have actioned it by forwarding it internally to his fellow director Jon Cooper, whereas he did not. As he also explained, as a busy businessman he typically received around 300 emails a day, so that it is not surprising that he might simply have missed it.

It follows in my judgment that the claim for rectification must fail and Presbar is liable for a breach of warranty in that as a result the order book was not true, accurate and/or complete and was misleading.

The two live issues therefore are first notification and second quantification.

As to the former, it is apparent – given the sequence of events in relation to rectification – that Shield cannot hope to rely on wilful misconduct or concealment, since Jeffrey Wrinch positively notified Christopher Shield at the time of the error.

However, in its closing submissions Shield advanced a case to the effect that the claim was notified in time in sufficient terms and that it did not matter that the quantification of the claim had been altered since. This submission requires the court to consider the notification made on 7/4/22 with supporting documents. The claim being advanced there was, in relation to breach, the same claim as now advanced. The difference is that the only claim put forward in terms of loss was the claim made based on a difference in value between the LM6 and EN47100. There was no further claim made for the increased melting costs of using EN47100.

Shield submits that there was no obligation to do so, relying on observations made by Birss LJ in Drax v Scottish Power [2024] 2 All ER (Comm) 1062 at [50] – [59] as to the commercial purpose of such notification clauses.

However, these observations were made at a general level and must always be read in the context of the wording of the clause in question. Here, the clause required Shield to “summarise the nature of the claim (insofar as known to [Shield]) and as far as is reasonably practicable, the amount claimed”.

There is and can be no suggestion that as at 7/4/22 Shield was unaware that the error in the order book had had the effect of increasing its production costs. Thus, it cannot be said that it was not reasonably practicable to make such a claim. However, that claim was not made. It cannot be said that the claim was in some way indivisible, so that it is sufficient that a claim was made giving details of one element of the costs. On the facts, there were clearly two separate claims, for two separate losses, albeit both based on the same failure.

There is no explanation as to why the further claim was not made. However, in my view the explanation is obvious, which is that such a claim cannot succeed anyway. That is because there is no evidence whatsoever that this is a consequence which is anything other than unique to Shield, given its production circumstances. There is, accordingly, in my judgment no evidence that the in-breach value would differ in any way from the as-warranted value by reference to the impact of this difficulty upon the hypothetical purchaser.

The reason why this is important is that, as Shield accepts on the evidence as it now stands, there was in fact no difference between the actual cost of the two metals, so that the claim as actually notified must fail.

Although there is evidence that the additional cost of melting the EN47100 was £10,436 p.a. (these are Mark Fairhurst’s calculations), since that claim was not notified in time it cannot succeed.

The machinery warranty claims .

These are pleaded in par. 31(4) of the DCC and, as stated in the introduction, all apply to non-warranted assets.

There is a further separate claim pleaded at par. 32 in relation to Presbar’s refusal to allow Shield to take a stock of spare ejector pins valued at £2,500 but, as Presbar submits, since these were consumables rather than machinery (as Mr Turner accepted in cross-examination) this claim is misconceived.

In its opening submissions Presbar made several overriding submissions, which have proved to be well-founded.

First, Shield’s principal witnesses in relation to these claims, Mr Hull and Mr Danes, gave evidence about the alleged breaches and remedial costs about which they both had little direct knowledge and even less by way of contemporaneous documentation to assist them. There was no good reason for Shield not calling the witnesses who could have given direct knowledge or providing the contemporaneous documentary evidence which would have provided sufficient particulars of the damage and the resultant costs. There was a very late application by Shield made on the first day of trial to rely on further photographic evidence which had been produced very late in the day, which I refused on the grounds of lateness and prejudice.

Second, Shield’s engineering expert, Mr Turner, gave evidence upon which little or no weight could be placed, bearing in mind that he stated in terms that “commenting on the state of the assets purchased would be to a degree immaterial, considering that the transfer was nearly five years ago”. The reference to five years was a reference to the fact that he had only first had the opportunity to examine various items of machinery in February 2025. However, doubtless for the reasons he gave, he had provided no detailed contemporaneous material such as inspection notes or photographs to support such conclusions as he expressed.

Whilst I also accept that I am unable to place any real reliance upon Mr Lyons’ evidence either save at a high level of generality, since his opinions were largely based on his analysis of the contemporaneous evidence and witness statements, the end result is that I can really only make my decision on such contemporaneous documentary evidence as there is and such weight as I can attach to the oral evidence of the witnesses who gave evidence in relation to the assets.

Trim Press 8 .

The pleaded case is that “the electrical panel of this machine had damaged components, including damaged casing and emergency stop buttons, missing isolator, and the panel door did not close. It could not safely be used in compliance with health and safety requirements and regulations”. A claim for “approximately £500” for fitting a replacement panel was made.

Shield relies on the evidence of Jeffrey Wrinch in his witness statement that there were problems with this press and Trim Press 7 when they were sent, in circumstances where they were only sent because “all serviceable presses were in production at the time”. Jeffrey Wrinch admitted that Mr Danes had contacted him about the issue at the time. Although he also said that Mark Wilson had offered to change them when others became available, but this offer was not taken up, in cross-examination he accepted that he may be wrong about this, since there is no documentary record of it and Mark Wilson does not recall this.

On the evidence I am satisfied that Shield has proved its case in respect of this item. However, there is no evidence at all to substantiate the claimed in-house cost of £500, even though Mr Hull said in evidence that he was there when the work was done. Given that he said in his witness statement that he sourced a replacement enclosure which was fitted and the asset re-wired, one would have expected at the minimum documentary evidence of the replacement cost and some evidence of how the labour claim is arrived at, either from Mr Hull or some other source, but there is none.

Trim Press 7 .

I reach essentially the same conclusion as regards this item as regards liability.

In relation to quantum, Mr Hull’s witness statement is not sufficient to establish the remedial in-house cost claimed of “approximately £1,000”.

When asked about this Mr Lyons said, in contrast to his willingness to agree a reasonable cost for trim press 8, that “the problem we all face is we don't know what was repaired in the pump. What exactly was repaired? I don't honestly know and there are no photographs to show that. There's no work order from the maintenance department saying we spent three hours doing X, Y and Z. There is a real lack of data and information”.

Hounsell Trim Press .

Reverbatory furnace .

The complaint is that “this was in very poor condition with no refractory or fire bricks and was distorted as the end door did not align so that it did not close or seal correctly”. Mr Hull records that this is what he was told by the Shield maintenance department and acknowledges that it was outside his field of expertise. As to quantum, the pleaded case is that “to fully refurbish is estimated to cost £35,000 £40,000”. It is not said that these works have been carried out in whole or in part.

Shield relies upon an internal email within Presbar dated 8/7/20 which refers to this furnace as “running but can’t hold temperature as the refractory is 1/3rd missing, as such we can’t melt baths so we must rely on running radyne 2 [another furnace] therefore running extended shifts is a massive problem, can’t run Radynes after 4pm”.

The question is whether this means that it was not fully operational or unfit for purpose save for any furnace linings.

In cross-examination Mr Lyons said that the reference to part missing refractory was a reference to part of the lining being missing which, as stated, is excluded from the assets warranty. He also said that the remedial cost would be “in the low four figures”.

Krown gas fired bulk tower smelter, extraction unit .

The pleaded complaint is that “the internal components had fire damage, and the filter membranes were in the bottom of the unit and not hanging centrally as designed. It therefore cannot be used at all”. The pleaded case as to quantum is that “the appropriate resolution is currently still under investigation but if replacement is found to be required then the estimated cost of the same is £50,000 £60,000”. As recorded by Mr Hull, this is based on a comment by the contractor who installed the unit at Shield’s foundry, however there is no evidence from the contractor or contemporaneous documentary evidence, and he does not refer to any estimated repair costs. Again, it is not said that these works have been carried out, in whole or in part.

Presbar called Mr Dibb of Atex Filtration who stated that the above was a reference to an original Mark 1 unit and not to the Mark 2 two-unit item, which he installed at Shield after replacing some worn-out filters and some other works. He says that the Mark 1 unit, which was also sent to Shield, “had sustained catastrophic fire damaged previously at Presbar and was completely destroyed, this rendered the unit scrap, [Shield] disposed of the unit after I made my assessment”.

In closing submissions Shield sought to advance a claim for £10-12,000 based on the cost of replacing the filters on the Mark 2 unit. However, this is not the fire-damaged unit which Mr Dibb referred to as the Mark 1 unit. As to this, the evidence is that it was unusable due to catastrophic fire damage and had only scrap value. I am prepared to accept that this must have rendered Presbar in breach of warranty. However, in the absence of evidence as to how much it would have cost to repair the same to place it into the warranted condition or to have replaced it with an equivalent age and condition unit which met the warranted condition I am unable to make any assessment of quantum such as to allow me to award Shield any sum in this respect.

Krown gas fired bulk tower smelter, furnace .

The pleaded case is that “the bottom of the furnace was full of debris (namely 'conundrum', being the by-product of melting, mostly aluminium slag) which must be removed” at an “estimated cost of digging out the furnace and consequently then relining it at £16,000 £20,000”.

Shield relies on an inspection report commissioned by Presbar following an inspection on 23/6/20, the stated purpose of which was to “identify any potential issues with the refractory lining in the Krown tower melting furnace, highlight any potential causes, and recommend any remedial works to re-pair, or prolong the lifespan of the refractory lining”. Shield relies upon the section headed “Bath”, identifying a build-up of corundum on the lining surface which, it was suggested, should be removed carefully on a small scale basis but, if that was unsuccessful, using a large breaker which may involve replacement or repair of areas of the wall. It relied on the evidence of Scott Bradley that the small-scale removal had been successful in that the production capacity was now 75% And not 66.7% as Shield persistently but wrongly claimed.

In terms of quantum, Shield relies upon a quotation from a specialist contractor dated 22/4/21 with a budget of £16,352.

In my judgment, Presbar is correct to submit that this evidence does not mean that the furnace was not fully operational and fit for purpose save for any furnace linings. The evidence shows that the problem was a build-up of slag on the surface of the lining which, after careful repairs, allowed the furnace to operate at 75% capacity as at the date of the APA. Given that this was a non-warranted asset I am not satisfied that Shield can sensibly contend that anything less than a substantially 100% capacity makes the furnace not fully operational. As Mr Lyons said in cross-examination: “To me, that is fully operational because it was doing 1.5 tonnes per hour. It needed repair, there is no denying that, the corundum needed to be made smaller. But it was fully operational”.

Further, given that the problem was a build-up on the lining, which is an excluded item, I am satisfied that the cost of removing the build up from the lining is not recoverable anyway. Finally, as Presbar submits, insofar as some part of the quotation related to something other than the build-up or the linings there is no way of ascertaining what that would be.

Castmaster machine number 6, oil cooler and hydraulic valve .

The pleaded case is that “the oil cooler and four hydraulic valves were missing from the machine” with a pleaded replacement cost of £850 and £1,600 respectively.

Mr Hull’s evidence was that these items were missing “prior to shipping” because they were missing on arrival at Shield’s furnace. This evidence, however, fails to exclude the possibly that they went missing during delivery.

I prefer and accept Scott Bradley’s evidence that these items were not missing at the time of the APA or up to the date of completion because, if they were, the machine could not have been run. In the circumstances, I am not persuaded that the allegation of breach has been made out.

The decommissioning contract breach claims .

It is common ground that Presbar and Atkins entered into a further and separate contract for decommissioning the machines prior to their being collected by Atkins’ removal contractor. It is also common ground that this made sense because the machines were connected to the electrical supply, some with electrical panels fitted and some with other services connected as well, and were also connected to guarding and pipework, all of which would need to be removed before they could be collected, and Presbar’s employees were obviously better able to perform this task than third party removal contractors with no particular knowledge of the machines and how they were connected.

Various express alternatively implied terms are pleaded in paragraph 26 DCC and a duty of reasonable skill and care is pleaded in paragraph 27. The only contested item is Shield’s allegation that Presbar was obliged to remove the machines from their floor mounting and mount on pallets ready for transport, as to which I accept Presbar’s case.

Castmaster machine number 10 .

The pleaded case is that the hydraulic pipework was cut and the guard fencing damaged, the pleaded loss being £488.88. Mr Hull says that the pipework was replaced and the guarding was repaired during the installation process by Shield’s maintenance department at an hourly rate of £50.00 but that he did not recall how long the repair works took to complete.

In cross-examination Scott Bradley agreed that rather than cutting the pipework to this machine (as was done) it could instead have been unscrewed, and that would have been easier for Shield to recommission had that been done. However, this was in my view an answer as to what might have been possible, rather than an acceptance that this is what could and should have been done in the circumstances of this machine at that particular time. Presbar had also admitted that the guarding had been cut and the suggestion that this was at the request of the machine mover was not supported by witness or other evidence.

However, Presbar relies on the cross-examination of Mr Hull to the effect that: (a) some of the machines were an integral part of the Presbar building and were welded to the walls of the building; (b) the guard rails had to be cut off anyway; (c) “some of the cables went behind and pipes went behind, so is it obviously again, because of the aggressive nature of the time to move everything, we cut through them or the Presbar guy cut through them”.

Buhler 520 serial number 10298476 .

The pleaded case is that during decommissioning the main hydraulic pump housing was broken with a cost of dismantling and specialist repair of £1,200. Mr Hull’s evidence confirmed this, and he also referred to the email from the removal contractor that this was due to Presbar’s stacking method, which made it hard for them to attach the slings which resulted in the damage. He identified the remedial costs based on a “10-day repair job and cost in the region of £1,200”.

However, as Presbar submitted, the difficulty for Shield is that there is no direct evidence from the removal contractor to support the case that the damage was due to Presbar’s stacking method or that this was a breach of contract or that it was causative of the damage – as opposed to the removal contractor’s decision to lift using the slings despite what, on its case, must have been an unsuitable stacking method.

Given that Mr Ormerod denied the allegation and given that the removal contractor agreed to contribute 50% towards the overall costs claimed by Shield against it for this and other damage I am not satisfied on the balance of probabilities that Shield has proved its case.

Castmaster machine number 6, shot register for Euro 6 .

Buhler econoline 840 serial number 700130682 .

This claim is pleaded on the basis that the main control cable was damaged (with exposed wires) with a cost of cable repair and new junction box of £500. Mr Hull in his witness statement simply adopted what he was told by the removal contractor to the effect that “the control panels should have been removed before loading the machinery and this could possibly have avoided the damage which was caused to the main control panel” and his costs are not detailed other than to identify “approximately 4 hours of labour at £50/hr”.

The scrap metal contract breach claim .

The following is common ground.

First, in Jan. 21 Presbar and Atkins agreed that Presbar would sell Atkins specified amounts of metal alloy LM24, LM6 and EN47100 scrap at a total price of £100,166 for Atkins to use in its foundry to make parts of such alloys.

Second, the usual terms implied by the Sale of Goods Act 1979 applied to such contract.

Third, in fact, the EN47100 scrap ( the scrap ) contained significant quantities of zinc, in that the maximum permissible amount of zinc in such alloy was only 0.55% in accordance with the relevant British Standard, whereas that sold contained zinc significantly in excess of that amount.

Fourth, that was only discovered upon the scrap being melted in the foundry.

Shield’s case is that as a result it suffered losses as pleaded in par. 42 in the total sum of £15,609.

Mr Danes gave evidence about this claim in his witness statement, but only in the most general of terms. Although the pleaded case in relation to the loss suffered is taken from his email to Christopher Shield of 1/7/21, neither his email nor his witness statement provided any real details as to the quantum of the claim, as to the downtime, draining and remelting costs. In his email he added “JFYI [Just for your information] Chris, we will be able to reuse all of the affected material” and in his witness statement he said that “the scrap was therefore sold at the lowest scrap price denominator”. He demonstrated little recollection of the details in cross-examination.

In in re-examination, he said that his best guess as to the value achieved on resale of what he referred to as “dross” was approx. £500 / tonne, which would amount to £2,800 in relation to the 5.6 tonnes rejected after melting.

Jeffrey Wrinch and Mark Wilson made some comments on this claim in their witness statements but did not appear to have much in the way of direct knowledge.

In the supplemental bundle was a late disclosed contemporaneous email to Mr Danes which attached evidence of testing results which suggested that there were “huge amounts of zinc present”, far more than the limit under the British Standard.

In his report Mr Lyons: (a) observed that Shield had produced no chemical analysis or other documentation to support its case as to the scrap being out of specification This, as well as the comment in (c), was made before the testing results had been made available.

Mr Lyons was cross-examined about his evidence on this topic. In my judgment the following points emerge: (i) there is no substance in any legal defence based on any failure to inspect the scrap before using it, because Atkins was entitled to assume that the scrap was not contaminated such that it was out of specification and unusable; (ii) for similar reasons there is no substance in any legal defence based on Atkins having failed to test the product before 5.6 tonnes had been melted; (iii) there is no basis for contesting the claim for the sale value of the 6.16 tonnes at £1,350/t, total £8,316; (iv) Shield has not provided sufficient evidential material to justify its claim for downtime at £5,700 or drainage at £300; (v) the claimed cost of £1,293 for remelting costs is reasonable; (vi) the allowance of £500/t for the resale value of dross is reasonable, because I was not prepared to accept Mr Lyons’ suggestion that losses could have been minimised by manually removing the zinc.

As to point (iv), I do not consider that this imposes too high an evidential standard on Shield. The casting machine downtime claim is a substantial one, and it is not unreasonable to have expected Shield to have provided some evidential basis for it. There is no proper basis for my taking some rough and ready figure, in circumstances where Shield did not make any attempt to do so through documentary, factual witness or expert witness evidence and where Mr Lyons commented that the downtime cost seemed high but, reasonably, stated that he had no evidential basis for providing an alternative valuation.

Appendix – The order book (Schedule 6)