Bv Nederlandse Industrie Van Eiproduckten v. Rembrandt Enterprises, Inc.

2019 EWCA Civ. 596

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Nature of the Case

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Facts

An avian flu epidemic which struck the United States. Rembrandt (D) had to destroy over 50% of its birds. P found a supplier based in the Netherlands, BV (P). P and D made a contract prices provided that P's procedures in the Netherlands satisfied the US regulatory authorities for supervision of the egg business. The authorities gave the required approval on 1st June 2015. But before the approval, P emailed D on 21st May 2015 saying that there would be unanticipated extra regulatory costs and that the prices would have to be increased and on 12th June 2015 P proposed a €2.50 per kilogram increase in the price “after thorough calculation”. D requested a breakdown of the extra costs and on 22nd June 2015 P sent D a cost calculation of €2.59 per kilogram. Two days later D agreed the price increase; on 25th June a new contract was agreed to with all the prices increased by €2.50 per kilogram. Both contracts had an English law and jurisdiction clause. P informed D that some of the egg white powder would be supplied by its sister company Henningsen whose plant had also been approved by the US regulatory authorities. P explained that the amount of that product being supplied by Henningsen was about 50%. The prices of all egg products fell and D alleged that P was failing to comply with US inspection requirements and suspending D’s continued performance of the two-year contract. P sued D for lost profits. D claimed the product did not comply with US regulations. D also claimed that the second contract had been procured by P's fraudulent misrepresentation that the increased sale price was calculated by reference only to the extra costs incurred as a result of compliance with US regulations, whereas in truth the increased price included an element of profit as well as the increase in cost. The judge held that the product complied with US regulation. P invited the Court to follow the decision in Raiffeisen Zentralbank v Royal Bank of Scotland [2010] EWHC. In that case, it was held that a party must show, not only, the misrepresentation played a real and substantial part in inducing a contract, but also, “but for” the misrepresentation the party would not have entered into the contract on the terms it did. The judge held that an element of profit was included in the increases and that the representations on price were false representations deliberately made and that D believed the increase to be a genuine estimate of additional cost. The judge held that P had to prove that the second contract would have been made even if there had been no fraudulent misrepresentation. P could not do that. D was entitled to rescind the second contract which meant that the lost profits must be calculated from the first contract. This appeal resulted.