Friday Law Report: Merger Caused Company to Breach Its Contract for Haulage Services ; 5 December 2003 CEL Group Ltd V Nedlloyd Lines UK Ltd and Another ( EWCA Civ 1716) Court of Appeal, Civil Division (Lord Justice Waller, Lady Justice Hale and Lord Justice Carnwath) 26 November 2003
Kate O'Hanlon, Barrister, The Independent (London, England)
A COMPANY which had granted another company the exclusive right to supply it with transport services for a three-year period was in breach of contract by voluntarily merging its business with another group in such a way that its transport requirements could no longer be separately identified.
The Court of Appeal dismissed the appeal of Nedlloyd Lines UK Ltd against a decision that it was in breach of a haulage contract with CEL Group Ltd.
The claimant was the holding company for a group of companies in the container road haulage and related businesses. The defendant was the UK subsidiary of a shipping line. The parties entered into a written agreement in July 1996 which provided that the claimant had the exclusive right to provide road haulage and transportation services for the defendant for a three-year period beginning in January 1996.
At the end of 1996, the defendant merged with another group of companies which had its own haulage business. There then ceased to be a discrete business of the defendant, and the claimant was not given exclusive haulage rights in respect of any part of the merged business.
The claimant commenced proceedings against the defendant, claiming damages for breach of contract. The judge gave judgment for the claimant, holding, in reliance on the decision in Stirling v Maitland (1864) 5 B&S 840, that there was an implied term in the contract the defendant would do nothing of its own motion to put an end to the "state of circumstances" whereby the defendant required services by way of overland haulage in the United Kingdom. The defendant appealed.
The issue on the appeal was whether, having granted the claimant the exclusive right to supply it with transport services for a three- year period, the defendant was in breach of contract by voluntarily to merging its business with another group in such a way that its transport requirements could no longer be separately identified. …