Grains Jamaica Ltd v The Peppersource Ltd

JurisdictionJamaica
CourtCourt of Appeal
Judge DOWNER. J.A. (DISSENTING), BINGHAM, J.A. , HARRISON, J.A: , DOWNER, J.A:
Judgment Date30 July 2004
Neutral CitationJM 2004 CA 24
Judgment citation (vLex)[2004] 7 JJC 3012
Date30 July 2004
IN THE COURT OF APPEAL
BEFORE:
THE HON. MR. JUSTICE DOWNER, J.A THE HON. MR. JUSTICE BINGHAM, J.A THE HON. MR. JUSTICE HARRISON, J.A
BETWEEN
GRAINS JAMAICA LTD
DEFENDANT/APPELLANT
AND
THE PEPPERSOURCE LTD
PLAINTIFF/RESPONDENT
Hilary Phillips Q.C., Dianne Edwards-Davis, Howard Pinnock instructed by Grant, Stewart Phillips and Co. for the Appellant.
Dr. Lloyd Barnett, Andrew Rattray, Clark Cousins and Sheryl Thompson instructed by Rattray, Patterson, Rattray for the Respondent.

DAMAGES - Breach of contract - Whether appellant was entitled to terminate contract without proper period of notice - Whether breach of confidence or wrongful interference of contract by appellant - Assessment of damages

ORDER

DOWNER, J.A:

By a majority appeal allowed in part. Order of the Court below as to damages varied. Damages to be in accordance with that proposed in the judgment of Harrison, J.A. Half costs of the appeal to the respondent to be agreed or taxed.

DOWNER. J.A. (DISSENTING)
1

(i)

2

Introduction

3

The respondent, The Peppersource Ltd - an American company, succeeded before the late Clarke J. on the issue of damages with respect to a breach of contract and breach of confidence. On the merits of the case there are three issues to be decided. Firstly, assuming that there was a breach of the terms of the contract by Peppersource, did the appellant Grains Jamaica Ltd "Grains" waive those breaches so as to disentitle it to claim repudiation of the contract? Secondly, if the contract was for a trial period of one calendar year but the course of dealing continued for some two years, was the appellant Grains entitled to terminate the contract without the proper period of notice? Thirdly, was there a breach of confidence or wrongful interference of contract by the appellant Grains if it used the specific knowledge it acquired from its dealings with Peppersource to entice Durkee, a client of Peppersource, to enter into a contract with it at the expense of Peppersource? These issues are relevant to the main contract for the appellant Grains to supply four types of hot pepper to Peppersource.

4

There were subsidiary contracts by way of a joint venture agreement for the appellant Grains to supply other products if Peppersource found a market. In this instance there was to be a sharing of the profit and loss on each transaction. Also to be determined, is the jurisdictional issue concerning the capacity of Peppersource to institute or defend legal proceedings in this jurisdiction.

5

(ii)

6

How was the main contract formed?

7

The initial document was a Letter of Intent, at page 2 of volume II of the Supplementary Record, which reads as follows:

"It is the intention of GRAINS JAMAICA LIMITED to grow up to 150 acres of hot peppers for CARIBE CROWN and-or JERRY MARCHESE. The 150 acres will be for the first crop and then expanding up to 350 acres as CARIBE CROWN calls for additional acres.

GRAINS JAMAICA LIMITED AGREES to produce four varieties, of which two of the varieties will be Red Cayenne and Jalapeno.

CARIBE CROWN AGREES to pay GRAINS JAMAICA LIMITED US$.10 per pound farm gate and an additional US$.02 for delivery of the product to the processing plant in Yallas.

The payment of US$.10 per pound will be for all grades of pepper, excluding rotted or insect damaged.

SIGNED: BILL TAYLOR DATE Oct 11, 1985

MANAGING DIRECTOR

GRAINS JAMAICA LIMITED

SIGNED: JERRY MERCHESE CARIBE CROWN DATE 10/15/85

Also, DBA - The Peppersource."

8

There was a letter which accompanied this Letter of Intent and as it explains the background, it is appropriate to set it out. It is at page 1 of Volume 11 of the Record and it reads:

"October 15, 1985

Mr. Bill Taylor

GRAINS JAMAICA LTD.

Shop 14, Montego Freeport

MONTEGO BAY, JAMAICA

Dear Bill:

I have enclosed the letter of intent, properly executed.

I would like to add, and have understood, that we are willing to pay the 10 cents (US) excluding rotted, Insect . . . or otherwise damaged, or in other words only quality pepper as will be accepted by John Fletcher or his representatives.

Also, it is my intention to start out with 100 acres, and then build up to 150 and onward to 350 acres. So, I guess what I am asking is for me to control the amount of plantings, etc. and, under no circumstances should we over-produce. I hope you will recall I do still have a large plantation in Haiti, which I plan on phasing out but is impossible to phase down immediately.

Another concern is the keeping of the pepper until you would have enough of a load to bring to John all the way in Yallas, as well as the very long and 'bumpy' trip all that way. I will assume you will ship in field crates and do everything else necessary to assure a good delivery.

Lastly, we will do business in Jamaica under the new name of THE PEPPER SOURCE so as not to mix our entities, finance, etc. I have signed accordingly.

I will be sending the seed to John later this week via air freight. I am hoping they can clear customs and can be given to you so you can start them in the nursery immediately. We are already one month late.

I will plan on being in Jamaica to meet with you, visit the fields and otherwise get to know each other about the time you would be making the transplants, I guess to be about early to mid November. Therefore, my suggestion would be to meet on November 28 th (Thanksgiving), or at least that Friday. I would like to finalize all our thoughts over that week end and be back in my office by Monday the 2 nd of December. If it will be more convenient, we can meet in Montego Bay, if acceptable to John and the Agro representative.

I will await your immediate reply, look forward to meeting with you and a good and profitable business relationship.

Sincerely

Jerry J. Marchese."

9

The phrase "first crop" in the Letter of Intent was explained in the evidence of Mr. Marchese at page 90 of Volume I of the Record. He stated that it was when the crop was ready for harvest as to be determined by the growers. Also to be noted is that the name Peppersource is a mere trade name but it is stated as a new name.

10

The other document was prepared by the appellant Grains. It was dated February 6, 1986, some four months after the Letter of Intent. It must be understood against the background of the initial letter of Mr. Marchese, which indicated that he anticipated that both parties would come to an agreement over the week-end of November when they met in Jamaica. The letter is to be found at page 7 of Volume 2 of the Record. One significant feature of this letter is that John Fletcher and Yallahs had dropped out of the picture. Initially, the peppers were to be processed at his plant in Yallahs. The peppers were later to be processed at Holland in St. Elizabeth and the appellant Grains had by this time acquired machinery to set up a processing plant at the farm in Holland, St. Elizabeth. The letter reads as follows:

"February 6, 1986

Mr. Jerry Marchese

The Peppersource

P.O. Box 750

643 South Route 83

Elmhurst, III. 60126

Dear Jerry:

It looks as though your pepper plant in Haiti is going to remain there for quite a long period of time, or at least it will not be shipped before our first pepper crop.

We can supply all of the equipment that is needed for bringing and making mash here, with the exception of the hammer mill.

We agreed that for this first crop, we would have a pre-marital arrangement. The Peppersource would provide all the necessary equipment and Grains Jamaica Limited would provide the labour and utilities. It was further agreed that the Peppersource would pay Grains Jamaica US 10¢ per pound for the peppers as they are delivered to the plant. Peppersource will also pay Grains Jamaica US. 03¢ per pound for the labour and utilities used in processing, plus US. 25c per 5 gallon bucket for filling the buckets.

We would like the following arrangement for the pre-marital crop year.

  • 1. Peppersource to pay for all of the equipment and expense for installing the plant equipment.

  • 2. Peppersource will bring your man in Haiti down to operate the processing plant.

  • 3. The final product will belong to "The Peppersource" and is responsible for the quality and transportation.

  • 4. The Peppersource will pay Grains Jamaica Limited for the peppers as they are delivered to the plant.

  • 5. The Peppersource will pay Grains Jamaica for the processing fee and all the ingredients purchased for the processing in U.S. Dollars before the final product is shipped.

  • 6. The Peppersource will place in effect a banker's guarantee or escrow account or some suitable instrument that will guarantee the payments to Grains Jamaica Limited.

  • 7. If after the pre-marital crop year, Grains Jamaica and the Peppersource finds each other compatible, then they will form a company together for processing peppers and other products. This new company will then share the cost of processing as well as the profits in marketing.

Sincerely,

GRAINS JAMAICA LIMITED

Bill Taylor

Managing Director

WMT/mj."

11

At pages 203–208 of Volume 11 of the Record there is a very long letter of 15 th April 1987, from Mr. Marchese to the appellant Grains when Grains had terminated the contract. Some of the provisions in this letter differ from the contract of February 6, 1986, but I take it that Mr. Bill Taylor's letter was an accurate record of the oral agreement between the parties.

12

It is important to note at this early stage that the course of dealing between the parties differed from the letter of February 6 th and some of these differences are reflected in the numerous telexes during the contract period. Also important are the specific problems encountered in this venture. Problems with customs, irrigation, flood rains and one of the type of peppers, (jalepeno) was never grown...

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