Agip S.p.A. v Navigazione Alta Italia S.p.A. (Nai Genova, Nai Superba)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SLADE,LORD JUSTICE OLIVER,LORD JUSTICE ROBERT GOFF |
| Judgment Date | 20 December 1983 |
| Judgment citation (vLex) | [1983] EWCA Civ J1220-1 |
| Docket Number | 83/0522 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 December 1983 |
[1983] EWCA Civ J1220-1
Lord Justice Oliver
Lord Justice Slade
and
Lord Justice Robert Goff
83/0522
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(COMMERCIAL COURT)
(MR. JUSTICE LEGGATT)
Royal Courts of Justice.
MR. DAVID JOHNSON, Q.C. and MR. TIMOTHY YOUNG (instructed by Messrs. Norton Rose, Botterell & Roche) appeared on behalf of the Appellants.
MR. ROBERT ALEXANDER, Q.C. and MR. JEFFREY GRUDER (instructed by Messrs. Richards Butler & Co.) appeared on behalf of the Respondents.
This is an appeal from a judgment of Mr. Justice Leggatt delivered on the 29th March, 1983 (now reported in (1983) 2 Lloyd's Law Reports 333) whereby he dismissed a claim for rectification of an "escalation clause" which appeared in identical form in two charterparties. The original charterers were the second plaintiffs, Industria Italiana Petroli S.p.A. ("IIP"), who later assigned each charterparty to the first plaintiffs, Agip S.p.A. ("Agip"). Both plaintiffs are members of the ENI Group. The charterparties were dated the 5th December, 1974 and were expressed to run from the 1st July, 1977 to the 31st December, 1984. They related to two vessels which, at the date of their execution, had not yet been built. When built, the ships were named "Nai Genova" and "Nai Superba" and were owned by Navigazione Alta Italia S.p.A., who are the defendants.
Clause 28 of each charterparty stated: "Escalation: escalation clause as attached, will apply as from 1st January 1980 based on costs effective on the 1st of April 1974 unless otherwise provided in such clause".
The parts of the attached escalation clause relevant to this appeal concern escalation payments for the repair and maintenance of vessels as from the beginning of 1980 and, so far as material, read as follows:
"Commencing from 1980 at the end of each calendar year of residual validity of this contract, the charterers will refund to the owners the increased costs incurred for crew, maintenance and ordinary repairs.
(2) Cost of maintenance and ordinary repairs Commencing from January 1980 for each year of residual validity of this charter it will be conventionally assessed the cost of maintenance and repairs and such cost will be compared with the basic amount conventionally assessed in U.S. Dollars 1,120,224.
It is understood that the basic amount is made up 60% by workmanship and 40% materials.
Workmanship means the cost of a qualified workman employed by the shipbuilding industry as evidenced by the tables issued by 'Associazione degli Industriali della Provincia di Genova'.
Materials means the mean value of the two quotations appearing for each item in the wholesale price list relating to the Milan market and issued by the Milan Chamber of Commerce.
…
The average percentage variation to be applied to the above mentioned basic amount of U.S. Dollars 1,120,284 in order to obtain the conventional cost increase for maintenance and ordinary repairs, is obtained by comparing the values of the above tables and price lists effective on 1st of April 1974 and those effective on 31st of December of each year of the contract.
Payment under this clause will be effected as follows: For Crew costs: in Italian lire.
For cost of maintenance and ordinary repairs: in Italian Lire, at a rate of exchange with the U.S. Dollar, which will be the average of the rates used for paying freights during the year under consideration."
Before the judge the parties agreed that the first dollar figure shown in each charterparty ($1,120,224), which I will call the "conventional base figure", was the correct one and that the second dollar figure ($1,120,284) should be treated as rectified accordingly. Nothing, therefore, turns on that small difference.
As will be seen from the escalation clause, the conventional base figure is taken as representing the costs of maintenance and repairs of the vessels as from the beginning of 1980. In succeeding years that figure is index-linked with a view to keeping it level with the rises in the costs of "workmanship" and "materials" in Italy. Under the wording of each charterparty, however, the conventional base figure is expressed in terms of U.S. dollars, rather than Italian lire. The plaintiffs say that by the conclusion of a meeting held on the 29th November, 1974 it was the parties' common accord that the conventional base figure should be expressed in each charterparty in lire rather than dollars, and indeed that it should be shown therein as a specific figure, 700 million Italian lire. They say that this accord was so firm that, by the end of the meeting, both parties were entitled to expect that one party would not change its mind on this particular point without giving the other specific notice.
In summary, the subsequent events were these. The defendants caused to be prepared a draft charterparty which expressed the conventional base figure in dollars instead of lire. A lengthy meeting took place on the 5th December, 1974 between the plaintiffs' and the defendants' representatives at which this draft was discussed in detail. The defendants did not specifically draw the plaintiffs' representatives' attention to the introduction of the dollar figure. The plaintiffs, as they admit negligently, failed to notice its introduction, though the defendants did not realise that the plaintiffs had failed to notice it. The dollar figure thus found its way into the two charterparties which were executed by the parties after the conclusion of the meeting. In these circumstances the principal purpose of the action was to obtain an order for rectification of the escalation clause in each charterparty so that the sum of 700 million Italian lire should be shown as the conventional base figure in place of the figure in U.S. dollars. The plaintiffs assert that the references to U.S. dollars introduced into the clause an irrational exchange element which, in view of the subsequent fall in the Italian lire, will leave the defendants with an uncontemplated windfall of many millions of dollars. The judge rejected their claim and the plaintiffs appeal.
The facts of the case have been set out in his full and careful judgment. There are few challenges to his findings or inferences of fact and for the purposes of this appeal a more abbreviated summary will suffice.
I begin by mentioning some of the dramatis personae. Mr. Rosina was the managing director of the defendants and Mr. Lollighetti was their president. Burke & Novi S.p.A. ("Burke & Novi") were a firm of Genoa brokers, of which Mr. Burke was managing director. Mr. De Francheschini was the representative of an Italian company called Financial Promotion and Industrial Development S.A. ("Financial Promotion"). S.N.A. S.p.A. ("SNAM") was another company in the ENI group. Mr. Girotti was president of ENI. Mr. Roasio was managing director of Agip and IIP. Mr. Croce was transport director of SNAM, Mr. Romano was liquid gas director of SNAM and Mr. Bocconcelli was head of maritime transport of SNAM.
The negotiations which led up to the charterparties began in February 1974. On the 12th February, 1974 Burke & Novi sent an offer to SNAM for a ten-year contract of affreightment of oil. SNAM were acting as agents for whichever company in the ENI group might eventually be nominated as the prospective charterers. Burke & Novi were acting on the instructions of Mr. De Francheschini of Financial Promotion, which was making the offer as agents for a company to be nominated as owner. The defendants in due course subsequently came to be nominated as owners under the agreement.
From the outset it was proposed on behalf of the owners that there should be an escalation clause in relation to repair and maintenance costs. There was attached to Burke & Novi's offer a proposed clause of this nature, which had been supplied by Mr. Rosina. With regard to escalation, the formula expressed in it was similar to that ultimately expressed in the charterparties themselves, with one important difference. The conventional base figure was given as 800 million lire and there was no provision for the determination of applicable exchange rates.
SNAM, on behalf of the charterers, responded to this offer by a letter of the 26th March, 1974 in which they appeared to accept in principle the escalation scheme proposed to them, but made it plain that the text of the escalation clause would have to be agreed between the parties.
On the 29th March, 1974 Burke & Novi nominated the defendants as owners. At about the same time they also drew up a draft charterparty which included an escalation clause in much the same form as that which had been previously supplied to them by Mr. Rosina. In this draft the conventional base figure in Italian lire was left blank for subsequent negotiation. Copies of the draft were supplied to both sides.
At this stage a contract of affreightment was contemplated, under which it would be open to the owners to use vessels of 250,000 tons or 400,000 tons deadweight. By a telex of the 31st May, 1974 Burke & Novi informed ENI that the estimated cost of maintenance and ordinary repairs for a vessel of 400,000 tons deadweight was 700 million lire, this being a figure which had been supplied to Burke & Novi by the defendants. This proposal was not accepted or rejected by the charterers at that stage. They had not agreed either the quantum or the wording of the escalation clause.
There then followed a dispute as to whether a contract had been concluded....
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