Alan (W. J.) & Company Ltd v El Nasr Export and Import Company
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS |
| Judgment Date | 03 February 1972 |
| Judgment citation (vLex) | [1972] EWCA Civ J0203-3 |
| Date | 03 February 1972 |
| Court | Court of Appeal (Civil Division) |
[1972] EWCA Civ J0203-3
The Master of the Rolls (Lord Denning)
Lord Justice Megaw and
Lord Justice Stefhenson
In The Supreme Court of Judicature
Court of Appeal
Appeal of defendants from Judgment of Mr. Justice Orr on 21st December, 1970.
Mr. S. A. STRMLER, Q.C., and Mr. JAMES (instructed by Messrs. Attwater and Liell of Marlow, Essex) appeared on behalf of the Appellant Defendants.
Mr. NORMAN TAPP; Q.C., and Mr. MICIAEL GETTLESON (instructed by Messrs. Gordon Dadds & Co.) appeared on behalf of the Respondent Defendants.
This case started off as an arbitration - but has finished up as a full-scale action. It concerns the effect of devaluation on a contract of sale and, in particular, on a letter of credit which was given for the price.
There are two contracts of sale here. One is dated 12th July, 1967, the other 13th July, 1967. The sellers were coffee producers in Kenya called W.J. Alan & Co. Ltd. of Nairobi. The buyers were an Egyptian State Trading Company with offices in many countries, but, in this case, the transaction was conducted by the office at Dar Es Salaam, Tanzania. The sales were negotiated by brokers in Nairobi. Each contract was for the sale of 250 tons of coffee. The price was 262 shillings a cwt. At that time the Kenya shilling and the sterling shilling were of equal value, do it did not seem to matter whether the currency of account was Kenyan currency or sterling currency. The material terms were:
First Contract for 250 tons of coffee.
Nairobi, 12th July, 1967 No. 3445 -
Sellers Messrs. "W.J. Alan & Co. Ltd., Nairobi.
Buyers Messrs. I Nasr Export & Import Co., Dar Ea Salaam.
Quantity 250 tons.
Price : Shs. 262/- (two hundred sixty two) per cwt. of 112 lbs. nett F.O.B. MOMBASA.
Shipment: During September 1967/October 1967 at Sellers' Option, but sellers agree to co-operate with
From Mombassa buyers to ship in accordance with their instructions if possible.
Payment: By confirmed, irrevocable letter of credit to be opened at sight onemonth prior to shipment as stipulated in this contract.
Special Conditions Destination and shipping instructions. to be declared by 15 days prior to shipment.
This contract is made under the terms and conditions of the London Coffee Trade Association". It was signed by the brokers and by the sellers and buyers.
Second Contract for another 250 tons of Coffee
This was in exactly the same form and language, but the date was "Nairobi, 13th July, 1967". The number was 3447. The shipment was "During October/November, 1967 at sellers' option".
The terms and conditions of the London Coffee Trade Federation contained these stipulations:
"Payment"
28. Payment shall be made at the time stipulated and the buyers must always take up the documents when in conformity with the conditions of the contract. The documents shall include the complete set of clean on board" or "shipped" bills of lading …--- 29. The property in the coffee remains in the sellers until it has been paid for, in full, in accordance with the contract, even if the sellers have already parted with the goods or with the documents which represent them.
OPENING OF CREDIT
30(a) If payment is to be made by means of a Letter of Credit, the credit shall be opened in strict conformity with the terms of the contract (by cable or by air mail) in time to enable the beneficiary to utilise it from the first day of the period stipulated for shipment. (b) In all cases the validity of letters of credit must exceed by at least 15 days the ultimate date stipulated for shipment".
There was also a clause providing for any dispute to be determined by arbitration in London, and for the contract to be interpreted according to the law in force in England.
In addition, the Central Bank of Kenya Act 1966 contained these provisions; 19. The unit of currency of Kenya shall be the Kenya shilling which shall be divided into one-hundred cents. 21. All monetary obligations or transactions entered into or made in Kenya shall be deemed to be expressed and recorded, and shall be settled in Kenya currency unless otherwise provided for by law or agreed upon between the parties. The Schedule said "shilling" (or its abbreviated form "sh". means the Kenya shilling.
THE LETTER OF CREDIT
The letter of credit is of the first importance. It was as follows: "THE NATIONAL BANK OF COMMRCE, TANZANIA, Dar-es-Salaam. 20th September, 1967 To: W.J. Alan & Co. Ltd., P.O. Box 1979, Nairobi.
Dear Sirs, 1. We request reference to telegraphic advice (14th September) of the transfer of letter of credit to you under instructions from M/s E1 Nasr Export & Import Co., of Dar-es-Salaam who are the original beneficiaries of an irrevocable transferable Letter of Credit established by a Bank in Madrid.
2. We have now received a mail confirmation of this credit and we quote below the terms of the Letter of Credit "By order of M/S El Nasr Export & Import Co., of P.O. Box 2281, Dar-es-Salaam and for their account we transfer an irrevocable documentary credit established in their favour by Banco Experior de Espana, Madrid, being their reference No. Credite 282539/S up to an amount of £131,000 (Sterling one-hundred thirty-one thousand pounds) valid until 5th October, 1967, inclusive at sight against delivery of the following documents: 1. Commercial Invoice issued to the name of El Nasr; 2. Pull set of Bill of Lading issued to Conisaria General de de Abastecimientos y Transportes, etc.3. Certificate of quality; 4. Certificate of origin;
5. Certificate phitosanitary. 6. Certificate issued at the shipping port for account of the beneficiaries stating weight and quality of the goods.7. Copy cable to: be sent to El Nasr, Dar-es-Salaam for insurance purpose stating number of bags and weight of the shipped coffee relating- to: 500 long tons De Cafe Robusta FAQ de Tanzania (packed in bags, etc.) at the price of Sterling 262/- for long ton FOB Shipment in September on the vessel Vinland Saga Mombasa and/or Dar-es-Salaam to Barcelona. Payments on account for partial shipment may yet be admitted".3. Please note that any charges arising out of this transaction are for account of beneficiary. Insurance covered by buyers. 4. The original credit advised to El Nasr bears our confirmation as per instructions of our Madrid correspondents.
Yours faithfully, THE NATIONAL BANK OF COMMERCE, TANZANIA".
It is quite plain that that credit did not conform to the original contracts of sale in many respects. In particular:-1. It was for 250 tons, instead of two separate parcels of 250 tons each; 2. It was for shipment in September by the vessel Vinland Saga instead of the first 250 tons Sept./Oct. 1967, and the second 250 tons Oct./Nov. 1967. 3. It was for payment in Sterling, and not in Kenyan Shillings. 4 It was not available from the first day of the shipment period. 5. It was only valid until 5th October, 1967, instead of 15th October, 1967 (per first contract) and 15th December, 1967 (per second contract).
TEE FIRST SHIPMENT
Nevertheless, although the letter of credit did not conform to the contract of sale, the sellers were content to draw on itand make use of it. On 19th September, 1967, they shipped on the Vinland Saga at Mobasa 88 tons of coffee, and on 20th September another 191 tons of coffee on the same ship, making 279 tons for carriage to Barcelona. That was presumably 250 tons under the first contract and 29 tons under the second contract. They invoiced this coffee to El Nasr. The first invoice was dated 20th September 1967, for Kenyan Shs. 401,283.75 converted to Sterling £23.044 3s. 9d. The second invoice was dated 27th September 1967, for Sterling £50,057 15s. 10d. The sellers sent the documents to their bank, the Ottoman Bank in Nairobi. The Ottoman Bank sent them to the buyers' bank, The National Bank of Commerce, Tanzania. They noted some discrepancies, but, on receiving the necessary indemnity from the sellers, the Tanzanian Bank paid the amount in sterling to the sellers' bank, Nairobi, where it was credited in Kenyan shillings. At this time Kenyan shillings were worth the same as sterling shillings - so the currency did not matter.
THE; SECOND SHIPMENT
The letter of credit, as originally issued, was only valid until 5th October, 1967, and only for the one vessel — the Vinland Saga. So it was not available for the second shipment and unless extended in date and to another vessel. (This shipment was to be for the outstanding 221 tons in the second contract). There were many cables passing between 8th October 1967, and 10th November, 1967 between the sellers and the buyers, and the various banks. As a result, the credit was extended up to 25th November, 1967, for shipment by the Maria Teresa.
On 16th November 1967, the sellers shipped 221 tons of coffee at Mombasa on the Maria Teresa. A Bill of Lading was issued for it.
All the documents were prepared for presentation. The sellers made out an invoice No. 28, dated 18th November, 1967 for the 221 tons at a price in sterling of £57,877 15s. 9d They headed it:
"Drawn under Banco Exterior de Espana, Madfid, Irrevocable Letter of Credit No. 282539/5". But then, before they sent the documents to the bank, they heard that sterling had been devalued. They waited to see if Kenyan currency would also be devalued. It was not. So they took the invoice which had been prepared, and inserted in it these words:
"Part payment of balance due - Contract No. 3447 of 13/7/67". The sellers handed the invoice, containing those words with the shipping documents and a draft payable at sight to their own bank in Nairobi. That bank sent them to the buyers'...
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