Axel Johnson Petroleum A.B. v M.G. Mineral Group A.G. (Obelix)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE FOX,LORD JUSTICE LEGGATT,LORD JUSTICE STAUGHTON,Lord JUSTICE FOX |
| Judgment Date | 24 May 1991 |
| Judgment citation (vLex) | [1991] EWCA Civ J0524-1 |
| Docket Number | 91/0524 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 May 1991 |
[1991] EWCA Civ J0524-1
Lord Justice Fox
Lord Justice Staughton
Lord Justice Leggatt
91/0524
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR JUSTICE STEYN)
Royal Courts of Justice
MR JEREMY L. COOKE, Q.C., and MR STEPHEN KENNY, instructed by Messrs Sinclair Roche & Temperley, appeared for the Appellants (Defendants).
MR DAVID GARLAND, instructed by Messrs Foot & Bowden (Plymouth, Devon), appeared for the Respondents (Plaintiffs).
I will ask Lord Justice Leggatt to give the first judgment.
The plaintiffs, Axel Johnson Petroleum A.B., and the defendants, M.G. Mineral Group A.G., had a joint venture arrangement under which the defendants sold to the plaintiffs oil bought from Saudi Arabian suppliers, The General Petroleum and Minerals Organisation, known as Petromin. The defendants say that the plaintiffs agreed to buy from the defendants all such oil as they acquired from Petromin, and that was why they bought back some of the cargoes from the plaintiffs instead of using it themselves without troubling to sell it to the plaintiffs first. The plaintiffs say that each purchase by them was subject to their specific approval.
For present purposes the plaintiffs' claim for demurrage is admitted, subject to the defendants' defence of set-off, and the plaintiffs' claim is limited to the sum for which the judge gave judgment under Order 14, namely $85,460. Against that judgment the defendants now appeal, reasserting as a set-off their cross-claim for $148,972.85, which arises out of a sale under the joint venture agreement of a cargo carried in a vessel called the "Obelix". The contract price between the plaintiffs and the defendants was to be the contract price between Petromin and the defendants, together with a sum of $1 per metric tonne for what, euphemistically or otherwise, were referred to as "local expenses". The price paid by the defendants was $5,458,798.74. The price paid by the plaintiffs was $5,349,819.58. The balance is $108,979.16. In addition the defendants counterclaim $39,993.69 for local expenses which the plaintiffs say was included in the price paid by them. The practical issue between the parties is accounted for by the fact that the price paid by the plaintiffs was computed on the assumption that the "Obelix" was to be regarded as an MR sized vessel, whereas Petromin contended when she presented for loading that she was of a larger size than that. Certain it is that steps had been taken to reduce her carrying capacity so as to render her an MR sized vessel because Petromin's charges were made by reference to the size of the vessel. Hence the discrepancy between the price paid by the defendants and the price which the plaintiffs paid and which they contended represented the extent of the defendants' liability.
It is right to mention that the judge regarded the defendants' evidence as "highly unsatisfactory". He also remarked that it seemed "rather shadowy"—ah expression sometimes applied to cases in which conditional leave to defend is given. For my part, I am not sure that those descriptions are justified. It seems to me that the case made by the defendants is sufficiently supported by the affidavits sworn on their behalf by their managing director, Mr Ghanadian. But for present purposes it is not necessary to say more on that topic, because the judge did not decide the case in favour of the plaintiffs on that point and there has been no respondents' notice under Order 59, rule 6 such as would entitle the respondents to contend that the judge's decision should be affirmed on that ground.
Although there may on occasion be room for doubt whether a claim for demurrage is by way of indemnity or original entitlement, it is conceded here that this constitutes a triable issue, and for purposes of Order 14 the plaintiffs' claim is limited to the sum actually paid. So whether the claim for demurrage is for an indemnity or for an agreed sum, it is liquidated.
The ground on which the judge held against the defendants was that their cross-claim was, as he described it, "in the nature of an indemnity", and that "following the 19th century cases it is perfectly clear that a legal set-off is not available in respect of such a claim". The defendants' case is that the plaintiffs expressly agreed to pay to the defendants the same sum as the defendants were obliged to pay to Petromin together with the additional $1 per metric tonne. The defendants say that there are two triable issues:
(a) Whether the plaintiffs agreed to pay whatever sum the defendants were charged by Petromin, even if it turned out to have been wrongly charged, and
(b) whether it was wrongly charged.
In my judgment it is important to distinguish between a dispute about a right on which a claim or cross-claim is based and a dispute about the sum to which the right entitles the person who enjoys it. There can in this case be no dispute about the sum to which the defendants are entitled, once they have made good the contractual right which they claim. The plaintiffs cannot, as it seems to me, by disputing the defendants' right prevent the defendants from relying on it by way of set-off for purposes of Order 14.
For set-off to be available at law the claim and cross-claim must be mutual, but they need not be connected. They need not be debts, strictly so-called, but may sound in damages. The question is, in the language of Chief Justice Tindal in Morley v. Inglis (1837) 4 Bing. N.C. 58 at page 71, "whether the demand is capable of being liquidated, or ascertained with precision at the time of pleading." A claim under a guarantee therefore cannot be set off until the amount of the liability in respect of which the guarantee was given has been established. As Lord Ellenborough said in Crawford v. Stirling (1802) Esp. Cases 207, "to make the sum admissible as a set-off, the sum must be settled in monies numbered…"
Mr Garland, for the plaintiffs, submits that both parties must be able to ascertain with certainty the amount of the claim, and if the amount is not prescribed by the contract itself it must be capable of being computed by reference to it without investigation. He relies on Hardcastle v. Netherwood (1821) 5 B.& A. 93. The plaintiff declared that whereas the defendant in consideration of the plaintiff accepting certain bills of exchange drawn by the defendant from the plaintiff for £10,455 and delivering the bills so accepted to the defendant in order that the defendant might negotiate them for his own benefit, the defendant undertook to provide money for the payment of the bills when they became due, and to indemnify the plaintiff for any loss or damage by reason of the acceptance of the bills. The plaintiff did accept the bills and deliver them so accepted to the defendant for that purpose, and although the bills were negotiated by the defendant for his own benefit and had long since become due, yet the defendant did not provide money for the bills, nor indemnify the plaintiff from damage by reason of his acceptance of them. The plaintiff as acceptor of the bills was called upon to pay, and had to pay to the respective holders of the bills "various large sums of money" amounting in all to £100.
The judgment of the court is only reported very briefly and it is hard to be confident that the ratio is properly understood. At page 95, according to the reporter, the court gave this judgment:
"This case cannot be distinguished from that which has been cited. [That was a case not cited in this court]. The Court must look to the contract declared on, and if that is such as might entitle the party to recover special damages, the statutes of set-off do not apply, although no special damage...
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