Bominflot Bunkergesellschaft fur Mineralole mbH & Company v Petroplus Marketing AG (The Mercini Lady)

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Rix,Lord Justice Patten,Lord Justice Maurice Kay
Judgment Date19 October 2010
Neutral Citation[2010] EWCA Civ 1145
Docket NumberCase No: A3/2009/1451

[2010] EWCA Civ 1145

[2009] EWHC 1088 (comm)

IN THE HIGH COURT OF JUSTICE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE QUEEN'S BENCH DIVISION,

COMMERCIAL COURT

Mr Justice Field

Before: Lord Justice Maurice Kay

Vice President of the Court of Appeal

Lord Justice Rix

and

Lord Justice Patten

Case No: A3/2009/1451

Between
KG Bominflot Bunkergesellschaft Für Mineraloele MBH & Co
Respondent/Claimant
and
Petroplus Marketing AG
Appellant/Defendant
The Mercini Lady

Mr Nigel Jacobs QC (instructed by Davies Johnson & Company) for the Appellant / Defendant

Mr Philip Edey QC (instructed by Holman, Fenwick & Willan) for the Respondent / Claimant

Hearing dates: Friday 7 th May 2010

Lord Justice Rix

Lord Justice Rix:

1

This appeal raises two short points of some importance in the area of sale of goods law. The first questions the judge's implication of what even the respondent accepts is a novel term. The second questions long-established and high authority to the effect that if a seller wishes to exclude Sale of Goods Act conditions, he must do so by express exclusion of “conditions”.

2

By a contract dated 9 January 2007 Petroplus Marketing AG of Zug, Switzerland, (the “seller”) sold to KG Bominflot of Hamburg, Germany, (the “buyer”) 38,500 mt gasoil 10% +/?- in buyer's option FOB Antwerp free destination, for shipment during 13/15 January 2007, at a price to be determined by IPE February 2007 gasoil less a stipulated discount (the “contract”). The contract was governed by English law. The buyer is the claimant in these proceedings and in this court the respondent. The seller is the defendant and here the appellant.

3

There was a specification clause (clause 4), headed “Quality”, which governed a dozen or so properties of the gasoil, including “Total sediment”. That was to have a maximum of 10 mg/litre as tested by a specified test, viz D-2709/88. Quality and quantity were to be determined by independent inspection at loading which was to be final and binding for both parties, save for fraud or manifest error (clause 12). Risk and title were to pass on loading (clause 15). Clause 18 (“Other Conditions”) contained a number of terms but also an exclusion clause which is central to the issues before us, as follows:

“There are no guarantees, warranties or representations, express or implied, or [sic, sc of] merchantability, fitness or suitability of the oil for any particular purpose or otherwise which extend beyond the description of the oil set forth in this agreement.”

4

This appeal arises out of preliminary issues and so there are no findings of fact. I take the following matters from the buyer's particulars of claim.

5

Loading of the gasoil on the Mercini Lady (the “vessel”) was completed on 17 January 2007 and the vessel arrived at her first destination of El Ferrol in Spain, four days later. The voyage proceeded without incident: it was a normal voyage of the sort reasonably contemplated by the parties. Most of the gasoil was to have been discharged at El Ferrol, and the balance at Cartagena. However, in the circumstances set out below the vessel never proceeded to Cartagena.

6

The gasoil was inspected at Antwerp prior to loading by an inspector from SGS. A composite sample was made up from the five shoretanks from which the gasoil was taken. The results were recorded in a Certificate of Analysis. The sediment was recorded at 6.4 mg/litre according to test method EN 12662. That was not the contractual test method. Although the particulars of claim do not say so, the loading determination found the gasoil to be within specification.

7

Following arrival at El Ferrol the cargo was sampled and tested on various occasions. On each occasion it was found to be off-specification as to sediment. The same test method was used as at loading, but no details of the results are given. There was then a re-testing of the retained loading samples, this time by test method ASTM D5452. This also appears to have been an uncontractual test method. The calculated arithmetic mean of the sediment was 39.6 mg/litre. A further test using a composite sample made up of different samples from the individual shoretanks, tested again by ASTM D5452, was found to have a sediment content of 55 mg/litre. Yet further tests on the preloading blend stocks from the shoretanks in question (on a different test method ASTM D5304) rendered results of 41 mg/litre, 35 mg/litre and 41mg/litre.

8

The goods were rejected by the receivers as being off-specification.

9

The claim is for over US$ 3 million, made up of damages for the difference in value of the cargo, freight, demurrage and other consequential losses.

10

The defence referred to the final and binding certification of SGS at loading and clause 4 of the contract so as to submit that any other and later tests were irrelevant. It also pleaded that the loading test was the best evidence of the condition of the cargo on loading.

11

In its reply the buyer admitted that the fact that the cargo was off-spec as to sediment when tested for the purposes of its on-sale at El Ferrol did not establish that the cargo was off-spec when the cargo was shipped at Antwerp; and also specifically stated that it “does not allege that the cargo was off-spec for the purposes of the Sale Contract when the cargo was shipped on board the Vessel.” Rather, its case was “as set out in paragraph 13” of its particulars of claim, viz that there was a breach of implied terms that the goods were “capable of remaining” during the voyage and for a reasonable time thereafter of satisfactory quality and/or on-spec.

12

Thus the buyer admits that the gasoil was delivered on-specification, but alleges that it thereafter changed its quality and specification by arrival in Spain. It was therefore to be inferred that the gasoil was not “capable of remaining” of satisfactory quality, and the seller was therefore in breach of the alleged implied terms.

13

It seems to me therefore that in the light of the buyer's admission as to the gasoil's compliance with specification at the time of loading, all factual questions relating to the loading port inspection and certification appear to be irrelevant. That is in all probability why the buyer has not sought to rely on the clause 4 exception of fraud or manifest error (I do not mean to suggest that there has been either), and why it has not gone out of its way, for instance in its reply, to rely on the fact that, the wrong test method for sediment having been used, the inspection certificate could not in any event have been binding: see Veba Oil Supply and Trading GmbH v. Petrograde Inc [2002] 1 Lloyd's Rep 295 (CA).

14

What are the implied terms relied on by the buyer? As pleaded they are as follows: (1) the implied term of satisfactory quality under section 14(2) of the Sale of Goods Act 1979 (the 1979 Act”), one aspect of which was the gasoil's durability (section 14(2B)(e)); (2) the implied term under section 14(3) of the 1979 Act that the gasoil would be reasonably fit for the purpose of remaining, during its time on the vessel and for a reasonable time thereafter, within the contract specifications; and (3) an implied term at common law that the gasoil would be capable of enduring a reasonable voyage and for a reasonable time thereafter so that it would still then be of satisfactory quality and/or in accordance with contractual specification.

15

Therefore the express terms of the contract are relied on by the buyer only in so far as the specification as to sediment is brought into any of those implied terms as reflecting satisfactory quality, fitness for purpose or what I might call the capability of the gasoil of meeting its specification into the future.

16

It is not easy to see how a cargo of gasoil which is admitted to be within contractual specification on loading and delivery at the time when risk and title passes, that admission being made irrespective of the evidential quality (which can be conclusive) of the loading certificate, can nevertheless be delivered in breach of contract in a matter going to its specification. I can understand that the subsequent condition of a cargo can be evidence of its seller's failure to deliver it within specification, but when it is admitted that the cargo was delivered within specification, it is hard to see how later events can render its delivery a breach of contract in a matter defined by that same specification (at any rate as long as that specification does not test durability: as to which see, in any event, Benjamin's Sale of Goods, 8 th ed, 2010, at para 18—297 footnote 2228).

17

The factual premises of these elusive submissions are nowhere made apparent. The suggestion is that even such a product as gasoil may be unstable such that it may be within specification as to sediment at one moment and out of specification at the next. That, however, is not what is expressly said in the buyer's particulars of claim. On the contrary, the various tests, after shipment, on both the cargo on arrival in Spain and on retained loading samples, which are pleaded in the particulars of claim, all suggest that the buyer's complaint is as to the specification condition of the cargo on loading.

18

On behalf of the buyer, Mr Philip Edey QC has moreover made it completely clear to us that he does not rely on his implied terms as amounting to continuing warranties as to the quality, fitness, or specification of the gasoil. He acknowledges that any such term has to be what he described as a “fixed point” warranty, ie a warranty that is to be tested only at the fixed point of delivery...

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