Bominflot Bunkergesellschaft fur Mineralole mbH & Company v Petroplus Marketing AG (The Mercini Lady)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE FIELD,Mr Justice Field |
| Judgment Date | 22 May 2009 |
| Neutral Citation | [2009] EWHC 1088 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Claim No 2008 Folio 378 |
| Date | 22 May 2009 |
[2009] EWHC 1088 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: Mr Justice Field
Claim No 2008 Folio 378
Mr Philip Edey (instructed by Holman Fenwick Willan LLP) for the Claimant
Mr Nigel Jacobs QC (instructed by Davies Johnson & Co) for the Defendant
Hearing dates: 15 th January 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Field:
Introduction
This is a trial of four preliminary issues. The necessary factual background is as follows. By a contract dated 9 January 2007, the defendants (“the sellers”) sold to the claimants (“the buyers”) 38,500 MT of EU Gasoil (+/-10% at buyer's option) which was to be shipped on board the “Mercini Lady” (“the vessel”) or substitute FOB Antwerp.
The contract was governed by English law. Clause 4 set out various specifications that the gasoil had to meet at the time of shipment, including as to total sediment. Clause 12 provided (so far as is relevant):
Quality and quantity, basis shoretank, to be determined by a mutually agreed independent inspector at the loading installation, in the manner customary at such installation. Such determination shall be final and binding for both parties, except in case of fraud or manifest error.
Clause 15 provided that “each delivery shall be completed and title shall vest absolutely in buyer when the product passes the vessel's permanent hose connection at the port of loading at which time buyer assumes all risks pertaining thereto”.
Clause 18 reads (so far as is relevant):
There are no guarantees, warranties or representations, express or implied, or (sic) 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.
Loading of the gasoil was completed on 17 January 2007 and the vessel arrived at the destination port, El Ferrol, in Spain, four days later.
An analysis of a composite sample made up of samples taken prior to loading from the five shore tanks from which the gasoil was loaded showed that the composite sample met the stipulated specifications, including the sediment specification. However, it is alleged by the buyers that when the gasoil arrived at El Ferrol after an incident-free voyage, it did not conform to the contract specifications, particularly as to sediment. It is further alleged that the receivers of the cargo accordingly rejected it and the buyers have brought these proceedings in which they claim that the sellers are in breach of an implied term that the cargo would be of satisfactory quality following a normal voyage pursuant to s. 14 (2) the Sale of Goods Act 1979 (“the 1979 Act”); and/or (ii) a term that the goods would be reasonably fit for their purpose following a normal voyage pursuant to s. 14 (3) of the 1979 Act; and/or (iii) a term to be implied at common law that the gasoil would be of satisfactory quality and/or in accordance with the contractual specification following a normal voyage and for a reasonable time thereafter.
The reasonable fitness term is pleaded in paragraph 5 of the Particulars of Claim as follows:
Further or alternatively, the Defendant knew (from the terms of the contract) that the goods were to be carried from Antwerp on board the MERCINI LADY (“the Vessel”) or substitute and knew, implicitly, that they were likely to be on board the vessel and stored thereafter before use for a reasonable period. In the premises, pursuant to s.14 (3) of the Sale of Goods Act 1979, it was an implied condition of the sale contract that the goods would be reasonably fit for the purpose of remaining, during their time on the vessel and for a reasonable time thereafter, within the specifications set out in the sale contract.
The damages claimed exceed US$3million and include the difference between the FOB Antwerp value of the goods had they been in accordance with the pleaded implied terms and the FOB Antwerp value of the goods in the condition they were actually in when delivered under the sale contract.
In their Defence the sellers rely on clause 18 and deny that the contract contained the implied terms asserted by the buyers.
On 23 October 2008 it was ordered by consent that there be a trial of the following preliminary issues:
(1) Was there an implied term of the sale contract, pursuant to section 14 (2) of the Sale of Goods Act 1979 and/or at common law that the goods would, on delivery under the sale contract, be capable of enduring a normal voyage such that upon arrival at their destination following such a normal journey (and for a reasonable time thereafter) they would still be of satisfactory quality and/or in accordance with the contractual specification?
(2) On the assumption the Defendants knew from the terms of the sale contract that the goods were to be carried on board the “MERCINI LADY” or substitute, was it an implied condition of the sale contract, pursuant to s. 14(3) of the Sale of Goods Act 1979, that the goods would, on delivery under the sale contract, be reasonably fit for the purpose of remaining, during their time on the vessel and for a reasonable time thereafter, within the specifications set out in the sale contract?
(3) Were the Defendants' obligations under the Sale of Goods Act under s. 14 (2) and/or at common law limited to the supply of goods which complied with their contractual specifications upon shipment FOB Antwerp?
(4) Does clause 18 of the sale contract preclude the implication of the terms referred to in paragraphs 1 and 2 above?
The relevant provisions of the Sale of Goods 1979 (as amended)
14 (1) Except as provided by this section and section 15 below and subject to any other enactment, there is no implied term about the quality or fitness for any particular purpose of goods supplied under a contract of sale.
(2) Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality.
(2A) For the purposes of this Act, goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances.
(2B) For the purposes of this Act, the quality of goods includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of goods—
(a) fitness for all the purposes for which goods of the kind in question are commonly supplied,
(b) appearance and finish,
(c) freedom from minor defects,
(d) safety, and
(e) durability.
(2C) The term implied by subsection (2) above does not extend to any matter making the quality of goods unsatisfactory—
(a) which is specifically drawn to the buyer's attention before the contract is made,
(b) where the buyer examines the goods before the contract is made, which that examination ought to reveal, or
(c) in the case of a contract for sale by sample, which would have been apparent on a reasonable examination of the sample.
(6) As regards England and Wales and Northen Ireland, the terms implied by subsections (2) and (3) above are conditions.
33. Where the seller of goods agrees to deliver them at his own risk at a place other than that where they are when sold, the buyer must nevertheless (unless otherwise agreed) take any risk of deterioration in the goods necessarily incident to the course of transit.
55 (1) Where a right, duty or liability would arise under a contract of sale of goods by implication of law, it may (subject to the Unfair Contract Terms Act 1977) be negatived or varied by express agreement, or by the course of dealing between the parties, or by such usage as binds both parties to the contract.
(2) An express term does not negative a term implied by this Act unless inconsistent with it.
The buyers' submissions
Mr Edey for the buyers accepted, as he had to, that under an FOB contract the goods are delivered when they pass the ship's rail or (as in this case) the ship's flanges, and that thereafter, the goods are at the buyer's risk. Mr Edey also recognised that if all cargoes of gasoil with these particular specifications would have inevitably deteriorated after four days, the buyers might have some difficulty in holding the sellers liable for the deterioration suffered during the voyage to El Ferrol. In his submission, the buyers' case was not inconsistent with either of these premises. He contended that, pursuant to the pleaded implied terms, this particular cargo of gasoil had to be capable of continuing to be of satisfactory quality and/or reasonably fit for the pleaded purpose after delivery for a reasonable period of time including the duration of a normal voyage and a reasonable period of time thereafter.
Mr Edey relied heavily on the reasoning of Diplock J in Mash & Murrell Limited v Joseph I. Emanuel Limited [1961] 1 Lloyd's Rep 461. There, 50 tons of Cyprus potatoes were sold c&f Liverpool on 8 July 1957. The potatoes had been loaded on 29 June 1957 at Limassol whence the vessel had sailed for Liverpool via Famagusta, which was held to be a “normal voyage”. When the vessel arrived at Liverpool on 18 July 1957, however, the potatoes were found to be rotten.
Having set out his findings of fact, Diplock J said in a well-known passage:
I have so far travelled through my legal life under the impression, shared by a number of other Judges who have sat in this Court, that when goods are sold under a...
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