Cereal Investments Company SA v ED&F Man Sugar Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Walker |
| Judgment Date | 07 December 2007 |
| Neutral Citation | [2007] EWHC 2843 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2007 Folio 1052 |
| Date | 07 December 2007 |
[2007] EWHC 2843 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Walker
Case No: 2007 Folio 1052
Mr Nicholas Hamblen QC and Ms Susannah Jones (instructed by Middleton Potts) for the claimant
Mr Andrew W Baker QC (instructed by Jackson Parton) for the defendant
Hearing date: 26 October 2007
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.
Introduction
This is an appeal under s 69 of the Arbitration Act 1996. By a contract dated 21 September 2006 the appellant (“CIC”) bought from the respondent (“Man”) a quantity of sugar “f.o.b. stowed (1/2 safe berth(s)) Santos.” Among other things the contract stated:
| Payment: | … Letter of Credit to be available at sight for 100% of invoice value against shipping documents. |
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| Letter of Credit to allow part shipments, negotiation of documents within 21 days after Bill of Lading date. … |
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| Letter of Credit for entire contractual tonnage to be opened in fully workable form in favour of seller within 5 working days of contract date … |
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| Shipment Period: | One vessel only presenting October 2006 Shipment at Buyer's Option, with 10 days pre-advise of vessel arrival. … |
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| Loading: | … |
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| Lay days at the average rate of 1000 MT per day … provided vessel can receive at this rate … |
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| At loading port in the event of congestion Master has the right to tender notice of readiness at the customary waiting place … whether in berth or not, whether in port or not, whether in free pratique or not, whether customs cleared or not. |
The contract also said that the rules of the Refined Sugar Association (“the RSA”) were incorporated. Rule 7 was in these terms:
In cases of FAS, FOB and FOB Stowed contracts, the Seller shall have the sugar ready to be delivered to the Buyer at any time within the contract delivery period. The Buyer has the option of taking delivery of the contract quantity in one or more lots during the contract delivery period …
The Buyer having given reasonable notice, shall be entitled to call for delivery of the sugar between the first and last working day inclusive of the contract delivery period. The Buyer must give notice … to the Seller of the name/s of the vessel/s on which the sugar is to be shipped and the vessel/s expected time of arrival at the loadport and the tonnage to be loaded …
If the vessel/s has presented herself in readiness to load within the contract delivery period, and loading has not been completed by the last day of the period, the Seller shall be bound to deliver and the Buyer bound to accept delivery of the balance of the cargo or parcel up to the contract quantity …
On 25 September 2006 CIC opened a letter of credit. It is common ground that this letter of credit required presentation of a bill of lading dated no later than 31 October 2006. During the afternoon of 25 September 2006 Man insisted that under the contract a bill of lading might have a date in November, and that the letter of credit should accordingly provide for a bill of lading dated in October or November. They drew particular attention in this regard to congestion problems at Santos. CIC replied that evening maintaining that the letter of credit was in strict compliance with the terms of the contract, and that Man should trust CIC to abide by what CIC described as their contractual obligation to extend the letter of credit shipment period if it became necessary as a result of delay in loading. During the early afternoon of 26 September 2006 CIC repeated that if it became clear that, despite Man's compliance with its contractual obligations, shipment would not in fact be completed during October they would extend the shipment period in the letter of credit appropriately. They gave Man until 4 p.m. that day to withdraw their demand for amendment of the letter of credit, failing which CIC in effect said that Man's conduct would be treated as repudiatory. Man replied that if CIC presented their vessel at the end of October the bill of lading date would be in November. Attempts to reach agreement were unsuccessful and during the evening of 26 September CIC held Man in default and terminated the contract.
In accordance with the contract CIC's claim for damages against Man came before a panel of arbitrators of the RSA. Man reserved the right to bring a counterclaim for damages against CIC. In a reasoned interim award dated 24 May 2007 concerning liability on CIC's claim the panel found that the letter of credit was not in accordance with the terms of the contract and that CIC's claim accordingly failed. CIC were granted permission to appeal by Simon J on 3 September 2007.
The preliminary question
The question of law (“the main appeal question”) set out in the arbitration claim form is:
Where an FOB buyer is obliged to open a fully workable letter of credit and:
(a) the sale contract provides for a shipment period during which the vessel must present for loading;
(b) the RSA rules apply envisaging that, if two pre-conditions have been met, loading may continue until an uncertain date after the end of the contract delivery period.
what final bill of lading date and expiry date should be provided for in the buyer's letter of credit?
Mr Hamblen QC, who appeared with Ms Jones for CIC, acknowledged that the answer to the main appeal question would only assist his clients if it were held by the court that the contract in the present case identified a shipment period under which loading had to be completed by 31 October 2006. In this judgment I shall deal in the first instance with the preliminary question whether CIC are right to contend that the contract in the present case identified a shipment period under which loading had to be completed by 31 October 2006.
Contentions on the preliminary question
The forensic points to be made on the main appeal question sometimes overlapped with those to be made on the preliminary question. In their skeleton arguments and oral submissions counsel understandably did not always clearly distinguish the two. In what follows I seek to summarise the main points which appear to me to have relevance to the preliminary question.
Mr Hamblen submitted that leaving aside RSA Contract Rule 7, so far as shipment period was concerned, this was a classic f.o.b. contract under which loading had to be complete by the end of the month specified in the contract, namely October 2006. The Panel had wrongly read the Shipment Period clause with an additional full stop: “One vessel only presenting October 2006. Shipment at Buyer's Option …”. If punctuation was to be added, the more natural construction was “One vessel only presenting. October 2006 Shipment at Buyer's Option …”. Properly construed the clause meant “One vessel only presenting [for] October 2006 Shipment at Buyer's Option”.
In support of this contention Mr Hamblen noted that the words in question appear against the rubric “Shipment Period” and observed that the ordinary meaning of “Shipment Period” is the period during which the goods must be shipped. In f.o.b contracts it is axiomatic that the seller must ship the goods at the latest by the end of the period specified for shipment in the contract. He referred to Benjamin's Sale of Goods, 7th edition at paragraphs 20–029 and 20–030, where the classic f.o.b. contract is said to oblige the seller, on receipt of proper shipping instructions, to ship the goods “at latest by the end of the period (if any) specified for shipment in the contract”, and if the time for shipment is expressly at the buyer's option (or the contract is silent on the point) the buyer is normally entitled to call for shipment at any time during the period. In the present case the Panel held that the contract contained no defined period...
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