Comdel Commodities Ltd v Siporex Trade S.A.

JurisdictionEngland & Wales
JudgeLORD JUSTICE POTTER:,LORD JUSTICE PETER GIBSON,LADY JUSTICE BUTLER-SLOSS
Judgment Date05 February 1997
Judgment citation (vLex)[1997] EWCA Civ J0205-11
Docket NumberQBCMI/96/0353/B
CourtCourt of Appeal (Civil Division)
Date05 February 1997
Comdel Commodities Limited
Plaintiff/Appellant
and
Siporex Trade S A
Defendant/Respondent

[1997] EWCA Civ J0205-11

Before:

Lord Justice Butler-sloss

Lord Justice Peter gibson

Lord Justice Potter

QBCMI/96/0353/B

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

(MR JUSTICE COLMAN)

Royal Courts of Justice

Strand

London WC2

MR SIMON GAULT (Instructed by Messrs Clyde & Co, London, EC3M 1JP) appeared on behalf of the Appellant

MR KENNETH ROKISON QC & MR PHILIP EDEY (Instructed by Messrs Middleton Potts, London, EC1A 3LD) appeared on behalf of the Respondent

LORD JUSTICE POTTER:
1

INTRODUCTION

2

This is an appeal by the plaintiffs ("Comdel") from a decision of Colman J. made on 24th November 1995, when on the application of the defendants ("Siporex"), he made an order discharging a Mareva injunction granted to Comdel as long ago as 13th May 1986, but stayed execution of the order pending determination of this appeal. The sum covered by the injunction was $1,887,200 which represents an amount paid on 13th May 1986 by Comdel's bankers under performance bonds issued by them in support of Comdel's obligations as buyers from Siporex of 11,000 tons of Cotton Seed Oil and 21,000 tons of Tallow, under two contracts dated 19th October 1984. The breaches concerned were the failure by Comdel to open letters of credit in favour of Siporex complying with the contract terms that payment would be by confirmed, irrevocable, transferable letters of credit to be at Siporex's bank and fully operable by latest end November/ first week in December 1984

3

Comdel sought to recover the difference between the amount their bank paid to Siporex under the performance bonds and the loss (if any) suffered by Siporex as a result of Comdel's breaches of contract. Despite the relative simplicity of this issue, the parties have, over a period of some 10 years, made almost no progress towards its disposal. However, if the order discharging the Mareva injunction takes effect, so that the sum caught by the injunction is freed into the hands of Siporex, that sum (and any other assets of Siporex) are unlikely to remain available to satisfy any award which Comdel may obtain.

4

THE PROCEDURAL HISTORY

5

On 16th January 1985 Comdel commenced arbitrations ("the 1985 arbitrations") against Siporex asserting that Comdel were not in breach of contract in relation to the letters of credit and that Siporex were not entitled to invoke the performance bonds. On 29th November 1985 the umpire in those arbitrations held that Comdel had failed to open conforming letters of credit and had no claim for breach of contract against Siporex.

6

On 25th February 1986 Comdel wrote to the 1985 arbitrators submitting that it was an implied term of the contracts that Siporex had to account to Comdel for any balance of monies paid under the performance bonds after deduction of Siporex's loss arising from Comdel's breach of contract. Siporex, however, issued an Originating Summons for a declaration that Comdel were not entitled to refer this submission to the 1985 arbitrators and sought an injunction restraining Comdel from proceeding with the arbitration in respect of that submission. On 27th February 1986 Comdel obtained a Mareva injunction in support of their claims.

7

Bingham J. subsequently held in Siporex -v- Comdel [1986] 2 Lloyd's LR 428 that the 1985 arbitrators had no jurisdiction to adjudicate on the new submission and that there would have to be a fresh reference to arbitration. He discharged the Mareva injunction on the grounds that, when it was obtained, Comdel did not have an accrued course of action.

8

On 13th May 1986 Comdel commenced new arbitrations ("the 1986 arbitrations"), and obtained the Mareva injunction with which this application for leave to appeal is concerned. Comdel faced a potential problem in the 1986 arbitrations because, under the FOSFA rules of Arbitration and Appeal, Comdel's claims had become barred on 31st May 1985 (i.e. almost a year before the bank paid Siporex on 13th May 1986, the date at which Comdel's cause of action accrued in respect of any sums so paid). Accordingly Comdel issued an Originating Summons seeking an extension of time under S.27 of the Arbitration Act 1950 and a declaration that their claims were not time-barred. Siporex for their part applied for a stay of Comdel's action under S.1 Arbitration Act 1975. Steyn J. decided in Comdel -v- Siporex [1987] 1 Lloyd's LR 325 that Comdel's application for an extension of time was premature. The issue of time-bar had first to be determined by the 1986 Arbitrators. He adjourned the application for extension of time.

9

On 31st March 1987, the umpire in the arbitrations ruled that the claims were indeed time-barred and refused to extend time, that ruling being upheld by the FOSFA Board of Appeal on 19th October 1987.

10

Comdel obtained leave to appeal to the Commercial Court, whence the case made its way to the House of Lords. It was held by the House of Lords in Comdel -v- Siporex [1990] 2 Lloyd's LR 207 that S.27 conferred jurisdiction on the Court to extend time for the commencement of arbitration, notwithstanding the fact that a discretion to extend time was also conferred on arbitrators by the relevant arbitration rules.

11

On 22nd June 1990, Comdel wrote to the arbitrators asking for their approval to bring the matter directly before the FOSFA International Board of Appeal. The arbitrators refused that application on 26th November 1990. On 24th January 1991, the arbitrators ordered new pleadings following which, on 16th April 1991, Comdel requested an order for discovery which was made in October 1991 in respect of any Siporex documents relating to any loss allegedly suffered by Siporex.

12

Such discovery as was given was completed in June 1992. Thereafter Comdel took no further steps in the arbitration until shortly before 17th January 1994 (a delay of 19 months). Comdel changed their solicitors twice during that period but appear to have done little else of significance. However, in January 1994, the matter was vigorously brought to life by Messrs Clyde & Co, who thereafter corresponded with Siporex's solicitors with a view to progressing Comdel's claim. This initiative provoked an application by Siporex to strike out those claims under S.13A Arbitration Act 1950.

13

On 2nd November 1995, Mr. R.W. Rookes, the umpire appointed in the 1986 arbitrations, dismissed Comdel's claims for want of prosecution. Comdel forthwith appealed to the FOSFA Board of Appeal, which appeals are still pending.

14

On 17th November 1995 Siporex applied to discharge the Mareva injunction granted some 9 years earlier on the ground of delay. On 24th November 1996 Colman J. acceded to that application and made the order which is the subject of this appeal.

15

Comdel appeal on the basis that, while recognising that the question of discharge was a matter for the discretion of the Judge, the discretion which he exercised was based upon or at least substantially affected by two particular errors. However, before turning to consider the two alleged errors, it is appropriate briefly to consider (a) the merits of Comdel's claim against Siporex apart from the question of limitation and (b) the merits of Comdel's appeal to the FOSFA Board of Appeal, pending which they contend that the Mareva injunction should be continued.

16

COMDEL'S CLAIM IN THE ARBITRATION.

17

Comdel submit that they have a strong case on the merits in their claim against Siporex. The substantive issue between the parties is whether, as Siporex contends, Siporex are entitled to keep the full amount paid under the performance bonds regardless of the amount of damage which Siporex suffered as a result of Comdel's breach of the original contracts of sale.

18

The law in this respect has recently been the subject of an illuminating decision of Morison J. in Cargill International SA -v- Bangladesh Sugar and Food Industries Corporation [1996] 2 Lloyd's LR 524 in which the authorities are reviewed, most notably decisions in two Australian cases and dicta of Lord Denning MR in State Trading Corporation of India Limited -v- E.D. & F. Man (Sugar) Limited, July 17th, 1981, transcript.

19

Those authorities are to the effect that it is implicit in the nature of a performance bond that, in the absence of some clear words to a different effect, when the bond is called, there will at some stage in the future be an "accounting" between the parties to the contract of sale in the sense that their rights and obligations will finally be determined at some future date. The bond is a guarantee of due performance; it is not to be treated as representing a pre-estimate of the amount of damages to which the beneficiary may be entitled in respect of the breach of contract giving rise to the right to call for payment under the bond. If the amount of the bond is not enough to satisfy the seller's claim for damages, the buyer is liable to the seller for damages in excess of the amount of the bond. On the other hand, if the amount of the bond is more than enough to satisfy the seller's claim for damages, the buyer can recover from the seller the amount of the bond which exceeds the seller's damages.

20

It does not appear that there is anything in the words of the contracts of sale in this case to exclude the implication that there would at some stage be an "accounting" between the parties in the sense that their rights and obligations would be finally determined at some future date.

21

So far as the question of loss is concerned it is not apparent that Siporex suffered any substantial loss as a result of Comdel's breach of...

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