Compagnie Commerciale Sucres et Denrees v C Czarnikow Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Bridge of Harwich,Lord Brandon of Oakbrook,Lord Ackner,Lord Oliver of Aylmerton,Lord Jauncey of Tullichettle |
| Judgment Date | 11 October 1990 |
| Judgment citation (vLex) | [1990] UKHL J1011-2 |
| Date | 11 October 1990 |
| Court | House of Lords |
[1990] UKHL J1011-2
House of Lords
Lord Bridge of Harwich
Lord Brandon of Oakbrook
Lord Ackner
Lord Oliver of Aylmerton
Lord Jauncey of Tullichettle
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Ackner. I agree with it and, for the reasons he gives, I would allow the appeal.
My Lords,
I have had the advantage of considering in draft the speech to be delivered by my noble and learned friend, Lord Ackner. I adopt gratefully his account of the material facts of the case and his formulation of the two questions which arise for decision on them.
The first question is whether paragraphs 1 and 2 of rule 14 of the Rules relating to Contracts of the Refined Sugar Association of London imposed on the sellers an obligation to have the sugar available for loading immediately upon the arrival of the ship after proper notice at the loading port ready to load. With regard to that question I agree with my noble and learned friend's conclusion that it should be answered "yes" and with the reasoning which leads him to that conclusion.
The second question is whether that obligation was a condition of the contract of sale, so that any breach of it, however insignificant and however much beyond the control of the sellers, would entitle the buyers, if they so elected, to treat the contract as at an end. My noble and learned friend concludes that this question should also be answered "yes". I respectfully disagree with him on that. For the reasons which follow I am of the opinion that this second question should be answered "no".
Breach by the sellers of the obligation concerned would cause delay in the loading of the sugar on the ship. It seems to me helpful, therefore, to consider what the contract provided in the case of breaches by either party of other contractual obligations which would also cause such delay.
I consider, first, a breach by the buyers of their obligation under paragraph 3 of rule 14 to present the ship in readiness to load within five calendar days of the date contained in their notice calling for delivery of the sugar. That paragraph provided that, in the event of a breach of such obligation, the buyers should be responsible for any consequential loss incurred by the sellers. That provision made it clear that the obligation of the buyers concerned was not a condition of the contract but a warranty, for breach of which the only remedy available to the sellers was damages.
I consider, secondly, a breach by the sellers of their obligation to complete loading within the permitted lay time, agreed to have been 16 weather working days. It is not in dispute that this obligation was not a condition but a warranty, for breach of which the only remedy available to the buyers was damages, such damages being liquidated damages in the form of demurrage.
It seems to me to be illogical to interpret the contract, with its incorporated rules, in such a way as to classify two obligations, the breach of which would cause delay in the loading of the ship, as warranties, and another obligation, the breach of which would have the same effect, as a condition. In each case what matters to the party to whom the obligation is owed is the result of its breach, namely, delay in the loading of the ship, and not the form or the nature of the obligation itself. It seems to me that the logical way to interpret the contract, with its incorporated rules, is to classify all obligations of either party, the breach of which would cause delay in the loading of the ship, in the same way, that is to say as warranties and not as conditions.
My noble and learned friend, Lord Ackner, like Sir Michael Kerr in the Court of Appeal, attaches great importance to the view of the arbitrators that the obligation imposed on the sellers by paragraphs 1 and 2 of rule 14 was a condition of the contract. I recognise that the view of the arbitrators is important and should be accorded proper respect by the courts. It seems to me, however, that the arbitrators, in reaching their conclusion on this question, concentrated too much on the single obligation in issue, and not enough on the general scheme and tenor of the contract as a whole in relation to delays in the loading of the ship. In any case, as pointed out by Lloyd and Butler-Sloss L.JJ. in the Court of Appeal, the question is solely one of construction of a written contract, so that the courts are not only entitled but bound to exercise their own independent judgment upon it.
For my part I would dismiss the appeal.
My Lords,
On 11 December 1985 the appellants, referred to hereafter as the "Buyers" entered into a contract with the respondents, referred to hereafter as the "Sellers", upon the Assuc Sugar Contract No. 2 form for the purchase of 12,000 metric tons of White Crystal Sugar at a price of French Francs 1,425 net per metric ton net on F.O.B. stowed terms. This contract incorporated the Rules relating to Contracts of the Refined Sugar Association of London, referred to hereafter as the "Rules".
This appeal raises essentially only two questions, both of which are far easier to state than they are to answer. In short they are:-
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1. Does Rule 14 impose on the Sellers an obligation to have the sugar available to begin loading immediately upon the arrival after proper notice of the ship at the loading port ready to load:
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2. If so, is this obligation a condition of the contract?
To these two questions, the arbitrators answered "yes", and the commercial judge Gatehouse J. answered "no". In the Court of Appeal, to question 1 Sir Michael Kerr, with Butler-Sloss L.J. providing some, but not total support, answered "yes". Lloyd L.J. dissented. As to the second question, Lloyd and Butler-Sloss L.JJ. answered "no" with Sir Michael Kerr dissenting, hence this appeal by the Buyers.
It is only necessary to set out the following three clauses of the contract:
"Clause 7: 'Delivery:– To one or more vessels presenting ready to load during May/June 1986 Buyer to give Seller not less than 14 days' notice of vessel(s) expected readiness to load. Such notice to be given on a business day in Seller's Country prior to 16.00 hours London time to be effective that day."
Clause 8: Price FF1,425 — net per Metric Ton net F.O.B. and Stowed 1 nominated E.E.C. port per vessel, Seller's quay(s).
Clause 9: 'Loading: — The Seller shall load sugar at a rate of 750 MT per weather working day of 24 consecutive hours basis 5 or more hatches … Demurrage and despatch as per Charter Party rate for Seller's account …"
It is common ground:
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(a) That the formula provided in Clause 9 gave the Seller 16 weather working days to load the sugar.
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(b) That under the above terms the Sellers were under no obligation to have the sugar available to begin loading immediately upon the arrival of the vessel at the loading port. If they did not load within the 16 weather working days, then their liability was limited to the payment of demurrage. If, however, they failed to load by the end of June that would amount to a repudiatory breach of the contract, enabling the Buyers to determine the contract forthwith.
The Rules are set out under a number of headings such as "Quantity", "Packages", "Weight", "Supervision", "Quality". Under the heading "Delivery" there first appears Rule 11 which is in these terms:
"In c. & f. and c.i.f. contracts the Seller has the option of delivering the contract quantity in one or more lots during the contract period. In f.a.s., f.o.b. and free stowed in hold (f.o.b. stowed) contracts the Buyer has the option of taking delivery of the contract quantity in one or more lots during the contract period."
Rule 14 is from the point of view of this appeal the vital rule. It contains four paragraphs and for the ease of reference these have been numbered. The rule reads as follows:
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(1) "In cases of f.a.s., f.o.b., and free stowed in hold (f.o.b. stowed) contracts the Seller shall have the sugar ready to be deliverd to the Buyer at any time within the contract period.
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(2) 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 period of delivery.
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(3) If the vessel (or vessels) has presented herself in readiness to load within the contract period but has failed to be presented within 5 calendar days of the date contained in the notice above calling for delivery of the sugar the Buyer shall be responsible for any costs incurred by the Seller by reason of such delay exceeding the 5 calendar days.
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(4) If the vessel (or vessels) has presented herself in readiness to load within the contract period, but loading has not been completed by the last working 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 15 May the Buyers gave notice to the Sellers for the Naxos to lift full contract quantity, that is the 12,000 metric tons of sugar e.t.a. Dunkirk 29/31 May 1986. The vessel presented for loading on 29 May 1986 but despite repeated calls by the Buyers and a warning given on 27 May that if loading did not commence on 29 May the Sellers would be held in default, the Sellers did not, to quote the words of Rule 14(1) "have the sugar ready to be delivered to the Buyer". Not only did the Sellers fail to commence delivery of the sugar on that day, they failed at any time thereafter before 3 June 1986.
On 3 June 1986 the Buyers telexed the Sellers setting out...
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