E.D. & F. Man (Sugar) Ltd v Haryanto

JurisdictionEngland & Wales
JudgeLORD JUSTICE LLOYD,THE VICE-CHANCELLOR,SIR DAVID CAIRNS
Judgment Date05 March 1986
Judgment citation (vLex)[1986] EWCA Civ J0305-4
CourtCourt of Appeal (Civil Division)
Date05 March 1986
Docket Number86/0223

[1986] EWCA Civ J0305-4

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE QUEEN'S BENCH DIVISION

Royal Courts of Justice

Before:

The Vice-Chancellor

(Sir Nicolas Browne-Wilkinson)

Lord Justice Lloyd

and

Sir David Cairns

86/0223

No. 13/85

Yani Haryanto
Appellant/(Plaintiff)
and
E D & F Man (Sugar) Limited
Respondents/(Defendants)

MR. A. POLLOCK Q.C. and MR. R. JACOBS (instructed by Messrs Clifford Turner, London, EC4) appeared on behalf of the Appellant (Plaintiff).

MR. M. LITTMAN Q.C. and MR. M. HAVELOCK-ALLAN (instructed by Messrs Simmons & Simmons, London, EC2) appeared on behalf of the Respondents (Defendants).

LORD JUSTICE LLOYD
1

The question in this appeal is whether the plaintiff, Mr. Yani Haryanto, is bound by two alleged contracts for the sale of a very large quantity of sugar. The first of the contracts, No. 7458, is dated 12th February 1982, and was for the sale by the defendants, E.D. and F. Man (Sugar) Ltd., to the plaintiff of 300,000 tons of refined white crystal sugar at $530 per ton C. and F. one safe Indonesian port. The second, No. 7527, is dated 23rd March, 1982, and was for the sale of 100,000 tons of the same commodity on the same terms, save that the price was $470 per ton. Both contracts were made at a time when the market was falling, after a very steep rise during the latter half of 1979 and 1980. Each of the contracts contained an arbitration clause. The plaintiff failed to open letters of credit as required under the contracts. In due course, the defendants held the plaintiff in default, and claimed arbitration. On 12th June 1984, they referred the matter to the Council of the Refined Sugar Association. Their claim is for $146,000,000. On 20th June, the plaintiff commenced this action, in which he claims a declaration that the contracts are not binding.

2

The plaintiff accepts that he signed the two documents dated 12th February and 23rd March, 1982. But he submits that those documents are not what they appear. Their sole purpose was to record the terms on which the defendants would be prepared to contract with a third party, Badan Urusan Logistik ("Bulog"), the official Indonesian governmental body controlling the import of sugar. In so far as the documents appear to show a contract of sale between the plaintiff and the defendants, they are fictitious or a sham.

3

A similar argument was advanced and accepted by Megaw J. in Garnac Grain Company Incorporated v. H.M.F. Faure & Fair clouqh Ltd (1966) 1 Q.B. 650. But Megaw J.'s decision was reversed in the Court of Appeal and the decision of the Court of Appeal was subsequently affirmed by the House of Lords. Diplock L.J. in a passage to which the judge referred, said: "The judge reaches the conclusion that Faure contracted with Garnac as agents for Allied by expressing, first, the view that contract "D" between Faure and Allied was a 'fictitious' contract, and contract "C" between Garnac and Faure was 'fictitious' so far as Faure was concerned but not 'fictitious' so far as Garnac was concerned. Counsel for Garnac did not shrink from using the four-letter word 'sham'. 'Fictitious' and 'sham' are emotive epithets, not terms of art, and the concept of a contract which is 'fictitious' as respects one party and 'genuine' as respects another is one which I myself find difficult to grasp. I think, however, that the judge meant no more than that the party as respects whom the contract is 'fictitious' did not contemplate that the contract would be performed in accordance with its terms. But, as I have already said, unless some question of waver or estoppel arises the contemplation or expectation or intention (unless incorporated in the contract) of the parties or either of them as to the way in which it will be performed or left unperformed does not affect their legal rights or obligations under it. To affect these it is necessary to go further and to show that the parties really made some other and different contract between them and agreed that the ostensible contract should not give rise to legally enforceable rights or liabilities."

4

In the present case the judge heard evidence from the plaintiff himself as the sole witness on his behalf. He also heard evidence from Mr. Kralj, among others, for the defendants. On the principal issues of fact, he regarded the defendant's evidence as impressive and reliable. By contrast, he found that he could not rely on the plaintiff's evidence. The judge held that there had been no agreement between the parties, express or implied, that the apparent contracts were not to give rise to legally enforceable rights and liabilities. Accordingly, he dismissed the plaintiff's claim. There is now an appeal to this court.

5

Mr. Pollock, for the plaintiff, accepted that the evidential burden lay on him to displace the apparent contracts. He conceded that in the normal way the burden would be a heavy one, because parties do not normally put their hands to documents which appear to be contracts unless they intend them to be binding. But that the burden can be discharged is shown, he says, by cases such as Clever v. Kirkman (1876) 33 Law Times 672. In that case the parties signed a document which appeared to record a sale by the defendant to the plaintiff of the defendant's business as a piano manufacturer. Brett J. described the document as the strongest possible evidence to prove the existence of a contract. But the defendant gave oral evidence that he never intended to enter into a contract of sale with the plaintiff. The purpose of the document was to record the terms on which he would be willing to sell to a third party. The jury found for the defendant. It was held by the Divisional Court of the Common Pleas that the defendant's evidence was properly admitted. The apparent contract was displaced.

6

There is a certain similarity between Clever v. Kirkman and the argument put forward by Mr. Pollock in the present case. But there is this important difference on the facts. In Clever v. Kirkman Brett J. said of the defendant's evidence that there could not be stronger evidence to show that it was not intended to enter into a contract. Here the judge had found the opposite. He has held that much of the plaintiff's evidence was unreliable. Mr. Pollock concedes that he cannot go behind that finding.

7

So Mr. Pollock has a double hurdle to surmount. First, there are the apparent contracts signed by both parties, and secondly, there is the absence of any convincing evidence from his client in support of his case.

8

A lesser advocate might have been deterred by these obstacles. But nothing daunted, Mr. Pollock sought to persuade us, in a sustained argument to which I would pay my respectful tribute, that the judge ought to have rejected the defendant's evidence and found, on a balance of probabilities, that the contracts were indeed a sham.

9

Mr. Pollock's first argument was that on neither side's case did the documents record the true agreement between the parties. For even on the defendant's own case, it was always intended that the defendants should enter into matching contracts with Bulog for the same quantity of sugar over the same delivery period, but (it was hoped) at an enhanced price. The Haryanto contracts would then "fall away", save that the plaintiff would be entitled to the difference between the price contained in the Haryanto contracts and the price contained in the Bulog contracts. Mr. Kralj described this process, in layman's terms, as the "transfer" of the contracts from the plaintiff to Bulog.

10

I readily accept that, on the defendant's case, the documents did not contain the entire contract between the parties. The contractual obligation created by the Haryanto contracts were subject to certain further terms. But that is not uncommon in commercial contracts. I can see nothing inherently implausible in the defendants selling to the plaintiff, but agreeing that their contracts with the plaintiff should be replaced by contracts with Bulog. By contrast, there is to my mind something inherently implausible in the parties signing what appear to be contracts of sale, without intending to create any legal relations at all, but only conferring on Bulog some sort of option to buy, and imposing on the defendants a correlative moral obligation to sell. Businessmen simply do not behave in that way. So the fact that, on the defendant's case, the documents do not contain the entire contract between the parties, a not uncommon situation, does not lend any weight at all to the plaintiff's case, that the documents are a sham.

11

That leads to Mr. Pollock's second argument, that it is a mistake to seek to infer anything in the present case from the way businessmen normally behave. That, he says, was the very mistake the judge made. He paid insufficient regard to the abnormal nature of the transactions between the parties. In the first place, it is most abnormal for an individual to purchase such enormous quantities of sugar for physical delivery.

12

Secondly, if, as appears to have been the case, the plaintiff was acting as procuring agent for Indonesia ' s entire requirement for imported sugar, one would have expected him to have acted as agent for Bulog, rather than as principal. This is indeed how the transactions between the parties had started in 1973, and there is no explanation either in the evidence or the documents as to why the course of business should have changed when it was resumed after an interval in 1977. Thirdly, the history of transactions between the parties both in the earlier and the later periods, showed that very large sums of money were being paid to the plaintiff and...

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4 cases
  • Union of Clerical, Administrative and Supervisory Employees and Others v Industrial Disputes Tribunal & Anpr
    • Jamaica
    • Supreme Court (Jamaica)
    • 31 May 2013
    ...determined that there was inconsistency, under no circumstance could said term have been implied. In that regard, see:- Yani Haryanto v E.D. & F Man (Sugar) Ltd. [1986] 2 Lloyd's Rep. 44, at p. 46 and Youell v Bland Welch & Co. Ltd [1992] 2 Lloyd's Rep. 127, at p. 140. 38 As such, there bei......
  • Man (E. D. & F.) (Sugar) Ltd v Yani Haryanto (No. 2)
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 21 December 1990
    ...raised by the claims for a declaration and an injunction. On 28th March 1985 Staughton J gave judgment dismissing these claims: see [1986] 2 Lloyd's Rep 44. 14 Mr. Haryanto then appealed to the Court of Appeal. The hearing of the appeal took place in February 1986 and lasted nearly six day......
  • Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd
    • Singapore
    • Court of Appeal (Singapore)
    • 27 June 2008
    ...of Appeal in Wild v Civil Aviation Authority (25 September 1987) (unreported) (see also Yani Haryanto v E D & F Man (Sugar) Ltd [1986] 2 Lloyd’s Rep 44 at 46, and Youell v Bland Welch & Co Ltd [1992] 2 Lloyd’s Rep 127 at 140). It has also been endorsed by Chitty ([33] supra) at para 36 Howe......
  • Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd
    • Singapore
    • Court of Three Judges (Singapore)
    • 27 June 2008
    ...of Appeal in Wild v Civil Aviation Authority (25 September 1987) (unreported) (see also Yani Haryanto v E D & F Man (Sugar) Ltd [1986] 2 Lloyd’s Rep 44 at 46, and Youell v Bland Welch & Co Ltd [1992] 2 Lloyd’s Rep 127 at 140). It has also been endorsed by Chitty ([33] supra) at para 36 Howe......
1 books & journal articles
  • Die Integrasiereël in die Suid-Afrikaanse Kontraktereg
    • South Africa
    • Stellenbosch Law Review No. , September 2019
    • 16 August 2019
    ...En glish Law Commission Law o f Contr act: T he Parol Eviden ce Rul e Repor t 154 (1986); Haryant o (Yani) v ED & F Man (S ugar) Ltd [1986] 2 Lloyd’s Rep 44 47; A L Zuppi “The Parol Evi dence Rule: A Compa rative St udy of t he Common Law, the Civil Law Tradition , and Lex Mercatoria” (2007......

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