Gill & Duffus S.A. v Berger & Company Inc. (No. 2) (Salland)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Diplock,Lord Keith of Kinkel,Lord Roskill,Lord Brandon of Oakbrook,Lord Templeman |
| Judgment Date | 15 December 1983 |
| Judgment citation (vLex) | [1983] UKHL J1215-4 |
| Court | House of Lords |
| Date | 15 December 1983 |
[1983] UKHL J1215-4
Lord Diplock
Lord Keith of Kinkel
Lord Roskill
Lord Brandon of Oakbrook
Lord Templeman
House of Lords
My Lords,
The subject-matter of this appeal is a single contract dated 22nd December 1976 for the sale of a consignment of 500 tonnes of "Argentine Bolita Beans - 1974 Crop" as per sample, c.i.f. Le Havre, on the terms of GAFTA 41 subject to certain variations, of which the most material was a provision ("the certification clause") that a certificate of quality at port of discharge given by General Superintendence Company Ltd. Paris ("GSC") should be final.
At the outset of his judgment in the Court of Appeal Sir John Donaldson M.R. set out the arbitral and litigious history of this case since 1st April 1977, when the appellants, Berger and Company Inc. ("the Sellers"), appointed their arbitrator in a claim against the respondents, Gill and Duffus S.A. ("the Buyers"), in the dispute that had by then arisen between them and the Sellers. By the time judgment had been given by the Court of Appeal that history had extended over nearly six years and had involved proceedings by way of saisie conservatoire in the Tribunal de Commerce at Le Havre, hearings by arbitrators, who disagreed, followed by a hearing by an umpire, who made an award in favour of the Buyers, then an appeal to the Board of Appeal of GAFTA culminating in an award in the form of a special case in April 1980 and in a supplemental award in April 1981, in compliance with a remission ordered by the High Court (Mustill J.) at a hearing in January of that year. The hearing of the special case in the High Court recommenced before a different judge (Lloyd J.) in July 1982. He found partly in favour of the Buyers and partly in favour of the Sellers. From his judgment an appeal to the Court of Appeal was brought. They found by a majority (Sir John Donaldson M.R. and Slade L.J.) wholly in favour of the Buyers. Robert Goff L.J. dissented and would have found wholly in favour of the Sellers. In face of this diversity of judicial opinion between judges of great experience in commercial law, the Court of Appeal gave leave to appeal to your Lordships' House. So a claim for damages for an alleged breach of a contract for the sale of goods committed on 30th March 1977 will have taken more than six and a half years in order to obtain final resolution of it. The Master of the Rolls rightly described this delay, up to the time of hearing in the Court of Appeal, as deplorable. Now, nearly twelve months later, I would substitute for "deplorable", "a disgrace to the judicial system."
The delay and expense arise from the refusal of the Buyers to comply and the failure of some of the arbitration and judicial authorities to recognise the obligation, freely negotiated and included in the contract between the parties in the interests of speed, certainty and economy, to accept as final the certificate of the expert chosen by the parties to indicate whether the quality of the cargo delivered by the sellers was equal to the quality of the sealed sample furnished by the Sellers.
My Lords, I venture to think that by the time the case had reached the Court of Appeal it had managed to acquire a deceptive appearance of complexity which an analysis of the legal nature of the duties of the Buyers and Sellers under the contract of sale of 22nd December 1977 should have shown that it did not possess. Stripped down to its essentials that contract, apart from the certification clause, was on ordinary c.i.f. terms.
The contract was set out in a confirmation note dated 22nd December 1976 and signed on behalf of the Buyers and the Sellers. The only provisions of this document which it is necessary to set out are:
"We herewith confirm to you the following transaction by our intermediary on the conditions of: GAFTA 41 LONDON ARBITRATION where not contradictory to the terms below.
….
….
COMMODITY: ARGENTINE BOLITA BEANS - 1974 Crop
QUALITY: As per sample submitted to buyers and sealed by the General Superintendence Company Ltd., Paris
QUANTITY: 400 (four hundred) to 500 (five hundred) metric tons at seller's option to be declared latest 10/2/1977.
….
DESTINATION: CIF LE HAVRE/ANTWERP at seller's option preferably Le Havre.
….
SHIPMENT: February/March 1977
PAYMENT: Net cash against documents on first presentation through: Banque de Paris et des Pays-Bas, Geneve
….
SPECIAL CONDITIONS & REMARKS: Quality final at port of discharge as per certificate of General Superintendence Company Ltd., indicating that the quality of the lot is equal to the one of the sealed sample. Charges for sealing of samples at seller's expense."
Under the QUANTITY clause the sellers declared the full 500 tonnes on 3rd February 1977, and this quantity was shipped on the Salland from Limon in Costa Rica under a Bill of Lading dated 28th February. The vessel arrived at Le Havre on 21st March, but from some reason (which does not appear) she left after discharging 9,661 bags containing only 445 tonnes of the consignment, and over-carried the balance of 55 tonnes to Rotterdam where it was transhipped and brought back to Le Havre in another vessel and was discharged there on 2nd April 1977.
So much for what happened to the goods themselves. I turn next to what happened to the shipping documents relating to the goods. These documents under ordinary c.i.f. terms (incorporated without material alteration in GAFTA 41) comprise: invoice, full set on board Bill of Lading and policy or certificate of insurance. It is not disputed that shipping documents which satisfied this requirement and covered the whole contract quantity of 500 tonnes, were presented at the Buyers' bank in Geneva on 22nd March 1977 as provided for by the clause of the contract appearing against the rubric PAYMENT. The Buyers, however, rejected the documents and refused to pay against presentation on the ground that they did not include "Certificate of Quality on discharge made out on behalf of all parties by GSC certifying that the goods are of the same quality as the sample sealed by GSC Paris when the business was concluded."
My Lords, a certificate by GSC as to the quality of the goods at port of discharge under the certification clause in the contract is not, and is indeed incapable of being, included among shipping documents which a buyer is required to tender to his seller in return for payment of the price under a contract of sale in ordinary c.i.f. terms. Although an argument to the contrary was apparently persisted in by the Buyers up to the Court of Appeal, its hopelessness has now been recognised and it has not been advanced in the argument for the Buyers in your Lordships' House.
The Sellers did not elect to treat as a wrongful repudiation of the contract the Buyers' rejection of the documents as good tender under the contract and their consequent refusal to pay the price upon presentation on 22nd March. Instead the Sellers set about getting from GSC a certificate under the certification clause as to the quality of the 445 tonnes that had been discharged at Le Havre and were all that were available for sampling there.
On 29th March 1977, GSC issued a certificate in the following terms:
" CERTIFICATE OF QUALITY AND INSPECTION No 15.944
In pursuance of an order given to us by: BERGER and Company to inspect: Quality of 10.894 bags 'BEANS BOLITAS' at time of Discharge by sampling.
We hearby certify that we inspected the quality of a parcel designated as:
- 9.661 Bags 'Beans Bolitas', No marks
discharged ex m/s 'SALLAND' in LE HAVRE on the 21st March 1977. According to the results of the analysis performed on the samples drawn by us on a 10% basis at random, the parcel of beans discharged from m/s 'SALLAND' is equal to the samples previously sealed by us and kept in our possession.
PARIS, 29th March 1977
SOCIETE GENERALE DE SURVEILLANCE S.A."
The shipping documents were re-presented to the buyers on 30th March together with this certificate, but were again rejected. This time the Sellers did treat the Buyers' refusal to pay the price on presentation of the documents as a wrongful repudiation of the contract and by telex of 1st April 1977 they elected to treat the contract as rescinded. This had the consequence in law that all primary obligations of the parties under the contract which had not yet been performed were terminated. This termination did not prejudice the right of the party so electing to claim damages from the party in repudiatory breach for any loss sustained in consequence of the non-performance by the latter of his primary obligations under the contract, future as well as past. Nor did the termination deprive the party in repudiatory breach of the right to claim, or to set off, damages for any past non-performance by the other party of that other party's own primary obligations, due to be performed before the contract, was rescinded. In the instant case these latter obligations included a primary obligation, to be performed by the Sellers at the time of shipment, and thus before the date of termination of the contract, to ship goods that were in conformity with the contract, albeit that the right of disposal of the goods was reserved by the Sellers until payment by the Buyers for the shipping documents upon presentation.
My Lords, at all relevant times the Sale of Goods Act 1893 was still in force in its original terms. The contract of sale was one by sample as well as by description. The goods "Argentina Bolita Beans - 1974 Crop" were two year old beans and as such were of a kind prone to contain some admixture of impurities and of defective beans, the extent of which would be revealed by a sample by reference to which the contract of sale was made, if such a sample were properly taken so as to be representative of the...
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