Huyton SA v Distribuidora Internacional de Productos Agricolas SA de CV
| Jurisdiction | England & Wales |
| Judge | Lord Justice Waller |
| Judgment Date | 24 July 2003 |
| Neutral Citation | [2003] EWCA Civ 1104 |
| Docket Number | Case No: A3/2002/2605 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 July 2003 |
[2003] EWCA Civ 1104
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEENS BENCH DIVISION
Mr Justice Andrew Smith
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Ward
Lord Justice Waller and
Lady Justice Hale
Case No: A3/2002/2605
Mr Stephen Males QC; Mr Edmund Broadbent (instructed by Middleton Potts solicitors) for the Appellant
Mr Timothy Young QC; Mr Timothy Otty (instructed by Hill Taylor Dickinson solicitors) for the Respondent
This is the judgment of the court.
The dispute, which gives rise to this appeal, can be put in reasonably straightforward terms. In May 1998 Huyton had 3,375 mt of Ethiopian whitish sesame seed on board the Zarina Huyton made a Joint Venture Agreement (the JVA) with Dipasa under which it was hoped the seeds would be imported into Mexico and sold, and under which the seeds were to be stored in Huyton's name with a public warehousing company Acosa. Importation required compliance with Mexico's health regulations. The seeds were not in fact stored in Acosa's warehouse in Huyton's name. They were stored in Dipasa's warehouse under an "enabling agreement" between Acosa and Dipasa, but this was something of which Huyton were never told either by Dipasa or by Acosa with whom Huyton were in direct communication. Huyton did not produce the phytosanitary certificate required by the importing authorities certifying the health of the seeds, and problems arose between Dipasa and Huyton leading to Dipasa and Huyton agreeing that Dipasa should purchase the seeds, and the Joint Venture Agreement be cancelled "at par". It was a term of the Sale Agreement (the SA) that the goods being stored at Acosa's warehouse should only be released to Dipasa on payment of the price. After conclusion of that agreement Dipasa processed the seeds and discovered that they were rancid. Since the seeds were stored at Dipasa's premises, Dipasa were in a position to sell the seeds to a third party without paying Huyton. Each party cries foul – Huyton complaines that Dipasa had failed to store the goods with Acosa's warehouse in Huyton's name and had thus taken the goods without paying for them alleging dishonesty against Dipasa; Dipasa alleges that Huyton had dishonestly sold them old crop for new.
It is a matter of great regret that the two parties have not been able to see that what needed sorting out was primarily of course whether the seeds were rancid and from an earlier crop year, but also why Huyton should not be secured in relation to any money that was owed to them since Dipasa should not have been able to obtain the goods without paying for them. Security one would have thought would have been easy to resolve. The question of whether the crop was from the wrong year would have been a short point for an arbitrator. Since it was a term of the SA that disputes under that agreement should be the subject of a FOSFA Arbitration that was an obvious tribunal. Before us both parties recognised the force of the above. Mr Young QC for Dipasa accepted that his clients owed the price under the SA which they had never paid, and Mr Males QC accepted that if the price were paid into court or a joint account it might well be an appropriate solution that his clients should arbitrate the crop year point. The respective positions appeared to have the making of a sensible compromise, but that was not to be because enormous costs had been incurred in fighting the action before Mr Justice Andrew Smith, and agreement as to who should pay those costs was not possible.
What then was the action before Andrew Smith J about, and how did it come to take place? Huyton wished to go back to suing on the JVA. It was their case that Dipasa had fraudulently misrepresented where the goods were stored which had induced them to enter into the SA; they claimed that they had rescinded the SA, and they claimed that the JVA had been repudiated and that they should receive damages for that repudiation. The benefits of being entitled to go back to the JVA are difficult even now to ascertain, but one benefit was said to be that Dipasa's obligations under the JVA were guaranteed by Dipasa Europe. Mr. Young suggested that the reality was that Huyton did not wish to have the dispute decided by traders under the FOSFA arbitration provision. But it is right to say, Dipasa did not apply to stay that part of the proceedings concerned with whether the SA had been entered into under a misrepresentation.
The above unhappy state of affairs is compounded by the following. If Huyton establish a material misrepresentation, which induced them to enter into the SA, the question would arise as to what the court should do. Now that Huyton no longer allege fraud that question arises under the Misrepresentation Act 1967 Section 2(2) of which provides as follows :-
"Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party."
Would the court order rescission? The goods the subject of the SA have long since been sold and disposed of to third parties. The judge seems to have contemplated that disposal of the goods would not have prevented rescission [see para 472]. The theory behind that view must be that in some way rescission would enable the JVA to be reinstated giving rise to a claim in damages under that agreement. That seems to us to disguise the reality, which was that in no way could the parties have been put back in the position as if the SA had not existed. Monetary compensation had to be the only realistic remedy. But in any event the judge's view is expressed in the context of an alleged fraudulent representation whereas now the court is concerned with a representation to which the Misrepresentation Act applies. Huyton accepted that they suffered no financial loss as a result of the goods being located where they were, and suffered no financial loss as a result of the misrepresentation itself other than being kept out of money that they would otherwise have received from Dipasa before the goods could be released. There is no credible suggestion that Huyton would have received a higher price than they negotiated with Dipasa under the SA. The only credible suggestion argued by Mr Males is that any SA would have not been on precisely the same terms. That argument relates as it seems to us purely to the possibility that the terms which were intended to secure payment to Huyton prior to delivery of the goods from the warehouse would have been renegotiated to preserve Huyton's position. The only aspect that makes one pause in considering whether this is not a clear case where the court would declare the contract subsisting relates to the "loss" of security which Huyton suffered in two senses. First they did not have a term in the contract which meant they got paid before the goods were delivered to Dipasa and they did not have the security of a guarantee from Dipasa Europe. As to the first if they obtain the price plus interest under the SA that will in fact provide recompense; as to the guarantee, it appears to have been contemplated that Dipasa Europe would guarantee the SA. Presumably that was never ultimately provided and cannot thus have been thought of as that important by Huyton in the context of obtaining the sale that they got. So even if a misrepresentation were established in relation to the location of the goods, this seems to be a case where the court would exercise its jurisdiction to declare the SA subsisting leaving the parties to their remedies under that agreement. Damages in lieu would not seem to arise because Huyton could not establish any loss flowing from the misrepresentation itself.
During the trial Huyton obtained permission to amend to raise a plea of unilateral mistake. It has always been difficult to see how if Huyton failed to establish a misrepresentation, they would be likely to succeed on the basis of unilateral mistake. But even if such a mistake could be established, once again it would seem in the highest degree unlikely that the court would grant the remedy of rescission if by maintaining the contract, Huyton achieved adequate and proper compensation.
The fight over whether there was a misrepresentation or mistake inducing the SA agreement relating to the location of the goods seems accordingly to have been a complete waste of time and resources. There are probably matters in the background about which we know very little including an injunction which we were told had been obtained in Holland over Dipasa Europe's assets which has led to the litigation being fought out in the way it has. Accusations of dishonesty from both sides have almost certainly not helped. But one can see at least with the benefit of hindsight that it is lamentable that the parties allowed themselves to adopt entrenched positions that resulted in the litigation that has so far been fought. It is furthermore lamentable that the resources of the courts have been used up allowing such litigation to be...
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