Huyton SA v Peter Cremer GmbH & Company [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mance J. |
| Judgment Date | 21 October 1998 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 October 1998 |
Queen's Bench Division (Commercial Court).
Mance J.
Stephen Males QC (instructed by Richards Butler) for the plaintiff.
Alistair Schaff (instructed by the Simkins Partnership) for the defendant.
The following cases were referred to in the judgment:
Barton v ArmstrongELR [1976] AC 104.
Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40.
CTN Cash & Carry Ltd v Gallagher LtdUNK [1994] 4 All ER 714.
Dimskal Shipping Co SA v International Transport Workers Federation (“The Evia Luck”)ELR [1992] 2 AC 152.
Director of Public Prosecutions for Northern Ireland v LynchELR [1975] AC 653.
Enichem Anic SpA v Ampelos Shipping Co Ltd (“The Delfini”)UNK [1990] 1 Ll Rep 252.
Ginzberg v Barrow Haematite Steel Co LtdUNK [1966] 1 Ll Rep 343.
Grimoldby v WellsELR (1875) LR 10 CP 391.
Kwei Tek Chao v British Traders & Shippers LtdELR [1954] 2 QB 459.
Maskell v HornerELR [1915] 3 KB 106.
Napier (FE) v Dexters LtdUNK (1926) 26 Ll L Rep 184.
Occidental Worldwide Investment Corp v Skibs A/S Avanti (“The Siboen” and “The Sibotre”)UNK [1976] 1 Ll Rep 293.
Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1994] CLC 868; [1995] 1 AC 501.
Pao On v Lau Yiu LongELR [1980] AC 614.
Rich (Marc) & Co AG v PortmanUNK [1996] 1 Ll Rep 430.
Selectmove Ltd, ReWLR [1995] 1 WLR 474; [1994] BCC 349.
Thorne v Motor Trade AssociationELR [1937] AC 797.
Universe Tankships Inc of Monrovia v International Transport Workers FederationELR [1983] 1 AC 366.
Shipping — Sale of goods — Economic duress — Seller agreed not to pursue arbitration claim — Seller claimed that agreement entered into as result of economic duress — Whether there was illegitimate pressure — Whether illegitimate pressure a significant cause of agreement.
This was an action in which the plaintiff, Huyton SA (“Huyton”), sought declaratory and injunctive relief to prevent the defendant, Peter Cremer GmbH & Co (“Cremer”), from pursuing a claim which Cremer had referred to London arbitration by GAFTA.
Huyton agreed to sell wheat to Sudanese buyers C+FFO Port Sudan. Huyton agreed to buy wheat from Cremer, FOB Constantza, which Cremer had agreed to buy from Romanian suppliers. The sale contract provided for payment cash against listed documents. Huyton's broker chartered a vessel to lift the wheat contracted to be shipped by Cremer. The vessel incurred substantial load port demurrage amounting to some $500,000. The vessel arrived at Port Sudan and discharged against indemnities given in favour of the owners and Huyton. Some of the wheat was moved inland by the Sudanese buyers.
When Cremer presented shipping documents to Huyton's bank they were rejected for a number of discrepancies. Cremer asserted that the cargo had been accepted on completion of discharge and that Huyton had thereby waived any right to reject the documents. Cremer gave a deadline for payment to be confirmed failing which it would seek return of the contractual documents. Huyton reiterated that Cremer was required to present conforming documents. When its deadline passed Cremer held Huyton in breach for refusing to pay for the cargo of which Huyton had taken delivery. Huyton replied that Cremer's failure to remedy the defects in the documents was a repudiation which Huyton accepted. Cremer replied that it was Huyton which had repudiated. Cremer claimed arbitration and Huyton appointed an arbitrator.
After further negotiations Huyton instructed its bank to pay against the documents re-presented by Cremer on the basis of Cremer's agreement that the presentation of the amended documents was the first proper presentation and that Cremer irrevocably withdrew its demand to arbitrate on the demurrage and guarantee charges claims. Once it had been paid, Cremer said that it did not regard itself as bound by the agreement to allow the deductions and give up the right to arbitrate about the demurrage and guarantee expenses. Huyton took proceedings to restrain pursuit of the arbitration. Cremer argued that the agreement to withdraw its arbitration claim was not binding on Cremer because there was no consideration or because it had been forced to agree to by economic duress.
Held, giving judgment for Huyton:
1. On the basis that Huyton was acting in good faith and (so far as material) that its stance was reasonably arguable, the situation was one where it was on the face of it open to the parties to reach a compromise and where consideration for each party's agreement could be found in their mutual forbearance from maintaining or pursuing their original rights and remedies. Cremer could not argue that the apparent compromise could be ignored on the ground that it did not subjectively intend to compromise, unless the agreement was voidable for causative duress. (Maskell v HornerELR[1915] 3 KB 106applied.)
2. Economic duress required (i) illegitimate pressure which (ii) constituted a significant cause inducing the other party to act as it did. (Dimskal Shipping Co SA v International Transport Workers Federation (“The Evia Luck”)ELR[1992] 2 AC 152applied.)
3. Cremer was unable to establish any illegitimate pressure arising from Huyton's alleged wrongful failure to pay the purchase price. Huyton did not become liable to pay by virtue of discharge of the goods, nor delivery to Huyton's sub-buyers nor removal of the goods from Port Sudan. The contract was one of payment against documents, there was no variation of it, and Cremer did not present conforming documents. Huyton was entitled to treat Cremer's attitude as repudiatory; and if Huyton's termination was ineffective then Cremer's termination was valid. In either event Cremer had no continuing right to present conforming documents and claim the price, or to require payment of the price or any equivalent sum on any other basis. (Ginzberg v Barrow Haematite Steel Co LtdUNK[1966] 1 Ll Rep 343considered.)
4. If, on a contrary assumption, either property in the goods had passed and the price had become payable leaving Cremer discharged from the obligation to present conforming documents, or Cremer had accepted Huyton's repudiation, and if Huyton's position was therefore unjustified and constituted illegitimate pressure, that pressure was not a significant cause of Cremer entering the agreement. The minimum basic test of subjective causation in economic duress ought to be a “but for” test. Good or bad faith was also relevant but not decisive. Cremer had not shown that the relationship between the illegitimate pressure and the agreement was such as to justify relief on the ground that Cremer's will was deflected. In so far as Cremer felt under pressure to enter into the agreement, that resulted from its own misconceptions about the position which were not Huyton's responsibility.
Mance J:
In this action the plaintiff, Huyton SA (“Huyton”), seeks declaratory and injunctive relief to prevent the defendant, Peter Cremer GmbH & Co (“Cremer”), from pursuing a claim which Cremer has referred to London arbitration by GAFTA. The claim whichCremer wishes to arbitrate seeks to establish that demurrage under a sale contract entered into with Huyton should have been measured at a rate of $6,500 per day, rather than the $11,000 which Huyton insisted upon Cremer paying; to establish further that it was not liable for all or at any rate the larger part ($49,000) of the sum of $65,245.40 likewise paid at Huyton's insistence, on account of guarantee expenses; and to recover sums accordingly.
The factual background starts with the sale contract dated 13 September 1995 for the shipment and sale by Cremer as seller to Huyton as buyer of 30,000 mt Romanian milling wheat plus or minus ten per cent at buyer's option at $175 per mt FOB spout trimmed Constantza in September/October 1995. The contract provided for payment cash against listed documents. Shipped weight, quality, condition, description, sampling and analysis were to be final as certified on loading by SGS. Loading was to take place at 2,000 mt per weather working day (Saturdays, Sundays and holidays excluded), with “demurrage max. 11.000. US$ as per C/P…” The charter was otherwise subject generally to GAFTA form 64, which by cl. 29 includes provision for GAFTA arbitration in London of “any dispute arising out of or under this contract”.
Cremer is based in Hamburg. It had previously contracted to buy equivalent wheat from Romanian suppliers. Huyton is a Swiss company, owned I was told by Sudanese interests, but represented for most purposes by a London company, Agrimpex Co Ltd. Huyton also had a pre-existing commitment, made 31 August 1994, to sell to Sotisco Trading Co Ltd (“Sotisco”) of Khartoum any origin milling wheat in sound good condition, crop 1993/1994 or 1994/1995 at sellers option at $225 per mt C+FFO Port Sudan. Payment under Huyton's contract with Sotisco was by irrevocable letter of credit, which was opened through the Omdurman National Bank. Quality, condition, description and sampling were to be final as certified on loading by an independent surveyor. Sotisco acts, it appears, simply as importer, on-selling in this case to Sidco, a buying federation or cooperative established by Sudanese millers.
Agrimpex on behalf of Huyton instructed its regular brokers, J Gran & Partners Ltd (“JGP”) of London, to charter a vessel to lift the wheat contracted to be shipped by Cremer. The principal of JGP is Mr Jens Gran, and his assistant at the time was Mr Frank Lund. In order to try to ensure that it obtained the most favourable conditions, Agrimpex's policy was, to JGP's knowledge, to charter vessels from their owners or time charterers, rather than on back to back terms from other voyage charterers. On 22 September 1995 Mr Lund recapitulated to Agrimpex a voyage charter for the Ithomi said to have been made with Norwegian Bulk Transport Ltd (“NBT”), under which the freight was $550,000 (increased in a side letter...
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