Leigh and Sillavan Ltd v Aliakmon Shipping Company Ltd (Aliakmon)

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE OLIVER,LORD JUSTICE ROBERT GOFF,And
Judgment Date07 December 1984
Judgment citation (vLex)[1984] EWCA Civ J1207-2
Docket Number84/0469

[1984] EWCA Civ J1207-2

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION (COMMERCIAL COURT)

(MR. JUSTICE STAUGHTON)

Royal Courts of Justice.

Before:

The Master of the Rolls (Sir John Donaldson)

Lord Justice Oliver

and

Lord Justice Robert Goff

84/0469

1977 L. No. 3164

Leigh and Sillavan Limited
(Plaintiffs) Respondents
and
Aliakmon Shipping Company Limited
(Defendants) Appellants

MR. ANTHONY CLARKE, Q.C. and MR. NIGEL TEARE (instructed by Messrs. Anthony King & Co.) appeared on behalf of the (Plaintiffs) Respondents.

MR. JONATHAN SUMPTION (instructed by Messrs. Holman Fenwick & Willan) appeared on behalf of the (Defendants) Appellants.

THE MASTER OF THE ROLLS
1

The issue in this appeal is whether it is the buyers or the sellers of a quantity of steel in coils who are entitled to sue the shipowners for damage to those goods when on a voyage from Korea to Immingham. Usually this would not matter, since buyers and sellers would make common cause against the shipowners, but here they do not do so. Indeed the buyers may have a slightly larger claim than would the sellers, if they have a claim at all, since the buyers can rely, by way of estoppel, upon the fact that the shipowners issued a clean bill of lading. The sellers on the other hand were the shippers and cannot contend that they relied upon that document.

2

Mr. Justice Staughton held that the plaintiffs, the buyers, were entitled to sue and the shipowners now appeal. The facts were highly unusual and it is necessary to set them out as found by the learned judge.

3

The contract of sale was for steel coils to be shipped in Korea c. and f., free out, Immingham. The price was payable by a 180-day bill of exchange to be endorsed by the buyers' bank in exchange for a bill of lading. The steel was purchased by the sellers from the Illsin Steel Co. who shipped it, taking a bill of lading showing the buyers as named consignees and the sellers as the notified party. The shippers delivered the bill of lading to the sellers and the vessel sailed.

4

It is common ground that if the sale contract had been performed as contemplated, the buyers would, upon taking the bill of lading in exchange for their bill of exchange, have had transferred to and vested in them all rights of suit, and been subject to the same liabilities in respect of the goods, as if the contract contained in the bill of lading had been made with them. But the contract was not performed as contemplated.

5

The buyers had intended to re-sell the steel before the time when the bill of lading would be tendered and they would have to produce the bill of exchange, backed by their bank, in payment of the price. Unfortunately steel prices fell and they were unable to effect a sale. In consequence the bank considered that it would have insufficient security, if it backed the bill and declined to do so. The buyers were a substantial and respectable concern and were greatly embarrassed at the situation which had arisen. The sellers were equally substantial and respectable and the two parties got together to resolve the problem.

6

I turn to the learned judge's judgment for an account of what happened then and his conclusion:

"A meeting was held in London on 7th October 1976 to resolve this problem. There were present three representatives of the Buyers, and two from the Sellers. I heard evidence from each of the Buyers' representatives; not surprisingly, the Sellers' representatives did not give evidence.

I was invited to consider both what was said at the meeting and also the subjective intentions of the parties to it, so far as these were revealed by the evidence. As to what was said, none of the witnesses pretended to a precise recollection of the words used; the meeting occurred nearly six years ago. There are a few contemporary letters which may be expected to reflect what was said in a general way, but they were not written by lawyers nor in circumstances where the recipients could be expected to correct any minor mis-statement of the terms agreed.

Plainly it was expressly agreed at the meeting that the Sellers would not insist upon the indorsement of a bill of exchange by the Buyers' bankers. It was also, I think, agreed that the Buyers need not accept a bill of exchange at all, but would remain liable to pay the contract price 180 days after the bill of lading date. Either the Japanese Sellers were not aware of the advantage enjoyed by the holder of the bill of exchange when proceeding under the Rules of the Supreme Court Order 14, or they did not attach importance to it. I reject entirely the suggestion that it was agreed to 'unscramble' (sc.cancel) the sale contract altogether. That was contraverted by the Buyers' witnesses. I was not persuaded to accept it, either by the apparent insistence of the sellers that the terms should be kept strictly confidential, or by the Buyers' later statement that they paid the import duty as agents for the Sellers.

Equally plainly, some agreement was reached with the object of assuring the Sellers that the price would be paid. The Buyers contend that it was an agreement by which the steel became security for the performance of their obligation. Mr. Sumption, for the shipowners, contends that the goods were to remain in the ownership of the Sellers, at any rate for the time being, notwithstanding the endorsement and delivery of the bill of lading.

What was actually said, as I find, was that the goods would be held 'to the order of' or 'at the disposal of' the Sellers; that their approval would be obtained before any of the goods were re-sold; and that the Sellers would do their best to help the Buyers re-sell the goods. If I have to choose between 'to the order of' and 'at the disposal of', I would prefer the former expression, for it seems to me to be that which an English businessman is more likely to have used.

I do not think that anything was said about ownership, or about pledge, mortgage or hypothec. The parties were not concerned about the precise legal analysis of the new bargain. They regarded it as a temporary expedient, to relieve the Buyers from embarrassment and reassure the Sellers while they granted 180 days credit for a sum exceeding $900,000. Furthermore the Buyers had not (any more than had the Sellers) acquired the goods as chattels for use or ornament; both parties wished to convert them into money as soon as possible; they were not much interested in who owned them meanwhile.

As to subjective intention, I am sceptical as to how far this is relevant, particularly as for all I know the subjective intentions of the parties may have been different. However, I was referred to no authorities on the point, and I am able to find what was the subjective intention of the Buyers. They regarded the security part of the transaction as similar to others which they conducted with their bankers from time to time, when they would give a letter of hypothecation over goods in store as security for a loan. For that reason only, I find that the subjective intention of the Buyers was to mortgage or hypothecate the goods.

I therefore conclude that, at the meeting of 7th October, although the contract of sale was carried in other respects, there was no variation of the term which (it is common ground) was originally part of that contract, that ownership of the steel should pass to the Buyers by endorsement and delivery of the bill of lading. This conclusion is confirmed by two letters, one written by each party soon after the meeting, which expressly envisaged re-sales of the steel by the Buyers. Those letters dated 11th and 18th October 1976 respectively enclosed and acknowledged receipt of the endorsed original bills of lading. No doubt it is common, as Mr. Justice McNair explained in Ginzburg v. Barrow Haematite Steel Co. [1966] 1 Ll.R. 343, for the parties to a c.i.f. contract to intend that property in the goods shall pass only when payment is made; but I do not see that, in law, they must inevitably have had that intention.

For reasons which will appear, it is not essential for me to reach a conclusion about a second meeting held at Macclesfield on 25th November 1976. But I ought nevertheless to consider it briefly.

The evidence was that the Sellers' representative became concerned as to whether they had adequate security. This may have been because he had granted credit to a greater extent than he was permitted by the Sellers to do in his own discretion. At any rate, he pressed the Buyers for some reassurance. It may have been as a result of this pressure that the Buyers, on 12th November 1976, wrote that they would accept liability for the export duty acting as the Sellers ' agents, although one witness said that this arrangement was made because of what had been agreed on 7th October. At all events Mr. Tolson, managing director of the Buyers, told me that he was asked to write another letter by Mr. Yamashita of the Sellers; and that a letter dated 26th November 1976 is that which he wrote as a result of the meeting. This letter spoke of 'confirming the agreed arrangements' of the previous day. It said in plain terms that ownership of the steel remained in the Sellers.

I cannot do otherwise than regard that letter as reflecting accurately in that respect what was said at the meeting. My view is fortified by evidence which Mr. Tolson gave in examination-in-chief about the October meeting:

'At that meeting I do not think much was said about ownership.'

(The emphasis was recorded by me at the time as my impression of the evidence). It is further supported by later correspondence.

Mr. Sumption invited me to conclude that, if it was only agreed in the...

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    • Southampton Student Law Review Nbr. 1-1, January 2011
    • 1 January 2011
    ...Bussani, M and Palmer V,V, (ed), Pure Economic Loss in Europe, (Cambridge University Press, Cambridge, 2003) 18 73Ibid 74 The Aliakmon [1985] 2 All ER 44, 73 (Lord Goff) 75Grubb, A, The Law of Tort (Butterworths Lexis-Nexis, London, 2000) 528 [2011] Southampton Student Law Review Vol. 1 Gor......

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