Pagnan (R) & Fratelli v Corbisa Industrial Agropacuaria Limitada (Mustafa.)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SALMON,LORD JUSTICE MEGAW |
| Judgment Date | 14 April 1970 |
| Judgment citation (vLex) | [1970] EWCA Civ J0414-2 |
| Date | 14 April 1970 |
| Court | Court of Appeal (Civil Division) |
[1970] EWCA Civ J0414-2
In The Supreme Court of Judicature
Court of Appeal
(Commercial List)
(Special Paper)
(On appeal from the High Court of Justice Queen's Bench Division)
Lord Justice Salmon
Lord Justice Megaw and
Sir Frederic Sellers
In the Matter of the Arbitration Act, 1950
and
In the Matter of An Arbitration
MR. R. COFF and MR. B. DAVENPORT (instructed by Messrs. Crawley & de Reye) appeared on behalf of the Appellants (Buyers).
MR. A.B. HALLGARTEN (instructed by Messrs. Richards, Butler & Co.) appeared on behalf of the Respondents (Sellers).
( As revised)
All the facts canvassed by the parties to this arbitration are fully set out in the Award and in the lucid judgment of Roskilll, J. It is unnecessary for me to re-state any of them in detail. Moreover, having regard to the concessions made by the Appellants in this Court, many of those facts have become irrelevant. I need therefore refer only in broad outline to the main facte upon which this Appeal turns.
By a written contract dated the 20th May, 1905 the spellants, an Italian firm which I shall call the Buyers, agreed to buy from the Respondents, a Brazilian Company which I shall call the sellers, 10,000 tons 5 per cent, more or less of Brazilian maize at U.S.A. $64 a ton. The contract which was in form No. 38 of the London Corn Trade Association Limited provided for c.i.f. terms, shipment in June 1905 from Brazil for a West Coast Italian port or, at Buyers' option, for an Adriatic port at an extra charge of 50 cents per ton, Rye Terms and arbitration in London. Rye Terms, for the purposes of this case, means that If the goods are damaged in transit, the Buyers cannot reject but must take them with an allowance off the purchase price, to be fixed by agreement or arbitration. Prima facie this allowance would be the difference between the value of the goods to the Buyers at the time of arrival and the value they would have had if they were undamaged. It is perhaps worth noting that this contract is a typical example of contracts commonly entered into by foreign merchants all over the world. These contracts have nothing to do with this country but nevertheless provide for arbitration in London because of the confidence which the merchants repose in the integrity, expertise and comparative expedition with which arbitrations are conducted and justice is administered in the United Kingdom.
The Sellers ran into difficulties from the beginning. They could not find the money necessary to pay for the freightand the insurance premiums. The Buyers accordingly advanced the money for these purposes. The shipment of the maize was seriously delayed. The Buyers twice agreed to an extension of time in consideration of reduction in each instance of per cent. of the contract price. The last extension of time expired on the 22nd August, 1965, and on this date time for performance by tender of documents expired. Thereafter the Sellers were in breach of a fundamental term of the contract and accordingly the Buyers might then lawfully have treated the contract as at an end. But they did not do so. Instead, after intensive negotiations, the contract was varied by an oral agreement made between the parties' representatives on the 21st September, 1965. By this date, the loading of the cargo had been completed and soon afterwards the Buyers designated Venice as the port of dlscharge. Some damage to the cargo had been observed. The oral agreement to which I have referred provided that notwithstanding the Sellers' breaches, the contract should remain alive and the Buyers should accept and pay the contract price (as varied) for the cargo providing that they were satisfied with its condition on arrival at Venice. If they were not satisfied then they should be entitled to reject it. This meant that the contract had changed its character. The Rye Terms had been struck out and it had become a contract for goods delivered when the ship arrived. The ship arrival at Venice on about the 10th October, 1965. By arrangement between the parties it was sent on to Trieste where it arrived on the 19th October, 1965. On that date the Buyers, not being satisfied with the condition of the cargo, rejected it, as they were entitled to do. If the history of the dealings between the parties had stopped there, this case would present no problem. The Buyers would dearly be entitled to damages, and these damages would prima facie be the difference between the contract price (as varied) and the market price of sound goods in Trieste at the date of the breach, that is to say, about to $2 to$3 a ton. But the history of the dealings between the parties did not cease on the 19th October. On the 13th October, the Buyers had obtained a decree of sequestration from the court at Padua relating to 2350 tons of the cargo as security for $76,130 which they had paid out for freight and insurance premiums and for $56,450 which they claimed as damages for breach of contract by the Sellers. On the 27th October the Sellers repaid the $76,130. Accordingly on the 5th November the sequestration order was lifted as regards 1650 tons but remained in force in relation to 700 tons of the cargo. This 700 tons represented upwards of about $35,000 at $51 a ton or $56,000 at the contract price.
After the 19th October there were negotiations for a purchase of the whole cargo by the Buyers at a reduced price - the Buyers having Intimated to the Sellers by a letter of the 11th October, confirmed by a telex of the 19th October, that they were prepared to negotiate such a purchase at a reduced price in the event of their rejecting the goods and repudiating the contract of the 20th May.
These negotiations resulted in a new contract being entered into between the Buyers and the Sellers on the 13th November under which the Buyers bought the cargo at a price of $51.40 per ton free of all expenses up to the 26th November on an ex silo Trieste basis.
According to Paragraph 29 of the Award (1) the price of $51.40 a ton (I quote): was unduly depressed by reason of (the Buyers')… sequestration, and having regard to discharging landing, storage and other incidental expenses saved, the difference of over 23 per cent between the contract price and ($51.40 a ton) was at least 10 per cent more than (the Buyers') would have been entitled to receive by way of a Rye Terms allowance had the goods been accepted and not rejected", and (2) "the …. purchase of the 13th November, 1965 formed part of a continuous dealing with the situation in which (theBuyers) found themselves and was not an Independent or disconnected transaction. By such purchase (the Buyers) diminished and mitigated any loss which they would (otherwise) have suffered".
An addendum to the agreement of the 13th November recited that "about 700 tons…are presently under a conservation seizure. These 700 tons will be paid by the Buyer and delivered by silo as soon as seizure is withdrawn and the counter-value deposited with the Commerciale Italiano into a 'bound account' Accordingly after the 13th November 1965 the 700 tons were released to the Buyers and the proceeds of their sale at $51.40 a ton amounting to $35,980 were paid by the Buyers into a blocked bank account, pending the award to be made in the arbitration proceedings which had been instituted by the Buyers in London claiming damages from the Sellers for breach of contract.
The addendum dearly did not amount to an admission by the Sellers that the Buyers had suffered any loss or damage. Equally clearly, it did not amount to an admission by the Buyers that the contract of the 13th November was to be treated as a settlement of their claim for any loss or damage which they might have suffered as a result of the Buyers' breach of contract.
The Arbitrators appointed by the parties failed to agree. Accordingly an Umpire was appointed. On the 14th March, 1966, the Umpire made an Award in favour of the Sellers. The Buyers appealed from that Award to the Appellate Tribunal of the London Corn Trade Association Limited. The very experienced members of that Tribunal in their Award, which was in the form of a special case, found that the Sellers were in breach of the contract of the 20th May, 1965 but that the Buyers were not entitled to recover any damages in respect of these breaches because they had suffered none. The Tribunal stated a number of questions of law for the decision of theCourt, the only one of which that is now material is whether upon the facts found and the true construction of the contract, the Tribunal in assessing damages was bound or entitled to take account of the purchase of the cargo by the Buyers on the 13th November, 1965. If the answer to that question is "Yes" the Tribunal's Award stands. Otherwise, the Buyers' appeal from the Umpires Award must be allowed and the case remitted to the Tribunal to assess damages. The Buyers appealed from the Tribunal to Roskill, J. He upheld the Tribunal's Award and answered the question to which I have referred in favour of the Sellers. The buyers now appeal to this Court from the Judgment of Roskill, J.
In my view the basis of the Tribunal's conclusion was (a) that the purchase of the 13th November, 1965 showed the Buyers a profit substantially in excess of the damages which they claimed, namely, the difference between the May contract prices (as varied) of $62,64 a ton and the market price of $64.50 to $65 on the 19th October 1965, (b), that the purchase of the 13th November, 1965 formed part of a continuous course of dealing between the same parties in respect of the same goods, (c) that the Buyers' profit extinguished their alleged loss, and (d) that accordingly the Buyers having suffered no loss they were not entitled to any...
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