Pagnan S.p.A. v Tradax Ocean Transportation S.A.
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,LORD JUSTICE BINGHAM,LORD JUSTICE WOOLF |
| Judgment Date | 12 June 1987 |
| Judgment citation (vLex) | [1987] EWCA Civ J0612-4 |
| Docket Number | 87/0549 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 June 1987 |
[1987] EWCA Civ J0612-4
Lord Justice Dillon
Lord Justice Woolf
Lord Justice Bingham
87/0549
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM AN ORDER OF MR JUSTICE STEYN
Royal Courts of Justice
MR DAVID JOHNSON Q.C. and MR CHRISTOPHER HANCOCK, instructed by Messrs Middleton Potts, appeared for the Appellants (Plaintiffs)
MR BERNARD RIX Q.C. and MR NICHOLAS HAMBLEN, instructed by Messrs Sinclair Roche & Temperley, appeared for the Respondents (Defendants).
I will ask Lord Justice Bingham to give the first judgment.
This is an appeal by buyers, Pagnan S.p.A., against a decision of Mr Justice Steyn dismissing their appeal against a reasoned award of the Board of Appeal of the Grain and Feed Trade Association in favour of sellers, Tradax Ocean Transportation S.A. The appeal is brought with the leave and certificate of the judge under section 1(7)(a) and (b) of the Arbitration Act 1979, which were also granted to the sellers on a point which they have argued.
The issues before the judge and before us were primarily issues of contractual construction, but to appreciate how these issues arise some recapitulation of the facts is called for. By a contract made on 23rd November 1982 the sellers agreed to sell to the buyers 35,000 metric tonnes, plus or minus 5 per cent at buyer's option, of Thailand tapioca pellets for shipment F.O.B. Sriracha, a Thai port. There were to be three shipments of 10,000, 10,000 and 15,000 metric tonnes to be made in February, April and May 1983. The appeal concerns the last two of those shipments.
There are three terms of the contract which are of particular importance to the issues on this appeal. First, there is a special condition to this effect:
"Sellers to provide for export certificate enabling buyers to obtain import licence into E.E.C. under tariff 07.06 with 6% import levy."
I shall hereafter describe that as "the special condition". It is to be noted that that is a typed clause and does not form part of any standard form. Secondly, the contract provided that its general conditions should be according to G.A.F.T.A. contract form No. 119/125. Form 125 regulates G.A.F.T.A. arbitrations and raises no issue in this appeal. Form 119 is the general F.O.B. contract form and attention must be drawn to clause 19 of that form which is in these terms:
"10. Prohibition—in case of prohibition of export, blockade or hostilities or in the case of any executive or legislative act done by or on behalf of the government of a country of origin, or of the territory where the port or ports of shipment named herein is/are situate, restricting export, whether partially or otherwise, any such restriction shall be deemed by both parties to apply to the Contract to the extent of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this Contract or any unfulfilled portion thereof shall be cancelled. Sellers shall advise Buyers without delay with the reasons therefor, and if required, Sellers must produce proof to justify the cancellation."
Thirdly, the contract made provision for a possible conflict between the terms of the printed form and special terms introduced by the parties. The clause was to this effect:
"Any special terms and conditions contained herein and/ or attached hereto shall be treated as if written on such Contract Form and shall prevail in so far as they may be inconsistent with the printed clauses of such Contract Form." I shall hereafter refer to that as "the inconsistency clause".
The heart of this case lies in the question whether there is inconsistency between the special condition and clause 19 of G.A.F.T.A. form 119.
I shall also refer briefly to four provisions relied on by the sellers in the course of their construction argument. Clause 8 of G.A.F.T.A. form 119 entitles the buyers on notice to extend the contract date for shipment by up to 30 days. There was provision in the contract under which the sellers guaranteed that a berth would be suitable for vessels up to a certain length. There was, furthermore, a clause under which the sellers guaranteed to load the vessel at a specified average rate. Finally, in addition to the special condition which I have mentioned, there was also under the heading "Special Conditions", a further clause which read:
"Sellers to supply phytosanitary certificate."
These last three provisions were relied on by the sellers for the contrast between their language and the language of the special condition.
Having given that brief summary of the contract terms, I go on to consider the international commercial and regulatory background to the contract, which is of major importance in this case.
Tapioca is an important crop in Thailand, whose economy is to a large extent dependent upon it, but there is effectively only one foreign market into which tapioca can in practice be exported, and that is the European Community. The reason for that is that tapioca pellets are a component in animal feeding stuff compounds. As such they compete with grain, but grain is cheaper almost everywhere in the world, so there is no economic incentive for compounders to buy tapioca. It is only in the European Community, where the price of grain is artificially maintained, that Thai tapioca can effectively compete. Even then, it can only compete if it is allowed to enter the European Community on preferential terms, that is, without being subjected to the heavy duty ordinarily imposed on barley and other foreign cereals. There is thus an obvious clash of interest, the interest of Thailand being to get as much tapioca as possible into the European Community on preferential terms, and the interests of the European Community being to limit, so far as it fairly can, the quantity so admitted. This clash was reconciled in a Co-operation Agreement made between the European Community and the Government of Thailand in July 1982 pursuant to a Council Decision of 19th July. The Co-operation Agreement fixed an export quota for Thai tapioca for each of the years 1982 to 1986. The European Community agreed to levy on quota quantities of Thai tapioca a levy at the rate of 6 per cent ad valorem. There was, furthermore, in clause 5 of the Co-operation Agreement this provision:
"Thailand shall ensure that the quantities covered by the agreement do not exceed the limits specified therein by ensuring that export certificates are not issued for any amount beyond such limits."
The implementation of the Co-operation Agreement called for a framework of governmental regulation, both in the European Community and in Thailand. In the European Community regulations were made for quota quantities to be treated under tariff heading 07.06 with the 6 per cent levy, and a system was introduced for the issue of import licences against Thai export licences.
On 30th September 1982 the Thai Government introduced a regulation. It imposed a framework of which the main features were these, so far as the relevant period is concerned. First, the year 1983 was divided into four quarters, beginning on 1st January, and the annual quota was divided, albeit somewhat unevenly, between the four quarters of the year. Secondly, there was a requirement that exporters of Thai tapioca should be registered. Thirdly, it was required that export licences should be issued to registered exporters before loading of cargoes destined for the European Community. Fourthly, provision was made for the issue of export certificates on the submission of evidence of loading of vessels by means of submission of a bill of lading. Only goods covered by an export certificate would qualify for preferential treatment within the European Community. This was the regulation in force when the buyers and sellers made this contract. They were both, as was found by the Board of Appeal, well aware both of this and of later regulations. The finding of the Board was to this effect (in paragraph 21):
"Both parties would have been well aware of all these Regulations and Notices as and when issued, the Sellers because they were part of the Cargill Group which has a major facility in Thailand for the production of tapioca pellets and the use of the warehouse and loading facility at Sriracha, mentioned above, for the purpose of exporting large quantities of Thai tapioca pellets; the Buyers because they are major traders in constituents for animal feedingstuffs who purchase large quantities of Thai tapioca pellets for import into the EEC for this purpose."
Subsequently, the regulatory position in Thailand changed. It is not necessary to rehearse all the details of the changes, but it was apparent, as from December 1982 and January 1983, that the quota was being exceeded and that the Thai Government was concerned at the prospect of continuing shipments in excess of quota.
On 28th January 1983 new Thai regulations were introduced superseding those of 30th September. A new paragraph 3.3 of the regulations was introduced which provided:
"The Foreign Trade Department may issue an export licence in advance for each period of issuing export certificates. However, export certificates shall only be issued for products loaded aboard the vessels as from the date fixed by the Foreign Trade Department and by prior notice of not less than 15 days."
This was a change made because excessive quantities were being licensed and exported and the quota was being exceeded.
On 31st January 1983 there was a further change. By a notice of that date the...
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