Port Sudan Cotton Company v Govindaswamy Chettiar & Sons (Barbara, Varvara)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE BROWNE,SIR JOHN PENNYCUICK |
| Judgment Date | 08 March 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J0308-3 |
| Date | 08 March 1977 |
| Court | Court of Appeal (Civil Division) |
[1977] EWCA Civ J0308-3
In The Supreme Court of Judicature
Court of Appeal
On Appeal from the High Court of Justice
Queen's Bench Division
(Mr. Justice Donaldson)
The Master of the Rolls (Lord Denning)
Lord Justice Browne and
Sir John Pennycuick
MR. M. SAVILLE, Q.C., MR. A. COLMAN and MR. B.I. ANCHI (instructed by Messrs. Norton, Rose, Botterell & Roche, Solicitors, London) appeared on behalf of the Claimants (Respondents).
MR. A.E. DIAMOND, Q.C., and MR. A.G.S. POLLOCK (instructed by Messrs. Hill, Dickinson & Co., Solicitors, London) appeared on behalf of the Respondents (Appellants).
In the old days, when Lancashire made cotton goods for the world, the bales of raw cotton came through the port of Liverpool. Since then disputes in the cotton trade have been resolved by the Liverpool Cotton Association. It has its own rules and procedures. The disputes are settled by experts in the trade not by lawyers. Rarely is there recourse to the courts. Now the Directors of the Association - I will call them "the arbitrators" have stated an Award in the form of a Special Case for the opinion of the Court. I can well under stand the reason. It raises difficult points which are better suited for determination by lawyers than by experts in the trade.
The parties come from far. The sellers are the Port Sudan Cotton Company of Khartoum. I will call them the Sudanese sellers. The buyers are Chettiar & Sons of Coimbatore, India. I will call then the Indian buyers. These Indian buyers were buying agents for a Liverpool firm of cotton merchants -A Meredith Jones & Co. Ltd. I will call them the Liverpool merchants.
Throughout the transactions, it must be borne in mind that there has for some years been a trade agreement between India and Sudan. It is called the Indo-Sudan Trade Agreement. Under it Sudan was to export to India its special commodities, including raw cotton: and India was to export to the Sudan tea, jute, and textiles, including cotton piece-goods. The unit of account was to be pounds sterling. But the intention was to have a special account in which the cross dealings could be set one against the others: and cancel out as far as possible. So that there would be no need for either country to have to buy foreign exchange, such as sterling or dollars.
Another thing to bear in mind is that the sales of cotton from the Sudan are under the control of the Government of the Sudan. There is a Government Authority called the Cotton Public Corporation. In February of each year it announces its cotton marketing policy. It offers to sell cotton to all-comers at a stated price F.O.B. It receives tenders from buyers all over the world. Then it operates a quota system, by which it allocated so much to such buyer. In making the allocation, the Corporation has special regard to Indian buyers so as to implement the Indo- Sudan trade agreement. But when the actual contracts are made, the Cotton Public Corporation nominates a subsidiary company to be the actual party to the contract as seller. There are four subsidiaries. In the present case the nominated subsidiary was the Port Sudan Company of Khartoum.
Now I will outline the dispute in the present case. In 1973 the Indian buyers made a contract with the Sudanese sellers. This was for 9,000 bales of cotton for shipment F.O.B. from Port Sudan; the Sudanese sellers say that these were sold for "Destination India" so as to implement the Indo-Sudan Agreement. So they could only be shipped to India. But the Indian buyers say that there was no such limitation. The contract was for shipment to places elsewhere than India, and in particular to countries of the Far East: and that payment for them was to be made in a hard currency, such as U.S. dollars or sterling. Acting on this view of the contract, the Indian buyers made contracts of resale to buyers in other countries. But, when the time came for shipment, the Sudanese sellers refused to ship to any country other than India. So the contract was never fulfilled. And the buyers have suffered big losses owing to their commitments to their own purchasers.
As we go through the facts, you will see that these questions arise: First, when was the contract concluded? Second, what were the terms of it? Was it for "Destination India" or for other destinations also? But another question arises, too. The Sudanese sellers say that they were induced to enter into the contract because of a representation made by the Indian buyers. They say that the Indian buyers represented that the goods were for mills in India, and that the Indian buyers should not be allowed to go back on that representation.
The opening bid. In March and April, 1973 the Cotton Public Corporation of Sudan announced that they were offering cotton for sale at certain specified prices, and inviting bids from all comers for such quantities as buyers should require.
On 18th April, 1973 the Indian buyers made a bid for 9,000 bales. It was contained in this cable to the Sudanese sellers and also to the Sudan Cotton Public Corporation: "Please confirm (here were 1,000 - technical details) - total 9,000 bales. Buyers Radhakrishna Group Mills, Tamilnadu Cooperative Group Mills, TNTC Group Mills, Far East Mills, advising individual unit names at shipment time; Kindly cable confirmation"
On 2nd May, 1973, the Sudan Cotton Public Corporation accepted this bid. It was in this cable to the Indian buyers:"… The following part of your bids has been accepted (here giving technical details) for 4,000 and 5,000 bales). Prices and conditions of sale will be according to our policy statement … Shipment June/December 1973… Please confirm your acceptance … And name exposing firms with whom you want to sign contract" On 5th May, 1973, the Indian buyers replied to the Sudan Cotton Public Corporation: "Confirm our acceptance 9,000 bales exporting firm Port Sudan Cotton Company (the Sudanese sellers)".
Thereupon the Cotton Public Corporation Instructed the Sudanese sellers to prepare the necessary contracts and send to the buyers without delay.
On those cables the Arbitrators held that, in making their bid. Indian buyers made a misrepresentation of fact which induced the Sudan Cotton Public Corporation to accept the bid. The misrepresentation, they hold was that the Indian buyers actually held orders from the three mills first-named in the cable of 15th April, 1973: whereas the Indian buyers had no such orders. But the Arbitrators went on to hold that the misrepresentation was innocent because the Indian buyers hoped that they would afterwards obtain orders from those mills.
I am afraid that I cannot agree with the Arbitrators on this point. No one should be held guilty of a misrepresentation, even of an innocent misrepresentation (with all the serious consequences that that entails) upon an ambiguity in wording. And this cable of 15th April was ambiguous. The word "buyers' might mean either actual buyers or hoped for buyers. Seeing that it was only a bid (before anything had been concluded at all), the reasonable interpretation was that it meant hoped-for buyers: that is, mills from whom buying orders were hoped to be received. On that interpretation there was no misrepresentation at all. And it is only fair to the Indian buyers to say so.
There is another point about the cable of 18th April, 1973. What was the meaning of the words "Far East Mills". Was "Far East" the name of another Indian mill? Or was it used to describe mills in the Far East? The Arbitrators held, I think rightly, that It meant mills in the Far East; at any rate It would mean it to any principal of ordinary experience of thecotton trade.
The result of this discussion is that the opening bid of the Indian buyers, properly construed, was for 9,000 bales of cotton for supplying mills in India and the Far East - whom it was hoped would boy the cotton from the Indian buyers - but without any commitment to any particular mill or mills in any particular quantities. This bid was accepted by the Sudan Cotton Public Corporation, but there was no concluded contract at that point. The contracts were to be afterwards concluded between the Port Sudan Cotton Company (the Sudanese sellers) and the Indian buyers.
The contract documents. On 12th May, 1973 the Sudanese sellers at Khartoum sent by air mail five printed forms of contract to the Indian buyers. These five forms were numbered in sequence PSC/IND/501/73 - 502, 503, 504 - to PSC/IND/505/73. They covered in all 9,000 bales of cotton for shipment between June and December, 1973, at prices quoted F.O.B. Port Sudan. The Indian buyers were to advise the Sudanese sellers of the name of the steamer at least seven days before its arrival at Fort Sudan: and were to pay for the cotton by Letter of Credit in sterling pounds in Port Sudan, payable on surrender of shipping documents. Any dispute was to be settled by arbitration in Liverpool before the Liverpool Cotton Association. These printed forms contained the provision "Destination: India"
At that stage the Sudanese sellers were clearly asking that the destination of all 9,000 bales was to be India and India only. Those printed forms were signed by the Sudanese sellers in Sudan and sent in triplicate to the buyers In India. They were sent by air mail, but did not arrive at the buyers' place of business in India until 12th June, 1973.
As soon as the Indian buyers received the forms, they signedthem in the space provided for the buyer, but the Indian buyers did not send them back at that time. The Indian buyers were evidently concerned about the provision for "Destination India". They wanted no such limitation, as they might want to ship to the Far East. So that very day, 12th June,...
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