Sempra Oil Trading SARL v Kronos Worldwide Ltd
Jurisdiction | England & Wales |
Judge | Lord Justice Mance,Mr Justice Evans-Lombe,Lord Justice Thorpe |
Judgment Date | 23 January 2004 |
Neutral Citation | [2004] EWCA Civ 3 |
Docket Number | Case No: A3/2003/0905 |
Court | Court of Appeal (Civil Division) |
Date | 23 January 2004 |
[2004] EWCA Civ 3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH
DIVISION (COMMERCIAL COURT)
(HHJ NICHOLAS CHAMBERS QC)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Thorpe
Lord Justice Mance and
Mr Justice Evans-Lombe
Case No: A3/2003/0905
Mr Edmund King (instructed by Ince & Co.) for the Appellant
Mr Andrew Baker (instructed by Waterson Hicks) for the Respondent
By a sale contract, on terms contained in or evidenced by telexes dated 24 th and 25 th April and 17 th May 2001, the appellant, Kronos Worldwide Limited ("Kronos") agreed to sell and the respondent, Sempra Oil Trading SARL ("Sempra") agreed to buy either one or two cargoes of gasoil per month "FOB one safe port/berth Constantza by buyer's m/t 'TBN' over the period 1 st June/31 st December 2001". The price was to be secured by a letter of credit.
In these proceedings Sempra seeks to establish an entitlement to demurrage in respect of the vessel at Constantza. The appeal relates to a preliminary issue, which was (according to the court's order dated 4 th March 2003) directed at a hearing on 18 th December 2002. The direction was that "the Court would finally determine, as a preliminary issue, the following question of law", namely:
"Whether (subject to waiver) laytime did not run under this contract until after a letter of credit had been opened".
HHJ Nicholas Chambers QC determined this issue against Kronos, holding that laytime could run prior to the opening of a letter of credit by Sempra.
As to delivery, the sale contract provided for the sellers "to declare cargo availability, namely one cargo or two cargoes each month ….", together with a fifteen day loading range for each cargo, by the fifteenth day of the month preceding each month of delivery. The fifteen day loading range so declared was "to be mutually narrowed to three days loading range (always minimum five days between liftings)".
The contract further provided:
" PAYMENT
…..
PAYMENT TO BE SECURED BY AN IRREVOCABLE LETTER OF CREDIT TO BE OPENED PROMPTLY THROUGH A FIRST CLASS BANK…….
LAYTIME
AS PER CHARTER PARTY AND TO BE DIVIDED BY TWO PLUS 6 HOURS NOR SHINC, BOTH PRORATA FOR PART CARGO, UNLESS SOONER BERTHED, BOTH SHINC, OTHERWISE CALCULATED AS PER CHARTER PARTY TERMS, CONDITIONS AND EXCEPTIONS.
DEMURRAGE
IF ANY, WILL BE CALCULATED IN ACCORDANCE WITH THE CHARTER PARTY RATE, TERMS CONDITIONS AND EXCEPTIONS (EXCEPT AS INDICATED UNDER ABOVE CLAUSE) . VALID CLAIM(S) SHALL BE PAYABLE AS AGAINST BUYER'S CLAIM. DULY SUPPORTED BY THE NOR STATEMENT, CHARTER-PARTY, TIMESHEET OR STATEMENT OF FACTS, DEMURRAGE CALCULATION AND INVOICE, PROVIDED SAME IS RECEIVED WITHIN 90 DAYS FROM B/L DATE, OTHERWISE CLAIM WILL BE NULL AND VOID….."
It is not in issue that the charterparty terms, as incorporated into the sale contract, provided for notice of readiness to be served after the vessel had arrived in Constantza at the customary anchorage, berth or no berth, and for laytime to run from 6 hours after such service or from when the vessel was ready to load, whichever first occurred.
Sempra's demurrage claim relates to a second cargo which Kronos on 8 th May declared that it would supply in June 2001. The loading range was 20–30 June, narrowed on 29 th May to 25–30 June—no point arises on the fact that these were ten and five (rather than fifteen and three) day ranges. On 15 th June Kronos asked to postpone the shipment to 1–5 July, because of slippage in the refinery schedule. In response on 18 th June Sempra nominated Spear I (a vessel in fact chartered by Sempra's sub-buyer, Trafigura Beheer BV, by a fixture dated 22 nd May 2001) . Sempra did not agree Kronos's request for postponement, but stated that it intended to narrow the vessel's arrival to 28–30 June. Kronos maintained its request and Sempra repeated its stance on the same day.
The Spear I arrived at Constantza early on 28 th June 2001. Loading commenced on Monday, 9 th July and was completed on 11 th July 2001. Sempra claims that the vessel, after her arrival in Constantza, anchored at the customary anchorage and tendered notice of readiness at 0934 hours, that laytime commenced 6 hours thereafter at 1534 hours on 28 th and that it expired 48 hours thereafter at 1534 hours on 30 th June 2001, after which the vessel was on demurrage for 11 days 1 hour 16 minutes, earning US160,265.26. The time at which the notice of readiness was tendered, and so its validity, is in dispute, but this dispute lies outside the scope of the preliminary issue. It is common ground that no letter of credit was issued until 5 th or possibly 6 th July 2001, when Kronos called for one and it was opened immediately. Whether Kronos waived the provision of any letter of credit before that date is in issue, though again outside the scope of the preliminary issue. The appeal has been argued on the basis that a separate letter of credit was to be or could be issued in respect of each shipment. Kronos claims that laytime did not commence until a reasonable time after provision of a letter of credit, and on this basis not before 9 th July 2001, after which the vessel loaded within the permitted laytime, so that no demurrage is due.
We are to assume for the purposes of the preliminary issue (a) that the notice of readiness given on 28 th June 2001 was valid, (b) that there was no waiver of Sempra's sale contract duty to provide a letter of credit "promptly" (cf Plasticmoda Societa P.A. v. Davidsons (Manchester) Ltd. [1952] 1 Ll.R. 527 for an example of such a waiver) (c) that, in the absence of any such waiver, that duty required Sempra to open a letter of credit at a date (presently unnecessary to seek further to define) in advance of the vessel's arrival at Constantza on 28 th June 2001 and (d) that, due to slippage in the refinery programme, Kronos did not have any cargo to load until, at least, 5 th or 6 th July 2001 when it called for the letter of credit. Mr Baker for Sempra asserts, on the basis of the evidence filed below, that the fourth assumption is also clear as a matter of fact, but it is unnecessary to consider whether that is so; the preliminary issue ordered was expressly described as one of law, and the judge's reasons for granting permission to appeal confirm that he decided it "on assumed facts". On those four assumptions, therefore, Sempra was in breach of the sale contract in failing to open a letter of credit promptly (no doubt, well in advance of the vessel's arrival at Constantza, although the judge did not specify by when he considered that a letter of credit should have been opened) . Kronos's case is that the opening of a letter of credit was a condition precedent to any duty on its part to load cargo, and that laytime cannot therefore have begun to run until (a reasonable time) after the letter of credit was put up. It is common ground that the preliminary issue does not require us to consider whether the bracketed reference to "a reasonable time" would be correct, if Kronos is otherwise right, still less whether the delay from 5/6 th to 9 th July 2001 would in that event constitute or exceed a reasonable time.
The judge accepted that the opening of a letter of credit was a condition precedent to the obligation of a seller to load cargo. He cited Trans Trust SPRL v. Danubian Trading Co. Ld. [1952] 2 QB 297, 305 per Denning LJ. He might also have cited the analysis of this and other FOB cases in Ian Stack Ltd. v. Baker Bosley Ltd. [1958] 2 QB 130, where Diplock J concluded that (in the absence of other express agreement) such a credit must be opened either within a reasonable time prior to or at latest by the earliest shipping date (meaning the earliest date of the contractually agreed shipping period, as opposed to whatever might prove to be the actual shipping date) . Sempra does not challenge the judge's proposition, although it seeks to confine "the obligation of a seller to load cargo" in this context to "the f.o.b. seller's obligation to part with possession of the goods i.e. (in the usual case) actually to put the goods onto the ship once she is at berth for loading". The judge also accepted that "once the letter of credit had been opened, …. Kronos would be entitled to a reasonable period within which to load the cargo". But, he considered:
"… that does not mean that laytime under the laytime and demurrage provisions of the contract would begin to run when Kronos first became obliged to load. The fact that laytime may have started to run before the provision of the letter of credit is nothing to the point. There is no reason in principle why the occurrence of a condition precedent should not result in an obligation to be responsible for an expense incurred before the condition occurred. For instance, expenses may have been incurred in connection with an anticipated contract which the other party to the eventual contract undertakes to reimburse in the event that a condition is met at a later time."
The judge also thought that to equate Kronos's duty to load with the commencement of laytime would involve
"an impermissible elision of Sempra's obligation for demurrage under the charterparty at which the demurrage provision in the contract is aimed with the separate contractual obligation between Sempra and Kronos arising from Sempra's failure promptly to open the letter of credit".
Leaving aside the fact that the charterparty was made by Sempra's sub-buyer, not Sempra, Kronos points out that elsewhere the judge expressly accepted that the sale contract provisions regarding...
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