Septo Trading Inc. v Tintrade Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Phillips,Lord Justice Males,Lord Justice Moylan |
| Judgment Date | 18 May 2021 |
| Neutral Citation | [2021] EWCA Civ 718 |
| Date | 18 May 2021 |
| Docket Number | Case No: A4/2020/1531 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 718
Lord Justice Moylan
Lord Justice Males
and
Lord Justice Phillips
Case No: A4/2020/1531
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Teare
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Ashcroft QC & Oliver Caplin (instructed by Holman Fenwick Willan LLP) for the Appellant
Robert Bright QC & Sarah Martin (instructed by Allen & Overy LLP) for the Respondent
Hearing date: 6 th May 2021
Approved Judgment
The issue in this appeal is whether a quality certificate issued by an independent inspector at the load port was intended to be conclusive evidence of the quality of a consignment of fuel oil supplied under an international sale contract. The email confirmation of the parties' transaction (“the Recap”) said that the certificate would be binding on the parties in the absence of fraud or manifest error, but it also provided for the BP 2007 General Terms and Conditions for FOB Sales (“the BP Terms”) to apply “where not in conflict with the above”. Those terms say that the quality certificate will be conclusive and binding “for invoicing purposes”, but without prejudice to the buyer's right to bring a quality claim.
The quality certificate issued by the independent inspector certified that the fuel oil was in accordance with the contractual specification at the load port, but the judge, Mr Justice Teare, found as a fact that it was not. He held that the BP Terms qualified the Recap term which, if it had stood alone, would have excluded the buyer's quality claim, but that there was no conflict between these terms which could be read together so as to give effect to both of them. Accordingly the buyer's claim succeeded and the judge assessed damages in the sum of US $3,058,801.
The seller, Tintrade Ltd, now appeals, contending that the BP Terms are in conflict with the Recap term providing for the determination of quality by the independent inspector to be binding on the parties. The buyer, Septo Trading Inc, supports the judge's reasoning and conclusion.
Accordingly this appeal raises once again the court's approach to the incorporation into a contract of general terms which are alleged to conflict or to be inconsistent with a term expressly agreed between the parties in a “main terms” document such as the Recap.
The contract terms
The parties' contract was concluded on 20 th June 2018 and its terms were recorded in the Recap. The product was described as “high-sulphur fuel oil RMG 380 as per ISO 8217:2010”. The quantity was 36,000 to 42,000 mt in buyer's option, with delivery “in one cargo lot, FOB one safe berth, one safe port Tallin or Ventspils, for loading on board M/T ‘NOUNOU’ during the period 1 st – 3 rd July 2018”.
ISO 8217:2010, which deals with marine fuels, provides by clause 5.1 that the fuel shall conform to the characteristics and limits given in Table 1 or Table 2 as appropriate, when tested in accordance with the methods specified. Table 2, dealing with residual fuels, is the appropriate table and provides that “total sediment aged” shall not exceed 0.1%. “Total sediment aged”, also known as “total sediment potential” or “TSP”, is a measure of how much sediment any given fuel will produce in long-term storage. Thus TSP does not indicate the presence of contaminating materials but measures the fuel's tendency to precipitate sediment in, for example, the fuel filters of a marine engine.
The payment clause of the Recap was internally contradictory. In its first paragraph, it provided for payment by telegraphic transfer at the latest five working days after the bill of lading date, while its final paragraph provided for the buyer to open a letter of credit with a first-class bank. We were told that in the event a letter of credit was opened. However, nothing turns on the contradiction, as in either case the contract provided for payment against usual shipping documents which would include a certificate of quality.
The clause in the Recap entitled “Determination of Quality and Quantity” provided as follows:
“As ascertained at loadport by mutually acceptable first class independent inspector, or as ascertained by loadport authorities and witnessed by first class independent inspector (as per local practice at time of loading).
Such result to be binding on parties save fraud or manifest error.
Inspection costs to be shared 50/50 between buyer/seller.”
A further clause, entitled “General”, provided as follows:
“Where not in conflict with the above, BP 2007 General Terms and Conditions for fob sales to apply.”
The BP Terms contain 41 sections and 8 schedules. Of particular relevance to the present case is section 1, entitled “Measurement and sampling, independent inspection and certification.” This provides as follows (so far as material to this appeal):
“1.1 Measurement and Sampling
Measurement of the quantities and the taking of samples and analysis thereof for the purposes of determining the compliance of the Product with the quality and quantity provisions of the Special Provisions shall be carried out in the following manner:
1.1.1 Where the Loading Terminal is operated by the Seller: …
1.1.2 Where the Loading Terminal is not operated by the Seller:
(i) by an independent inspector jointly agreed upon by the Buyer and Seller in accordance with current Approved Industry Practice. All charges of the independent inspector shall be shared equally between the parties and the inspector's report shall be made available to both parties. The Seller shall use all reasonable endeavours to enable the independent inspector so appointed to have full access to the facilities at the Loading Terminal necessary to perform his duties, or;
(ii) should the parties fail to agree upon an independent inspector, or should the Loading Terminal refuse access to any independent inspector appointed by the parties then by the Loading Terminal's own qualified inspector(s) in accordance with good standard practice at the Loading Terminal at the time of shipment.
1.2 Certificates of Quantity and Quality
1.2.1 Provided always the certificates of quantity and quality (or such other equivalent documents as may be issued at the Loading Terminal) of the Product comprising the shipment are issued in accordance with sections 1.2. 2 or 1.2.3 below then they shall, except in cases of manifest error or fraud, be conclusive and binding on both parties for invoicing purposes and the Buyer shall be obliged to make payment in full in accordance with Section 30.1 but without prejudice to the rights of either party to make any claim pursuant to Section 26.
…
1.3 Place of Certification
Should it not be customary practice at the Loading Terminal at the time of shipment for measurement and sampling pursuant to Section 1.1 to take place at the Vessel's manifold immediately prior to loading, or should the parties agree otherwise, then it is a condition of the Agreement that the Seller shall be obliged to provide the same quantity and quality of the Product at the Vessel's permanent hose connection as set out in the certificates of quantity and quality so issued.”
Section 26 of the BP Terms is headed “Quality and claims in respect of quality/quantity”. It provides that:
“Unless otherwise stated in the Special Provisions, the quality of the Product delivered hereunder shall be not inferior to the specification set out in the Special Provisions. …”
It goes on to exclude conditions or warranties as to the description, quality or fitness for purpose of the product and provides that any quality claim must be brought within 45 days of completion of discharge.
The facts
On 25 th June 2018 the seller nominated Ventspils as the loading port. The next day the buyer provided SGS Latvija Ltd (“SGS”) with instructions to perform quantity and quality determinations of the fuel oil to be shipped at Ventspils on board the NOUNOU. These instructions were approved by the seller and so were joint instructions. They stated that:
“Quality to be ascertained or witnessed (as per standard practice at load port at time of loading), basis representative composite sample drawn from shore tank(s) before commencement of loading.”
The instructions set out the contractual specification, including that the maximum TSP was 0.1%.
SGS took samples from a number of shore tanks on 20 th, 26 th and 27 th June 2018 and prepared a composite sample. This was analysed between 29 th June and 2 nd July 2018. SGS then issued a certificate dated 2 nd July 2018 which set out the analysis results obtained for the various components of the specification. The TSP was stated to be 0.04% and was therefore within the contractual specification.
The cargo was loaded on board the vessel between 30 th June and 2 nd July 2018. The total loaded was 41,335 mt. The cargo was then transported to Gibraltar where it was transferred to the M/V FIONIA SWAN and the M/V SKS TANARO pursuant to a contract of sale between Septo and Macoil International SA. On 17 th July 2018, Saybolt España SAL issued a certificate of analysis in respect of samples drawn from the M/V SKS TANARO on 12 th July 2018 after Macoil had received the cargo. This stated that the TSP of the sample was 0.37%, being in excess of the maximum permitted TSP value under ISO 8217:2010. By this time, Septo had paid the purchase price.
Samples collected by SGS prior to and during the loading at Ventspils...
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