Smagow Group Consultancy Ltd v BJB Import Ltd; BJB Import Ltd (Part 20) v Smagow Group Consultancy Ltd (2) Godwin Kwaku Amekuedi (3) Smagow Resources Ghana Ltd (Part 20)
| Jurisdiction | England & Wales |
| Judge | Lady Justice Smith,Mr Justice Munby |
| Judgment Date | 29 March 2007 |
| Neutral Citation | [2007] EWCA Civ 349 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2006/1749 |
| Date | 29 March 2007 |
[2007] EWCA Civ 349
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE SEYMOUR)
Lady Justice Smith and
Mr Justice Munby
Case No: A2/2006/1749
MR D WILBY QC (instructed by Messrs CJ Russell) appeared on behalf of the Appellant.
MR M MALLIN (instructed by Messrs Teacher Stern Selby) appeared on behalf of the Respondent.
This is a renewed application for permission to appeal against the order of HHJ Seymour QC sitting as a deputy high court judge on 31 July 2006 when he gave judgment against the appellants in the sum of just over US$13.4 million. Permission to appeal was refused on paper by Jonathan Parker LJ on 7 November 2006. The Lord Justice considered that the proposed appeal had no real prospect of success. However, he imposed a stay on execution of the judgment pending the renewal of the application. The application was duly renewed and was due to come before the court on 17 January 2007. However, the court was informed that criminal proceedings had begun in Ghana, the outcome of which was said to have an important bearing on the proposed appeal. The court was informed that the proceedings would be complete by mid-February. The renewed application was fixed for today 29 March.
Last week I received an application for a further adjournment on the basis that the criminal proceedings had not yet begun. The trial had been adjourned until 10 April 2007. I was asked to adjourn the renewed application until some time in May so that the outcome of the criminal proceedings would be known. I refused the application for two reasons: first, the court had not been provided with any material from the Ghanaian court other than a documentary summary of evidence to be relied on, which appeared to me to be capable of being used to initiate proceedings; second, on reading the judgment in the instant case and the proposed grounds of appeal, it did not appear to me that the outcome of any criminal proceedings in Ghana could greatly effect the prospects of success in the instant appeal.
In preparation for today's hearing, the applicant has exhibited some further documents from the Ghanaian court and, by counsel, Mr David Wilby QC, has not only renewed the application for permission by attacking the judgment but has also renewed its application for an adjournment on the ground that fresh evidence might become available in the course of the criminal trial.
The appellant is the Smagow Group Consultancy Limited (“SGC”), a company incorporated in the Republic of Ghana. Its business is to buy unrefined or partially refined gold and to sell it to purchasers who wish to export it from Ghana. The managing director of SGC is Mr Godwin Amekuedi. SGC has an associated company called Smagow Resources (Ghana) Limited (“SRG”), the first directors of which were Mr Amekuedi, Mr Michael Saka and Mr Barbana Asante-Asare. It appears that most of the business of SGC was carried out by SRG. The respondent to this appeal is a company called BJB Import Limited (“BJB”), incorporated in England. Its chairman, formerly managing director, is Dr Brian Joseph Berenblut. Its business is to import gold wholesale and to manufacture jewellery for sale in the United Kingdom.
In 2000 Mr Philip Dzirasa, an employee of BJB, advised Dr Berenblut of the possibility of buying gold from Ghana at prices lower that the prevailing world market price. The world market price for pure 24 carat gold is fixed daily on the London Metal Exchange (“LME”). In the trade the price fixed each morning on the LME is known as the “LME AM price.” All exports of gold from Ghana must take place under the regulatory auspices of a company owned by the Ghanaian government named Precious Minerals Marketing Company Limited (“PMMC”).
Negotiations took place between the parties in 2000 and, on 4 September 2000, a contract was signed by Mr Amekuedi on behalf of SGC and by Dr Berenblut on behalf of BJB. By that contract SGC, described as the seller, was to supply gold to BJB, the buyer. English law was to apply. The crucial term, about which the parties were later to disagree, provided as follows:
“The commodity that the seller will buy on behalf of the buyer and export through PMMC to any final destination that will be specified by the seller is as follows:
BJB Import Limited UK London.
COMMODITY: Gold of 50 kg weight or more
per each month's shipment or as otherwise specified
in the special conditions attached hereto.
FINESS/PURITY: 92% plus FINESS [that may be a mistake for fineness].
PRICE : LME AM price on the date of receiving funds through PMMC's accounts with Bank of Ghana less 12.5% for overheads to the seller.”
Another important term related to the costs of the transactions. PMMC were to be responsible for security and insurance costs until the gold reached Accra airport. The buyer and seller would each be responsible for their own taxes, import levies, duties, bank fees, charges, encumbrances and other institutional costs. BJB was to be responsible for all charges for security, customs clearance, VAT deposits, transport and insurance cover from Accra airport to the final destination, plus all smelting, refining and assay costs. BJB also undertook that, after delivery of the first trial shipment, it would pre-finance all future transactions.
All went well for a substantial period of time. Indeed, there were some 200 transactions pursuant to the contract. Proper records were kept and when the parties eventually fell out there was no dispute as to the amounts of gold that had been supplied. By the time of the last transaction in March 2005 BJB had paid SGC in excess of US$124 million. By that time the parties had fallen out about the meaning of the price provision in the contract and in particular the meaning of the words, “LME AM price less 12.5% for overheads to the seller”. SGC was contending that the parties had agreed that BJB would pay the LME AM price plus 12.5%, the 12.5% being intended to cover SGC's overheads. BJB were contending that the words of the contract meant what they said: less meant “less” and did not mean “plus”. The overheads referred to were their overheads, BJB's: they were bearing all the costs of the transactions, including pre-financing. The financial consequence of this difference of view about the meaning of the payment provision was substantial. SGC contended that BJB owed it US$10.6 million. BJB claimed that SGC owed it US$13.4 million.
The judge's first task was to construe the contract. First, he considered the words of the price provision, which he said was poorly drafted, but he formed the provisional view that the price as specified in the contract was LME AM less a discount of 12.5%. He then directed himself according to ICS v West Bromwich Building Society [1998] 1 WLR 896 and particularly referred to the passage of the speech of Lord Hoffmann beginning at page 912H. He approached the issue, he said, in the light of the matrix of facts known to the parties. He concluded that the contract would have made no commercial sense at all if BJB had to pay 12.5% over the LME AM price for unrefined gold and also pay all the costs of transport, refining, assay and pre-financing, when it could buy refined gold on the open market at only a little above the LME AM price. The judge held that the price provision in the contract properly construed meant that the price agreed was LME AM less 12.5%.
In the course of reaching that conclusion the judge considered and rejected one of SGC's main contentions, namely that SGC could not obtain unrefined gold in Ghana at a price significantly below the LME AM price. The judge accepted the evidence of Mr Reuben Damptey, the former managing director of PMMC, about the price structuring of gold in Ghana. He had said that the price for exporting gold was not fixed but was subject to negotiation between buyer and seller. Where the seller was pre-financing the transaction, it was possible to negotiate a discount from the prevailing LME AM price. He gave examples of occasions when PMMC had bought gold in Ghana at discount of 8% or 10% below LME AM rate. The judge said that he was impressed by Mr Damptey's evidence. On this issue he also accepted the evidence to similar effect of Mr Asante-Asare. He rejected the evidence of Mr Amekuedi, supported as it was by a report from a Mr Treveh, a metallurgist.
SGC had also contended that BJB was so desperate to obtain gold that it would pay whatever it cost to obtain its supplies. As to that the judge said this:
“The suggestion that BJB was desperate to obtain gold and was prepared to pay whatever it cost to obtain it, specifically a premium of 12.5 per cent over the LME price, in any event, makes no sense. Gold is traded on a global scale. The price fixed by LME reflects the demand for gold on the day and at the time in question, on the one hand, and the supply, on the other. If gold were in short supply, the LME price would increase. Unless, which was not suggested to have been the case in September 2000, gold was virtually unobtainable at any price, it was just lunatic for anyone to have contemplated paying one eighth over the prevailing market price for refined gold delivered to your door, never mind paying that for unrefined gold still to be shipped and refined.
In the result, I find that the conclusion suggested simply by a consideration of the words used in the Contract, that the price agreed was a...
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