State Trading Corporation of India Ltd v Golodetz Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE KERR,LORD JUSTICE LLOYD,LORD JUSTICE BUTLER-SLOSS |
| Judgment Date | 08 June 1989 |
| Judgment citation (vLex) | [1989] EWCA Civ J0608-5 |
| Docket Number | 89/0544 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 June 1989 |
In the matter of the Arbitration Acts 1950–1959
and
In the matter of an Arbitration
[1989] EWCA Civ J0608-5
Lord Justice Kerr
Lord Justice Lloyd
and
Lord Justice Butler-Sloss
89/0544
1988 Folio 393
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR. JUSTICE EVANS)
Royal Courts of Justice
MR. BERNARD RIX Q.C. and MR. ANGUS GLENNIE (instructed by Messrs. Thomas Cooper & Stribbard, Solicitors, London EC3A 2DJ) appeared on behalf of the Respondents/Sellers (Appellants).
MR. A.E.J. DIAMOND Q.C. and MISS GERALDINE ANDREWS (instructed by Messrs. Ince & Co., Solicitors, London, EC3R 5EN) appeared on behalf of the Applicants/Buyers (Respondents).
Introduction.
This is an appeal from a judgment delivered in the Commercial Court by Evans J. on 16th December 1987 which is reported in (1988) 2 Lloyds Rep. 182. It came before the court by way of an appeal from an arbitration award made by five members of the Council of the Refined Sugar Association on 25th November 1986. The dispute arose out of a contract for the sale of 12,600 metric tons of South Korean sugar in December 1985 C & F to an Indian port at a price of U.S.$201.95 per ton. I will refer to the claimants as the sellers or "Golodetz" and to the respondent buyers as STC. Payment was to be made by an irrevocable letter of credit to be opened within seven days from the conclusion of the contract. The sellers were to give a performance bond guarantee (PBG) in certain agreed terms and were to instruct their bank to open this immediately upon the conclusion of the business. But the contract also provided expressly that the letter of credit to be opened by the buyers was to be operative irrespective of whether the PBG had been notified to the opening bank. I will refer to this performance bond as "the sugar PBG". The contract also contained a "countertrade" provision for the export of unspecified goods to a value of 60% of the stowed value of the sugar, which was to be carried out within about six months thereafter. In that connection Golodetz were to give a further 3% performance bond ("the countertrade PBG") within seven days of the conclusion of the contract. Both parties appreciated that the C & F sale and purchase was for a cargo of sugar which was already afloat on a vessel called the "Sara D". STC were required to insure the sugar under the contract and duly did so with the United Indian Insurance Company Ltd. Unfortunately the vessel then sank on the following day so that the cargo became a total loss before the expiry of seven days from the conclusion of the contract. By that time Golodetz had duly provided the sugar PBG, but not the countertrade PBG, and the letter of credit had not been opened. Despite Golodetz's demands STC failed to open the letter of credit, without giving any reason. They made no reference to the countertrade PBG and the arbitrators found that STC had not even noticed that Golodetz had failed to open it. After some fruitless exchanges and meetings between the parties Golodetz treated STC's failure to open the letter of credit as a wrongful repudiation, and the arbitrators found that this brought the contract to an end. The sellers' claim for damages equal to the price of the sugar was referred to arbitration. STC then raised a number of defences for the first time, and they also counterclaimed for damages for loss of the profit which they would have made from the countertrade transaction. But their only remaining defence with which this appeal is concerned turns on the sellers' failure to provide the countertrade PBG within seven days. This raises two issues. First, whether this obligation was in the nature of a condition, with the effect that the sellers' breach concerning it could have been treated by STC as a repudation of the contract so as to relieve them from their obligation—which it was common ground had the character of a condition—to open the letter of credit within seven days. Secondly, whether—if the sellers' failure to provide the countertrade PBG within seven days was a breach of condition—this excused STC's breach in failing to open the letter of credit before the sellers treated this breach as a wrongful repudation of the contract.
The arbitrators decided both issues in favour of the sellers. They held that the sellers' obligation concerning the countertrade PBG was not a condition of the contract, that STC never purported to treat it as such, and that the contract came to an end when the sellers treated STC's failure to open the letter of credit as a wrongful repudation, as they were entitled. They awarded the sellers damages equal to the price of the sugar in the sum of U.S.$2,544,570—there was no dispute as to quantum—and dismissed STC's counterclaim for loss of profit in relation to the countertrade transaction.
STC then obtained leave to appeal. In the event Evans J. reversed the decision of the arbitrators on both of the foregoing issues. Golodetz now appeal against his judgment on both issues. The award.
I turn to some of the detailed findings in the award since these are important. I can summarise most of them, but a number of passages must be set out verbatim. The history began on 9th December 1985 when STC's London office sent out invitations to a number of London sugar traders, including Golodetz, to tender for the supply to STC of sugar on C & F terms, together with a requirement that any offer should also contain an undefined commitment to purchase goods from STC by way of countertrade. On the following day Golodetz submitted an offer by telex to STC without any countertrade commitment. This led to telephonic negotiations on 11th December between two representatives of STC and Golodetz in London. By this time STC were aware that if terms were agreed, Golodetz intended to perform the contract by supplying a cargo which was already afloat, and on the following day they learned that the vessel was the "Sara D" which had loaded at Inchon. The negotiations revolved around many of the terms of the proposed contract, but for present purposes it is only necessary to mention a few of them. First, Golodetz agreed to purchase goods from STC by way of countertrade valued at 60% of the FOB stowed value of the sugar, and to give a countertrade PBG for 3% of this commitment within seven days from the conclusion of the sugar contract. Secondly, while it was agreed that the contract should generally be subject to STC's "Standard Terms for Sugar Contracts", which were annexed to the award, both parties recognised that these were designed for goods to be shipped and that they were unsuitable for the sale of cargoes already afloat, with relatively little time before their arrival. A particular problem in this connection concerned the need to adapt clauses 9 and 11 of the Standard Terms headed respectively "Payment" and "Performance Bank Guarantee", i.e. what I have referred to as "the sugar PBG". (The Standard Terms contained no reference to any countertrade commitment). It is necessary to set out the material parts of these two provisions.
"9. Payment:
By irrevocable letter of credit at sight as per annexure II hereto which forms an integral part of the contract. The L/C covering 100% value of the contracted quantity…will be established by the buyer on receipt of acceptable performance Bank Guarantee as per clause 11 hereof and not before 21 days from the commencement of shipment period.…
"11. Performance Bank Guarantee:
The seller will establish an unconditional, irrevocable performance Bank Guarantee in favour of the buyer by State Bank of India, Overseas Branch, Parliament Street, New Delhi-110001 India (Telex No. (031) 2226/4481 ND, Cable: Videshbank New Delhi) for 5% of the total contract value…within 7 days of the conclusion of deal, in the format as per annexure III hereto, which forms an integral part of this contract."
Annexure III to the Standard Terms, which was also annexed to the award, contained a detailed "Format of Performance Bank Guarantee" as described in clause 11 to be established by sellers under contracts with STC for the import of sugar into India. It is unnecessary to set it out at length. However, it should be noted that the prescribed wording of the sugar PBG could obviously not have been used for the purpose of the countertrade PBG on which the parties had also agreed in principle. It might no doubt have been possible to use its terms as a basis for a countertrade PBG for the export of unspecified goods, in which STC would have been the sellers and Golodetz the buyers. But such adaptation would have required agreement between the parties. The award contains no finding that there was any prescribed or available text for a countertrade PBG: nor any agreement as to the bank at which it was to be opened; nor as to its precise terms.
The award went on to find that "after several hours of discussions on 11th December, both parties believed that they had concluded a contract". They then exchanged what they took to be confirmatory telexes, but these were not in identical terms. Whereas the telex from Golodetz contained a special payment clause (as it came to be called), the corresponding effect of STC's telex was to incorporate the Standard Terms by reference, which would have included clauses 9 and 11. On the other hand, while both telexes referred to the agreed countertrade commitment, the telex from Golodetz made no reference to the countertrade PBG, whereas the telex from...
To continue reading
Request your trial
-
Jet Holding Ltd and Others v Cooper Cameron (Singapore) Pte Ltd and Another and Other Appeals
...following observations by Kerr LJ in the English Court of Appeal decision of State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd’s Rep 277 at 286 are The fact that in the present case both parties had committed breaches before one of them elected to treat the contract as ......
-
Brown Noel Trading Pte Ltd v Donald & McArthy Pte Ltd
... ... the above cargo via Credit Lyonnais to your banker Swiss Bank Corporation ... Please confirm receipt in due course ... `. The letter of credit was ... In State Trading Corp of India Ltd v M Golodetz Ltd [1989] 2 Lloyd`s Rep 277, ... ...
-
Siti and Another v Lee Kay Li
... ... the withdrawals, namely: (i) there was an omission to state one of the lots involved, and (ii) although the caveator`s ... was considered by the Court of Appeal in State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd`s ... ...
-
Alliance Concrete Singapore Pte Ltd v Comfort Resources Pte Ltd
...following observations by Kerr LJ in the English Court of Appeal decision of State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd’s Rep 277 at 286 are The fact that in the present case both parties had committed breaches before one of them elected to treat the contract as ......
-
Termination of Contracts
...away. However, the contract is not treated as if it had never existed (State Trading Corp of India Ltd v M Golodetz & Co Inc Ltd [1989] 2 Lloyd’s Rep 277). Secondary obligations continue to arise, such as the duty to pay damages for breach of contract, and the obligations of a guarantor und......
-
The Transfer of Moveables in Scotland and England
...Ltd v Securicor Transport Ltd [1980] AC 827 at 844 per Lord Wilberforce; State Trading Corporation of India v Golodetz Ltd [1989] 2 Lloyd's Rep 277 at 289 per Lloyd LJ; Hurst v Bryk [2002] 1 AC 185 at 194 per Lord Millett. However, even if one does not accept this view on retroactive effect......
-
A Preference for Innominate Terms: The Good, the Bad Bargain and the Ugly
...(n 14) 72 (Lord J ustice Diplock). 31 State Trading Corporation of India Ltd v M Golodetz Ltd (Now Transcontinental Affiliates Ltd) [1989] 2 Lloyd’s Rep 277 (CA) 282 (Lord J ustice Kerr). 32 The Hansa Nord (n 24) 70 -71 (Lord J ustice Roskill). 33Bunge Corporation v Tradax (n 17) 715-16 (Lo......