Metallgesellschaft Hong Kong Ltd v. Chinapart Ltd

Case No.CACV 144/1989

Court

Court of Appeal

Date20 Mar 1990

Judge—

Case Document

100%

CACV000144/1989

IN THE COURT OF APPEAL

1989, No. 144
(Civil)

BETWEEN

METALLGESELLSCHAFT HONG KONG LIMITED

Plaintiff

AND

CHINAPART LIMITED

Defendant

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Coram: Cons, V.P., Kempster & Clough, JJ.A.

Date of hearing: 8 & 9 March 1990

Date of delivery of judgment: 20 March 1990

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JUDGMENT

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Cons, V.P., delivered the judgment of the Court:

1. This is an appeal from the judgment of Sears, J., entered on the 6th September, 1989. It arose from a contract made on the 18th November, 1988 whereby Metallgesellschaft Hony Kong Limited ("the Plaintiff") sold 6,000 metric tons, 5% more or less, of soda ash light to Chinapart Limited ("the Defendant") c&f Qing Dao. Only the last two clauses of the contract are relevant for present purposes:

"16.	Arbitration: All disputes in connection with this contract or the execution thereof shall be settled by friendly negotiation. If no settlement can be reached, the case in dispute shall then be submitted for arbitration to the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Foreign Trade in accordance with the Provisional Rules of Procedure of the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade. The decision made by the Commission shall be accepted as final and binding up on both parties. The fees for arbitration shall be borne by the losing party unless otherwise awarded by the Commission.
17.	Additional Clause: if any of the above-mentioned Clauses is inconsistent with the following Additional Clause(s), the latter to be taken as authentic.
	1.	Discharge rate 1,000MT/WWDSHEX(even if used).
	2.	Demurrage/Despatch per day USD5,000.00/ 2,500.00 or pro rata."

On the 29th November, 1988 the Plaintiff telexed details of the shipment to the Defendant, as the Plaintiff was required to do by the contract. The Plaintiff added, although this was not a requirement under the contract, that the sailing date of the vessel in question, the "Toyvo Antikainen" ("the Ship"), was on or about the 26th November, and the estimated time of arrival 5th January, 1989. There was affidavit evidence before the judge to the effect that during December the Defendant made continuous enquiries from the Plaintiff as to the whereabouts and the expected arrival date of the Ship, but that the Plaintiff's staff could do no more than repeat the earlier estimation. In fact the Snip arrived on the 24th December, the Master tendering a Notice of. Readiness 0010 hours that day, which Notice was accepted at 1400 hours on the 28th December. There is a note on the document which records that the Ship

"passed her entry formalities at 1320 hours on the 28th December, 1988".

2. The actual amount of soda ash light loaded was 6,400.8 metric tons. To comply with Clause 17 it ought to have been unloaded in 6.4008 weather working days, other than Sundays or holidays. The full discharge however was not completed until the 30th January, due to the lack of a suitable berth, warehouses and even trains to carry the cargo away. The Defendant blamed this state of affairs upon the lack of detailed information as to the Ship's expected time of arrival, without which it was not possible to make the necessary arrangements.

3. Correspondence between the parties leading nowhere, the Plaintiff issued a writ on the 5th July, 1989 to recover what it claimed to be due to it under Clause 17. The Statement of Claim alleged demurrage of 26.59295 days, amounting to US$132,964.75. On the 27th of the same month the Plaintiff took out a summons for judgment under Order 14. A few says later the Defendant took out a counter summons to stay the action by virtue of Section 6A (1) of the arbitration Ordinance, Chapter 341.

4. The two summonses came on together before Sears, J. In addition to the affidavit evidence there was a draft Defence and Counterclaim which put forward four main contentions:

	1.	that Clause 17 was on its true construction an indemnity clause restricting the Plaintiff to recovering its own liability, if any, for demurrage,
	2.	that the Plaintiff had been under an obligation at various times before the expected arrival of the Ship in Qing Dao to keep the Defendant supplied with details of the same; this obligation arose as an implication of law by reference to the regulations or terms of business pertaining to that port in conjunction with various permutations of agency suggested to exist between the Plaintiff and the owners and charterers of the Ship,
	3.	that a similar obligation arose as a duty of care from the special relationship which existed between the Plaintiff and the Defendant, and
	4.	that in computing the demurrage the Plaintiff had omitted to allow for days when the weather prevented working the Ship.

5. The judge concluded that none of the first three contentions was seriously arguable, but found that there was some doubt as to when laytime properly commenced, a point which did not appear in the draft Defence and Counterclaim, but which apparently had emerged during the course of the hearing. He therefore entered judgment for US$122,931.42, as being "indisputably due" and referred the balance to arbitration. The figure mentioned takes account of the appropriate weather conditions and was agreed between the parties as being factually correct after the judge had intimated the nature of the judgment he intended to enter. The Defendant, by this appeal, challenges the correctness of that decision; the Plaintiff, by a Respondent's Notice, seeks to vary it to the full amount claimed.

6. It is common ground that section 6A(1) of the Arbitration Ordinance applies in the present circumstances. This section provides that

"If any party to an arbitration agreement to which this section applies, or any person claiming through or under him, commences any legal proceedings in any. court against any other party to the agreement, or any person claiming through or under him, in respect of any matter agreed to be referred, any party to the proceedings may at any time after appearance, and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings; and the court, unless satisfied that the arbitration agreement is null and void, inoperative or incapable. of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings."

7. Mr. Chang, for the Defendant, does not challenge the English approach to a situation such as this, which is that the court will consider points of law raised by a defendant if it can do so without reference to contested facts. If however the court concludes that the plaintiff is clearly right, the court will enter judgment instead of referring the matter to arbitration, on the principle that in reality there is no dispute between the parties: see Sethia v. State Trading 'Corporation of India Limited [1986] 1 Lloyds L.R. 31. Mr. Chang however suggests that there are seriously arguable questions in dispute, namely, as to the nature of the obligation, the requirements of notification of arrival and the quantum of demurrage.

8. In repeating the arguments for an indemnity construction Mr. Chang has drawn our attention to five authorities in which purchase and sale contracts containing clauses bearing some similarity to Clause 17 have been construed. In the first two, i.e. Houlder Bros. & Co. Ltd. v. Commissioner of Public Works [1908] A.C. 276 and French Government v. S. Sanday & Co. (1923) 16 Lloyd's List L.R., the court rejected arguments restricting the clauses to indemnities. Mr. Chang seeks to distinguish these authorities on the grounds that in each the clause in question was specific as to when laytime was to commence - in one "immediately on arrival" and in the other "24 hours after arrival" - thereby obviating any need to refer to the charter-party in that respect, a factor apparently of some relevance in the third authority, i.e. Suzuki & Co. v. Comp. Mercantile International (1921) 9 Lloyd's List L.R. 171, which went the other way. But we do not see that factor as having influenced the court in either of the cases.

9. Mr. Chang further observed that in each the seller was also the charterer of the ship in question, a factor mentioned in both judgments. But we take the judge's words in French Government v. S. Sanday & Co. as doing no more than to suggest a reason for the inclusion of a direct obligation upon the purchaser, while in Houlder Bros. & Co. Ltd v. Commissioner of Public Works their Lordships remarks were made in the context of agency.

10. In Suzuki & Co. v. Comp. Mercantile International the relevant provision was "demurrage as per charter-party or freight agreement". It seemed to Bankes, L.J. that this language

"from the nature of things, points to a contract of indemnity rather than to a contract of the nature contended for by the appellants, and apart from the decision in the Houlder Bros. case, I doubt whether the contention we have heard would have been raised. Mr. Justice Shearman had that case called to his attention, and he distinguished it from this case, and I think rightly.

In the Houlder Bros case the contract was of a very special character. It contained no reference at all to the charter-party, and there was in audition a course of business between the parties which was proved and which was relied upon in the Privy Council, and was a matter taken into consideration in arriving at what the proper construction was."

11. The emphasis is our own. With the very greatest respect, as we read the advice of the Privy Council at p. 291, the course of business between the parties was an alternative ground of decision to words which were "regarded in themselves as plain and unequivocal".

12. In Mallozzi v. Carapelli S.P.A. [1976] 1 Lloyds L.R. 407 the appropriate clause provided for

"demurrage/half despatch on unloading at the rates indicated in the charter-party for buyer's account".

but the relevant charter-party contained no provision for demurrage on unloading nor rates for demurrage. We can derive no assistance from this case. Nor is Sethia Ltd. v. State Trading Corporation of India Limited of any greater help. There Kerr, L.J. was left with the impression that there was "a strongly arguable case", but in the circumstances gave no reasons. It is to be noted however that the contract provided for despatch/demurrage to be "for the account of the seller" - (it was a loading situation) - which may have influenced his judgment.

13. We accept that the purpose of Clause 17 was almost certainly to cover a situation where the Plaintiff might find himself obliged to pay demurrage to a third party. But it does not necessarily follow from this that the parties intended the clause to assume the nature of an indemnity, with all the problems that that might entail where, as is frequently the case in similar circumstances and was so in the present instance, the contract is one of a string of contracts. The intention of the parties is always to be extracted from the words they have used in the particular circumstance. In our view there is nothing in the words chosen in the present instance to support a suggestion of indemnity. We would respectfully agree with the judge below that the clause imposed absolute obligations.

14. In so deciding we do not discount the theoretical possibility that the Defendant, had he in fact been the ultimate consignee, could have been forced to pay twice, once to discharge the shipowner's lien to which he would have become contractually subject via the Bill of Lading, and once under Clause 17. But there is no law which precludes a man from Undertaking a similar liability to separate parties, and Clause 17 could in any event have been easily adapted to take care of that, we think unlikely, situation.

15. We should mention at this stage an alternative construction suggested by Mr. Chang which took the form of what might be termed a "quasi-indemnity", i.e. where liability could only be triggered by the Plaintiff's liability, but would not be restricted to the amount thereof. The suggestion is said to derive from and be not inconsistent with Houlder Bros. & Co. Ltd v. Commissioner of Public Works. We think it sufficient to say that we are unable to find anything in that authority, or in anything else, to support such a construction.

16. The submission for an implied obligation or duty of care to notify the time of the Ship's arrival maybe shortly disposed of. Volume 43 Halsbury's Laws of England, 4th Edition, paragraph 656, states the law thus:

"Consignee's duty to discover arrival. Apart from special contract or custom or course of dealing, it is the consignee's duty to use due and reasonable diligence to discover when the ship arrives with the cargo on board; and the master is, therefore, under no obligation, in the absence of special contract or custom or course of dealing, to give notice of his arrival or readiness to unload, whether the ship is a general ship or whether she is working under a charterparty. In either case time begins to run against the consignee as soon as the ship is ready to unload, and it is immaterial that he was in fact ignorant of her arrival."

17. Paragraph 1890 of Carver on Carriage of Goods by Sea, 13th Edition is to similar effect. It seems to us it would need very strong circumstances to import anything to the contrary. We see none at all.

18. Finally we turn to quantum and the question of when laytime should have commenced to run. As already noted, that is not mentioned in Clause 17. There being then nothing to the contrary it would have been when the Ship arrived at Qing Dao and was ready to discharge: see Scrutton on Charterparties, 19th Edition, Article 147, i.e. 26th December, 1988. That is a factual situation, satisfied in the present instance by an acceptance that the Ship had arrived at Qing Dao and by the Master's Notice of Readiness to discharge. There has at no time been anything to suggest, whether by affidavit or otherwise, that the position was altered by the need "to pass entry formalities", whatever those might have been. In the order 14 proceedings it fell to the Defendant, in order to obtain leave to defend, to show some reason why the normal principles should not apply. As the Defendant did not do so, and there is no dispute as to the days which did not count as laytime, judgment should have been entered against it for the full amount.

19. For these reasons we dismiss the appeal, and allow the cross appeal: the judgment below is varied by the substitution of the figure 132,964.75 in place of the figure 122,931.42.

(D. Cons)	(M.E.I. Kempster)	(P.G. Clough)
Vice President	Justice of Appeal	Justice of Appeal

Representation:

Michael Thomas, Q.C. &Clifford Smith (M/s. Ince & Co.) for the Plaintiff/Respondent

Denis CHANG, Q.C. & Thomas LAI (M/s. Ho, wong & Wong) for the Defendant/Appellant