The Shell Company of Hong Kong Ltd v. The Hongkong Electric Co Ltd

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

CIVIL APPEAL NO. 21 OF 1972

(On appeal from O.J.M.P. 251/71)

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JUDGMENT

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Leonard, J. :

1.  I have had the advantage of reading the judgment prepared by Huggins, J. with which I agree. I have little to add.

2.  There were 19 grounds of appeal before us and a Respondents Notice questioning the refusal of the learned judge to admit as an aid to the construction of clause 06.06, an agreement entered into between the parties as far back as 1957. The parties, then, were clearly anxious that no factor which might assist in the interpretation of that clause should be overlooked.

3.  At the risk of over simplification I must say that I do not find the “surrounding circumstances” of much assistance in construing the clause. They loomed so large in the argument before us that I found myself at times in danger of considering not, at what contract the parties had arrived, but, at what contract I should have expected them to arrive, and of forgetting that, once the “matrix offacts” in which the agreement lies has been ascertained, it is to the agreement itself that one must look to find the consensus. In so far as the surrounding circumstances are of assistance I find the most important of them to be the documents signed on the 6th August 1969. By the Memorandum of Agreement of that date the respondents bound themselves to enter into a new fuel supply agreement in the form of the draft agreement if the appellants acquired a lease of land adjoining the respondents’ premises at Ap Lei Chau and built a terminal on it. That memorandum was accompanied not only by the Draft Agreement and the Letter of Inducement (which enabled the respondents to re-negotiate prices in events with which I need not concern myself) but also by the Additional Memorandum of the same date whereby :–

“for ease of operation of clause 06.06 ..... it is agreed that the average of the Oil Companies’ posted prices at Bandar Mah Shahr be calculated on the date of signature of the said agreement and the resultant figure in U.S. Dollars per U.S. Barrel be scheduled to the Agreement as Schedule E.”

It was a figure which was to be scheduled and not an example or method of calculation.

4.  Although the draft annexed to the Memorandum of Agreement of the 6th August 1969 was altered in certain respects in order to produce the final agreement, the clauses by which price was to be ascertained were not altered nor were any other clauses which can be said to effect the construction of clause 06.06. Therefore for the purpose of these proceedings the consensus at which the parties arrived was crystalized in August 1969. Reading clause 06.06 together with the Additional Memorandum of the 6th August 1969 and giving the Additional Memorandum its natural meaning and immediately apparent purpose I have no doubt but that in August 1969 the consensus was that the basic price would be varied with reference to increases to or decreases from the figure to be scheduled in the Agreement as Schedule E. The figure to be scheduled at Schedule E was, in the apt metaphor used by Mr. Neill, to be the “where one was to board the escalator” operated by 06.06 and therefore might be loosely said to “ease the operation” of that clause. I do not consider that there is anything in the surrounding circumstances or the Agreement to show a change in that consensus between 6th August 1969 and the 17th June 1970.

5.  One can arrive at the same conclusion without the assistance of the 1969 papers from the wording of the Agreement itself. It is to be noted that the term of art “contract period” which is defined in clause 01 as “the term of this Agreement” [ beginning on the 1st October 1971 or on the date on which the terminal is opened for business and ending not earlier than 31st December 1984 ] appears again only in clause 02. The phrase used in clauses 03 and 04.01 is “during the continuance of this Agreement” which is capable of meaning either “during the period from the date hereof to the end of the contract period” or “during the contract period” depending on the context. In 04.01 it must mean the latter; in clause 03.04 the former. In clause 06.04 the phrase used is “during the currency of this Agreement” and this phrase, in its context, must mean “during the period from the date hereof to the end of the contract period”.

6.  In clause 06.05 reference is made to “existing foreign exchange rate” which is “as specified in Schedule C” and is the rate existing at the date of signature. In clause 11 the phrase “during the continuance of this Agreement” is again used and here, because of the context, the phrase must again mean “during the period from the date hereof to the end of the contract period”. Since the phrase “contract period” is not used in any of clauses 03, 04, or 06 I can see no reason to suppose that the parties intended to limit the meaning of the phrase that are used in those clauses by clause 01. The same reasoning applies to clause 06.06. One cannot conclude that the parties intended it to be governed by clause 01 since there is reference in it to neither the “contract period” nor to the “term” of the Agreement.

7.  I must confess that I was for a moment attracted by Mr. Wilmer’s argument that one must strive to avoid regarding the words “of the commencement” as superfluous and that as a consequence the parties must mean the phrase “ on the date of the commencement of this Agreement” to bear a meaning different from the phrase “ on the date of this Agreement”. On reflection I consider that that is crediting the parties with a greater nicety in the use of words than the documents indicate and that the inserion of the words “of the commencement” cannot of itself make the adjustments contemplated by clause 06.06 subject to clause 01 when those contemplated by clauses 06.05 and 06.07 are not so subject and when clause 06.06 itself contains a reference to clause 06.05.

8.  I do not then consider that there is an ambiguity in clause 06.06. If there is it is resolved by Schedule E which itself refers to clause 06.06 but to the “date of signature of this Agreement”. It does not suggest that the date of signature and the date of commencement are two different dates. I would, therefore, allow this appeal.