AD TOEPFER INTERNATIONAL GmbH v NIDERA HANDELSCOMPAGNIE BV NIDERA HANDELSCOMPAGNIE BV v ROMAK [1990] NSWCA 1

AD TOEPFER INTERNATIONAL GmbH v NIDERA HANDELSCOMPAGNIE BV NIDERA HANDELSCOMPAGNIE BV v ROMAK

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

MAHONEY, PRIESTLEY and HANDLEY JA 8 March 1990, 16 October 1990 [1990] NSWCA 1

CONTRACT — "String" contracts for sale of barley — contracts provide mechanism for loading of barley and its carriage by sea — also provide for times by which this be done — buyer's obligation to provide ship — ship in port within time, but unable to berth because of port congestion — question whether upon proper construction of contracts this meant buyer was in breach, and if so in such breach as entitled seller to terminate — held that buyer was in breach, and seller entitled to rescind.

Mahoney JA This appeal concerns the obligations of the buyer and the seller under a particular contract for the sale of barley. Mr Sheller QC has, in his presentation of the case, reduced it to its essentials. It is accepted that, in a classic FOB contract in this area of the law, the obligations of a buyer include the obligation to berth the ship at the relevant berth. The obligations of the seller include the obligation to nominate the berth. It is accepted also that, in such a case, a buyer is in breach if, because of port congestion or the like, it is not in a position to put the ship into such berth as the seller may properly have nominated. And, as I understand what has been put in the appeal, this is so even though it means that the seller is not able to nominate a berth which is free to take the vessel.

The issue in this appeal is whether the terms of the present contract result in the seller bearing the risk of the buyer not being able to do what, in the circumstances, it was obliged to do.

Mr Sheller QC has urged that the present contract creates a different set of obligations. And he seeks an order that the arbitration be dealt with accordingly.

The matter is, in my opinion, one of not inconsiderable difficulty. I have had the opportunity of reading the judgment of Priestley JA. In the end, I agree with the orders which his Honour proposes and with his Honour's reasons.

Priestley JA On 10 December 1985 a Swiss company, ("Romak''), and a Dutch company, ("Nidera'"'), made an agreement by which Romak was to sell and Nidera was to buy 35,000 tonnes of Australian barley at US$85 per tonne. On 22 January 1986 Nidera agreed to sell to a German company, ("Toepfer"), the same 35,000 tonnes of barley at US$88 per tonne. Toepfer contracted with a ship owner, ("Intermare"), by a charter party dated 27 March 1986 to have a ship available for the barley to be loaded into it. As matters worked out, Toepfer had until the end of April to receive the barley into the ship it had arranged for, the ship to be loaded at the port of Geelong. There was a dispute as to how it came about that Geelong was the nominated port, but there was no dispute that was the port at which loading was to take place. The ship arrived at the port of Geelong on 23 April and gave notice of readiness to load which was accepted on 28 April.

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Because of port congestion, the ship was unable to load within the month of April. On 1 May 1986 Romak, claiming to be entitled to rescind its contract with Nidera, purported to do so, and Nidera, claiming to be entitled to rescind its contract with Toepfer, purported to do so. Toepfer asserted against Nidera, and Nidera asserted against Romak, that the purported rescission was unjustified, and each buyer claimed damages from each seller for breach of contract. The substantial issue in each case was whether the seller was entitled to rescind as it claimed. Arbitrators appointed by the parties were unable to agree and appointed an Umpire who decided that the sellers were in each case entitled to rescind. Rogers CJ Comm D gave leave to appeal from the Umpire's decision. In the subsequent proceedings before Rogers CJ Comm D, he came to the same conclusion as the Umpire, holding that the sellers had been entitled to rescind. Leave to appeal was in turn granted by this court, and the question of the sellers' entitlement to rescind was fully argued before us.

Romak, Nidera and Toepfer were separately represented at all stages of the proceedings. The counsel for all three were agreed that the contractual arrangements between Romak and Nidera were, with the exception of the $3 difference in price per tonne of the barley, identical with those between Nidera and Toepfer. They were also agreed that no complications arose because of the duality of the contractual arrangements and that the same legal conclusions would apply to both contracts. It will therefore be both possible and convenient to deal with the question of rescission by reference to one only of the contractual arrangements, and in the course of doing this I will simply refer to the party asserting the right to rescind as the seller and the party asserting there was no right to rescind as the buyer.

The principal argument relied on by the buyer for saying the seller was not entitled to rescind, was that the buyer had fulfilled its obligation under its contract to buy of having a ship in the port of Geelong ready for loading, within the month of April. According to the buyer, once the ship was in port, ready to load at such berth as the buyer nominated, whether in berth or not, the buyer's contractual obligation was in that respect discharged, and it was for the seller to see to it that the ship was berthed for loading. This contention was based upon what was said to be the proper construction of the contractual documents.

The contractual documents used for the purposes of the argument were those between Nidera as seller and Toepfer as buyer. The first, called a confirmation note, was dated 22 January 1986. It set out the details of the agreement between the parties by reference to side notes entitled, Sellers, Buyers, Quantity, Commodity, Price, Delivery, Payment, and Other Conditions. I will mention only those conditions which either cast light on the interpretation of the overall contract or gave rise to some issue between the parties.

Against the side note, Price, after the price of US$88 was stated, the condition continued "FOB unstowed/untrimmed in bulk, delivered free on board buyer's vessel".

Against the side note, Delivery, the following appeared: "April/May 1986 at buyer's call as per respective board ex 1/2 safe port/s. Shipment period April or May to be declared by buyer the 17th March 1986". As I have mentioned there is no dispute between the parties but that the buyer had declared April to be the shipment period in accordance with this condition.

Of the conditions listed against the side note, Other Conditions, only the final one seems to me to have any bearing upon the issues in the appeal. This said: "All others as per relevant board FOB contract".

UWRUTOEPFER INTERNATIONAL GmbH v NIDERA HANDELSCOMPAGNIE BV NIDER& HANDELSCOMPAGNIE BV v ROMAK (Priestley JA)

There was in evidence a form of contract which the parties were agreed was the "relevant board FOB contract". This was a standard form, headed "Bulk barley FOB contract" in which the Barley Marketing Board for the State of New South Wales was described as the seller and room was left for the insertion of the name of the buyer. CLI, CL2 and CL3 dealt with Goods, Quantity and Destination. Nothing turns on these clauses for present purposes. CL4 against the side note, Delivery, was as follows:

"(a) FOB Buyer's freight in one shipment between.............. and

(b) Buyer's freight to be nominated 21 days prior to expected readiness to load.

(c) Buyer to give Seller at least 15 days notice of vessel's expected readiness to load.

(d) Bulk grain berth at... "

CLS dealt with price. CL6, against the side note, Payment, comprised paras (2) to (g). The more material ones for present purposes were:

(f) In the event of the Owner(s) and/or Master(s) of any vessel or vessels exercising their rights under the War Risks Clauses of the 'AUSTWHEAT" Form of Charter Party and refusing to sign the Bill(s) of Lading for a port or ports specified in the Contract owing to such port(s) being declared a blockaded port, or requesting an alternative port after Bill(s) of Lading have been signed, payment in accordance with Contract terms to be made on presentation of Bill(s) of Lading or Mate's Receipt(s) together with other relevant documents:

(i) for any other discharge port as per the 'AUSTWHEAT" Charter Party War Risks Clauses and in accordance with the orders or directions claimed therein; or alternatively

(ii) showing the destination as 'for orders'. (g) (i) If the Buyer fails to comply with CL4 herein and the Seller elects not to exercise its rights to rescind this Contract for such failure (which election shall be deemed to have been made if the Seller does not give notice to the Buyer of its election to rescind the Contract within three (3) working days of the end of the contractual period for delivery under this Contract) and [underlining added for later reference] if the Buyer has complied with CL4(b) and CLA(c) of the Contract but the Buyer's nominated vessel(s) fails to present a valid and effective Notice of Readiness to Load (NOR), the Seller shall carry the Barley for the Buyer's account at the rate for storage, interest and insurance current at the time of the vessel(s) presentation, which rate the Seller shall announce from time to time;

(ii) such charges will accrue from the day following expiration of the specified period for delivery until Bill of Lading date.

(iii) the Buyer shall pay such charges against the Seller's invoice on or after completion of loading; and

(iv) if the Buyer's nominated vessel(s) fails to present within thirty (30) days of the last day of the specified delivery period -

(a) the Buyer will be in further fundamental default under this Contract, and

(b) the Contract price shall be deemed to be increased by the carrying charges accrued to that day and for the purposes only of CL6(g)(iv)(b) of this Contract the vessel(s) will be deemed to have presented on the said thirtieth day."

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CL7 dealt with weight, quality and condition and CL8 with insurance. CL9 was a force majeure clause providing that the seller was not to be responsible in any manner whatsoever to the buyer for any force majeure delay or non fulfilment. CL10, against the side note, Prohibition, provided that in case of prohibition of export, or of governmental act restricting export, the contract was to be deemed cancelled at no penalty to the seller.

CL11 contained special CL(a) to CL(1), the following being the more material for present purposes:

"(a) The Buyer undertakes to provide the freight, which is to be mutually agreed, to permit shipment to be made in accordance with this Contract -

(i) on Liner terms (for quantities less than 5000 tonnes); or

(ii) on the terms of the Australian Wheat Charter, 1983 - Code Name '"AUSTWHEAT" agreed between the Australian Wheat Board and_ the Documentary Committee of the Chamber of Shipping of the United Kingdom (for quantities in excess of 5000 tonnes).

(f) Despatch or Demurrage at loading port to be for Seller's account.

(g) The Buyer warrants the vessel tendered for loading to be a self-trimming bulk carrier.

(h) The Buyer undertakes that the Charter Party will not require or permit the loading onto the chartered vessel of other Barley or Grain which is not the subject of this present Contract unless express approval to the contrary is first obtained from the Seller.

(i) The Buyer to supply Seller with Charter Party and Documentary Instructions

(5) five working days prior to the arrival of the VESSEL.

(j) No riders or additions to be added to the Charter Party that conflict with the Contract terms. (at page 10)

(k) No change in shipping dates or any other Contract conditions allowed if cargo on sold to another Buyer.

(1) No additional Letter of Credit requirements permitted outside Contract terms, unless with prior approval in writing from the Board."

CL12 made the law of New South Wales the governing law of the contract. CLI13 made time of the essence of the contract in all respects.

The documents so far mentioned, subject to one matter requiring discussion, do not in my opinion give any foothold for the buyer's contention. Subject to the matter to be discussed, nothing more appears from the documents than an FOB contract for sale, the words of which make it reasonably plain it is the buyer's obligation to provide a vessel actually to take delivery; see in particular paras (a) and (g) of CL11. The most obvious way of reading the contract leads to the meaning that this must happen in the shipment period, notwithstanding congestion; this is recognised as the usual position in regard to such contracts unless there is some specific provision for a different result: Tradax Export SA v Italgrani Di Francesco Ambrosio (1986) 1 L1 R112 at 117; Benjamin's Sale of Goods, 3rd edn, paras 1811, 1838; also in their written submissions, all parties accepted this as the position in regard to the ordinary FOB contract. The buyer

UWRUTOEPFER INTERNATIONAL GmbH v NIDERA HANDELSCOMPAGNIE BV NIDERA HANDELSCOMPAGNIE BV v ROMAK (Priestley JA)

however relied on two separate arguments for saying that the terms of the contract in the present case brought about a result different from that in the ordinary case.

The first argument depended upon the construction of CL6(g), which has been set out above, of the bulk barley FOB contract. For the buyer it was argued that the part of CL6(g)(i) which precedes the "and" which has been underlined in the sub-paragraph where it has been earlier set out and the part of the paragraph commencing with the abbreviated reference to the Notice of Readiness to Load, NOR, refer to two alternative sets of conditions, the fulfilment of either of which entitles the buyer to an extension of the time within which it must have a ship at berth ready to load.

The first of the alternative conditions would be complied with if there was any non compliance with CL4 by the buyer, and the seller elected not to exercise its right to rescind within three working days of the end of the contractual period for delivery under the contract. Those two events would oblige the seller to carry the barley for the buyer's account on the day following expiration of the specified period for delivery until Bill of Lading date. After completion of loading it would then be for the buyer to pay those charges against the seller's invoice. Or, if the buyer's vessel did not present for loading within thirty days from the last day of the specified delivery period, the buyer would again be in fundamental default under the contract and the contract price would be deemed to be increased by the carrying charges accrued to that day.

As to the second and alternate condition on the buyer's construction of para (g) it would be fulfilled whether or not the seller had elected not to exercise its right to rescind in the event that the buyer complied with CL4(b) and CL4(c) but the vessel did not present a valid and effective Notice of Readiness to Load, that is, as I understand it if the buyer did not comply with CL4(a). Upon these things happening, the same consequences would follow as for fulfilment of the first condition, that is relevantly for present purposes, the buyer would obtain a thirty day extension from the last day of the specified delivery period for the vessel to be available for loading.

On this construction of CL6(g) the specified delivery period under CL(a) is subordinate to the qualification that it will automatically be extended by thirty days if the buyer complies with CL4(b and (c). On the facts of the present case, such a construction would mean that the seller was not entitled to rescind the contract on | May 1986 as the buyer would not be in breach of the obligation to have a vessel available for loading until the expiration of thirty days after the last day of the specified delivery period, which, it was common ground, was 30 April 1986.

It was argued for the buyer that this construction would make perfect commercial sense in the circumstances of the present case, in that it would give the buyer the advantage, in a situation where it had its vessel in the port, ready to load at a particular time save for the port congestion, of having an extension. Had it not got as close as that to having the vessel at berth ready for loading the matter would be entirely in the hands of the seller, but having got so close and being thwarted only by port congestion, the submission ran not only that the contract should be read as intending to give the buyer the automatic extension in those circumstances, but also that it would be commercially nonsensical to read it in any other way.

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Although I can see that seller and buyer might agree in advance for an automatic extension of the delivery period in the kind of circumstances that arose in the present case, it also seems to me no less plausible, as a matter of commerce, that they might not. On the sparse contextual material with which the Umpire and the court have been favoured in these proceedings, there is nothing which persuades me that it would necessarily be nonsensical for a seller to insist that it would be for the buyer to foresee, deal with and make provision for the possibility of port congestion or that a buyer's bargaining position concerning such a condition is so strong that a seller will necessarily agree to it. The question in the present case is what provision these parties made by their contractual arrangements for such a possibility.

There are two chief reasons why I do not accept the construction of CL6(g) for which the buyer contends. The first is, that as a matter of impression upon reading the language of par (g) it does not seem to me that the "and" underlined above in reproducing the paragraph has the meaning of either "and, in the alternative" or, more simply "or" which the buyer's submission requires. The word "and" in its context seems to me to be indicating that it is adding another condition to those which preceded it, all of which must be fulfilled before the last part of para (g)(i) comes into operation, that being the part commencing with the words "the seller shall carry the barley for the Buyer's account...".

The second main reason follows from a remark fairly made by counsel for the buyer in the course of his argument of this point. He said that the question of construction basically turned on whether the construction of the parts of the document dealing with the buyer's obligation to provide a ship for loading within the specified delivery period should begin with the obligation made clear in CL4, or should begin by deciding on the meaning of CL6(g) and then reading CL4 in the light of it. It seems to me that the former way is preferable. The specified delivery period is obviously one of the matters of basic importance in a contract of sale of the present kind, and it would not seem reasonable to me to read down a plain statement of that period in a CLsuch as CL4 in the present case, by reference to a later sub-clause, unless that later provision quite clearly governed the earlier one. I do not think that the qualification relied on by the buyer fills that description. Further, it seems to me much more consistent with the tenor of all the contractual provisions to understand CL6(g) as bringing about a certain situation giving some benefits to the buyer following failure to have the vessel ready for loading at the right time, if and only if the seller has elected not to exercise its right to rescind, than it would be if the benefit to the buyer could be forced upon the seller whether or not the seller elected to exercise its right to rescind.

I therefore conclude that the buyer's first principal argument fails.

The other principal argument for the buyer depended upon the terms of the charter party made on 27 March 1986 by Toepfer with Intermare. The first step in this argument was that the seller became a party to this charter party. This was said to be shown by the fact, inter alia, that CL2 of the charter party required the ship to proceed to Geelong, or to Sydney and/or Newcastle "'as ordered by the Shippers" (who although perhaps misdescribed in the document, were taken as the seller) and that it was pursuant to this clause that Geelong was the named port. It was then argued that the charter party had the effect that once the seller had been notified that the vessel was in port and ready to load at such berth as the seller ordered, (CL12) the buyer's obligation to have a vessel ready for loading was fulfilled and it became the seller's obligation to have a berth available for the ship from which the ship could be loaded. On this view of the

UWRUTOEPFER INTERNATIONAL GmbH v NIDERA HANDELSCOMPAGNIE BV NIDERK HANDELSCOMPAGNIE BV v ROMAK (Priestley JA)

contractual arrangements between seller and buyer, since the seller had received the ship's notice of readiness to load at such berth as might be ordered by the seller, the buyer was not in breach of its contractual obligation and the seller was not in a position on | May 1986 to rescind the contract for breach of delivery conditions.

I do not agree with the first step of this argument. The position seems to me to be that seller and buyer agreed on the terms of the contract of sale between them, well before the buyer entered into the charter party with Intermare.

The contract of sale contemplated that the buyer would in due course enter into a charter party with a ship owner. The seller obviously had an interest in that charter party being one which would facilitate the due completion of the contract of sale; hence the references in the contract to the "Austwheat" form of charter party. The charter party of 27 March 1986 was headed "Australian Wheat Charter 1983" and then beneath that heading and to the left of its date there is the further heading "Aust-wheat 1983". It seems clear therefore that both seller and buyer knew of the standard form provisions of this document and had them in contemplation in fixing the terms of their own contract: CL11(a)(ii), (h), (i) and (j) show this, as well as showing the importance to the seller of at least some of the terms of the charter party.

This does not mean however that it was necessary for the seller to become, or that that seller did become a party to the charter party. It means no more than that it was to the seller's interest to ensure, in making its contract with the buyer, that the buyer's arrangements for freight would be of a certain kind. Provided that the buyer complied with its contract with the seller by ensuring that its contractual arrangements for freight with the ship owner were of the kind agreed between seller and buyer, the seller's interests would be adequately protected, without any legal or practical need for it to become a party to the charter party. When these considerations are taken together with the fact that the seller was not a signatory of or a party to the charter party, I can see no basis for the assertion that the seller was such a party. The charter party itself can be read completely consistently with this interpretation.

This view of the matter is illustrated by CL2 of the charter party. I have mentioned that it provided that the chartered vessel should proceed as ordered by the seller to Geelong or Sydney or Newcastle. It continued that the vessel should there load at such berth as the seller ordered. In my view it was not necessary for the seller to be a party to the charter party for this clause to operate satisfactorily. The seller had contracted with the buyer that the buyer should charter a ship which would proceed as ordered by the seller to one of the nominated ports. In compliance with its contract the buyer did enter into such a charter party. Under the charter party the Intermare was bound to the buyer to see to it that the vessel went to the port ordered by the seller. This is in fact what happened, and was not a matter of contention between the parties as a matter of practice. It did give rise to the contention by the buyer that the seller was only able to control the choice of port for loading by being able to rely on the provisions of the charter party, which in turn, in the contention of the buyer, could only be because the seller was a party to the charter party. For the reasons I have indicated, I do not think this last part of the buyer's submission is sound. The seller was able to nominate the port of shipment not because it was in contractual relation with the ship owner, but because it had contracted with the buyer that the buyer should so contract with the ship owner that the ship owner would be obliged to comply with the seller's order as to the port of shipment.

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What I have said deals with the only matters contested in this court, the buyers' claim that their appeals should be upheld. In my opinion they should be dismissed with costs. The court was also told some further procedural matters were outstanding. After some discussion of these, it appeared the parties would agree on orders disposing of them, and that it would be appropriate for the court to make the agreed orders, once the court's intentions on the matters in dispute were made known. Accordingly, short minutes of orders should be brought in to implement the court's opinion, and to dispose of the procedural matters, at 10 am on the 23rd day of October 1990.

Handley J This appeal arises out two string FOB sales of 35,000 metric tonnes of Australian barley in bulk. The first contract was entered into between Romak SA, a Swiss company, (the first seller) and Nidera Handelscompagnie BV, a Dutch company, (the intermediate seller) on 10 December 1985 at a price of $US85 per metric tonne. By further FOB contract dated 22 January 1986 the intermediate seller on-sold to AC Teopfer International GmbH, a German company, (the end buyer) at a price of $US88 per metric tonne but otherwise on the same terms. The relevant terms of the confirmation note for the second sale are as follows:

"COMMODITY ALL BARLEY BOARD AUSTRALIAN TWO/SIX ROW FEED BARLEY AT SELLERS OPTION 1985/1986 SEASON'S CROP. SELLER TO DECLARE ORIGIN THE THIRD OF MARCH. PRICE $US88 (EIGHT Y-EIGHT USD) PER METRIC TON. FOB UNSTOWED/UNTRIMMED IN BULK, DELIVERED FREE ON BOARD BUYER'S VESSEL(S). DELIVERY APRIL/MAY 1986 AT BUYERS CALL AS PER RESPECTIVE BOARD EX1/2 SAFE PORT/S. SHIPMENT PERIOD APRIL OR MAY TO BE DECLARED BY BUYER THE 17TH MARCH 1986."

The last clause was "all others as per relevant Board FOB contract".

Since Nidera as the intermediate buyer/seller passed all notices it received onto the first seller or to the end buyer as the case may be it will be convenient to refer only to the steps taken by the end buyer Toepfer and the intermediate seller Nidera in the performance of the contract, always remembering that corresponding steps were taken as between Nidera as the intermediate buyer and Romak as the first seller.

On 3 March the intermediate seller declared the barley's origin to be the New South Wales Barley Board. The NSW Board's FOB contract was thus incorporated into the contract. On the same day the buyer declared April as the shipment period.

CL4 of the Board's contract provided:

"(a) FOB buyer's freight in one shipment between... and....

(b) Buyer's freight to be nominated twenty-one days prior to expected readiness to load.

(c) Buyer to give seller at least fifteen days notice of vessel's expected readiness to load.

(d) Bulk grain berth at..."

The confirmation note did not contain provisions filling up these blanks. This is not surprising as this document was not incorporated until the seller declared the barley's origin. The blanks therefore must be completed by a process of construction based upon the terms of the confirmation note. On this basis CL4(a) in my opinion read:

UWRUTOEPFER INTERNATIONAL GmbH v NIDERA HANDELSCOMPAGNIE BV NIDERA HANDELSCOMPAGNIE BV v ROMAK (Handley J)

"(a) FOB buyer's freight in one shipment between 1 April and 30 April or between 1 May and 31 May at Buyers call EX112 safe port(s). Shipment period April or May to be declared by buyer 17th March 1986".

Pursuant to CL4(b) on 4 April the buyer nominated the "Bulk Genie" or substitute as the freight ready to load on 25 April, and the seller was asked to nominate the load port. On 9 April the seller declared that the load port would be Pinkenba/Geelong range and that it would be declared "as per terms of Aust. Wheat c/p". On 10 April pursuant to CL4(c) the buyer gave fifteen days notice of the vessel's expected readiness to load on 25 April.

On 21 April the buyer substituted the "Lakeness" and on 23 April the seller declared Geelong as the sole load port. Thus CL4(d) came to provide for delivery at a bulk grain berth at Geelong. The vessel arrived at Geelong on 23 April and notice of readiness was accepted on 28 April. However owing to congestion the vessel was unable to load or even to get alongside the berth to commence loading. On 1 May the first seller cancelled the first contract and the intermediate seller cancelled the second.

Cross-Claims by each seller against each buyer and by each buyer against each seller were referred to arbitration. The arbitrators being unable to agree the Hon. CLD Meares QC was appointed umpire and he made an interim award in favour of each seller. Leave to appeal to the Supreme Court was granted to each buyer but the appeals were dismissed by Rogers CJ in Com Div Leave to appeal was granted by this Court.

It is necessary to consider some of the other terms of the Board contract. CL11 "Special Clauses" so far as relevant provided:

"(a) The buyer undertakes to provide the freight, which is to be mutually

agreed, to permit shipment to be made in accordance with this contract -

(i)...

(ii) on the terms of the Australian Wheat Charter 1983 - code name "AUSTWHEAT"...

(f) Despatch or demurrage at loading port to be for seller's account... (i) The buyer to supply seller with Charter Party and Documentary Instructions 5 (five) working days prior to the arrival of the VESSEL. (J) No riders or additions to be added to the Charter Party that conflict with the Contract terms."

CLI13 provided that "time shall in all respects be of the essence of this contract". In due course it will also be necessary to refer to CL6(g).

It will be appropriate first to consider the duties as to delivery of buyer and seller under an ordinary or classic FOB contract. These are conveniently stated in Benjamin's "Sale of Goods" Third Edition, 1987 at pages 1164-1194. The principal duty of an FOB seller is to put the goods on board ship in accordance with the shipping instructions of the buyer. The duty to deliver only arises after the buyer has nominated the ship and when the ship is able to receive the goods. Thus, if the buyer fails to give shipping instructions or to give them within the required time or to give instructions which are effective the seller is not liable in damages for non-delivery. If proper shipping instructions have been given and a ship is tendered which is able to receive the goods the seller must load at the latest by the end of the shipment period.

Failure to load within the shipment period is a fundamental breach entitling the buyer to reject the goods or otherwise rescind the contract.

The principal duties of the buyer as to delivery are to name the ship, to give shipping instructions in time to enable the seller to send forward the goods for shipment and to tender the ship to take delivery of the goods. If no shipping

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instructions are given, if shipping instructions are not given within the time allowed, or the ship is not able to take delivery in time the buyer will be in fundamental breach and the seller will be entitled to rescind.

The clause in an fob contract which defines the shipment period is prima facie a condition and in the absence of express provision to the contrary the time for shipment will be essential.

Ever since Bowes v Shand [1877] 2 App Cas 455 it has been settled that an unqualified term as to the time of shipment in a sale of goods is a condition and that time is of the essence. See also Kwei Tek Chao v British Traders and Shippers Limited [1954] 2 QB 459. Moreover it has also been settled since Bowes v Shand that such a term requires all the goods to be shipped on board within the relevant period and if only some of the goods are shipped the seller is in fundamental breach and the buyer entitled to rescind.

The result, in the absence of some qualifying provision, therefore was that all the barley had to be shipped before midnight on 30 April 1986.

The position in such a case was clearly stated by Donaldson J in Bunge and Co Limited v Tradax England Limited (1975) 2 Lloyds 235 at 239: "The buyers have the right to nominate the vessel... They also have the right to send her to the port of loading at a time of their choice. But both these rights are subject to two qualifications. First... Second that the time when she is tendered shall be within the shipment period and such that the cargo can thereafter be shipped in accordance with the custom of the port and shipment completed at or before the expiry of that period. The sellers...have an obligation to start shipping as soon as the vessel is tendered and to continue to do so in accordance with the custom of the port...this obligation to ship ceases at the end of the shipment period...Under no circumstances are they [the sellers] under any obligation to continue to ship after that period has expired."

See also Tradax v Italgrani (1986) 1 Lloyds 112 at 117 per Kerr LJ.

Prima facie here the buyers were in fundamental breach by 1 May when the sellers purported to rescind because their nominated ship was not ready to take delivery at the bulk grain berth. However Mr Sheller QC. for the end buyer submitted that the classic FOB contract had been modified by the special provisions of these contracts so that the sellers were not entitled to rescind, and submitted that this result flowed from the incorporation of the terms of the AUSTWHEAT Charter.

He submitted that the risks of delay in shipment were distributed as between buyer and seller in the same way as those risks were distributed between charterer and owner. He further submitted that the same result also flowed from the terms of CL6(g) of the Board contract which contained what he described as a "carry over clause".

The delivery clause in the confirmation note provides that delivery shall take place "EX1/2 safe port/s". No provision is made in the confirmation note for the nomination of such ports and CL4 of the Board contract does not provide any mechanism either.

The charter party was dated 27 March. The end buyer was the charterer. CL1 provided that the party referred to as "shippers" shall be the Barley Market Board of NSW CL2 provided so far as relevant:

"That the said vessel...shall...proceed, as ordered by the shippers, to Geelong, or to Sydney and/or Newcastle...and there load...at such safe...berth, as ordered by the shippers, a cargo of barley in bulk ex-silo from the shippers...".

UWRUTOEPFER INTERNATIONAL GmbH v NIDERA HANDELSCOMPAGNIE BV NIDERA HANDELSCOMPAGNIE BV v ROMAK (Handley J)

CL8 and CL9 provided a timetable and a mechanism by which the shippers would be obliged to give sailing orders culminating in their nomination of the loading port or ports. These printed conditions, which were only modified to substitute references to the Barley Board for the Wheat Board, did not properly reflect the limited range of east coast ports specified in CL2. No doubt the owners, charterer, and shippers treated those clauses as being applicable, mutatis mutandis, and on this basis the shippers nominated Geelong.

We were not told whether the Board in fact acted as shipper under the charter. It may have done so as the seller to Romak or as Romak's agent. It is possible that the nomination of the Board as the shippers was a mistake and the parties acted throughout as if the shipper was either the first seller or the intermediate seller. Nothing turns on these matters. In the events that happened and with the authority or acquiescence of the sellers and buyers Geelong was nominated as the loading port under both the charter and the contracts for sale.

CL12 of the Charter provided that the cargo should be loaded within nine weather working days. The clause further provided for the giving of notice of readiness.

Mr Sheller submitted that as a result of the incorporation of the charter in the FOB contract the end buyer's obligation to take delivery during the shipment period was modified and so long as a valid notice of readiness was tendered during the shipment period it did not matter that no berth was available and loading had neither been completed or even commenced. The contract remained on foot and if necessary demurrage would be payable by the seller until the cargo was loaded.

The foundation for Mr Sheller's argument was CL11(a)(ii) which required the buyer to provide the freight on the terms of the AUSTWHEAT Charter and para (f) which provided that despatch or demurrage would be for seller's account. This latter provision necessarily required reference to the charter in order to determine whether demurrage or despatch was payable and if so how much.

Moreover he submitted that the contract of sale contained no provision which enabled the contractual load port to be ascertained, and this could only be done as a result of the incorporation of the nomination provisions of the charter party. Rogers CJ Com Div referred to the decision in David Boyd v Louis Loca (1973) 1 Lloyds Reports 209 at 212 where Kerr J held that under an FOB contract where nothing else appears the buyer has the choice of the loading port. See also Benjamin (above) at pages 1165-6, 1185-6, but compare Tradax v Italgrani (1986) 2 Lloyds 112 at 117 ("the sellers must name a loading port within the contractual range").

In this case it is possible that the sellers' option to declare the origin of the barley would have been sufficient to indicate that it also had the right to nominate the port of shipment. However the reference in CL11(a)(ii) to the AUSTWHEAT charter, and the provisions of CL2 of that charter operated, in my opinion, to confer on the seller the right to nominate the "1/2 SAFE PORT(S)".

Nevertheless both contracts can work without the terms of the charter altering the prima facie rights of the seller and the buyer under the express terms of the contract of sale. Thus the provision that demurrage or despatch will be to the seller's account should be construed as a promise by the seller to indemnify the buyer against demurrage payable under the Charter and a promise by the buyer to account to the seller for any despatch money received.

12 UNREPORTED JUDGMENTS

The requirement that the AUSTWHEAT charter be used served other purposes as well. The printed terms of CL12 fixed the lay days or loading time for a cargo of this size as nine days. This would be important in fixing the parties' rights to demurrage or despatch. It also shows that when the buyers gave fifteen days' notice of the vessel's expected readiness to load on 10 April the vessel may have already been too late and would not be able to load during April. In other words it was arguable that the buyer's notice of expected readiness for 25 April was not "effective" and the seller possibly could have rejected those instructions and rescinded for actual and anticipatory breach. See Bunge Corporation v Tradax Export (1981) 1 WLR 711 (HL). Loading of course was under the control of the sellers who were not bound to work overtime, and in view of the market they were not likely to do so voluntarily.

The buyer's obligation to contract for the freight on the AUSTWHEAT charter probably envisaged that the shipper named in the charter would be the seller or its agent.

The Board therefore may have been properly named as the shipper if it was going to load the cargo, perhaps from its own silo, in performance of its obligations under an earlier sale contract. If that was the case the Board would be loading as the agent or sub-agent for the first seller, who would be acting as agent for the intermediate seller.

At the same time the owners in giving notices to the shippers under the charter whether they were given to the Board, to the first seller or to the intermediate seller would be discharging or preparing to discharge the buyer's obligations to tender a ship to receive the cargo.

In other words the owners in performing their obligations to the end buyer under the charter party on the instructions of that buyer would also be causing that buyer to perform its obligations under the contract of sale. Likewise if the Board was correctly named as the shipper, in performing or preparing to perform its obligations to its buyer, it would be causing each seller in the string to perform its obligations to its own buyer.

Performance by the end buyer of its obligations under CL11(a)(ii) did not require the intermediate seller to become a party to the contract of affreightment. Moreover it is difficult to see how CL11(a)(ii) could also produce such a result in this case as between the first seller and the owner.

If the end buyer complied with CL11(a)(ii) the interests of the intermediate seller and the first seller would be adequately protected without any legal or practical need for either to become a party to the contract of affreightment. To these considerations must be added the fact that the intermediate seller was not a signatory to the charter party.

This view of the matter is illustrated by CL2 of the charter. It provided that the vessel should proceed as advised by the shippers to Geelong or Sydney and/or Newcastle and should there load at such berth as the shippers advised. Assuming that the reference in the charter to the Board as the shippers was a mistake and the intermediate seller should have been named instead, it was not necessary for the intermediate seller to be a party to that contract for this clause to operate satisfactorily. On this basis the intermediate seller contracted with the end buyer that the latter would charter a ship which would proceed to a port etc. nominated by the intermediate seller. The end buyer did enter into such a charter. Thus the intermediate seller was able to nominate the port of shipment not because it was

UWRUTOEPFER INTERNATIONAL GmbH v NIDERA HANDELSCOMPAGNIE BV NIDER& HANDELSCOMPAGNIE BV v ROMAK (Handley J)

in contractual relation with the ship owner, but because its contract with the end buyer entitled it to give orders to a ship owner who was under the contract with the end buyer to obey those orders.

I cannot agree therefore that the reference to the charter and the incorporation of some of its provisions for limited purposes alters or qualifies the parties' essential obligations as defined in express terms by the contract of sale. In particular I cannot agree that the charter terms were incorporated so as to modify the essential term that shipment take place during April. Compare Miramar Maritime Corporation v Holborn Oil Trading Limited (1984) AC 676.

If the appellant is correct the clause making time of the essence would not apply to the shipment clause and the time of shipment would be greatly extended and it would become quite uncertain. If, as in the present case, the vessel did tender a valid notice of readiness within the shipment period the parties could remain bound while the vessel remained on demurrage because of congestion or strikes unless and until the delay became so great as to frustrate the contract. Compare Universal Cargo Carriers Corporation v Citati (1957) 2 QB 401.

In my opinion CL11(a)(ii) and its reference to this form of Charter Party does not have such a drastic effect on the prima facie obligations of the parties to procure the loading of the cargo during the shipment period.

Mr Sheller's second submission was that CL6(g) of the Board contract had the effect of extending the shipment period beyond 30 April in all cases where the buyer had complied with the time table in CL4(b) and (c) of the contract on terms that the buyer became responsible for payment of the seller's carrying charges.

The clause so far as relevant provided:

"(g)(i) If the buyer fails to comply with CL4 herein and the Seller elects not to exercise its rights to rescind this Contract for such failure...and if the Buyer has complied with CL4(b) and CLA(c) of the Contract but the Buyer's nominated vessel fails to present a valid and effective Notice of Readiness to Load...the Seller shall carry the Barley for the Buyer's account at the rate for storage, interest and insurance current at the time...

(ii)...

(iii)...

(iv) if the Buyer's nominated vessel fails to present within thirty (30) days of the last day of the specified delivery period (a) the Buyer will be in further fundamental default under this Contract, and (b) the Contract price shall be deemed to be increased by the carrying charges...".

The submission was that sub-CL(i) contained two limbs separated by the "and" (underlined by me above) which was disjunctive, and that under the second limb if the buyer had complied with CL4(b) and (c) the shipment period was automatically extended with the buyer becoming responsible for the seller's carrying charges. Although the present case did not fall literally within the second limb Mr Sheller submitted that it was an a fortiori case because the buyer's vessel had given a valid notice of readiness within the shipment period.

Para (i) opens with the words "Tf the Buyer fails to comply with CL4 herein...". The buyer could be in breach of CL4 for a number of reasons. It could have failed either to nominate the freight within the time specified in sub-CL(b) or to give notice of readiness within the time specified in sub-CL(c). These provisions are conditions and the times stated essential even without express provision to that effect. See Bunge and Co Limited v Tradax (1981) 1 WLR 711. Accordingly the seller would be entitled to rescind for any breach of c114(b) and (c). If the buyer

14 UNREPORTED JUDGMENTS

complied with those obligations or if any breach was waived the buyer's next obligation under CL4 was to take delivery of the goods within the shipment period.

Prima facie, as already indicated, the buyer was in fundamental breach of this provision and the seller was entitled to rescind. The first limb of para (i) does not, in terms, fetter the seller's right to rescind. The buyer however relies upon the second limb, construed as an independent provision, as doing so. This submission depends upon the word "and" where underlined above being given a disjunctive meaning. The prima facie meaning is conjunctive but in a proper case the subject matter and context may suffice to demonstrate that a disjunctive meaning was intended.

In my opinion the context in fact supports the prima facie conjunctive meaning and para (i) does not contain two separate limbs as suggested. The so called first limb clearly contemplates that the seller will have a right to rescind for any breach of CL4 including a breach of CL4(a). Moreover the provision (not quoted) that the seller shall be deemed to have elected not to rescind if it fails to do so within three working days of the end of the contractual period for delivery shows that the seller retains the right to rescind for an actual breach of CL4(a) which would occur at the end of that period.

The end buyer is thus driven to rely upon the so-called second limb to establish that the right of rescission prima facie arising as a result of the buyer's breach of CLA(a), which is clearly recognised by the so-called first limb of para (i) is taken away by the second limb. Such an extraordinary result would require the use of language which was clear and intractable The language of the so-called second limb is quite inadequate for this purpose.

Moreover para (iv) provides that in the events therein referred to "the Buyer will be in further fundamental default under this Contract". The buyer can only bring itself within the second limb if it has complied with its obligations under CLA4(b) and (c). Accordingly para (iv) indicates that the buyer's breach of CL4(a) which must have occurred before the second limb of para (i) can apply is a "fundamental default". The buyer's construction of para (i), in my opinion, is denied by the language of para (iv).

The construction which was accepted by the Umpire and by the Judge gives a reasonable and coherent operation to the sub-clause. If the seller elects to rescind for the buyer's fundamental breach the clause cannot operate. However if the seller elects not to rescind it will be entitled to an increase in the contract price in the event covered by the so-called second limb. The clause operates only in the event of the seller electing to keep the contract on foot. Otherwise it confers no rights on the buyer at all. This view of the clause is of course consistent with its presence in CL6 which deals with payment by the buyer. The question of payment does not arise if the seller elects to rescind for fundamental breach.

In my opinion both the language and context of CL6(g)(i) demonstrate that it cannot operate to extend the shipment period in the manner contended for by the buyer.

In these circumstances the appeals must be dismissed with costs.

1. Appeals dismissed with costs. 2. Short minutes to be brought in at 10 am, Tuesday 23 October 1990.

Counsel for Toepfer: CS Sheller QC / E King

Counsel for Nidera: M Cashion

UWRUTOEPFER INTERNATIONAL GmbH v NIDERA HANDELSCOMPAGNIE BV NIDERA HANDELSCOMPAGNIE BV v ROMAK (Handley J)

Counsel for Romak: R McFarlan QC / N Rein Solicitors for Toepfer: Phillips Fox Solicitors for Nidera: Westgarth Middletons

Solicitors for Romak: Ebsworth and Ebsworth