SAMCO LIMITED v NOVEL COMMODITIES SA and Another (CC668/07 )  SLHC 2 (10 March 2008);
CC668/07 2007 SNO. 137
IN THE HIGH COURT OF SIERRA LEONE COMMERCIAL & ADMIRALTY DIVISION Admiralty Action in Rem Against The Cargo Of "MV ALEXI 1 & in Personam
SAMCO LIMITED 57 ABACHA STREET
FREETOWN - PLAINTIFF/ RESPONDENT
NOVEL COMMODITIES SA 21 RUE DES CAROUBIERS CASTE POSTALE 1851 1227 CAROUGE
GENEVA SWITZERLAND - 1st DEFENDANT/ APPLICANT
THE OWNERS AND / OR PERSONS INTERESTED IN THE CARGO OF THE VESSEL "MV ALEXI 1" NOW LYING AT THE QUEEN ELIZABETH 11
QUAY CLINE TOWN, FREETOWN - 2nd DEFENDANT
EDITAYO PABS GARNON FOR THE PLAINTIFF / RESPONDENT
YADA KASHIM WILLIAMS & OSMAN JALLOH- For the Defendant /Applicant
RULING DELIVERED THIS 10TH DAY OF March 2008.
D.B. EDWARDS, J. By Notice of Motion dated 1st February 2008 made under action intituled CC668/07 S NO. 137, the 1st Defendant in this action applied to this Honourable Court for the following orders:
1. That the judgment or order of this Honourable court dated 26th November 2007 and all subsequent proceedings be stayed pending the hearing and determination of this application;
2. That all further proceedings in this action be stayed as the parties hereto had agreed to refer to arbitration the matters in respect of which the action is brought;
3. That the Judgment in this action be set aside and the action be stayed on the ground that Sierra Leone is not the proper forum for bringing this action and / or that it will be just and equitable that any proceedings between the plaintiff and the 1st defendant be commenced or settled in England.
4. That the judgment / order of this Hounourable court dated the 26th November 2007and all subsequent proceedings be set aside on the ground of irregularity i.e. that the court had no jurisdiction to award damages in dollars based on the Judgment of the Supreme Court in CASTROL VS MICHAEL MOTORS CIV APP NO 1/98.
5. That the Judgment / Order of this court dated 26th November 2007 and all subsequent proceedings be set aside on the ground that the 1st Defendant has a good defence to the action.
6. That the Plaintiff/ Respondent do pay costs of this Application
The Application was supported by the affidavits of YADA HASHIM WILLIAMS SOLICITOR for the 1st Defendant / Applicant sworn to on the 1st, 4th and 11th day of February 2008 respectively, together with the following exhibits attached thereto to wit EXHIBITS A-L
The Plaintiff opposed the application. The Plaintiff also filed two affidavits in opposition viz. that sworn on the 5th and 6th of February 2008 respectively together with the following exhibits attached thereto to wit, Exhibits EPG1- EPG12.
In his final arguments, the 1st defendant's solicitor submitted that order 3 & 5 are prayed for in the alternative.
FACTS OF THE CASE TO DATE
The facts of this case are that the plaintiff on the 14th of September 2007 brought an action in rem against the cargo on board MV ALEXI 1 to wit 6,000metric tonnes of rice and in personam against the 1st and 2nd defendants for damages for breach of contract, an injunction restraining the 1st defendant whether by itself, its servants or howsoever otherwise from breaching the terms of the agreement between the plaintiff and the 1 st defendant for the sale of 6,000 metric tonnes of Indian rice which were lately being offloaded from the MV ALEXI 1 and now at the Queen Elizabeth II Quay in Freetown by way of sale or disposal or otherwise ; an order that the 1st defendants complete the performance of the said contract by delivering the said cargo or authorizing the said cargo to be delivered to the plaintiff; any further relief and costs. On the 17th of September by Notice of motion dated 17th September 2007, the plaintiff sought by way of ex parte application and obtained an order to arrest the cargo as specified under the bills of lading KD/ALX 1-6 of the vessel MV ALEXI 1 as contained in the said vessel to be kept under arrest until the defendants herein shall have given sufficient security for the satisfaction of the order or until further order. The defendants entered appearance on the 19th of September 2007 but thereafter failed refused or neglected to file a defence within the time frame, or at all. Meanwhile the vessel MV ALEXI I contrary to the courts order failed refused or neglected to discharge its cargo, the subject matter of this action, and vamoosed and /or flee this jurisdiction. The plaintiff could not effect the order reference to the warrant of arrest on the cargo and so the on 12th of October 2007 the plaintiff applied pursuant to the High Court Rules for judgment to be entered for damages to be assessed in the absence of the defence. The court on the 17 of October 2007 ordered that judgment be entered for the plaintiff for damages to be assessed. On the 14 of November 2007 following an application by the plaintiff dated 8th November 2007 for damages to be assessed, this court ordered that damages be assessed pursuant to the order of 17th October 2007 and that the 23rd be fixed for the said assessment. The assessment of damages was done on the 23rd of November 2007 and on the 26th of November 2007 damages for breach of contract was assessed at sum of US $ 450,000 or its equivalent in Leones and costs to taxed. The plaintiff armed with a Judgment for the sum of US$450,00 against the Defendants, he sought to execute against what it thought
was the cargo property of Novel Commodities SA the 1st defendant herein when they were charterers of the VESSEL MV LOVESTAR which has been chartered to deliver a consignment of Rice at the Queen Elizabeth Quay, the same which was on board the vessel, but failed in this regard in that they could not give sufficient and cogent proof that the property was that of Novel, the 1st defendant . The plaintiff then decided on an alternative means of execution to secure the Judgment debt of US$450,000 and obtained a garnishee order absolute in respect of an irrevocable letters of credit opened by a 3rd party in favour of NOVEL Commodities at the Guarantee Trust Bank (SL) Limited the 1st defendant herein as beneficiaries . The obtaining of the Garnishee order nisi sparked the 1st defendant into action as it was at this stage that the 1st defendant it would appear began to take the matter of the action against them very seriously. They immediately changed their solicitor and hence the current application in which the 1st defendant is among other things, asking for the setting aside of the Judgment of 26th November 2007 and for leave to file a defence out of time on the ground that they have a good defence .
The back ground in particular to this action was that on the 3rd of July 2007, the plaintiff buyer hereinafter referred to as SAMCO concluded a contract with the 1st defendant seller hereinafter referred to as NOVEL for a quantity of 6,000 metric tonnes of Indian rice sale by description to be delivered CIF Freetown. By the said contract, notice of appropriation was to be given by the shipper/seller 14 consecutive days from the date of shipment /date of the bill of lading which was 11th August 2007; they failed to do so and only did so on the 28th of August 2007 which was less than 14days to the expected arrival of the vessel in Freetown. Payment was to be by irrevocable letters of credit which was to be received not later than 14 days before the arrival of the vessel in Freetown.Also the sum of US$500,000was to be paid by telegraphic transfer not later than 10days before the arrival of the vessel. The plaintiff never paid the transfer or credit on time as a result of which the plaintiff terminated the contract and sold same to 3rd party. SAMCO strongly believing that the repudiation of the contract was uncalled for and wrong in law brought an action for breach of contract and delivery of the consignment of rice to them inconsequence of which damages have now been assessed.
Before delving into and analyzing the issues raised, I think it is convenient at this stage to confirm the basis under which this Honourable Court is constrained to construe the effect and substance of this Agreement. To this end, it becomes necessary to prove the terms of the contract by ascertaining their true nature and extent, to wit, whether the terms of the contract were limited to Exhibit B or did in fact encompass exhibit B to the point of absorbing and/or including in particular Exhibit L. It is obvious to me that the primary terms of this contract between SAMCO and NOVEL was the Sale Agreement dated 3rd July 2007; this notwithstanding those terms did not and never in fact encapsulate, encompass and/or contain all the terms of the SALE AGREEMENT. The last paragraph of exhibit B is instructive on this:
"All other terms and conditions when not in contradiction to the above to be as per GAFTA NO 122 with Arbitration in London as per GAFTA 125 which the parties have knowledge of and hereby accept".
The purport of this clause is that there are several clauses in the GAFTA 122, incorporated into the Sale Agreement, Exhibit B, by reference to the GAFTA 122 with the condition for incorporation being that they were not clauses /terms in contravention of the terms already expressly stated in exhibit B. This being the case, this Court takes Judicial notice of the fact that there are several provisions / clauses in the GAFTA 122 Exhibit L in this Application which are or do form part and parcel of this SALE AGREEMENT the subject of construction in this Application and there are also clauses in Exhibit L which could not be provisions of the Sale Agreement Exhibit B as the same was expressly provided for in exhibit B.
Secondly, before attempting to construe the terms of this contract one must be able to determine what was the nature of the contract as distinct from its terms as between the buyer and seller in respect of this SALE GAGREEMENT. In this regard, two things become germane. In the first place this court takes Judicial Notice that the contract
between SAMCO and NOVEL was as Buyer and Seller respectively of a consignment of rice. A contract between a buyer and seller of rice is governed primarily by the Sale of Goods Act Cap 225 of the Laws of Sierra Leone 1960 and this has its own natural or inherent implications on the contract. The Sale of Goods Act may be different from the Sale of Goods Act 1979 in England and its subsequent amendments in some or various material aspects, but by and large, the provisions by which this current application may be linked have all been retained by the subsequent Acts of the English Parliament and are governed in part by the common law. That apart, the fact that SAMCO as buyer and NOVEL as seller were from Sierra Leone and Switzerland respectively engaged in the buying of rice from India with payment to be effected in London means that this was an International Sales Agreement governed by the law and practice involving such International Sales and financing. Lastly, I find it instructive that the basis of this Sales Agreement was established along these lines
"DUE TO THIS SPECIAL CONTRACT PRICE, THE BUYER RENOUNCES IRREVOCABBLY TO PRESENT ANY QUALITY CLAIM TO SELLER FOR CHINESS RICE COVERED BY CONTRACT S 2196"
and that the same was included as part of the Sales Agreement. It represents what the parties have agreed as a form of settlement regarding a previous obligation owed by the seller to the SAMCO and this in itself may have some bearing on the conduct of the parties and the justice of the case.
Having confirmed the basis under which this Honorable Court would be constrained to construe the effect and substance of this Agreement, it behoves me at this juncture to consider the contentions of the parties.
The 1st Defendant /Applicant after making submissions in respect of the 2nd & 5th orders sought, decided to abandon them. I would therefore limit this Ruling to the 1st 3rd and 5th & 6 orders prayed for which he has postulated so much confidence.
With regard to the 1st order prayed this court on the 5th of February 2008 granted an interim stay of execution of its Garnishee order absolute dated 31st January 2008 pending the hearing of this application.
UNDER THE 3rd order prayed, the 1st defendant has sought that the Judgment in this action be set aside and the action be stayed on the ground that Sierra Leone is not the proper forum for bringing this action and / or that it will be just and equitable that any proceedings between the plaintiff and the 1st defendant be commenced or settled in England. The 1st Defendant's Solicior submitted that the Domicile clause under exhibit L was an exclusive jurisdiction clause and that the same has been incorporated into Exhibit B by reference. That the above clause is incorporated by reference is not in doubt. That the clause does provide for the applicable law which is English law is also not in doubt. But to say it is an exclusive jurisdiction as to determine the right of the parties is not so clear. Exclusive jurisdiction clauses must be clear and precise and this is not so clear and precise. Be that as it may, this court is prepared to accept that it is as an Exclusive Jurisdiction clause despite the fact that it is not so clear.. Sierra Leone case law clearly provides for the striking down of exclusive jurisdiction clauses where the circumstances of the case so warrant proceedings being instituted in this jurisdiction. This follows from the common law where parties by their private stipulation or of their own accord cannot make an agreement ousting the jurisdiction of our courts. In the case of THE FEHMARN (1957) 2 LLOYDS REPORT 551AT P 555 PER LORD DENING stated the position thus:
"Then, the next question is whether the action ought to be stayed because of the provision in the bill of lading that all disputes are to be judged by the Russian Courts . I do not regard the provision as equal to an arbitration clause , but I do say that the English courts are in charge of their own proceedings; and one of the rules which they apply is that a stipulation that all disputes should be judged by the tribunals of a particular country is not absolutely binding. It is a matter to which the courts of this country will pay much regard and to which they will normally give effect, but it is subject to the overriding principle that no one , by his private
stipulation, can oust these courts of their jurisdiction in a matter that properly belongs to them "
In the case of LEONE MINING COMPANY VS EUROAFRICAN IMPORT AND EXPORT COMPANY CC 119705 UNREPORTED (HEREINAFTER REFRRED
TO AS the Leone Mining Case ) this court after considering cases like the EL AMRIA (1981) 2 LLOYDS REPORT P119-128; SVENBORG AND WANZA 2 LLOYDS REPORT 559-576; HADSON TAYLOR &CO VS A P MOLLER MIS APP348/87 UNREPORTED AND THE WELL KNOWN CASE OF SPILIADA MARIME CORPORATION VS CANSULEX LTD 1986 3ALL ER PAGE 843 stated the issues which would weigh in the court's mind in granting or refusing of stay of proceedings because of an exclusive jurisdiction clause thus:
"From the above citations, it is clear to me that the principles under which this Honourable Court will be guided could be stated thus:
1. Where Plaintiff's sue in Sierra Leone in breach of an agreement to refer disputes to a foreign tribunal or court and the defendants apply for a stay of proceedings the Sierra Leone High court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not.
2. The discretion could be exercised to grant the stay or refuse the stay
3. The discretion to grant the stay would only be exercised in favour of the defendant only where the defendant can show not merely that Sierra Leone was not the natural or appropriate forum for the trial but there was another available forum which was clearly or distinctly more appropriate than the Sierra Leone High Court.
In considering whether there was another forum which was more appropriate, the court will do the following:
A) Look for the forum with which the action had the most real and substantial connection in terms of:
a) In what country the evidence on the issues of fact is situated , or more readily available , and the effect of that on the relative convenience and expense of the trial as between the Sierra Leone and foreign court;
b) Whether the law governing the relevant transaction of the foreign court applies and if so, whether it differs from (Sierra Leone law) in any material respects;
c) With what country either party is connected and how closely, In effect what country or places the parties reside or carry on business;
d) Whether the defendants genuinely desire trial in the foreign country or are only seeking procedural advantages.
B) Where the defendant can show by affidavit evidence that his choiced forum is that to which the action has the most real and substantial connection he would have established a prima-facie case for stay of proceedings.
C) Even so, the plaintiff might be able to get the courts to refuse the stay if he can prove (the plaintiff is under obligation or has the burden to prove) that there are circumstances militating against a stay for example if the plaintiff would not obtain justice in the foreign tribunal in terms of
i) being deprived of security for their claim
ii) be unable to enforce any judgment obtained
iii) be faced with a time bar not applicable in Sierra Leone
iv) for political, racial, religious or other reasons not likely to get a fair trial"
Each case would depend on its own peculiar facts. The 1st defendant's solicitor noting this, has gone on to state 7 areas where the facts presented in the Leone Mining case where the court granted a stay of proceedings are not dissimilar to the facts at hand, and these he itemized as follows .
a) that both contracts/cases had arbitration clauses;
b) that both contracts/ cases have exclusive jurisdiction clauses;
c) that in both cases the plaintiff instituted proceedings in Sierra Leone;
d) that in both cases previous applications have been made to set aside or stay proceedings for reasons other than the exclusive jurisdiction clause;
e) that in both cases the initial applications were unsuccessful;
f) in both case the initial solicitors were changed before the application of stay of proceedings as a result of this exclusive jurisdiction was made . In both cases the defendant have not filed their defence;
g) In the Leone Mining case I was of the view that there were no experts in Spanish law. In this application the defendant is contending that there are no experts in GAFTA Proceedings in Sierra Leone.
The 1st defendant's solicitor further argued that a further reason why the Leone mining decision should apply in this case and is on all fours with this case was that the plaintiff had not adduced any evidence to show circumstances militating against a stay of proceedings . He noted that they have discharged the burden cast on the defendant He referred the court to the case of A P MOLLER CIV APP. 10/88 Un reported in which the dictum of Lord Justice Kerr in the EL AMRIA was extensively quoted by the Appeal Court . "This discretion must be exercised in favour of granting a stay unless strong causes for not doing so is shown and the burden of proving such strong cause is on the plaintiff . He submitted that the plaintiff has failed to discharge this burden. Since the plaintiff has not proved such facts, it is proper to assume that they do not exist. It was the plaintiff's duty to show why they would not be able to enforce a judgment in England as against Sierra Leone. He submitted they have deposed that all the assets of the 1st Defendant are in Switzerland , England and other places and that they do not have any asset in Sierra Leone . This is he stated, all the more, makes attractive why England is the most attractive country where action should be initiated
While the Leone Mining case may not be dissimilar to the case in most of the above respects, I would want to note major differences between the Leone Mining case and the one at hand. On such reason is that stay of proceedings was applied for pending the hearing and determination of the matter in the High Court, while in this case stay of proceedings is being applied for after proceedings in the matter have been concluded with
judgment delivered in the plaintiff's favour. It is for this reason the 1st defendant solicitor has rightly prayed that the Judgment in this action be set aside in the first place and the action be stayed on the ground that Sierra Leone is not the proper forum for bringing this action and / or that it will be just and equitable that any proceedings between the plaintiff and the 1 st defendant be commenced or settled in England. I should however think that in circumstances where it was a regular judgment as happened in this case and the defendant has filed a proposed defence and counterclaim with a view of having that judgment set aside he would have submitted to jurisdiction. Thus the reason why he may have argued this order in the alternative in the sense that he cannot say the court has no jurisdiction and at the same time say the court has jurisdiction. That may be true, but the fact remains that because a judgment has been entered that judgment ought to be set aside in the first place. If it is an irregular Judgment it is set aside ex debito justicae but if it is a regular judgment, it could only be sets aside on merits depending on the filing of a proposed defence. Since the above judgment was not irregular a fact amplified by the fact that the 1st defendant had to abandon order 4 prayed, it can only be regular; thus this court cannot grant the order which starts with the setting aside in the absence of a proposed defence.. The judgment then becomes a fait accompli in the sense it cannot be set aside or stayed at that stage for it to be heard in another court/forum of first instance. This would simply be an abuse of process and the plaintiff may well be advised to stay such proceedings on the ground of res judicata In short it would be quite inappropriate to stay proceedings after a regular judgment on the ground of forum conveniens or that it was just and equitable to do so when that judgment has not been set aside and if you move to set it aside you would be taking a fresh step and submitting to jurisdiction by your proposed defence which would be necessary if you have to set it aside. As things are in this application the 1st defendant is well out of time in making this application. Be that as it may, I do not intend to make a short thrift of this order prayed for and I have advised myself to go through the full hall. Peradventure I am wrong in my appreciation of the law on the subject, it behoves me to consider whether in fact this court on the submissions so amply raised by the 1st defendant's solicitor that it is appropriate for stay of proceedings to be granted . He the 1st defendant stated that the burden of proof was on him to show why stay ought to be granted and this burden he has amply discharged by showing that
his choiced forum England is the forum which is the most suited for proceedings to be conducted by its being the convenient or better forum which the action had the most real and substantial connection and for which it was just and equitable for it to be conducted. I disagree with him. The issue of stay of proceedings on the ground of a better forum, forum conveniens or that there cannot be a better forum all saying the same thing really is;
Firstly, it is in the discretion of the court, and this would only be exercised in favour of the defendant only where the defendant can show not merely that Sierra Leone was not the natural or appropriate forum for the trial but that there was another available forum which was clearly or distinctly more appropriate than the Sierra Leone High Court, and that that forum is the forum with which the action had the most real and substantial connection in terms of
a) In what country the evidence on the issues of fact is situated , or more readily available , and the effect of that on the relative convenience and expense of the trial as between the Sierra Leone and foreign court? Need I point out that the contract documents are not disputed as between the parties and they speak for themselves. The facts were never in dispute.
b) Whether the law governing the relevant transaction of the foreign court applies and if so, whether it differs from (Sierra Leone law ) in any material respects? The law of England as I stated earlier in so far as the sale of goods is concerned and the common law is concerned is not materially different from what is at present. The law applicable in GAFTA proceedings is English Law.
c) With what country either party is connected and how closely, in effect what country or places the parties reside or carry on business? Both parties do not come from or relate to one country as happened in the case of Leone Mining. In the Leone Mining case the defendant was a Sierra Leone by birth but owned a Spanish Passport which was not expire for the next five years; the contract was concluded in Spain; it had a clear and precise
exclusive jurisdiction clause that dispute where to be tried in Spanish courts; the plaintiff too was Spanish. Here the plaintiff is from Sierra Leone and the defendant from Switzerland and the applicable law is English.
d) Whether the defendants genuinely desire trial in the foreign country or are only seeking procedural advantages. It would seem to me that the 1st defendant is seeking procedural advantages. A change of jurisdiction should not cause the parties to lose rights they have acquired by the suit already taken. This is particularly true in actions in rem. Intricately linked to this is the fact that the plaintiff stands to lose the security it has now obtained by the attachment of the letters of credit standing to the 1st defendants benefit at the Guarantee Trust Bank SL Limited .
Secondly, one must not lose sight of the fact that this case arose from a special contract precipitated by the 1st defendant's breach through sale of defective Chinese rice for which concessionary price was awarded to the buyer with regard a fresh consignment of rice from India which the 1 st defendant has now failed to deliver in consequence of which they were mandated to pay damages. This court takes special cognizance of the basis under which this contract was entered viz. that he buyer renounce irrevocably to present any quality claim for the Chinese rice.. The plaintiff would then be caught by a bar based on their irrevocable renunciation which was a concession to the 1st defendant and would be unable to argue their claim for the defective Chinese rice which was the basis of the contract in the firs place.
The 1st Defendant has not been able to satisfy the test of most real and substantial connection and this too is after a careful and thorough consideration of paragraphs 5-9 and 14to 18 of the affidavit sworn to on the 1st of February 2008
The issue of the absence of affidavit has been raised by the 1st defendant's solicitor but he has to discharge his burden first before we begin to think of reasons why the application should not be granted deposed to in an affidavit by the plaintiff. Sierra Leone was the natural and appropriate forum and certainly the English forum cannot be a better forum. In the above circumstances this court cannot grant this order prayed for.
Under the 5th relief sought, the contention of the 1st defendant is that the plaintiff breached the contract as explicitly provided in exhibit B which is the Sale Agreement by failing to comply with the 2 timeframes/deadlines to wit payment of the sum of US$500,000.00 latest 10 days to the arrival of the vessel in Freetown and the opening of the irrevocable letters of credit which was to be received not later than 2 weeks (14) days to the arrival of the vessel .The 1st defendant's Solicitor argued that exhibit H was an e-mail from the 1st defendant to the plaintiff which stated the expected arrival of MV ALEXI 1 containing the 6,000 tonnes as at the 10th of September 2007. He further argued that payment of US$500,000.00 should have been paid (i.e. paid into the defendants account) latest the 30th of August 2007 and the letter of credit received latest the 26th August 2007 but this was not the case as the US$500,000 was received on the 5th of September 2007, while that of the letter of credit was only opened on the 13th of September 2007, constituting 7 and 13 days lateness respectively, in consequence of which the defendant breached the Sale Agreement. The breach he argued, even become more glaring as it was breach of a condition precedent making time of the essence which entitled the seller, the 1st defendant to terminate the contract. The 1st defendant further submitted that by exhibit J, the plaintiff themselves acknowledged that time was of the essence, it being a condition precedent that the US$ 500,000 should be paid 10 days before the arrival of the vessel .He buttressed his submission by referring to a group of emails as represented by exhibit E where the 1st defendant stressed and/ or reminded the plaintiff that time was of the essence in this contract. He referred the court to CHITTY ON CONTRACT 27™ EDITION 1030 PARAGRAPH 21-012 UNDER THE RUBRIC "TIME MADE EXPRESSLY OR IMPLICITLY OF THE ESSENCE" He submitted that time was of the essence by the plaintiff accepting that compliance with the payment terms was a condition precedent. He referred the court to the case of BUNGE
CORPORATION VS TRADDAX SA (1981) 2 ALL ER 513 where it was held that performance by the buyer was a condition precedent to the sellers obligation to perform.
Finally on this point, the 1st defendant contended that as against this background they were right in terminating this contract and in fact had a good defence and counterclaim for damages for breach of contract precipitated by the Plaintiff's failure to comply with the payment terms and that the same was exhibited as exhibit D. In particular he noted paragraphs 5, 6, 7 as being instructive as to their good defence.
In his reply on this point the plaintiff's solicitor argued that the plaintiff did make payment of the sum of US$500,000.00 by telegraphic transfer as against the value date 4th of September 2007. As regards the opening of the irrevocable letters of credit, the plaintiff submitted that the conduct of the 1st defendant regarding corrections on the letter of credit was the reason for them not complying to the deadline regarding the date it was to be received which was 14 days to the arrival of the vessel and that the said conduct constituted a waiver or estoppel on time being of the essence in this contract. Because of the time lost in making those corrections, he argued, the 1st defendant was entitled to fix a new deadline on the time the letters of credit was to have been received and that the time was to be reasonable in all he circumstances. This he argued the 1st defendant failed to do. In such circumstances the defence and counter claim which detailed time being of the essence could not be a meritorious defence warranting the setting aside of the judgment.
The 1st defendant's solicitor in reply argued that in the first place there was no such delay caused by corrections. Relying on the case of NICHIMEN VS GATOIL (1987) 2 Lloyds Report CA page 46-57, he submitted that there was no waiver of or estoppel on the insistence of time being of the essence and that all the 1 st defendant did was to grant extension of time from the 3rd to the close of business on the 4th of September 2007 as to the deadline for payment which had not been complied with, hence the termination of the contract by the 1st Defendant.
I have listened keenly to the arguments raised by the plaintiff and 1st defendant's solicitor. I have also spent considerable time considering their opposing submissions. Most importantly, perhaps I have spent some time construing the terms of this contract which in the main is contained in exhibit B and partly in Exhibit L.
This application definitely concerns regularly obtained Judgments and the circumstances in which the courts may well be advised to exercise its discretion to set it aside and grant leave to defend out of time. The law on the subject has been time and time again been restated.
In the House of Lords decision in EVANS VS BARTLAM (1937) AC 473 Lord Atkin at page 480 stated it thus
"The principle obviously is that unless and until the court has pronounced a judgment on the merits or by consent, it is to have the power to revoke the expression of its coercive power where that has been obtained by failure to follow any of the rules of procedure"
In that case Lord Wright at page 489 stated as follows:
"In a case like the present there is a judgment, which though by default, is a regular Judgment and the applicant must show grounds why the discretion to set aside should be exercised in his favour. The primary consideration is whether he has merits to which the court should pay heed; if merits are shown the court will not prima facie desire to let a judgment pass on which there has been no proper adjudication."
In the case of VANN VS AWFORD 1986 THE TIMES 23 APRIL 1986 CA UNREPORTED DILLON J quoting Lord Justice May at page 10 of the case of LADUP LIMITED VS SIU (UNREPORTED) in delivering a judgment with reference to a similar application for setting aside judgment stated the following:
" Although in these cases where an application is made to set aside a judgment obtained by default, it is frequently said that not merely must a defence on the merits be shown, but also a reasonable explanation for the delay, I think that the passages to which I have referred from the speeches in EVANS VS BARTLAM make it clear that it is first, the defence on the merits, which is of the primary importance at least in the case of an interlocutory Jugdment, and that the question of delay is a matter which falls to be dealt with only secondarily'
In the case of the regular judgment the right to set aside is solely a matter of discretion of the Judge, as the judgment was regular in the first place, in which case it should stand, but for an affidavit on the merits showing a meritorious defence. A meritorious defence was defined in the case of ALPINE BULK TRANSPORT CO INC VS SAUDI EAGLE SHIPPPING CO INC, the Saudi Eagle (1986) 2 LLOYDS REPORT PAGE 221, CA as a defence which must have "a real prospect of success" and "carry some degree of conviction" and the court must be able to form a provisional view of the probable outcome of the action.
What these cases do establish is that no matter what might have been the reason for the delay i.e. whether the defendant was negligent, careless, reckless or deliberately avoiding proceedings he knew about as the cause of the delay, this may be irrelevant; so long as the defendant has a good defence on the merits he should and must be given an opportunity to defend even if he would have to be condemned to heavy costs occasioned by his delay:
It is clear to me that the judgment of 26th November 2007 was a regular Judgment obtained by default after due process. The 1st defendant's Solicitor places heavy reliance on the aforementioned cases and has filed a proposed statement of defence and counter claim which is Exhibit D and in the main is relying on the paragraphs 5, 6 & 7 as
establishing that he has a good defence on the merits. The said paragraphs are produced hereunder:
"5. That an irrevocable letters of credit should have been received 14 days prior to the vessel's arrival in Sierra Leone but was received by the 1st defendant's office on the 17th September 2008 i.e. 4 days after the vessels arrival
6. The 1st defendant avers that time was of the essence of the Sale Agreement and that this was continuously repeated to the plaintiff by the 1st defendant
7..The 1st defendant admits paragraph 3 of the statement of claim but will aver that the copy of the bills of lading was sent to the plaintiff on the 27th of August 2007 together with the vessel nomination and that this was before the plaintiff was declared in breach of contract and the sale agreement terminated"
However for completeness and wholesome application, this court considers the totality of the defence and counterclaim. This being the case, the question which this court has to answer is whether the defence and counterclaim as contained in exhibit D is one that has merits taking the case of the Saudi Eagle as the test.
On a careful consideration of the proposed defence and counterclaim as reflected in exhibit D, the following are the issues which call for attention:
i) Whether the Sale Agreement provided that the contract price was to be paid against 2 stipulated deadlines but the plaintiff buyer failed to make these payments against those stipulated deadlines; ii) Whether in the performance of the contract time was of the essence as detailed in
the payment terms and several emails directed to plaintiff; and iii) Whether as against the answer in 1 and 2 above, or at all the 1st defendant was right in terminating the contract on the 5th of September 2007?
The answer to the 1st enquiry as gleaned from the evidence before this court and contract documents was that the payment terms was US$2,202,500.00 for the purchase of 6,000 metric tones of Indian rice of which US $ 500,000 was to be paid by direct telegraphic transfer 10 days before the arrival of the vessel and the balance US $ 1,702,500.00 by irrevocable letters of credit to be received 2weeks (14days) before the arrival of the vessel.
Without making a short thrift of this issue, while I note that the plaintiff did make massive efforts and showed a readiness and willingness to make payment of the contract price as against the stipulated deadline, I do not think the plaintiff stands a chance in saying that payments were made within the stipulated deadline. The evidence clearly shows that payment of US$500,000.00 was made by telegraphic transfer as against the value date which is 4th September 2007 and that date to the arrival of the vessel is 9days and not 10 as was required under the payment terms. In the same vain the irrevocable letters of credit must be received 2 weeks (14days) to the arrival of the vessel. This clearly means that it must have been received as against the 30th of August 2007, but it was only received on the 17th of September2007 See exhibits F and G. This being the case it was indeed very true that the plaintiff did not comply with the stipulated time frame. But was there a cogent reason for this? Could the plaintiff be excused for not complying with these stipulated deadlines? The plaintiff's Solicitor submitted that the reason for this was that the conduct of the 1st defendant regarding corrections on the letter of credit delayed their complying to the deadline regarding the date it was to be received which was 14 days to the arrival of the vessel and that the said conduct constituted a waiver or estoppel on time being of the essence in this contract. Because of the time lost in making those corrections, he argued, the 1st defendant was entitled to fix a new deadline on the time the letters of credit was to have been received and that the time was to be reasonable in all the circumstances. This he argued the 1st defendant failed to do.
The above answer by the plaintiff, I should think, brings me to the second enquiry which is whether as per the contract, performance of the buyer's obligation within the stipulated deadline and on time was of the essence to the seller performing his
obligation, that of delivery of the 6,000 tonnes of rice to the plaintiff?. In the case of TRANS TRUST SPRL VS DANUBIAN TRADING & CO (1952) 1 ALL ER CA PAGE 970-978 AT PAGE 976 LORD DENNING having to deal with a similar problem as to whether a stipulation as to time for opening of a confirmed irrevocable letters of credit constituted a condition precedent to the seller performing his obligation making time of the essence, had this to say:
"This credit is an irrevocable promise by a banker to pay money to the seller in return for the shipping documents. One reason for this is that the seller wishes to be assured in advance, not only that the buyer is in earnest, but that he , the seller will get his money when he delivers the goods......................The ability of the seller to carry out the transaction is therefore dependent on the buyer providing the letter of credit, and for this reason the seller stipulates that the credit should be provided at a specified time well in advance of the time of delivery of the goods. What is the legal position of such a stipulation? Sometimes it is a condition precedent to the formation of a contract, that is, it is a condition which must be fulfilled before any contract is concluded at all.........In other cases a contract is concluded and the stipulation for a credit is a condition which is an essential term of the contract. In those cases the provision of the credit is a condition precedent not to the formation of a contract, but to the obligation of the seller to deliver the goods”
In the case of BUNGE CORPORATION VS TRAD AX SA (1981) 2 ALL ER a case which the 1st defendant's Solicitor relied, on the buyers were required by a term of the contract to provide a vessel and give the sellers at least 15days notice of readiness of the vessel to load. They were 4days late in doing so, it was held, that this provision as to time was a condition precedent, breach of which entitled the sellers to treat the contract as repudiated
In the SALE OF GOODS ACT CAP 225 LAWS OF Sierra Leone 1960 Section 12 (1)
provides as follows:
"Unless a different intention appears from the terms of the contract stipulations as to time of payment are not deemed to be of essence of a contract of sale . Whether any other stipulation as to time is of essence of the contract or not depend on the terms of the contract"
From the above citations it is clear to me that while stipulations as to time will not ordinarily be construed as being of the essence, they will be so construed if expressly stated to be such or if this court infers from the nature of the subject matter of the contract or the surrounding circumstances that the parties intend to have that effect. CHITTY'S LAW OF CONTRACT 27™ EDITION at page 577 illustrates this by putting it thus:
"In mercantile contracts, where it is of importance that the parties know precisely what their obligations are and be able to act with confidence in the legal results of their action, the courts will readily construe a stipulation as to time as a condition of the contract. Thus stipulations , for example as to the time within which a ship must be nominated or is expected ready to load under a charterparty, goods must be delivered under a contract of sale, the loading port must be nominated, the vessel provided, notice of readiness to load must be given and the goods must be ready to be delivered under fob contract; goods must be shipped, documents tendered and notice of appropriation given under a Clf contract., a letter of credit to be opened or hire paid under a time charter have been held to be conditions entitling the innocent party in the event of default in punctual performance to treat himself as discharged."
Looking at the contract documents before this court it is crystal clear to me that this was a mercantile CIF contract for which time was prima facie of the essence, not only with regard to the payment terms, which was an obligation which required punctual performance by the buyer, but with regard shipment which required punctual performance by the seller /shipper and the arrival of the vessel as well. That apart, the notice of appropriation too required punctual performance by the seller making time of the essence in respect thereto and it was the intention of the parties when they concluded the contract on the 3 of July 2007 to have adhered strictly to the times therein stipulated.. However, interestingly though, it appears that from the conduct of the parties such strict adherence as to time being of the essence or punctual performance has been waived. I have considered exhibit E the emails by the seller which stressed time and in one case gave extension of the deadline from the 3rd of September to the close of busness on the 4th of September 2007But was that even reasonable in the circumstances? The waiver was not exactly by what the plaintiff is suggesting as conduct constituting waiver alone but in conduct more earnest and glaring than that. This court has been constrained to form this view from the under mentioned provisions. By the contract documents Exhibit B and Exhibit L stipulations as to time apart from the payment terms are as follows: SHIPMENT/DELIVERY:
JUNE-JULY 2007 Shipment From Origin. Intention is arrival early August all going well. Arrival either END JULY (I.E. BETWEEN 25-July to 1st August). AFTER MID AUGUST DUE TO ELECTIONS IN FREETOWN (FIRST OPTION MORE FAVOURABLE)
"9. EXTENSION OF SHIPMENT: The contract period for shipment, if such be 31davs or less, shall be extended by an additional period of not more than 15days, provided that the sellers serve notice claiming extension not later than the next business day following the last of the originally stipulated period.
a) Notice of Appropriation shall state the vessels name, the approximate weight shipped, and the date or the presumed date of the bill of lading.
a) The Notice of Appropriation shall within 14 consecutive days from the date of the bills of lading be served by or on behalf of the shipper direct on his buyers or on the selling agent or Brokers named in the contract. The Non Business days clause shall not apply.
In so far as shipment from origin which is KINKINADA is concerned, the time for shipment was latest July 2007.The exact wording is "June -July 2007 shipment from origin." but shipment only took place on the 11th of August 2007. A breach of the shipment time. In the case of BOWES VS SHAND (1877) 2 APP CASES 455 it was held that failure to adhere to the time in which the goods were to be shipped entitled the buyer to treat the default in punctual performance by the seller as discharging the contract. In so far as arrival is concerned, it was to be End July i.e. between 25th of July- 1 stAugust 2007 or if this is not possible, then Arrival should be after Mid August. After Mid August is different from End August and End August is different from beginning September and 10th or 13 September is not beginning September. Clearly the 1 ST defendant seller never fulfilled the above conditions which were time stipulations and their primary obligations and failure to fulfill these conditions as they were was enough to discharge the contract. Worse still was the failure of the seller to give the appropriation notice within the 14days period commencing from the date of shipment as detailed in clause 10 of the GAFTA 122 Exhibit L .In the case OF SOCIETE ITALO BELGE POUR LE COMMERCE ET LINDUSTRIE VS PALM &VEGETABLE OILS (MALAYSIA) "THE POST CHASER" 1981 2 LLOYDS REP 695 the sellers under a CIF contract failed to make a declaration of ship as soon as possible after vessel sailed it was held that punctual performance was required. Similarly in the case of BUNGE G M B H VS CCVLANDBOUWBELANG
G.A "BUNGE VS C. C. V" 1980 1 LLOYDS REP 458 the sellers failed to give the appropriation notice in relation to 200 tonnes of Soya bean meal under GAFTA IOO and it was held that the buyer were entitled to reject the notice of appropriation because it was out of time.
In this matter, the appropriation notice was only received by the buyer on the 28th of August 2007.See exhibit H, and it forwarded the bills of Lading for the 6,000metric tonnes of Indian rice and this was 3 days later than the deadline /latest date which was the 25th August 2007. Worse still, the 28th of August 2007 was only 13days before the expected arrival of the vessel and less than 14 days to the expected arrival of the Vessel MVALEXI 1. The opinion which this court is able to form is that the 1stdefendant seller breached the shipment time from end July to 11th August 2007 , breached the expected arrival time from after mid August to 10lh September 2007 and breached the appropriation notice by failing to give the required appropriation notice within the stipulated time frame of 14days from the date of the bill of lading 11th August which is the date of shipment and worse still gave the said notice after the latest permissible date for the receipt of the letters of credit, reference to the expected arrival of the vessel, and just 3days to the latest permissible date for the receipt of the credit, reference to the actual arrival of the vessel on the 13th of September 2007. The above no doubt constitutes conduct which this court takes to be an unambiguous representation that time was not of the essence and that the essence of time has been waived. I say so because of several reasons. If the 1st defendant intended not to perform they could have held back in which case the plaintiff would or could have been entitled to bring action for breach of those terms; but they could not do so, and so gave the impression that they were continuing with the contract, knowing fully well that they intended not; having given that impression, they had to go on with the contract to conclusion . I am sure this is what Chitty meant when in his 22nd edition of the Law of Contract at paragraph 1151 under the rubric effect on party seeking concession at page 501 when he states as follows:
"Where one party has induced the other to accede to his request., he will not be permitted to repudiate the waiver and to set up the original terms of the agreement."
One party, thelst defendant sellers herein have by their conduct induced the plaintiff buyers to go on with the contract by their conduct of sending such appropriation notice
even though time has elapsed, they should not be permitted to repudiate the waiver which the buyers have so graciously granted by not taken action on their breaches by setting up the original terms of the agreement .The cases of OGLE VS VANN (1868) LR 272-285 AND HICKMAN VS HAYNES (1875) L R. are instructive on this point. At the stage when the buyers received the notice of appropriation they must have known that it was out of time and that it was a breach by the seller but they were compelled in the circumstances to press on with all readiness and willingness to enforce the contract knowing fully well that this was a special contract resulting from their renunciation of rights which they once held against the defendant for sale of defective rice. How then could the 1st Defendant sellers raise the issue of time when they themselves have not been conscious of time.They must be estopped from doing this. The Plaintiff buyers were clearly in a position of advantage but they decided to waive their rights so that the contract could be concluded In the said Chitty on contract at page 501, paragraph 1157, under the rubric "waiver of condition" learned the luminary stated also. "Similarly if one party is in breach of one or more of his obligations under the contract, and the other party does not repudiate the contract, but accepts the substituted performance, a fresh agreement should be implied from this new arrangement. He refers to the case of CHRISTY VS ROW (1808) 1TAUNT 300. There is no doubt that this is exactly what has happened in this case. One party the 1 st defendant seller breached the agreement, the other party the buyer herein did not repudiate the contract but accepted the substituted performance thus a fresh agreement should be implied from this new arrangement whereby time cannot be strictly of the essence Alternatively it has been said however, the acceptance may be accepted as waiver so that the original method of performance can be reimposed upon reasonable notice see the case of PANOUTSOS VS RAYMOND HADLEY CORPORATION OF NEW YORK 1916-1917 ALL ER REP 448- 451 HARTLEY VS HYMMANS (1920) ALL ER REP 328-339 AND CHARLES RICK DALE LTD VS OPPENHAIM (1950) ALL ER 616-629. Such notice must be reasonable. Reasonableness will depend on the circumstances of the case. The 1st defendant has stated that there was no waiver consequently they were not under duty to give notice but only extension of time which they did to the 3rd of September 2007 to close of
business on the 4th of September2007. This was in no way reasonable in the circumstances As stated earlier there cannot be any doubt that the conduct of the parties show that there was waiver of time being of the essence even though the defendant seemed not to know this and was stressing that time was of the essence in his email of the 3rd September 2007 as reflected in exhibit E. He was therefore bound to give reasonable notice which he failed to do. The defendant is putting a heavy reliance on the Court of Appeal decision in the case of NICHIMEN VS GATOIL (1987) 2 Lloyds Report CA page 46-57 a case he says is on all fours with this one in terms of the fact that both cases i)involved shipping matters ii) a fixed date was specified for the opening of the letters of credit iii) in both cases the buyer failed to meet the deadline and in both cases extensions of time where granted with new specific deadline iv) in both cases the extended deadlines were not met and v) in both cases the sellers repudiated the contract and the issue of waiver was raised . He referred the court to the dictum of Lord Justice Kerr at page 53.He also referred to the dictum of Lord Justice Woolf. While that case may in many ways be identical to this case, I must distinguish the major differences. The facts of that case are that on the 10th of December 1985, the plaintiff sellers concluded a contract with the defendant buyers for a quantity of Brent crude oil to be delivered fob Sullom Voe terminal in April 1986. Payment was to be by irrevocable letters of credit to be opened on a form and content acceptable to seller by a first class international Bank at least 10 days before the declared lay day range. On April 11, 1986 the sellers nominated the loading range as April 27-29 and also put forward the terms of the required Letter of credit and included a suggested letter of indemnity. On April 15th the sellers reminded the buyers that the letter of credit must be opened no later than the 17th of April 1986. Various other telexes followed and despite all these communications the contractual period for the opening of the letter of credit expired without any reaction from the buyers. On April 18 the buyers telexed the wording of an alternative suggested letter of indemnity .The sellers on the same day agreed to extend the period for the opening of the letters of credit to Monday 21. By the 22nd no letters of credit had been opened and the sellers treated the buyers as wrongfully repudiating the contract and it was held that they were right in doing so.
One of the differences is that in this case communication regarding time being of the essence only began after the latest date that was permissible for the opening of the credit. In the NICHIMEN CASE you could see that the sellers were ready and willing to deliver the goods and began to communicate to the buyers about their failure to open the letters on the 15th of April as against the 17th of April by which time it should be opened. In the present case even the Notice of appropriation which was to have prompted them to action was denied let alone any prompting by them. They never put forward the terms of the letters of credit but rather allowed the plaintiff to put its own form and corrected same causing some amount of delay. Yet still the buyers immediately made attempts to open the letters of credit and this was to the knowledge of the 1st defendant.
Secondly in the NICHIMEN CASE the buyers failed to establish the letters of credit by the latest date that was permissible. In this case the latest date that was permissible was not yet ascertained at the time when the defendant seller terminated the contract, 5th September 2007, because the arrival time of the vessel was not yet ascertained. It was only the expected arrival time that was ascertained as 10th September 2007
Thirdly on the 11th of April 1986 the sellers nominated the loading range April27-29. Loading range means we have your goods ready, we shall be loading same at your nominated port from the 27-29. Noting the difference between an Fob contract and a CIFcontract reference to port of loading and arrival of the goods respectively the nomination of the loading range in an fob contract is equivalent to the appropriation notice in a CIF contract as the loading range tells you the time of loading while in the CIF contract, appropriation notice tells you the date of expected arrival of the vessel. This notice was firstly given out of time and secondly not given until such a time that it becomes practically impossible to revert to the original times as fixed by the contract.
Lastly in the case of NICHIMEN, the failure of the buyers to open the letters of credit was entirely their own fault uninfluenced by anything the sellers did. The buyers simply ignored all communications from the sellers and there was no implied agreement or
waiver. In this case the failure to open the letter of credit as against the stipulated deadline was mostly the fault of the 1st defendant seller in not providing the said notice, not stating the form the letters of credit should take prior to the application being made. After the notification which was out of time, the plaintiff buyers did not repudiate the contract but on the contrary acted promptly always in touch with the sellers with the hope that it would be received as promptly as possible. The Plaintiff buyers showed a readiness and willingness to pay for the cargo and even made the first payment as against the 5th of September when the contract was repudiated.
The truth of the matter as gleaned from the facts of this case is that there is no gainsaying that there was waiver of time being of the essence and the worst scenario was for reasonable time to have been fixed by the 1st defendant sellers..
On the delay of exhibit H, the 1st defendant's solicitor argued that it was not a condition precedent for goods to be appropriated before the letters of credit were opened. He referred the court to the provisions in exhibit B which states "Any delay in respect of the letter of credit and /or transfer will give sellers the rieht to renegotiate or cancel the present contract at buyers costs and expenses" .. He noted further that the plaintiff as the 3rd of July 2007 had a reasonable idea as to when the ship would arrive, and it was for the plaintiff to have taken steps to effect payment. This submissions do not hold in the light of the relevance of the appropriation notice as the document which was to prepare the buyer plaintiff to make payment as against the arrival of the vessel. It contained the most important information for the plaintiff buyers that the goods /cargo conforming to description of the expected cargo were already on the High seas as per shipment date which is the date of the bill of lading. In short it appropriated the goods to the contract It also contained information to the effect that from the date the goods were shipped the cargo would take at least 31 days.(i.e. date of shipment to ETA) .In a contract were the payment terms are clear that payment should be made at least on specific days before arrival it is this document, the notice of appropriation, that you would look for before making the necessary payment within the deadline stipulated. In normal financing of international trade this is not usually the
way it happens .Instead it would usually be a term of the contract that the buyer would procure the opening of the letter of credit in the sellers favour before the goods are shipped, a requirement which as we see was construed as a condition of the contract in the case of TRANS TRUST SPRL VS DANUBIAN TRADING & CO (1952) 1 ALL ER CA PAGE 970-978 . But in another case, THE CASE OF PA VIA & CO SPA VS THURMANN NIELSEN (1952) ALL ER CA PAGE 492 PP 494-495 Lord Denning had this to say
"THE SALE of goods across the world is now usually arranged by confirmed credits..........................The question in this present case is this . In a contract which provides that payment should be by confirmed credit when must the buyer open the credit ? In the absence of express stipulation, the credit must be made available to the seller at the beginning of the shipment period .The reason is because the seller is entitled before he ships the goods to be assured that on shipment he will get paid "
The purport of this is that a buyer need not open the letters of credit at the date of shipment as proposed by the 1 defendant's solicitor in his argument when there is an express stipulation as to when it must be opened and when that opening of the credit relates to the actual arrival of the vessel as happened in this case. In that case the court held
"in the absence of an express stipulation in the contract the credit should have been opened not when the sellers were ready to ship the goods but at the beginning of the shipment period ; on the facts of the present case the credit should have been made available in the case of the first shipment on feb 9 when the particulars were supplied to the buyers"
Because of this it is of paramount importance that the date of shipment and the expected arrival of the vessel be communicated well in advance and at least not later that than the deadline for the receipt of the appropriation notice. In those cases where there is no express stipulation as to the date when it must be opened it is expected that
the buyer should immediately pay by irrevocable letters of credit but were payment is with reference to a stipulation relating to the arrival time it is for sure different.
Noting the delay that 1st defendant had already taken in the shipment of the cargo which I said tantamounts to a breach of the terms, one wonders what the defendant was doing when he had to take 18 days after shipment of the cargo before he could tell the buyer that the goods were appropriated to him. The 1st defendant knew the terms of the Sale Agreement very well and if they were interested in receiving their payment at this specially negotiated and reduced price they should have been ready and willing to facilitate this process by sending the appropriation notice promptly. The appropriation notice is just a letter and its attachment which are the bills of lading as evinced by exhibit H. It is not a process involving other parties like as happens in the opening of an LC where the buyer has to apply to the issuing bank in Sierra Leone and get it confirmed by the confirming Bank. Yet he failed to do so. No doubt this court is convinced the 1 defendant had other intentions and created a scenario so as to be cleverly excused of his obligations to the buyer. Noting the background under which such sales agreement was concluded certainly the Justice of the case would not require that such a defendant goes scot-free without paying damages caused by their evasive conduct.
Having noted that the plaintiff breached the payment terms and that prima facie time was of the essence, but that the same had been waived, was it right and proper for the seller to terminate the contract for breach of a condition precedent?. The answer to this brings me to the 3rd enquiry as to whether as against the answer in 1 and 2 above, or at all, the 1st defendant was right in terminating the contract which he did on the 5th of September 2007? The answer to this is clearly no and in such circumstances the repudiation of the contract was wrong. As has been stated while the Plaintiff failed to pay within the time frame there was a definite waiver of time being of the essence. Thus it could not have been right for the 1st defendant to terminate the contract especially at the time he did. However, accepting that the buyer failed to pay within the stipulated time frame which prima facie is breach of a condition precedent was the seller right in terminating the
contract on the 5th of September 2007? Even if that was the case, I should think not. This is predicated on the fact that the expected time of arrival was not yet at hand on the 5th of September 2007 and moreover payment terms were tied up with the arrival time and not the expected time of arrival. Thus any default or delay was to be measured from the arrival time which only became ascertained long after the 1st defendant had terminated or repudiated the contract. It certainly becomes difficult to reconcile the attitude of the 1st defendant noting his early breaches and his rush to terminate the contract. An interesting provision is article 9 of GAFTA NO 122 which is saying that this being a situation where the shipment period was 31 days ending on the 10th of September 2007 as long as the seller informs the buyer on the next business day after the 10th of September 2007 that the vessel was going to be delayed it could be delayed up to 15days . The point here is that at the time when the plaintiff terminated the contract that last day, the 10th of September 2007 has still not yet arrived making it possible that even the so called 14days could have been met even though we know now that it was not met as the vessel arrived on the 13th of September 2007. The 1st defendant seemed to have acted on Article 23 of GAFTA 122 which talks of what should happen in case of default but this provision even though similar to the following clause under exhibit B is inapplicable. The provision under clause B is as follows "Any delay in respect of the letter of credit and /or transfer will give sellers the right to renegotiate or cancel the present contract at buyers costs and expenses" . In short there was ample provision under exhibit B to deal with default or delay. Since there was waiver of time being of the essence there could be no delay. And where there is no delay there is no right to renegotiate or cancel the contract. Delay would only have been occasioned if a fresh reasonable deadline was imposed and the same flouted. This was not done. In the circumstances the 1 defendant's right to renegotiate i.e. fix his own price or cancel did not arise. But even if there was no waiver of time the 1st defendant could or should never have terminated the contract As stated earlier delay was to be measured only after the vessel arrived and not before, such that to terminate before the arrival of the vessel and during the time when buyer showed readiness and willingness to pay was wrong and out of order. He was not to exercise his right of repudiation until such a time that the vessel had arrived without receipt of payment .What he would have been entitled to even if there was no waiver of the time
being of the essence would have been a few thousands of dollars perhaps interms of compensation.. The 1st defendant should have delivered and asked for damages as compensation, if at all. As against this background, the case for repudiation by the 1st defendant is I think, quite lacking in substance. It must never be forgotten that repudiation / termination of a contract is a serious matter not to be lightly found or inferred, to quote the words of LORD SELBORNE IN MERSEY STEEL & IRON CO VS NAYLOR, BENZON &CO (1884) 9 App Cas. 434 at page 438 stated that for you to repudiate you must look at " the actual circumstances of the case in order to see whether the one party to the contract is relieved from it's future performance by the conduct of the other, you must examine what that conduct is, so as to see whether it amounts to a renunciation, to an absolute refusal to perform the contract, such as would amount to a rescission if he had the power to rescind, and whether the other party may accept it as reason for not performing". Clearly as against the background in which I have presented the facts in this case regarding the waiver and /or estoppel, the failure of the plaintiff to pay the price at the stipulated time frame was not absolute refusal of the plaintiff to perform., the 1st defendant seller was never relieved from its future performanceof delivering 6,000 metric tonnes of Indian rice to the plaintiff buyers in Freetown
Could it be doubted that the plaintiff all along pursuant to Section 29 of the Sale of Goods Act Cap225 Vol. IV of the Laws of Sierra Leone 1960 was ready and willing to perform by making the requisite payment for the goods but that the 1st defendant was not ready and willing to deliver the 6,000 metric tonnes of Indian rice to plaintiff. In fact this court is of the view that he had other intentions. It would seem to me he wanted to sell to a 3 rd party because this was a special contract price for which he stood not to gain as much as he would want. .How does this court come to such a conclusion? See Exhibit EPG 9. It gives us the scenario were the 1st defendant showed that they were unhappy with the price which was finally settled at US$367 per tonne as gleaned from Exhibit B the Sale Agreement but that they had wanted a higher price than that. This showed that the 1st defendant despite having agreed on a special reduction was not happy with same and wanted to avoid the obligation therein for all time. Because the buyer has had the
Goods appropriated to the contract and bills of lading delivered to him in a way which effectively transferred or assigned to him the rights which they embody, he was in a position to assert his title to the goods. This is because property passes on delivery of the bill of lading and with it the right of possession. The plaintiff was therefore right in demanding possession/delivery at the port of arrival Freetown when the same was on board MVALEXI 1 by their bringing of the said action for which judgment has been given and damages assessed at US $450,000. This is a case where I see the 1st defendant orchestrating events to do grave injustice to the plaintiff and the justice of this case would certainly require that the plaintiff pays damages. Against the foregoing, I see the defence and counter claim as one lacking substance and merit.
Against the foregoing this court orders as follows:
1. Order 2 was abandoned and/or refused.
2. Order 3 is refused and consequently Judgment in this action cannot be set aside and the action be stayed.
3. Order 4 was abandoned and /or refused.
4. That the defence and counter claim in this action lacks merit and consequently the application that the Judgment / order of the court dated 26th November 2007 and all subsequent proceedings be set aside on the ground that the 1st Defendant has a good defence to the action, is refused.
5. The interim Stay of Execution granted by this court on the 5th of February 2008 pending the hearing and determination of this application is lifted and or rescinded pursuant to which Guarantee Trust Bank (SL) Limited is hereby ordered to execute this Courts Garnishee Order Absolute of 31st January forthwith.
6. Costs to be taxed
Hon Mr. Justice Desmond B Edwards J