Huyton SA v Distribuidora Internacional De Productos Agricolas SA De Cv

The dispute, which gives rise to this appeal, can be put in reasonably straightforward terms. In May 1998 Huyton had 3,375 mt of Ethiopian whitish sesame seed on board the Zarina 1. Huyton made a Joint Venture Agreement (the JVA) with Dipasa under which it was hoped the seeds would be imported into Mexico and sold, and under which the seeds were to be stored in Huyton’s name with a public warehousing company Acosa. Importation required compliance with Mexico’s health regulations. The seeds were not in fact stored in Acosa’s warehouse in Huyton’s name. They were stored in Dipasa’s warehouse under an "enabling agreement” between Acosa and Dipasa, but this was something of which Huyton were never told either by Dipasa or by Acosa with whom Huyton were in direct communication. Huyton did not produce the phytosanitary certificate required by the importing authorities certifying the health of the seeds, and problems arose between Dipasa and Huyton leading to Dipasa and Huyton agreeing that Dipasa should purchase the seeds, and the Joint Venture Agreement be cancelled “at par”. It was a term of the Sale Agreement (the SA) that the goods being stored at Acosa’s warehouse should only be released to Dipasa on payment of the price. After conclusion of that agreement Dipasa processed the seeds and discovered that they were rancid. Since the seeds were stored at Dipasa’s premises, Dipasa were in a position to sell the seeds to a third party without paying Huyton. Each party cries foul – Huyton complaines that Dipasa had failed to store the goods with Acosa’s warehouse in Huyton’s name and had thus taken the goods without paying for them alleging dishonesty against Dipasa; Dipasa alleges that Huyton had dishonestly sold them old crop for new.

It is a matter of great regret that the two parties have not been able to see that what needed sorting out was primarily of course whether the seeds were rancid and from an earlier crop year, but also why Huyton should not be secured in relation to any money that was owed to them since Dipasa should not have been able to obtain the goods without paying for them. Security one would have thought would have been easy to resolve. The question of whether the crop was from the wrong year would have been a short point for an arbitrator. Since it was a term of the SA that disputes under that agreement should be the subject of a FOSFA Arbitration that was an obvious tribunal. Before us both parties recognised the force of the above. Mr Young QC for Dipasa accepted that his clients owed the price under the SA which they had never paid, and Mr Males QC accepted that if the price were paid into court or a joint account it might well be an appropriate solution that his clients should arbitrate the crop year point. The respective positions appeared to have the making of a sensible compromise, but that was not to be because enormous costs had been incurred in fighting the action before Mr Justice Andrew Smith, and agreement as to who should pay those costs was not possible.

What then was the action before Andrew Smith J about, and how did it come to take place? Huyton wished to go back to suing on the JVA. It was their case that Dipasa had fraudulently misrepresented where the goods were stored which had induced them to enter into the SA; they claimed that they had rescinded the SA, and they claimed that the JVA had been repudiated and that they should receive damages for that repudiation. The benefits of being entitled to go back to the JVA are difficult even now to ascertain, but one benefit was said to be that Dipasa’s obligations under the JVA were guaranteed by Dipasa Europe. Mr. Young suggested that the reality was that Huyton did not wish to have the dispute decided by traders under the FOSFA arbitration provision. But it is right to say, Dipasa did not apply to stay that part of the proceedings concerned with whether the SA had been entered into under a misrepresentation.

The above unhappy state of affairs is compounded by the following. If Huyton establish a material misrepresentation, which induced them to enter into the SA, the question would arise as to what the court should do. Now that Huyton no longer allege fraud that question arises under the Misrepresentation Act 1967 Section 2(2) of which provides as follows :-

“Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.”

Would the court order rescission? The goods the subject of the SA have long since been sold and disposed of to third parties. The judge seems to have contemplated that disposal of the goods would not have prevented rescission [see para 472]. The theory behind that view must be that in some way rescission would enable the JVA to be reinstated giving rise to a claim in damages under that agreement. That seems to us to disguise the reality, which was that in no way could the parties have been put back in the position as if the SA had not existed. Monetary compensation had to be the only realistic remedy. But in any event the judge’s view is expressed in the context of an alleged fraudulent representation whereas now the court is concerned with a representation to which the Misrepresentation Act applies. Huyton accepted that they suffered no financial loss as a result of the goods being located where they were, and suffered no financial loss as a result of the misrepresentation itself other than being kept out of money that they would otherwise have received from Dipasa before the goods could be released. There is no credible suggestion that Huyton would have received a higher price than they negotiated with Dipasa under the SA. The only credible suggestion argued by Mr Males is that any SA would have not been on precisely the same terms. That argument relates as it seems to us purely to the possibility that the terms which were intended to secure payment to Huyton prior to delivery of the goods from the warehouse would have been renegotiated to preserve Huyton’s position. The only aspect that makes one pause in considering whether this is not a clear case where the court would declare the contract subsisting relates to the “loss” of security which Huyton suffered in two senses. First they did not have a term in the contract which meant they got paid before the goods were delivered to Dipasa and they did not have the security of a guarantee from Dipasa Europe. As to the first if they obtain the price plus interest under the SA that will in fact provide recompense; as to the guarantee, it appears to have been contemplated that Dipasa Europe would guarantee the SA. Presumably that was never ultimately provided and cannot thus have been thought of as that important by Huyton in the context of obtaining the sale that they got. So even if a misrepresentation were established in relation to the location of the goods, this seems to be a case where the court would exercise its jurisdiction to declare the SA subsisting leaving the parties to their remedies under that agreement. Damages in lieu would not seem to arise because Huyton could not establish any loss flowing from the misrepresentation itself.

During the trial Huyton obtained permission to amend to raise a plea of unilateral mistake. It has always been difficult to see how if Huyton failed to establish a misrepresentation, they would be likely to succeed on the basis of unilateral mistake. But even if such a mistake could be established, once again it would seem in the highest degree unlikely that the court would grant the remedy of rescission if by maintaining the contract, Huyton achieved adequate and proper compensation.

The fight over whether there was a misrepresentation or mistake inducing the SA agreement relating to the location of the goods seems accordingly to have been a complete waste of time and resources. There are probably matters in the background about which we know very little including an injunction which we were told had been obtained in Holland over Dipasa Europe’s assets which has led to the litigation being fought out in the way it has. Accusations of dishonesty from both sides have almost certainly not helped. But one can see at least with the benefit of hindsight that it is lamentable that the parties allowed themselves to adopt entrenched positions that resulted in the litigation that has so far been fought. It is furthermore lamentable that the resources of the courts have been used up allowing such litigation to be fought through.

We have considered whether, since it is likely that the end result of this appeal for the parties is likely to be the same whether the SA was entered into as a result of a misrepresentation or mistake or not, it is right to spend time considering whether the judge’s decision on these issues was right. Might not this court simply dispose of the appeal on the basis that, even if the judge was wrong, since the court would declare the SA subsisting, and leave the parties to their remedies under that agreement, it is not right for the court to spend further time debating the misrepresentation or mistake issue? Tempting as that course is, since costs in this court and below will on any view be a matter for argument, some view as to the merits of the appeal has to be formed. We shall however try to be as succinct as possible.

The first issue on the appeal is whether the SA was induced by a misrepresentation made by Dipasa. To succeed before the judge Huyton had to establish that Dipasa made a false representation to Huyton which had the object and result of inducing Huyton to enter into the SA [see paragraph 701 Halsbury’s laws Volume 31]. The allegation was that Dipasa had represented that the goods were to be stored in the warehouse of a third party (Acosa), that they became aware that the goods were not be stored in Acosa’s warehouse, that they allowed Huyton to continue to believe that they were so stored when they had a duty to correct that misapprehension, and thus were representing as at the date when the SA was entered into falsely that the goods were so stored. The allegation was further that Huyton relied on the representation in entering into the SA, and were thus induced to enter into the SA by the representation. The judge found (1) that by the date of the SA, Huyton were looking only to Acosa in relation to the whereabouts of the goods; (2) that Dipasa did not appreciate that Acosa were representing that the goods were in their warehouse or that Huyton were relying on such a representation in making the SA; and (3) that Huyton through Mr Philippas although they did not know that the goods were not stored in Acosa’s warehouse, did not in fact rely on any representation as to where the goods were stored in making the SA.

The judge’s judgment is detailed and scrupulous. He has made findings both for and against both parties in what was obviously not an easy trial having regard to the fact that he found difficulty in accepting the evidence of the main witnesses on each side. He clearly in that context took a more adverse view of Mr Philippas the Huyton main witness than he did of Mr Coello the Dipasa main witness, but his assessment of both was that he could not depend on what they said unless it was corroborated [see paras 46 and 50]. Mr Young has stressed before us more than once that we should be slow to interfere with findings of the trial judge who has had the advantage of seeing and assessing the witnesses. That principle exemplified by many decisions of this court and recently in Assicurazioni General SpA v Arab Insurance Group (BSC) [2003] Lloyd’s Rep IR 131we have well in mind. But it is important to distinguish between primary findings of fact and inferences to be drawn from those primary findings; and it is furthermore important to test the judge’s findings against the contemporary documents and the inherent probabilities. Of course if the findings are consistent with those documents and the inherent probabilities or given the “wide margin of appreciation” [per Ward LJ in Arig at 172] which must be given to the judge who has heard the witnesses, within that wide margin are so consistent, this court will not interfere.

The starting point is however the contemporaneous documents and the inherent probabilities taken together with the primary findings of fact of the judge which are unchallenged. For the present we will also include save where we say otherwise a finding of primary fact which is challenged that is to say that Mr Philippas of Huyton knew or suspected that in part the seeds were old crop and not 1997/8 year.

The chronological sequence is as follows. While the seeds were on the Zarina 1 the joint venture agreement was entered into. It is an agreement under which the goods were valued at a price of “US$700 per m/t cost, insurance, freight free out Lazaro Cardenas, Mexico.” It contained the following terms:-

“3.

The goods shall be transported to a bonded warehouse in the port or to any other bonded warehouse in any city in Mexico near to Dipasa’s factory where space is available and held in the name of Huyton. Such bonded warehouse shall be approved by Huyton’s bank prior to vessel’s arrival.

8.

Goods may be released by the warehouse only against receipt by Huyton’s bank of payment by Dipasa, and Dipasa undertakes to effect such payment prior to removal of the goods, or any of them, from the warehouse. Upon receipt of payment by the bank, Huyton shall immediately instruct the bonded warehouse by fax to release goods immediately to Dipasa.

10.

Huyton shall appoint SGS or its nominated agents to carry out a survey of the weight and quality at time of discharge in order to ascertain the actual discharged weight and the quality of the goods. The cost of such survey is estimated at US$ 0.37 PMT which shall be attributable to the joint venture. The parties agree that any quality or weight loss established by the survey (Huyton’s original purchase of the goods being on a “Shipped weight and quality” basis) shall be attributable to the joint venture. Only goods to the weight certified as discharged by SGS shall enter the joint venture as far as sales are concerned.

11.

The parties agree that onward sale of the goods shall be on a joint venture basis as is more particularly set out below.”

There are then detailed provisions relating to the basis on which the goods would be sold and processed and ultimately by clause 17 it was provided:-

“For all sales made by Dipasa, Dipasa shall pay Huyton’s share of the profit, or in the event of loss, Huyton shall reimburse Dipasa Huyton’s share of the loss.”

By clause 21 Dipasa Europe BV guaranteed the performance of Dipasa under the agreement.

On 4^th June 1998 Huyton sent a fax to Acosa of which a copy was sent to Mr Baptista of Dipasa [234 of the judgment] in the following terms:-

“Please be informed that Messrs Dipasa are making all the discharging and storage arrangements on our behalf and account. However the cargo is to remain at your bonded warehouse in our name and is not to be released or delivered to anybody without our written authority or instructions. For good order’s sake please confirm that you will act as per our above instructions.”

By fax on the same day Dipasa wrote to Huyton saying:-

“We want to inform you that goods will be discharged to custom warehouse and after customs clearance goods will be storaged at Acosa bonded warehouse. For that reason we need original set of documents as soon as possible. That means that there will be an additional cost of handling at port.”

Again on the same day Huyton wrote to their shipping agents copies of which instructions were sent to Dipasa on 9^th June 1998 [see page 288A]. Those instructions included the following:-

“3375mt gross Ethiopian whitish sesameseeds to be discharged and stored in messrs Huyton SA name. Cargo must not be released by you or the warehouse to anybody without our written instructions/authority. Therefore please ensure that the cargo is discharged and stored in our name only. Messrs Dipasa have been appointed to deal with all import formalities and arrange the stevedoring/storage on our behalf and account but not authorised to take possession of or dispose of this cargo without our written instructions. Please ensure. We understand that owners have already instructed/authorised you allow the discharging and release of the cargo to Huyton SA or to their order without the production of the original bills of lading. Therefore you are kindly requested to allow messrs Dipasa to discharge the cargo and store it at the warehouses of Acosa in Huyton SA name.”

Dipasa Europe on 8^th June 1998 pressed Huyton for the original documents in the following terms:-

“We need original documents as requested “URGENTLY” otherwise discharging and stevedoring costs will be duplicated plus double warehousing cost, since goods have to go to “customs” (rented) warehouse and from there to Acosa warehouses, also, please note that authorities are very burocratic to the extreme that they might create problems. Please “RUSH RUSH documents as requested”.”

9^th June 1998 was the day when the seeds were due to be discharged from Zarina 1 and there is an exchange of faxes culminating in a fax on which Mr Young placed great reliance as lulling Dipasa into a false sense of security. Dipasa Europe initially faxed Huyton including the following paragraph:-

“…..We are expecting to gain some time when discharging, we are also planning to discharge the vessel and as much as possible to load in Railroad cars (aiming to save some more cost), regrettably since Lazaro Cardenas is an small Rail station they do not have all RR cars available, therefore part of the cargo will be placed in Acosa warehouses in Lazaro Cardenas and part will be shipped directly to Celaya (Acosa warehouse near Dipasa’s factory). Therefore please send a fax or telex to your agent instructing them that cargo will be delivered to Acosa either in Lazaro Cardenas or in Celaya or at any of their warehouses, we will appreciate if you can transmit this fax/telex today and send us a copy by fax.”

Huyton faxed Dipasa including the following:-

“Very pleased to notice that an agreement has been finalised to discharge the vessel.

Insurance underwriters need to know the exact location of each warehouse where the cargo will be stored and the quantity to enable them to finalise the insurance cover.

Therefore please let us have the above information within today.

As for the release of the cargo the agent is already instructed by us to allow you to take delivery/transport and store the consignment in our name.

Please find attached our instructions to the agent…..

Finally we are obliged to provide our bank a direct confirmation from the warehouse company that the whole cargo is stored in our name.

We have asked Almacenadora Centro Occidente (Mr Liceaga) to send us this confirmation but so far we have received nothing.

As matter is extremely urgent and important can we please ask for your intervention.”

Dipasa Europe responded stating first that Acosa:-

“has a public warehouse almost in every city and medium sized town in the whole country of Mexico, it is by far the largest not only warehousing but also “goods financing” company of Mexico…..

As for the specific address of each of the warehouses, we do not have them here but we are requesting such information to Dipasa Mexico today.

As for the quantity to be placed in each warehouse please note that “our aim” is “to store all” in the city of Celaya….. but it will depend only in the availability of RailRoad cars at the time of discharging, whatever we cannot load to RR we will have to store it at Acosa’s warehouse in Lazaro Cardenas, and in later stages we will ship it to Celaya, of course you will appreciate that if we ship straight to Celaya we will be saving some cost, in short yet we do not know how many tons will be placed in each warehouse, this information will come in a couple of days.

As for the confirmation from Acosa that the whole cargo “IS” stored in your name I am sure you will appreciate that to state that goods “ARE” stored in your name the company will not be able to state as such. Therefore what we suggest is you to request them that the goods “WILL BE STORED IN YOUR NAME” as soon as they receive the good, I believe that indeed they should be able to do that.”

Acosa faxed Huyton in the following terms:-

“We are informed that the 67,500 bags, weighing 3375 mt of sesameseeds gross will be allowed to send it to our warehouse located in Celaya, y/o Irapuato, Guanajuato, Mexico.

The merchandise sall (sic) be discharged above your stricts instructions.”

Huyton’s response to Acosa was in the following terms:-

“Noted your confirmation that as soon as the cargo arrives at your warehouses it will not be released or delivered to anybody without our direct written instructions/authority.

As soon as all the consignment is in your stores, we shall contact you to ask for an official certificate. ……”

Huyton’s response on the same day (the fax much relied on by Mr Young) [page 298A] was so far as material in these terms:-

“We confirm that we have arranged insurance cover for transport and storage.

We also confirm that we have obtained storage company’s confirmation that the cargo will only be released against our direct instructions.”

It appears that it was on 9^th June according to the judge that Dipasa decided to take the cargo to their own premises [see para 19]. This came about in the following circumstances. Huyton had not supplied the original phytosanitary certificate. This was because they had not authorised payment under the letters of credit in favour of their suppliers although this was never revealed to Dipasa. Indeed Huyton was untruthful in the explanations it was giving to Dipasa for its inability to provide the phytosanitary certificate [see para 177]. Dipasa wished to arrange an import permit from Sagar [the Mexican Ministry of Agriculture]. In order to do so Dipasa gave a letter of undertaking that the phytosanitary certificate would be provided and backed their undertaking with a bond in the sum of 1 million Mexican pesos. Sagar it seems also detected the presence of pennisetum polystachion in the cargo which resulted in the goods having to be held in quarantine until a sample had been analysed [see para 193]. Sagar did issue the phytosanitary certificate of importation on 9^th June. That certificate showed Dipasa’s warehouse as the delivery place. The reason for Dipasa’s warehouse being shown was that by that time it had become clear that Acosa could not accept the goods into their warehouse at Lazaro Cardenas since that warehouse only took bulk goods. There had been a discussion about storing the goods at Celaya or Irapuato two Acosa warehouses close to Dipasa’s premises at Cortazar. The fax from Acosa quoted in paragagraph 22 above sent as it seems on 9^th June confirmed that expectation, but that expectation was not implemented. The decision on 9^th June was to use Dipasa’s own warehouse [see para 194]. This was to be done under what was termed an “enabling agreement” between Dipasa and Acosa under which Dipasa would become the authorised holder of the goods in accordance with the requirements of Mexican law. The scheme of that agreement was that Acosa should have use of Dipasa’s warehouse and should be responsible for the goods in exactly the same way as if the good were in their own warehouse, once certificates of deposit (CDs) had been issued. If Acosa had issued a CD in relation to these goods in favour of Huyton as Dipasa at all times expected, Huyton would have had as good a security over the goods as if the goods had been in Acosa’s warehouse. However there was no communication of the intention to store the goods at Dipasa’s warehouse to Huyton, and no communication of the effects of an enabling agreement under Mexican law.

It was Mr Young’s submission that the fax at page 289A would lull Dipasa into believing first that Huyton would be aware that the goods had been stored in Dipasa’s warehouse because of the confirmation in relation to insurance and second that Dipasa would understand that Acosa were giving their confirmation relating to the release of the cargo by reference to the fact that the cargo was in Dipasa’s warehouse. These submissions go further than the evidence on behalf of Dipasa. Unsurprisingly it was never Mr Coello’s evidence that he assumed at this stage that Huyton were aware of where the goods were going to be stored or that he contemplated that the assurance given by Huyton related to goods being stored in Dipasa’s warehouse. Dipasa cannot have contemplated any more than that Acosa had given a confirmation relating to the cargo which would be effective once the goods were in the warehouses of Acosa to which Dipasa themselves had referred.

On 17^th June 1998 the discharge of the seeds was complete and on 19^th June the seeds started to be delivered to Dipasa’s warehouse. On 30^th June 1998 the enabling agreement was actually signed as between Acosa and Dipasa.

On 29^th June Huyton faxed Acosa [247] seeking confirmation that the cargo had arrived at their warehouses in Celaya. The judge found that Dipasa did not know of this fax. However on the same day they also faxed Dipasa asking if they could confirm that all the cargo had arrived at Celaya and had been put into store. The response they got from Dipasa was that:-

“Cargo is beginning to arrive this week SGS comes tomorrow – will keep you informed, we hope that in about two weeks all cargo will arrive.”

There was no reference to any enabling agreement or that the goods were in Dipasa’s premises at Cortazar.

At about this time Mr Coello of Dipasa Europe arrived in Mexico. He found then for the first time that the seeds were in Dipasa’s warehouse at Cortazar rather than warehouses of Acosa [269]. On 3^rd July he told Mr. Philippas of Huyton that he was looking forward to seeing him in Mexico, and it was Mr. Coello’s evidence that he intended to tell Mr Philippas where the goods were stored plus the problems which were at that stage being faced in relation to quarantine. In his evidence he said: “I wanted him to know the situation of course the whole situation. He was my partner” [Transcript day 20 page 28].

From early July Huyton exchanged faxes with Acosa only, seeking confirmation that the goods were in their warehouse and in Huyton’s name. Huyton stated by fax of 13^th July:-

“Our bank is pressing us very hard for a storage certificate. Can you therefore please inform us urgently whether all the consignment has now arrived. If affirmative please let us have your certificate that you are holding the total cargo at your stores at Celaya in the name of Huyton SA and that you will not release any quantity without further authorisation. If the total cargo not yet arrived please advise when it will arrive.”

The response on the same day from Acosa was:-

“We are informed that the last 130 metric tons of sesameseeds gross will be arrive next Friday to our warehouse located in Celaya…..when all the consignment has been arrived we can send it to you the storage certificate.”

On the same day Acosa sent a further fax saying:-

“We already received 3235 metric tons of sesame seeds gross. We hope receive the last 140 metric tons next Friday. When all consignment have been arrived in our warehouse located in Cortazar Guanajuato; we have to count it. Then we shall extend the storage certificate at your name.”

On 15 July SGS on Huyton’s instructions attended as its certificate shows the warehouse of Dipasa for the purpose of sampling and weighing the seeds. This certificate was ultimately supplied to Huyton but the judge found and accepted that Huyton did not appreciate the significance of those words and did not appreciate that the seeds were in fact being stored at Dipasa’s warehouse.

On 20^th July Huyton further pressed Acosa for the storage certificate. On 27^th July Acosa having been informed that the phytosanitary certificate had not yet arrived responded to Huyton that they needed “that document to extend he storage certificate at your name.”

During all this period Mr Coello was pressing Mr Philippas of Huyton to come to Mexico. Mr Philippas was further suggesting from time to time that he would be coming, but ultimately never did come before Mr Coello returned to Holland on 20^th August. Of course if Mr Philippas had come to Mexico he would have discovered the true situation. It is thus hardly surprising that the judge acquitted Mr Coello of being fraudulent, nevertheless the fact remained that Huyton remained in ignorance of where the goods were stored.

On 27^th August in a telephone conversation between Mr Philippas and Mr Coello an agreement in principle was reached for the sale of the seeds by Huyton to Dipasa and a draft agreement was sent from Huyton to Dipasa. A sale was ultimately concluded containing the following terms:-

“The following agreement is in cancellation and replacement of the agreement dated 4/6/98, which is cancelled in its entirety at par without any recourse to either party. Accordingly, Huyton confirm having sold the following to Dipasa:-

Commodity:- Ethiopian whitish sesameseeds crop 1997/1998.

Quantity:- Min/Max 3434.872 gross metric tons.

Delivery:- Ex MV ‘ZARINA 1’ stored at Almacenadora Centro Occidente SA, Celaya, Mexico as per the schedule outlined under the payment clause here below.

Price:- US$ 695 per gross metric ton cost and freight free out Lazaro Cardenas, Mexico

Packing/Quality/Description/Condition/Gross Weight/Analysis:- final in all respects as is stored at Alacenadora Centro Occidente SA, Celaya, Mexico, which buyers have already inspected and approved.

Payment:- 100% cash by T/T at buyers cost upon presentation of sellers commercial invoice either by fax or mail prior release of the goods from the warehouse.

Buyers shall effect payment of the goods as follows:-

…………

Therefore sellers shall present (either by fax or mail in sellers option) to buyers their invoice prior to taking delivery of the goods. However irrespective of when buyers do take delivery of the goods, buyers shall effect payment against each invoice within the value dates as mentioned here above.

Immediately upon receipt of payment by sellers bank, sellers shall instruct the warehouse to release the relevant quantity to Dipasa.”

There was also a provision for Dipasa Europe BV joining in the agreement as guarantors. The copy of the agreement in our bundle bears Huyton SA’s signature only.

We shall return to the judge’s finding as to Mr Coello’s state of mind on reading the draft describing the goods as stored at Acosa Celaya.

On 3^rd September Dipasa commenced the processing of the seeds. On 18^th September the University of Chapingo produced a report with findings that the seeds were old crop and had an excessive ffa (free fatty acid) content.

On 22^nd September Huyton were informed by Acosa that they had been unable to store the seeds in their warehouses, and on 30^th September SGS informed Huyton that the seeds were in fact stored in Dipasa’s warehouse at Cortazar.

On 2^nd October Mr Coello wrote a letter in which as the judge found “he was lying in order to avoid revealing to Huyton the truth about where the seeds were stored. ..” [para329]

On 8^th October Huyton wrote to Dipasa stating they “are quite shocked at this flagrant breach of the agreement of 4^th June”.

On 12^th October Mr Coello wrote a further untruthful letter [see para 333 and 334 of the judgment].

On 29^th October Huyton faxed Dipasa saying “We hereby hold you in default and regard our contractual relationship as at an end…..”. It is that communication which Huyton contend rescinded the SA and accepted a repudiation of the JVA.

On 30^th October Dipasa responded:-

“As you remain unwilling or unable to present the original shipping documents as required by the agreements dated 4^th June and 27^th August 1998 and as you have unlawfully held us in default we treat your conduct as being a repudiatory breach of the contracts dated 4^th June and/or 27^th August 1998 and we accept your repudiation. In the circumstances we hereby hold you in default and shall claim against you all damages of whatsoever kind and howsoever arising resulting from your breach. “

The seeds were thereafter released from quarantine and sold. One sale can be ignored for the present purposes. The final sale was for US$420 per metric ton to Ajonjoli La Concepcion.

The judge made certain findings of importance. First he found that Huyton did not know that the seeds were not stored at an Acosa warehouse but were in fact stored with Dipasa [para 280 and 281]. He found that Huyton did not notice that the SGS certificate placed the seeds at Dipasa’s warehouse [278], and he held that Huyton were not themselves responsible for the misapprehension they were under [463]. Those findings are not challenged by Dipasa although with his advocate’s licence Mr Young might have been thought at some stages to be getting near to doing so.

It is the further findings in relation to whether any representation made was relied on by Huyton, and whether Dipasa made a representation which are the subject of challenge by Huyton. On reliance the judge found that Huyton were not influenced by their understanding that the seeds were at Acosa’s premises when they made the Sale Agreement. He found (1) that in entering into the SA, Huyton were relying upon Acosa rather than upon Dipasa for information about the storage of the seeds [303]; (2) Huyton were intent on selling old crop, and would have been unconcerned as to where the crop was located as long as they could conclude a deal at a reasonable price [304]; (3) that Mr Philippas was so dishonest that (a) there was thus no credible evidence before the court of reliance and (b) it was unrealistic to suppose that Mr Philippas would conduct Huyton’s affairs on the basis that others were honest [305].

As to whether a representation was made by Dipasa, he found that Dipasa did not appreciate that Huyton was proceeding under a misapprehension about where the goods were stored. He found [paragraph 436] (1) that Acosa was communicating directly with Huyton and that the implication of Huyton’s 9^th June faxes was that Huyton were looking to Acosa rather than Dipasa. (2) That Mr Baptista assumed that Acosa would tell Huyton of the enabling agreement because Mr Mosqueda of Acosa had said Acosa would do so. (3) He rejected the submission that the fax of 29^th June directed to Mr Baptista by Huyton [see paragraph 28 above] was an indication that Huyton were still looking to Dipasa.

There are a number of threads which run through consideration of this question. First what was Dipasa’s duty under the JVA? Second did Dipasa believe that Huyton were no longer looking to them for information as to where the goods were stored following the fax of 9^th June? Third did Dipasa actually appreciate on the date of conclusion of the SA, that Huyton were under the misapprehension that the goods were stored at Acosa’s warehouse? Fourth should Dipasa have appreciated on the date of the conclusion of the SA, that Huyton were under the misapprehension that the goods were stored at Acosa’s warehouse? Fifth would actual appreciation have imposed a duty to correct? Sixth if Dipasa should have appreciated but did not, does that render Dipasa a representor? Seventh what is the relevance of Dipasa’s view as to the importance of the place of storage to Huyton?

If we take the threads in turn. It would clearly as it seems to us have been an obligation of one partner in the joint venture to inform the other of a change in the arrangements for the storage of the goods. If there were a basis for saying that Huyton accepted at some stage that Dipasa should no longer have that obligation, that might have released Dipasa from its obligation under the JVA. But in our view the faxes of 9^th June and in particular the last fax [page289A] simply cannot in their context be read as accepting that Huyton would now look to Acosa and would no longer depend on Dipasa as a partner. For one thing the faxes are written on the assumption that the seeds will be going to Acosa’s warehouse - an assumption which Dipasa had no entitlement to think that Acosa would correct. In any event Mr Coello’s evidence was that it was his intention to tell Mr Philippas when he came to Mexico in July; it was not his evidence that he thought that Dipasa had been released from any obligation to inform Huyton of the whereabouts of the seeds. As regards “appreciation” of the position as at the date of the SA, the judge’s findings appear to be these:- (a) Mr Coello did not think that Huyton knew where the seeds were [280]; (b) Mr Coello would have told Mr Philippas if he had ever come to Mexico but Mr Philippas never came; (c) he read the draft SA but he did not pay attention to the description of the place where the seeds were stored, he thought the reference to Acosa was appropriate in the light of the enabling agreement, and it did not occur to Mr Coello at the time that the statement might be of any importance [285 and 286]. This finding the judge accepted he was making despite the October letters. In paragraph 287 he said:-

“I recognise that Huyton’s submission on this point is the more powerful because in his letters in October 1998 Mr Coello was dishonest about the storage of the goods. In the end, however, I have concluded that I should accept his evidence that when he read the draft SA, he overlooked the significance of the statements about where the seeds were stored.”

The judge is obviously acquitting Mr Coello of fraud. That acquittal is not challenged on this appeal. But in this area of duty to speak a person may not appreciate his duty or may not appreciate the importance of correcting a misapprehension and thus be acquitted of fraud, but may still be liable for a misrepresentation. [See Chitty 28^th Edition Note 67 to Paragraph 6-016]. The law may impose a duty to speak, and it will be no excuse that the party on whom the obligation is imposed was unaware of that duty. It is unnecessary to consider whether the duty would have arisen if the JVA was the only source of the obligation, or if without a JVA the only source was the fact that Dipasa had represented that the goods were to go to Acosa’s warehouse by the faxes in June. In this case there was both the JVA and the writing of the faxes. What in our view the judge should have held did impose the duty in this case was a combination of the following; an obligation under the JVA to inform where the goods were stored, the representation that the goods were to be stored in the Acosa warehouses by the June faxes, no entitlement to believe that Huyton had been informed that storage plans had changed, actual knowledge that as at the date of the SA the draft was showing that Huyton were under the misapprehension that the seeds were stored at the Acosa warehouse, and (although that may not have been appreciated) the fact that objectively viewed it would be of materiality to Huyton that the goods were stored with Dipasa.

Mr Males has attacked the judge’s finding and suggested first that the three grounds relied on by the judge hardly support his conclusion, and has submitted that there were factors which the judge has not considered . These are summarised in paragraph 21 of his written submissions, but include the terms of the JVA itself and the terms of the SA itself. He also stressed that the question is not whether the representee would have entered into a sale agreement, but whether he would have entered into this sale agreement on the terms that he did. He relies on an observation of Hobhouse J in The Larissa [1983] 2 Lloyd’s Rep 325 at 332 to the effect that an alleged misrepresentation “might have induced the making of this contract in that it affected the terms [in that instance one of the terms] on which the contract was made.”

Mr Young has attempted to answer Mr Males’ points in paragraphs 13 to 26 of his written submissions, and in his oral submissions. The thrust of those submissions is that the judge must have had in mind the terms of the JVA and the SA; that the location of the goods was in fact unimportant to Huyton; that even if at one time location was important Dipasa were lulled into a false sense of security by the fax of 9^th June [289A] which he submitted suggested that Huyton were now content with the assurance they had received from Acosa and were looking only to Acosa for information as to where the goods were stored; in any event location at the time of entry into the SA was totally unimportant because Huyton were extremely anxious to dispose of the goods at any price, and on any terms and the SA was its only realistic option. He deals with the terms point in this way:-

“27.

Huyton concludes its submissions on reliance by identifying two terms which would not have been included in the Sale Agreement had Huyton known the true position – the description of the location of the goods as “at Almacenadora Centro Occidente SA Celaya, Mexico” and the term that payment be made prior to release of the goods from the warehouse.

28.

Dipasa’s primary position is that the Sale Agreement would have been entered into in exactly the same terms, and the reference to Acosa Celaya would have been treated as a reference to the Acosa enabled warehouse at Cortazar. Cortazar – where the goods were – was, after all, near Celaya and so no confusion would have arisen [24]. It is, in any event, not accepted that it is sufficient for a party seeking rescission of a contract to show that any wording of the contract would have differed but for the alleged misrepresentation but, instead, it is submitted that it is necessary to show that the contract would either not have been entered into at all or that if entered into it would have differed in a material respect from that in fact entered into in terms of the rights and obligations it set out. Here all that would conceivably have changed would have been a description of the goods as at Acosa’s enabled warehouse at Cortazar near Celaya, and that cannot be sufficient to found rescission in circumstances where there was never any doubt as to the identity of the contract goods. No different terms in respect of Dipasa’s access to the goods would have been likely.”

In our view the terms point is critical in this case. That Huyton would have been prepared to sell the seeds at the price they did under the Sale Agreement even if they had known the true position seems overwhelmingly likely. We say that (we should emphasise) whether or not Mr Philippas knew or suspected the seeds were old crop. But the critical question is whether if Huyton had known the true position they would have concluded the sale agreement on the same terms, and whether if not the difference in terms was of materiality.

In focusing on that question we have serious difficulty with the findings of the judge. Looking at the terms of the Sale Agreement, and posing the question would all material terms have been the same even if Huyton had known that the goods were at Dipasa’s warehouse albeit subject to an enabling agreement, we find it impossible to conclude that they would. Certainly they could not be described as being at “ACOSA Celaya” unless Huyton had attempted to insist that should actually be so. If they had failed in that attempt, it seems to us that the payment provision would not have been maintained as it was. The object of the payment provision was that Huyton should receive payment “prior” to release from the warehouse i.e. Acosa’s warehouse. It maybe that if Dipasa had explained that even though the goods were in Dipasa’s warehouse the goods could not be sold by Dipasa without Acosa’s say so because of the enabling agreement, some term of the contract would have been worked out to meet the situation. But Huyton were totally unaware of an enabling agreement or as to what was needed to be done in order to make their position secure. It must have been of relevance that so far as Huyton were concerned Dipasa should not be able to obtain the goods without paying for them, and a term to secure their position would have been likely to have been negotiated.

If one turns to the judge’s reasoning as to why there was no reliance none of them are persuasive. His first reason is that Huyton were relying on Acosa; that is a question which arises under the question whether Dipasa made a representation. It does not go to the factual issue whether there was reliance on a representation as to location if it was being made. The judge’s second reason was that with knowledge that the seeds were old crop, Huyton would not have been concerned with who had control, but with doing a deal at a reasonable price. But this looks to see whether some contract at the same price would have been entered into and not whether the particular contract with its particular terms would have been concluded. Mr Philippas' desire to sell the goods and make a profit or less loss, only worked if he could get the price. Furthermore the terms of the JVA, the constant seeking of an assurance that the seeds were held in Huyton’s name and at a warehouse which retained control demonstrates that knowing the accurate position in relation to the storage of the seeds would have been of importance to Huyton in either agreeing a new clause 3 of the SA, or possibly insisting that the seeds were actually stored in some third party’s warehouse so that Dipasa had to pay before release from a warehouse as the SA contemplated. The suggestion that Mr Philippas was so dishonest that he would not care whether he would obtain his money before the goods were released makes no sense. We are also unattracted by the notion that his evidence was so dishonest that there was no evidence of reliance. It seems to us that this representation if made would be likely to induce a contract on the terms it was made. Its materiality is to our mind so obvious, that it should be for Dipasa to rebut [see Chitty 28^th Edition paragraph 6-034 note 67 and the cases there cited].

We would thus not uphold the judge on his conclusions in relation to the question whether Dipasa was making a representation nor on his conclusion as to reliance by Huyton. However dishonest Mr Philippas was and however bad a witness he was, the inferences from the objective facts and from the documents are in our view clear. It is however right to stress that to a considerable degree Huyton were the authors of their own misfortune. That is not to say that they should have found out where the goods were stored. But if they had provided the appropriate document Acosa would have issued a CD in their favour and Huyton would have been protected. The only effect of reversing the findings of the judge is to lead to the conclusion that certain of the terms of the SA would have been renegotiated. But Huyton have a perfectly good remedy under the SA for such loss as they have suffered. The court should accordingly declare the agreement subsisting and leave the parties to their remedies under that agreement.

We mean no disrespect to Counsel’s argument, but it seems to us unnecessary in the light of the above to consider the question of unilateral mistake.

The only other aspect to which we would refer is the challenge to the judge’s finding that Mr Philippas knew or suspected that the cargo was old crop. The reason why Mr Males wished to challenge this finding was both because the judge supported his conclusion in relation to reliance by reference to it, but also possibly because he feared that Huyton might be said to be estopped from refighting the issue on some future occasion. Our conclusions on reliance are reached even accepting as accurate the judge’s finding that Mr Philippas knew or suspected that the seeds were old crop. It is unnecessary to explore this issue in relation to that aspect. We would make quite clear that the finding also has no influence on our view that the only terms which might have been the subject of any renegotiations are those already referred to, and thus that the court would even if the findings were reversed still exercise its powers under Section 2(2) of the Misrepresentation Act.

Further Mr Young has accepted that no issue estoppel can apply in relation to that finding. On the judge’s reasoning and on the material in front of him it would have been very unlikely that this court would have interfered with that finding, and in the circumstances we can see no benefit to Mr Males’ clients in exploring the issue. The least said from their point of view would seem to be the better.

We would invite argument as to the appropriate order which this court should make.