P.T. Putrabali Adyamulia v Societe Est Epices

His Honour Judge Havelock-Allan Q.C. :

“4. FINDINGS

Under a C&F contract Buyers can only accept liability when the goods are loaded on board the ship. The contract called for shipment without mention of any specific origin. The Shipment and Classification clause in IGPA contract no. 5 states that:

Clause 6

“shipment must be by a first class ship(s) classed not lower than 100 A1 in the Lloyd’s Register or equivalent classification in any register which is a member of the International Association of Classification Societies”

The declaration was made in advance of the goods being loaded onto the ocean vessel giving the name of an unpowered barge, contrary to the terms of the contract. The declaration was thus defective. Buyers were entitled to object to the declaration within 3 days of tender, but were unable to do so, as they were unaware that the declaration was flawed. Buyers could not have objected to the declaration until they knew of the ship’s classification. …

THE BOARD OF APPEAL HEREBY OVERTURNS THE ARBITRATION AWARD … AND FINDS THAT the Buyers were not in breach of contract for non-payment.”

“Both sides, to a greater or lesser extent, appear to wish to rely on facts not found by the Board of Appeal. That may or may not prove necessary or appropriate, but it might be prudent to consider to what extent it is possible to agree any further facts over and above those expressly found by the Board, particularly where such can be proved or deduced from documents and/or are not controversial. I am not suggesting that an order under section 70(4) requiring further reasons will inevitably be necessary before the Court can properly consider the appeal but in the light of full argument of the issues such an order is an obvious possibility and I am merely concerned to try to avoid costs and delay if that is at all possible.”

7. The sellers identified two questions of law when they applied for permission to appeal. Before turning to those questions, it is convenient to set out the relevant provisions of IGPA contract no. 5. They are to be found in clauses 6, 10 and 11:

“6. SHIPMENT AND CLASSIFICATION: By first class ship(s) classed not lower than 100 A1 in the Lloyd’s Register or equivalent classification in any register which is a member of the International Association of Classification Societies. The goods of the contract description to be shipped on ships which will proceed directly or indirectly on a geographical normal commercially acceptable route from the port of shipment to the port/s of destination. “Overseas ship”; “ocean-going ship”, or similar words, shall mean a ship employed in carrying the contract goods on a sea-voyage from the port, place or country of shipment to the destination named in the contract direct or indirect with liberty to call and/or tranship at other ports. …

Where in any contract for goods sold for shipment it is expressly stipulated that shipment must be made on an ocean-going ship or ships, as defined above, a shipment shall be deemed not to have been made unless and until the contract goods are shipped on board the overseas ship. …

10. DECLARATION OF SHIPMENT: Notice giving name of ship and/or ships and/or ocean going ship/s, leading marks and other means of identification and/or bills of lading, date and numbers including container numbers where relevant shall be advised by shippers at time of shipment and by intermediate parties with due despatch. The time for making a declaration under this contract shall expire 72 hours before arrival of ship at port of discharge unless duration of voyage is less than seven days. …

A declaration or tender shall be deemed to be a good declaration or tender under a contract (but without prejudice to any question arising on points other than those concerning the declaration or tender) unless objection is made in writing by the Buyers to his Sellers concerned within three business days following the receipt of such declaration or tender, such objection to be passed on by intermediaries with due despatch. A declaration once made shall not be withdrawn, amended or replaced by another declaration or tender, except by mutual agreement.

11. LOSS OF SHIP: Should the ship or ships and the goods thereon which apply to this contract be lost, whether before or after declaration, Sellers shall tender complete set of shipping documents to Buyers as soon as fairly practicable after the loss is ascertained and Buyers shall pay cash in exchange for such documents, in order, within 14 days after presentation. …”

8. The questions of law raised in the arbitration claim forms are as follows:

“(1) Where a sale contract incorporates the Declaration of Shipment clause of the IGPA Form 5 … how should a seller’s compliance with this clause be determined? In particular;

(a) whether the Declaration of Shipment clause properly construed means that a notice of declaration is invalid if the notice of declaration does not specify the classification of the ship?

(b) whether a notice of declaration given in respect of shipment on board an “ocean going” and/or “unpowered” barge is a valid notice for the purposes of the Declaration of Shipment clause?

(c) whether failure by the buyers to object in writing within 3 business days following receipt of any notice of declaration made pursuant to the Declaration of Shipment clause precludes them from treating the notice of declaration as invalid?

(d) whether failure by the buyers to object in writing within 3 business days following receipt of any notice of declaration made pursuant to the Declaration of Shipment clause precludes them from treating the notice of declaration as invalid for the purposes of the Loss of Ship clause (clause 10)?

(2) Where a sale contract incorporates the Loss of Ship clause of the IGPA Form 5 … what is the meaning and the effect of the Loss of Ship clause where the ship and/or the goods are lost before or after a valid declaration by a seller?”

9. Mr Ashcroft, for the sellers (who appeared for the sellers in the Lorenzi case also) submits that the answer to the first question of law is “No” in the case of 1(a) and “Yes” in the case of 1(b), 1(c) and 1 (d). He says that the answer to question 2 is that the buyers are obliged to pay for the documents once they have received a declaration of shipment which is valid or deemed to be valid under clause 6, but only if the documents conform to the declaration of shipment and are otherwise in order i.e. in compliance with the terms of the contract. He relies heavily on the judgment in the Lorenzi case. Since the facts of the present appeals are indistinguishable from those in the Lorenzi case, it is worth quoting the judgment of Moore-Bick J. at some length. Having set out the relevant terms of IGPA contract no. 5 and the salient facts (namely that the goods were lost on INTAN 6 following a declaration of shipment similar to the declarations given in the present case), Moore-Bick J. recited the conclusion of the Board of Appeal. This was in exactly the same terms as the conclusion recited in paragraph 3 of this judgment. He then continued:-

“It is clear from this paragraph in the award that the Board’s decision effectively rested on two grounds: first, that the declaration itself did not comply with the contract; secondly, that the buyers were not prevented from objecting to it even though they had failed to do so within the time allowed by clause 10 because they did not know of the ship’s classification within the three day period there prescribed. The board appears therefore to have treated the sellers as being in default for failing to make a contractual declaration of shipment and no doubt that reflected the way in which the case was argued before them.

Mr Ashcroft, who has appeared on the appeal on behalf of the sellers, submitted that the Board of Appeal was wrong on both counts. As to the declaration of shipment itself, he has submitted, first, that it was not premature because the contract did not require shipment for these purposes to be shipment on an ocean going vessel. Accordingly, the sellers were entitled to give a declaration of shipment in respect of the first vessel on to which the goods were loaded. Secondly, he submitted that the declaration of shipment did not have to state the classification of the vessel and therefore to the extent that the Board proceeded on the basis that a declaration naming a vessel which was not classed in accordance with the requirements of the contract was defective, its decision was wrong.

In The Vladimir Ilich [1975] 1 Lloyd’s Rep. 322 Donaldson J. pointed out that where a contract for the sale of unascertained goods calls for a notice of appropriation the notice is a matter of contract, not of performance. In other words by giving a notice of appropriation the seller is identifying the ship on which the goods he will deliver are being or will be carried. What matters therefore is whether the notice is given in the right form at the right time. If, as in that case, the notice names a non-existent vessel the seller will find himself unable to perform his contract when the time comes, but that does not make the notice itself bad.

The declaration of shipment required by clause 10 IGPA form No. 5 is a statement of a similar kind. It is intended to identify the vessel on which the goods which the seller intends to appropriate to the contract have been shipped. It is not in itself a matter of performance.; that comes later. But it informs the buyer of the manner in which the seller intends in due course to perform and commits the seller to tender performance in that way. As such I agree with Mr Ashcroft that all that is necessary for the declaration of shipment to be effective so as to comply with the requirements of the contract is that it be given in the right form at the right time.

It follows that the fact, if it be the case, that the ship named in the declaration of shipment is not an ocean going vessel does not affect the validity of the declaration itself. But quite apart from that, the reference to “ships and/or ocean going ships” in clause 10 makes it clear that the ship identified in the declaration of shipment may or may not be an ocean going vessel. This reflects the provision in clause 6 that where it is expressly stipulated in the contract that the shipment must be made on an ocean going vessel, the shipment shall be deemed not to have been made until the goods have been shipped on an ocean going vessel. In other cases, as here, shipment on a non-ocean going vessel will satisfy the requirements of the contract.

There is nothing in clause 10 of the contract form which requires the seller to include in his declaration of shipment a statement as to the vessel’s class. The omission of any such reference cannot therefore render the declaration invalid. Moreover, the effect of the last paragraph of clause 10 is to render a declaration of shipment effective unless the buyer objects to it within the limited period provided. The clause does not make any exceptions to that and none in my view can properly be implied. Certainty in matters of this kind is of real importance because traders need to know whether notices of this kind are effective and can be relied upon. It is a consideration not confined to commodity traders. In the shipping context one of the best known examples is the Centrocon arbitration clause under which claims are deemed to be waived and absolutely barred unless made within three months of discharge. Such a clause has been held to deprive the charterer of the right to make a claim against the ship owner after the expiry of the three month period even though he may not have been aware of his right to make such a claim before the period expired.

It appears from the way in which the Board of Appeal has summarised the parties’ submissions in paragraphs 2 and 3 of its award that the buyers did not rely on any grounds in support of their refusal to pay for the documents other than the seller’s failure to make a valid declaration of shipment. Whether they could have done so or not is not a matter with which I am concerned.

For the reasons I have given I have reached the conclusion that the Board of Appeal was wrong to hold that the declaration of shipment in this case was defective and was also wrong to reach the conclusion that the buyers, having failed to make any objection within the three days provided by the contract, were nonetheless entitled to treat the declaration as flawed. In those circumstances the conclusion of the Board of Appeal cannot stand and the appeal must be allowed.”

10. I entirely agree with that reasoning. The contracts here contained no express stipulation that the goods should be shipped on an ocean-going ship. So, on the face of it, there was nothing in the contract to preclude the sellers from shipping the goods on INTAN 6 and giving notice of that fact under clause 6. In all other respects the declarations were regular in point of form and ought not to have been treated as invalid.

11. Nevertheless Mr Edey, on behalf of the buyers, says that the Board’s conclusion was right. He points out that in the Lorenzi case the buyers did not appear and were not represented on the appeal to the Commercial Court. Moore-Bick J reached his decision without the benefit of adversarial argument. Whilst Mr Edey accepts that the contract did not require that the vessel’s classification should be stated in the declaration of shipment, he submits that if INTAN 6 was not a contractual ship, no shipment took place when the goods were loaded onto her. Accordingly the declarations of shipment given in this case were premature. Even if one adopts the approach in The Vladimir Ilich, the declarations had to be correct as to form and timing. In the present case Mr Edey says that they were given too soon. Secondly, he challenges the view that the declarations should be deemed valid even where the buyers were unaware that the declarations were flawed until after the 3 day period for objections had elapsed. If all that is wrong and the declarations were valid or are to be deemed valid, Mr Edey’s final submission is that, in order for the sellers to succeed on the appeals they must show not only that the Board’s reasoning was wrong but that the Board’s conclusion was wrong also. The Board’s conclusion was that the buyers were not in breach of contract for non-payment. If the Board was wrong to arrive at that conclusion on the ground that the declarations of shipment were invalid, the conclusion is justified on an alternative ground, namely, that the buyers were entitled to reject the shipping documents because they showed that the goods had been shipped on a non-contractual ship.

12. The basis of all of these arguments is that the Board of Appeal has correctly found that INTAN 6 was not a contractual ship. This is not stated in terms in the awards and there was some debate as to how far a court can go in drawing inferences from express findings made in an arbitral award. I do not think that there is latitude to draw any inference which appears reasonable. After all, there may be more than one reasonable inference. The Court can only infer those matters which it is plain and obvious that the tribunal has accepted when one reads the express findings. In other words, it is only legitimate to infer matters which proceed by necessary implication from the express findings, or matters where the inference is inescapable because there is no other rational explanation to support the express findings in the award. To go any further would be speculation.

13. Applying that test, I think that in the present case it is a proper inference from the findings in the awards that the IGPA Board of Appeal considered that INTAN 6 was not a contractual ship. It is possible to discern two bases for that view: (1) that INTAN 6 was an unpowered barge, and (2) that her classification did not meet the requirements of clause 6. There was in fact nothing in the contracts to preclude the sellers from shipping the goods on a vessel which was unpowered and/or which was a barge. INTAN 6 was not uncontractual merely by virtue of her physical characteristics. But if her class was lower than 100 A1 in Lloyd’s Register or its equivalent, she was not a first class ship as defined in clause 6. I can see no rational explanation for the Board having recited the opening words of that clause in its findings or for having held that “the Buyers could not have objected to the declaration until they knew of the ship’s classification” unless the Board was of the second view.

14. Since I am prepared to infer that the Board accepted that INTAN 6 was not a first class ship, the buyers do not require the awards to be remitted for that fact to be found. This is just as well because I would not have been inclined to order a remission. True, the Court now has an express statutory power of its own motion to remit an award for further findings if it considers that the award does not set out the tribunal’s reasons in sufficient detail to enable the court properly to consider an appeal (s. 70(4)(b) of the 1996 Arbitration Act). But it would be possible to determine these appeals without knowing whether the Board considered that INTAN 6 was not a first class ship. Moreover the awards were published two years ago. It is undesirable to order a remission after such an interval of time, unless it is quite unavoidable. Here it is only the buyers who need the finding. In those circumstances they could and should have issued a precautionary cross-application under section 68(2)(h) of the 1996 Act to have the award remitted for further reasons as soon as the sellers’ applications for permission to appeal were served. It is incumbent on a party seeking to defend an appeal on grounds which may not be adequately expressed in the award to take that step. That was the view of this Court under the Arbitration Act 1979 (see Cefetra B.V. v Alfred C. Toepfer International G..m.b.H. [1994] 1 Lloyd’s Rep. 93 and Transcatalana de Commercio S.A. v Incobrasa Industrial E Commercial Brasileira S.A. [1995] 1 Lloyd’s Rep. 215), and I do not see why the practice should be any different under the 1996 Act. Although, tactically, it may be attractive for a respondent to an application for permission to appeal to adopt the stance that the award is good in its present form and therefore permission to appeal should be refused, a respondent is bound to consider whether the award is adequately expressed for his purposes in the event that permission to appeal is given. In the present case the buyers took their stand on the awards, notwithstanding the warning from Tomlinson J. as to whether the findings were adequate and notwithstanding that they had failed to persuade the sellers to agree to additional findings about the classification status of INTAN 6. They took a risk. If I had thought they needed a remission on the question of breach, I would not have granted it.

15. However it does not follow from the fact that INTAN 6 was not a first class ship that the declarations of shipment were defective. Mr Edey’s submission to the contrary rests on the proposition that “shipment” in clause 6 means “shipment on a contractual vessel”. For this he relies on two cases. The first is Bergerco U.S.A. v Vegoil Ltd [1984] 1 Lloyd’s Rep. 440. That case concerned a C&F sale under which, in return for the buyers agreeing an extension of shipment, it was expressly stipulated that the ship should sail direct from the port of loading to the port of discharge. In fact she deviated to other ports in the course of the voyage. By the time the buyers found out, their bank had already paid for the shipping documents. But the vessel was delayed in berthing at the discharge port and, before she berthed, the buyers rejected the goods. Hobhouse J. upheld their right to do so. He said this of the agreement that the ship should be a direct ship:

“… the term is more correctly described as a stipulation than a promise. The promise is to ship the goods. The term restricts the ways in which the seller can contractually perform that promise. It is in an all or nothing situation. Either the ship is a contractual ship, in which case the shipment discharges the promise, or the ship is non-contractual, in which case the shipment is nugatory unless and until the buyer with knowledge of the relevant facts chooses to accept it.”

16. Mr Edey contends that a nugatory shipment is no shipment at all and for that reason no shipment took place when the goods were loaded on INTAN 6. I cannot accept that argument. It was not necessary for the decision in the Bergerco case for Hobhouse J. to go so far as to say that shipment on a non-contractual ship was “nugatory”. It was enough for him to hold that it was not contractual. Furthermore the issue in that case was not whether the notice of appropriation was valid or whether the buyers could have rejected the documents. The issue was whether they were justified in rejecting the goods. Once it was held that the stipulation as to direct shipment was in the nature of a condition of the contract of sale, it followed that the goods could be rejected.

17. Mr Edey’s second authority is the decision of Lord Russell of Killowen CJ in Ashmore & Son. v C.S. Cox & Co. [1899] 1 QB 436. In that case the contract of sale provided for the goods to be shipped “from a port or ports in the Philippine Islands, by sailer or sailers, direct or indirect to London, between May 1 and July 1898, both inclusive”. On 27^th October 1898 the sellers made a declaration of shipment which stated that the goods had been shipped “Per Dulwich (ss.), London. Bill of lading, dated Manila, 15/9/98”. It was held to be a bad declaration. One ground of the decision was that shipment by a sailer rather than by a steamship was a condition precedent. So a declaration of shipment on a steamship was not contractual. That conclusion can readily be supported by the fact that the declaration expressly identified the Dulwich as being a steamship rather than a sailing ship. In consequence the declaration was bad in form as well as in substance. But it does not appear from the judgment of Lord Russell that he attached any particular significance to the fact that the acronym “(ss.)” had been included in the declaration of shipment. Nor does it appear from the brief summary of the arguments that this point was focused upon. Accordingly Mr Edey cites the case as authority for the proposition that a notice of appropriation or a declaration of shipment which on its face complies with the requirements of the contract is nevertheless liable to be rejected if the underlying facts reveal that the shipment in question is not contractual. I disagree. Since the declaration of shipment in the Ashmore case did not in fact comply with the requirements of the contract, and it was not argued by counsel that it did, I do not think that the judgment of Lord Russell can be interpreted as supporting so wide a proposition. If it were authority for such a proposition, it would be inconsistent with the approach of Donaldson J. in The Vladimir Ilich. Although Ashmore v Cox was not cited in The Vladimir Ilich, the judgment of Donaldson J. has stood unchallenged for nearly 30 years as providing the correct test of the validity of a notice of appropriation under a CIF contract. I would therefore confine the ratio decidendi of Ashmore v Cox to the narrower ground, which is that the declaration of shipment in that case was bad because it expressly identified the Dulwich as being a steamship rather than a sailer. This is consonant with the modern view that the validity of a notice of appropriation is to be judged by its form and timing and not by the substance of the performance which it purports to represent.

18. I can also see no justification for distinguishing The Vladimir Ilich from the present cases on the basis (as Mr Edey also argued) that the sale in that case was a sale on CIF terms whilst the sales here were on C&F terms. In my judgment the importance of certainty dictates that the validity of a notice of appropriation or a declaration shipment should be assessed on the same basis, whether it is the seller or the buyer who is insuring the goods.

19. I therefore reject Mr Edey’s submission that “shipment” in clause 6 of IGPA contract No. 5 means “shipment on a contractual vessel”. The word “shipment” in clause 6 is not a term of art. It simply means “loading on board a vessel”. A declaration of shipment which states that the goods have been shipped on board a particular vessel is a valid declaration if it does not indicate by its express terms that either, the vessel by reason of her characteristics, or the voyage by reason of the manner in which it is being performed, is not contractual. It follows that the Board of Appeal was wrong to conclude in the present case that the declarations of shipment were defective. They were valid declarations.

20. That being the case, it is strictly unnecessary for me to consider the “deemed validity” point. But for the reasons given by Moore-Bick J. in P.T. Putrabali v Fratelli de Lorenzi SNC, I consider that the Board was wrong here as well. The fact that the buyers may not have been aware that INTAN 6 was not a first class ship until more than 3 days had elapsed from the date of receipt of the declarations of shipment does not affect the operation of clause 10. Certainty again dictates that the clause should operate so that, in the absence of an objection to the declaration within the stipulated period for whatever reason, the seller is entitled to treat the declaration as a good declaration. The fact that the potentially harsh effect of a similar construction of the Centrocon arbitration clause may be mitigated by the granting of an extension of time under section 12 of the 1996 Act (and formerly section 27 of the 1950 Act) does not invalidate the Centrocon clause analogy. The existence of the statutory power to extend time was not a factor which persuaded the Court in either The Himmerland [1965] 2 Lloyd’s Rep. 353 or The Stephanos [1989] 1 Lloyd’s Rep. 506 that it was right to construe the Centrocon clause as barring even claims which could not have been advanced within the prescribed period. The Court arrived at that conclusion because of the overriding importance of certainty. Certainty is just as vital in the operation of clause 10 of IGPA contract no. 5. Moreover the final paragraph of clause 10 provides that a declaration, once given, cannot be amended or replaced save by mutual agreement. Thus the seller gets only one chance to make a valid declaration. The buyer can object to the declaration at any time without risk of it being alleged that, by his conduct since he received it, he is estopped from doing so (cf. Heisler v Anglo-Dal [1954] 1 WLR 1273). So it is fitting that the period for raising objections should be limited and that the limitation should be strictly applied in all circumstances.

21. I turn therefore to Mr Edey’s final argument, which is that if the buyers’ refusal to pay the contract price cannot be justified on the ground that the declarations of shipment were invalid, it can be justified on the ground that they were entitled to reject the documents. An immediate objection raised by Mr Ashcroft is that this point is not open to EWJ because EWJ, unlike SEE, did not file a statement in response to the application for permission to appeal which identified this ground as an alternative ground, not expressed or not fully expressed in the award, why the award should be upheld. Under the rules, such a statement must be served not later than two days before the hearing of the application for permission to appeal (CPR 62PD12.3(3)). The statement performs the function of the respondent’s notice which is still required in appeals under the Arbitration Act 1979 (see the Practice Direction at [1985] 1 WLR 959 and CPR 62.15(8)).

22. In Acada Chemicals Ltd v Empresa Nacional Pesquera S.A. [1994] 1 Lloyd’s Rep. 428, Colman J. emphasized the importance of adhering to the requirement for the service of a notice or statement of additional grounds. Having referred to the provision which contained that requirement in the then current edition of the rules, he said:

“The purpose of this provision is to enable a respondent to an application for leave to appeal to submit on that application that leave should be refused because the award has not been shown to be wrong, but by reason of grounds other than those expressed in the award. The requirement that the notice be served not less than two clear days before the hearing of the application is to enable the applicant to know in advance what arguments the respondent proposes to raise on the application for leave. What is quite clear is that the provision contemplates that any additional grounds must be raised on the hearing of the application for leave to appeal so that in reaching his decision on that application the Judge can look at all the arguments for and against upholding the award. For this reason the defendants’ notice of additional grounds is expressly made part of the procedure leading up to the application for leave to appeal as distinct from the procedure leading up to the hearing of the substantive appeal. For these reasons, once the application for leave to appeal has been heard and determined in favour of the applicant, it is too late for a defendant to serve a notice of further reasons. The rules include no such provision and, for the reasons I have given, it is not difficult to see why.

That being so, the attempt by the defendants in the present appeal to serve a notice of additional grounds in the period between the granting of leave to appeal and the hearing of the appeal was out of time and ineffective and there can be no question of extending the time for such service to cure the delay.”

23. Although there is no provision in CPR Part 62 expressly permitting an extension of time for service of a respondent’s statement of additional grounds, I do not understand Colman J. to have been suggesting that the court has no jurisdiction to grant an extension. The time limit is one created by the rules rather than by the Act and there is therefore power under Part 3 rule 5 to extend time in an appropriate case. However the decision in the Acada Chemicals case suggests that appropriate cases are likely to be rare. In this instance EWJ’s difficulties are compounded by the fact that not only have they been represented by a very experienced City firm of solicitors since shortly after the seller’s application for permission to appeal was served, but also those solicitors have served no less than four statements in response to the application and in none of them has the additional ground been raised. So far as EWJ are concerned, the additional ground was formulated for the first time in Mr Edey’s skeleton argument. This makes it very difficult indeed to be indulgent to them. It is only in the unusual circumstances of these conjoined appeals, and because I have reached the firm conclusion that the additional ground for upholding the awards is not well-founded, that I am prepared, exceptionally, to allow Mr Edey’s final argument to be advanced on behalf of EWJ as well as SEE.

24. In my judgment, the argument is not well-founded because I take it to be the law that, aside from cases of fraud, the buyer under a CIF or C&F sale can only reject the shipping documents in two circumstances: (1) where, by their express terms, they do not conform to the requirements of the contract in a respect which is more than minimal, and (2) where, even if they appear to conform to the requirements of the contract, they are not genuine in the sense that they contain false information about an aspect of the performance of the contract which would normally be disclosed in the documents and which is of more than minimal importance e.g. the date of shipment. (see Benjamin’s Sale of Goods, 5^th ed, paras. 19-074 to 19-075 and 19-142). In general the buyer is bound to pay for documents if, on their face, they conform to the terms of the contract. Lord Diplock so held in Gill & Duffus S.A. v Berger & Co. Inc.[1984] AC 382.

25. In the present case, the only dispute as to the conformity of the documents with the contracts is that INTAN 6 was named in the bills of lading as the first carrying vessel. According to Mr Edey that is sufficient to establish that the documents were not contractual on their face. He submits that any statement in the documents, which, if true, means that the goods were not contractually shipped, is a statement which renders the documents liable to be rejected. I am confident that that is not the test. It is far too wide and Mr Edey was unable to cite any case in support of it. The test is whether the documents contain a statement or statements which, without further investigation, demonstrate that the contract has not been honoured in one or more respects of more than minimal importance. This must be apparent from the terms of the documents themselves, without inquiry into the physical performance of the contract. Of the four cases to which Mr Edey referred in support of his argument, two can be explained on this basis. Thus in Marshall, Knott & Barker Ltd v Arcos Ltd (1932) 44 LL.L.Rep. 384 the documents were not contractual because the bills of lading expressly incorporated the charterparty and the terms of the charterparty qualified the delivery obligation in the contract of sale. The sale was a CIF sale for shipment to “Grimsby, Alexandra Dock, buyers’ quay”. But the charterparty did not oblige the vessel to reach the buyers’ quay. She was obliged only to deliver at that quay “or as near thereunto as she may safely get”. In Soon Hua Seng Co. Ltd. v Glencore Grain Ltd. [1996] 1 Lloyd’s Rep. 398, the sale was a sale C & F liner terms Rotterdam. That meant that the goods were to be landed at Rotterdam, free of expense to the buyers. The bills of lading did not comply with the contract because they expressly incorporated the voyage charterparty. The charterparty was for the carriage of the cargo on FIOT terms.

26. Mr Edey’s other two cases are Bergerco U.S.A. v Vegoil Ltd (supra) and T.W. Ranson Ltd v Manufacture d’Engrais et de Produits Industriels, Antwerp (1922) 13 Ll.L.Rep. 205. In Bergerco v Vegoil the question of entitlement to reject the documents did not arise because the buyers’ bank had already paid for the documents by the time it was discovered that the vessel had not sailed direct to the port of discharge. The case is therefore no authority for Mr Edey’s argument. If, however, the point had arisen, Hobhouse J. would in my view have been bound to hold that the buyers were wrong to reject the documents unless the documents themselves revealed that the vessel was going to deviate and/or had deviated. The decision in Ranson appears to rest on a different point. In that case the buyers’ claim against the sellers was for damage to part of a cargo which had been sold on CIF terms. The goods had been shipped on board a sailing ship rather than a steamer. The law report does not contain details of the umpire’s award and does not clarify whether this fact was apparent from the face of the documents. However, in the course of his judgment, Greer J. said this:

“In my judgment, sufficient facts are found by the umpire to justify the conclusion – indeed, to force the conclusion – that a bill of lading on a sailing ship was not the usual bill of lading in this trade, and that therefore a bill of lading making a contract for the carriage of goods in a sailing vessel was not a due performance of this contract, and might have been rejected. But it has been accepted, and the buyers are entitled to the alternative remedy for breach of the contract in sending goods upon a sailing ship.”

27. If it was apparent from the face of the bill of lading that the vessel was a sailing ship, the view that the buyers were entitled to reject the documents would be entirely consistent with the principles I have already expressed. But if it was not apparent, Greer J.’s observation may still be supported on the broader ground that it was a usage of the particular trade that shipment should be made by steamer. There is a strong case for saying that, in the absence of express agreement, a bill of lading which is not usual or customary in the trade, is not a valid tender under a CIF or C&F sale, whether or not the defect is clear from the document itself. Either way, I do not consider that the decision in Ranson is of much assistance to the buyers in the present case.

28. The result is that the conclusion of the Board of Appeal is not supported by the findings in the awards. It cannot stand and the awards must be set aside. The formal answers to the first question of law are: (1)(a) No, (1)(b) Yes, (1)(c) Yes and (1)(d) Yes. As for the second question, it was ultimately common ground that under the Loss of Ship clause (clause 11) of IGPA contract No. 5, the giving of a valid declaration of shipment, or one deemed valid, was a condition precedent to any right of the sellers to be paid for the documents. Once a valid declaration has been given, clause 11 confers on the sellers a right to be paid on tender of a complete set of shipping documents, provided the documents are “in order”.

29. In the Lorenzi case, Moore-Bick J. accepted that the logical consequence of this conclusion was that the sellers were entitled to an order that they be paid the purchase price. But that is not the consequence here. I have been told of the steps which the sellers took following publication of the umpire’s awards. Although the umpire awarded that the buyers should pay the price of the goods against re-presentation of the documents, the sellers began proceedings in Singapore in January 2001 against the owners of INTAN 6, the owners of the tug which was towing her when she sank and the contractual carriers under the bills of lading. In November 2002, which was after Tomlinson J. had granted permission to appeal, the sellers compromised the Singapore action. They compromised the claims against all of the defendants, including the contractual carriers under the bills. I am told that the amount paid to the sellers as a term of the compromise was roughly equivalent to 15% of the value of their claims. As part of the compromise, the sellers warranted that they were the owners of the cargo and/or lawful holders of the bills of lading at the time it was lost.

30. When documents presented under a CIF or C&F sale are rejected by the buyer, the seller has a choice. He can maintain the presentation of the documents, and if the buyer persists in refusing to pay for them, her can sue for the price. If the goods have reached their destination in the interim, the seller can land and store them, ostensibly for the buyers’ account, and claim the costs incurred in doing so. Alternatively the seller can treat the rejection of the documents as bringing the contract to an end. He can then deal with the documents and the goods as he pleases, if necessary by selling them elsewhere. In that event his remedy against the buyer lies in an action for damages for failure to pay the price. The measure of the damages will usually be represented by the difference between the price payable and any value which the seller has been able to realise by his dealing with the documents or the goods. In the present case it is clear to me that the sellers elected to adopt the second course when they commenced the action in Singapore or, at latest, when they compromised that action. Accordingly, I do not think that it is now open to them to claim the price of the goods. The bills of lading which they have to offer in return for the price are bills which no longer confer any contractual rights against the carrier. The sellers can now only claim damages for the buyers’ wrongful refusal to pay the price. Those damages must be assessed by the Board of Appeal and the awards will have to be remitted to the Board for that purpose. In making its assessment the Board will need evidence of the terms of the settlement of the Singapore action and will have to consider what, if any, credit should be given for the sum recovered under that settlement.

31. However there is an issue as to whether the scope of the remission should not be wider. If, as I have held, the Board concluded that INTAN 6 was not a contractual ship, the buyers are entitled to claim damages for that fact. SEE advanced a counterclaim in the arbitration on this basis. The claim was in one sense purely defensive in that the quantum of the loss counterclaimed was the amount of the contract price, plus the IGPA’s fees of the arbitration. But an additional sum of £6,000 was counterclaimed for legal costs. The Board did not deal with the counterclaim no doubt because it considered that it did not arise in view of its conclusion that SEE were not in breach for non-payment. But, technically, the counterclaim for legal costs did arise, and, on the conclusion I have reached as to the validity of the declaration of shipment and of the documents tendered, the whole counterclaim requires to be considered afresh. It is suggested that it gives rise to a substantial issue of causation. Did the breach in shipping the goods on a vessel which was not a first class ship cause the loss of the goods? I am in no doubt that this issue, indeed the counterclaim as a whole, is a matter which the Board should reconsider on the remission of award No. 013.

32. Yet there is a further question which potentially affects the remission of both awards. It is whether both buyers have a defence to the claim for the price because, even if they were obliged to pay for the documents, they could have rejected the goods. The right to reject the goods would depend on whether the provision in clause 6 of IGPA contract No. 5 that shipment should be made by first class ships has the status of a condition or an innominate term and, if the latter, whether the breach on this occasion was of such gravity as to justify rejection (see Bergerco v Vegoil at 444-445). Mr Edey concedes that these are matters on which findings are required from the Board of Appeal. Even if the status of the term is ultimately a question of law, the view of a trade tribunal on that question is likely to be of value. Ought the court to allow this question to be argued on the remission? Mr Ashcroft says that the court should be slow to remit an award for a point to be argued which was not argued before. He makes the usual complaint about second bites at cherries and objects to any course which would impugn the finality of arbitration. In general, his approach is correct. But each case must depend on the particular facts. In these arbitrations the broad submission made by both buyers, at first instance and on appeal, was that they were not liable to pay the price because the goods were not shipped on a first class ship. This proposition was capable of being translated into a number of legal arguments: but neither of the buyers explored its full implications in their written submissions to the Board of Appeal, whilst the Board, having upheld the challenge to the validity of the declarations of shipment, did not feel the need to do so. The consequence is that the tribunal has not got to grips with the critical issues which arise in both appeals. In the circumstances it would in my judgment be artificial and unjust not to order that on the remission which is now inevitable, the Board of Appeal should permit the buyers to raise any arguments which may be available to them as to why they are not liable to pay damages for the non-payment of the price.

33. The awards will therefore be set aside and the appeals will be remitted to the Board of Appeal with a direction that the Board shall assess the measure of the damages due from the buyers to the sellers for the non-payment of the price, and shall determine SEE’s counterclaim, after giving the parties an opportunity to present such further arguments as may be relevant in the light of this judgment.