No A3/2001/2150/B, A3/2001/2150
Neutral Citation Number: [2002] EWCA Civ 251
IN THE SUPREME COURT OF JUDICATURE                     
IN THE COURT OF APPEAL (CIVIL DIVISION)                                                
APPLICATION FOR PERMISSION TO AMEND
APPELLANT'S NOTICE
AND PERMISSION TO RELY ON FURTHER EVIDENCE
ON APPEAL FROM ORDER OF MR JUSTICE STEEL
								Royal Courts of Justice
								Strand
								London WC2

							Monday, 11th February 2002
B e f o r e:

LORD JUSTICE TUCKEY

SIR ANTHONY EVANS

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TRAFIGURA BEHEER BV
Appellant

- v -

BCL TRADING Ges
Respondent
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(Computer Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited, 190 Fleet Street,
London EC4A 2HD
Tel: 0171 421 4040
Official Shorthand Writers to the Court)
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MR P MacDONALD-EGGARS (Instructed by Middleton Potts of London) appeared on behalf of the Appellant

MR N SWAINSTON (Instructed by Ince & Co of London) appeared on behalf of the Respondent
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J U D G M E N T
1.	SIR ANTHONY EVANS: On 20th September 2001 Mr Justice David Steel, sitting in the Commercial Court, heard an application by the claimants for the summary determination of the claim in their favour. The claim is for the price of a cargo of gas oil amounting to 6864.654 metric tonnes which, at a price of US$242.50 per tonne, equals a total of US$1,664,678. The cargo was shipped at Gela in Italy on 12th January 2000 and discharged at Varna in Bulgaria where the vessel arrived on 17th or 18th January 2000. The cargo was discharged into the custody of Litex, a company which is described as the “biggest private petroleum company” in Bulgaria.
2.	The defendants are BCL Trading who, in May 1998, entered into a joint venture agreement with another company called BSS Petroleum Handel GmbH. Both companies have addresses in Vienna. Under this agreement, BSS undertook to purchase petroleum products, as it was put, “at its sole discretion and for its account”. BCL undertook to pay the suppliers “on behalf of BSS Petroleum through direct telegraphic transfers or by documentary instruments LCs or CPOs”. That obligation to pay the supplier - and, among other possibilities, to do so by opening letters of credit - was described, perhaps somewhat euphemistically, as a mere obligation to “provide finance”.
3.	In December 1999 BSS was negotiating to purchase a quantity of gas oil from the claimants. The claimants required payment to be secured by letter of credit which BSS was unable or unwilling to provide. In the result BCL, the present defendants, did so. No formal or signed sale contract was ever entered into. Draft terms were forwarded by the claimants which we have at page 194 of the bundle. It is noteworthy that those draft terms invite the buyer to provide their full style address and fax numbers etc. On 9th December 1999 the defendants, BCL, wrote to the claimants:
“Please find enclosed the letter of credit opened today from our bankers.”
4.	The letter of credit provides for the claimant to be paid against documents. It was to expire on 17th March 2000. It provided for presentation up to 90 calendar days after the bill of lading date. It required, as well as a commercial invoice and on-board bills of lading, a certificate of quality, among other documents. A further condition - number 7 - provided
“Documents presented later than 21 days after shipment date are acceptable provided they are presented within the validity of the [letter of credit].”
5.	On 19th December the defendants BCL and BSS signed an annexe, number 7, to their joint venture contract which referred to this particular purchase of 7,000 metric tonnes of industrial gas oil from the claimants. It provided “letter of credit to be opened by BCL Trading payable on sight”. When the vessel arrived at Varna it was necessary for the parties to obtain Customs clearance. For that purpose, at the request of BSS, the claimants stated in writing that they, as owners of the cargo, had transferred title to the defendants BCL. BCL stated, also in writing, that they BCL had transferred the property in the cargo to Litex. The documents include, at page 192 of our bundle, what purports to be a sub-sale of the cargo from the defendants BCL to Litex. But it is contended that that document, for whatever reason, was not authorised by the defendants and that no such sub-sale is proved to have taken place.
6.	On 18th January the claimants sent a further set of draft contract terms to the defendants and to BSS. Those terms named BCL as the buyer. The cargo was discharged to Litex. The arrangements under which that discharge took place are far from clear. Subsequently, the claimants presented shipping documents to the defendants' bank; that was some time before 16th March. The bank noted four discrepancies which are set out in a letter dated 16th March from it, The Erste Bank, to the defendants. The defendants' reply was as follows, dated 17th March:
“We refer to your letter on 16/3/00 and hereby inform you that delivery was duly made. We accept the discrepancies.”
7.	For some reason, which is unclear, the bank nevertheless refused the documents. The documents were later presented to the defendants who, likewise, refused to pay for them.
8.	The cargo - and it is disputed whether it is properly described as gas oil or not - has remained with Litex. It may be that up to some 2,000 metric tonnes has been used or disposed of by them. The present whereabouts of the balance - some 5,000 metric tonnes - is uncertain.
9.	The defendants, represented before us, as below, by Mr MacDonald-Eggars, have constructed a number of legal arguments that lead to the conclusion, they say, that they are not liable for the price which is the only claim made in these proceedings, so far at least. I say “constructed” because the grounds advanced before the judge were not consistent with ones which had previously been advanced. Before the judge three defences were raised. First, that the defendants were not a party to the sale contract; the buyers, they say, were BSS. Secondly, even if the defendants were a party to the sale contract, they are not liable for the price in circumstances of this case, relying primarily on Section 49 (1) of the Sales of Goods Act. Thirdly, that in any event a compromise agreement was reached between the defendants and the claimants.
10.	The judge held, with regard to the first of those defences, at page 40 line 19 of the judgment:
“On this aspect of the case, as I have already indicated, I have come to the conclusion that it would not be appropriate to give summary judgment. But, on the other hand, it would be right to make a conditional order requiring the defendants to pay into court a sum, subject to any further argument, in respect of the purchase price by virtue of the fact of my conclusion that the defendant's defence on this matter is, as I have described it, improbable.”
11.	With regard to the further suggested defences, he continued:
“This makes it unnecessary to consider the other defences relied upon by the defendant since they were all conditional on being wrong on the primary issue. But I will very briefly touch on them.
(1) Settlement This issue will turn on oral evidence, but it has to be said that the correspondence following the main meeting, which I will not solemnly read out, is very difficult to reconcile with any such agreement. The point may be arguable but it is likewise improbable.
(2) The price is not due The suggestion that the price was not due because property in the goods was not passed because the goods have been rejected and/or because a right of disposal had been maintained is a somewhat startling proposition, at least on the basis of the facts that I have sought to summarise earlier in this judgment. But I am not disposed to shut the defendants out from arguing the point.”
12.	The judge therefore ordered the payment by the defendants of the principal sum claimed but not the further claim for interest as either payment into court or that it be secured appropriately as a condition of committing the defendants to contest the action further.
13.	The application for permission to appeal was made promptly and was dealt with by Lord Justice Waller on 10th October 2001. For reasons which will appear it is right I should read the reasons he gave for granting permission plus a stay of execution:
“I suspect the judge's decision of conditional leave is right. I have however granted permission because it seems to me the statement supporting a stay raises the question whether the imposing of the condition is not equivalent to giving judgment (a point not taken before the judge) and because arguing at an oral hearing whether there are reasonable prospects of success will almost involve hearing the appeal in a case of this sort.”
14.	That application to Lord Justice Waller was supported by a statement from Mr Alon, on behalf of the defendants, dated 4th October 2001. The formal application for a stay made to the court on 20th December 2001 was supported by a fourth statement from him dated 20th December 2001.
15.	There are therefore two matters before this court today. The first is the application to adduce further evidence and for a stay; the second is the appeal for which Lord Justice Waller granted permission. Lord Justice Waller, perhaps, was unaware that there had been evidence before the judge as to the financial status of the defendants BCL. That matter was raised in the third statement of Mr Sheppard, on behalf of the claimants, dated 25th July 2001. It is right that I should read paragraph 2 of that statement:
“I have advised the defendant's solicitors, Middleton Potts, by fax dated 24/7/2001 that in the event that the court is minded to give the defendant permission to defend, the claimant would be asking the court to do so on terms, ie, that the outstanding purchase price be paid into court, alternatively,that the defendant provide acceptable security for the purchase price. In that eventuality, the court will no doubt wish to consider the financial strength of the defendant.”
16.	Mr Sheppard continued by referring to information he received which indicated, he said, that the defendant's company was of very little worth indeed.
17.	Mr Alon responded to that with his second statement dated 14th September, and therefore prepared only a week or so before the hearing before the judge. He referred to Mr Sheppard's statement and then continued:
“The latest available accounts for BCL are for the year 1998. They show a profit triple that of 1997, of Austrian Shillings 21,591,598.07.”
18.	He produced the audited accounts for 1998. He then dealt with two other matters. That evidence at the hearing before the judge was relevant only to the then current financial status of the defendants BCL. The claimants said that the company, effectively, was worthless. Mr Alon certainly appeared anxious to dispel that impression. It should also be noted that the evidence before the judge, not directed specifically to that issue, included assertions that BSS and the defendants BCL regarded this transaction as only one of a large number of presumably lucrative shipments of petroleum products which they hoped or intended to bring about.
19.	It should also be noted that following judgment in the terms I have read there was an exchange between the judge and counsel which included this:
“MR EGGARS: My Lord, may I take a moment to take instructions? (After a pause) My clients have no objection to the amount which your Lordship suggests to be put up ..... They do ask though if, instead of payment into court, they could have the option of posting a bank guarantee.”
20.	The order was drafted accordingly.
21.	Against that background we have had to consider the application to introduce further evidence which is intended to show that the defendants are and were not able to comply with the condition requiring either payment of $1,664,678 into court or the provision of a bank guarantee as security therefor. 
22.	Counsel has accepted that the evidence does not include any further accounts for the company more recent than the financial year 1998. He has accepted also that the impression sought to be given in October and December 2001 as to the current financial status of the defendants is clearly contrary to the impression in fact given to the judge on 20th September 1991. He says that the further evidence describes - and we have read it for the purposes of this application - efforts which have been made to enable the defendants to comply with the condition, but he accepts that few particulars are given, even of that assertion. I would go further: the evidence is remarkably incomplete. That matters not, because in my judgment the fact the evidence is designed to create an entirely different picture of the defendants' financial status, not only now but at the time of the hearing before the judge, from the picture presented to him, makes it inevitable that this application must be refused. 
23.	I bear in mind the underlying principle of fairness and that oppressive or even unreasonable conditions should not be imposed. I bear in mind, too, the references that have been made to the Human Rights Act. Even so, my clear view is that this application should be dismissed.
24.	The next question is whether the defendants should be permitted to argue that the judge was wrong to regard their proposed defences as “improbable” but not without some prospect of success. Mr Swainston suggested that the judge had given his permission, which he accepted was not qualified in terms, on the basis of incomplete and perhaps even erroneous information as to what the position was with regard to the evidence of the defendants' financial status. However that may be, I find the fact that the permission granted was not qualified in any way means that the defendant should be permitted to raise these issues at this hearing. As my Lord indicated in the course of the hearing, we proceeded to hear arguments accordingly.
25.	Mr MacDonald-Eggars introduced this part of his submissions by indicating that he was not contending that the judge was not entitled to exercise the court's discretion as he did, if this was a case where the judge was correct to place the defences in the category which he described, that is to say, having some prospect of success although that prospect was improbable. Mr Eggars addressed us on the three defences, taking first the second which was that the defendants - even if they were the buyers under the sale contract -were not liable for the price. His submissions were based upon Section 49 (1) of the Sale of Goods Act which provides:
“Where, under a contract of sale, the property in the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract the seller may maintain an action against him for the price of the goods.”
26.	Mr Eggars submits that here, for the purposes of Section 49 (1), the property did not pass and that, in any event, payment was not wrongfully refused because the documents presented, first, to the bank and later to the defendants, were non-compliant with the terms of this contract. This was, as I am sure he will allow me to say, a bold submission in the face of the defendants' express statements in writing, to which I have already referred, first, that the property did pass to them and then to Litex pursuant to whatever arrangements were made at the time of discharge, and secondly, that the bank should pay under the letter of credit, the discrepancies noted by the bank being waived by the defendants. 
27.	The argument was developed with a measure of subtlety even if it was almost entirely unsupported by any authority. The argument, as I understood it, was as follows. (1) This was a sale on CIF terms under which property passes only on acceptance of and payment for the documents required by the contract and or the letter of credit. (2) When the goods were discharged to the sub-buyer Litex the property did not pass unconditionally because the claimants, as sellers, retained the right to dispose of the property or perhaps to have the property revert to it if the documents, as subsequently tendered, proved to be non-compliant with the contract. (3) The documents were non-compliant, and although the defendants instructed the bank to pay, the bank failed and refused to do so as did the defendants themselves at a later date.
28.	With regard to the paucity of authority, the only reference which, as I understood it, was directed even to any related point was in the course of the judgment of Mr Justice Mance, as he then was, in Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd's Rep 620 at 633. Mr Justice Mance described how that was a case where a somewhat similar submission was made which he described as an -”attempt to invert the reasoning in Kwei Tek Chao v British Traders and Shippers Ltd [1954] 1 Lloyd's Rep 16; [1954] 2 KB 459, by making the passing of property in physically delivered goods conditional upon later examination of documents which, on this hypothesis, must have ceased to constitute documents of title whatever their other commercial or economic importance leaves me presently unconvinced, but I need not consider it further.”
29.	I hope, though without total confidence, that I have adequately summarised the submission that Mr Eggars puts forward.
30.	I remind myself that this is a case where buyers - treating the defendants as the buyers - acknowledged that the property had passed to them and later instructed their bank to pay the price under the letter of credit.
31.	I acknowledge that the application in Section 49 (1) may be difficult where a contract in so-called CIF terms provides for the presentation of documents after the goods have been discharged and delivered, at least to the extent of delivery into the custody of the buyer or sub-buyer. It may be that one should be careful to recognise that CIF terms are not statutory. The effect of any contract, however it may be described, with regard to the passing of property and risk depends upon the terms of the individual contract. 
32.	Notwithstanding the discrepancies which Mr Eggars drew to our attention between the documents required by the contact and the documents presented, I have no hesitation in agreeing with the judge's conclusion, which I would paraphrase in the following way. There may be something in these legal arguments. Whether there is or not is not a matter for summary determination, especially when the facts are as unclear as they are here. It is improbable, in my view, that they would release a buyer who has received the goods, has acknowledged that he received them, has instructed his banker to pay and who does not purport to reject them until later, much later, from his obligation to pay the agreed price. 
33.	For those reasons I would hold that the judge was correct in his assessment of the merits of this defence.
34.	The second point raised is whether the defendants were parties to the sale contract. If this point had stood alone I would have been tempted to go further than the judge and I would say that it was “inconceivable” that the defendant should not be liable for the price when the letter of credit was opened by them in the circumstances described above. I would - although this is not been done expressly - challenge Mr Eggars' assumption that because BCL was described merely as a provider of finance and not as the buyer it was therefore not liable for the price. If it is necessary to show that BCL, the defendant, was the buyer, the overwhelmingly clear inference, in my view, is that the claimants shipped the goods against the letter of credit opened by the defendant with some draft terms not naming BSS or the defendant, giving rise to an implied, if not express, contract under which BCL was the buyer.
35.	However, like the judge, I back from saying more than that the chances of this defence succeeding are certainly improbable, and the judge said that they were.
36.	The third and final defence raised was the suggestion that there was a compromise agreement. I have quoted already the relevant paragraph from the judge's judgment. I have read paragraphs 40 and 41 of the appellant's skeleton argument which Mr Eggars invited us to read without addressing any oral submissions to us. I have no doubt at all that the judge was correct in his conclusion on this part of the case also. For those reasons I would refuse the present application and I would dismiss the appeal.
37.	LORD JUSTICE TUCKEY: I agree that both the application to adduce further evidence and the appeal should be dismissed for the reasons given by my Lord.
Order: Application refused and the appeal dismissed