Safco v BHP

[1998] QSC 64

IN THE SUPREME COURT

OF QUEENSLAND
  O.A. No.1615 of 1993
Brisbane

Before Mr Justice Ambrose

[Safco v BHP]

BETWEEN:

SAFCO (AHMED) FARID PARTNERS

Plaintiff

AND:

B.H.P. AUSTRALIA COAL LIMITED

(ACN 010595721)

Respondent

REASONS FOR JUDGMENT - B.W. AMBROSE J.

Judgment delivered 20 April 1998

CATCHWORDS:     BREACH OF CONTRACT - CONSTRUCTION - VOID OR VOIDABLE - ORAL AGREEMENT  - WHETHER THE CONTRACT CONTINUED TO HAVE EFFECT BECAUSE THE DEFENDANT DID NOT EXPRESSLY ELECT TO RESCIND IT - WHETHER THE ORAL AGREEMENT BETWEEN THE PARTIES SUBSTITUTED THE ORIGINAL CONTRACT MADE WITH THE DECEASED AGENT - DAMAGES

Counsel:Mr Douglas Bates for the plaintiff

Mr Tony Morris QC for the respondent

Solicitors:Corrs Chambers Westgarth for the plaintiff

Allen Allen & Hemsley for the respondent

Hearing Date:              16 March 1998           

REASONS FOR JUDGMENT - B.W. AMBROSE J.

Judgment delivered 20 April 1998

In this case the plaintiff is an Egyptian partnership which under the law of Egypt is an entity capable of suing.

In the course of the trial it emerged that the composition and indeed status of the partnership had changed since the date upon which the written agreement which the plaintiff seeks to enforce was made and indeed since the date of the alleged breach of that agreement.

At the end of the day however, it was agreed that I need not give consideration to the rather unsatisfactory evidence touching on this matter which goes only to the question whether the plaintiff as currently constituted  has the capacity to pursue this action. I proceed to consider the evidence in the case on the basis that the plaintiff is properly constituted as a legal person under the law of Egypt and that there is no procedural impediment to it prosecuting this action for the relief it claims in Queensland.

The plaintiff frames its action on two principal bases -

1. That an undated agreement in writing made in 1987/88 between the plaintiff and the defendant remained in full force and effect subsequent to the death of one of the members of the partnership, a Mr Salah Farid who died on 4 August 1991.

   It is the case for the defendant that pursuant to the terms of the contract upon the death of Mr Salah Farid it became inoperative thereby discharging the parties from all obligations under it.

2. That if the death of Mr Salah Farid did have the legal consequence for which the defendant       contends there was an oral agreement made between the plaintiff (by  Mr Ahmed Farid) and the defendant (by Mr Vaughan Williams) on 7 August 1991 that the plaintiff  would continue to perform the obligations which it performed prior to the death of Salah Farid by substituting for that man his son, Mr Ahmed Farid and that in all other respects with inconsequential necessary variations, the terms of the contract between the plaintiff and the defendant which terminated on the death of Mr Salah Farid would apply.

   It is the case for the defendant that there was an oral agreement on 7 August 1991 but in terms quite different from those asserted by the plaintiff.

   Under Clause 8 of the written agreement, the agreed proper law of the contract was that of Queensland. It is clear upon the whole of the evidence that the contract was made in Egypt and was to be performed in Egypt and the plaintiff’s entitlement to commission under the agreement was to be paid in Egypt. Apart  from the contractual provision of Clause 8 the proper law of the contract upon which the plaintiff sues would of course have been that of Egypt. However with respect to the first basis of the plaintiff’s claim, it is clear that the law of Queensland applies and it was not argued to the contrary.

   With respect to the second basis of the plaintiff’s claim, the matter is less certain. If the plaintiff’s contention is correct that there was a new agreement embodying all or substantially all the terms of the written contract, then Clause 8 constituting the law of Queensland as the proper law of the contract would have application.

   It is the case for the defendant however that there was never any such agreement either express or implied, although undoubtedly there was an agreement made on 7 August 1991 the terms of which however would not incorporate Clause 8 of the agreement in writing.

   If this be the case, then on the facts, the proper law of that oral agreement would be the law of Egypt. 

   Expert evidence was called on a variety of legal matters from an Egyptian legal practitioner but there was no evidence led to suggest that the laws of Egypt were in any way different from the laws of Queensland with respect to the legal consequences of an oral agreement of the sort asserted  by the defendant.   I proceed therefore on the basis that should the oral agreement made on 7 August 1991 be of the sort for which the defendant contends, the law of Egypt would apply to it. In the absence of any evidence to the contrary, I assume that Queensland law, as the law of the forum is the same as Egyptian law in the determination of the obligation of the parties under that oral agreement.

   Clause 2(a) of the agreement in writing specifies its duration. It provides that the plaintiff is appointed agent of the defendant for the sale of coal in Egypt for a period of 12 months beginning 1 January 1988.

   Clause 2(b) proceeds then to provide that the agreement:-

   “shall automatically be extended for a further twelve (12) months beginning 1 January each year unless the agreement is terminated on or before 30 September of the previous year by notice in writing from one party to the other.”

Clause 9(b) provides:-

“This agreement shall remain valid only while Mr Salah Farid remains Chairman of Safco and is personally able to carry out on behalf of Safco the services specified above.”

The services required of the agent are specified in Clause 4 of that agreement. It is unnecessary to detail the various services which the plaintiff agreed to provide. It suffices to categorize them as services designed to promote and protect the sale of the defendant’s coal in Egypt and in particular to provide liaison services with buyers of the defendant’s product as requested by it.  As well, information was to be collected and provided relating to the market potential for the defendant’s coal in Turkey and to pursue marketing opportunities etc. for the defendant’s coal generally. 

At the time of the death of Salah Farid, he and his son, Ahmed Farid were members of the partnership with which the defendant had entered into the written agreement to which I have referred.

Mr Salah Farid had, for many years, been involved in business relating to the coal requirements of Egypt. He was a wealthy man of significant reputation and expertise in the coal industry and indeed, had been Chairman of the company Chemicoke with which the defendant had a contract for the supply of coal.

I infer that it was Mr Salah Farid’s close association with the only purchaser in Egypt of coal of the sort which the defendant wished to sell which had resulted in the defendant appointing the plaintiff to be its agent and incorporating in the contract Clause 9(b).

Mr Ahmed Farid had no experience whatever in the coal industry in Egypt. The evidence suggests that he certainly had business interests in  development and finance which required his personal attention but it seems he had no personal business involvement with the defendant or with any of the defendant’s coal sales. He had met with some of the defendant’s officers socially as a member of Mr Salah Farid’s family during the years that the personal relationship between the defendant’s officers and Mr Salah Farid had developed. There is no indication that Ahmed Farid had any association either of a business or personal kind of the sort which his father had with people in management positions in Chemicoke.   I accept the evidence of Mr Gasteen that in July 1992 Mr Ahmed Farid had difficulty in even locating the place where Chemicoke conducted its operations.

Against this background therefore, I will turn to deal with the first point upon which the plaintiff relies - i.e. that in the circumstances, the written contract continued in force subsequent to the death of Mr Salah Farid.

The answer to this question, in my view, involves both construction of Cl. 9 of the written agreement and the effect of the arrangement made between the plaintiff and the defendant on 7 August 1991.

The defendant contends that the clear intent of Clause 9(b) is that the written contract shall have legal effect or be legally enforceable or operative only while Mr Salah Farid remains Chairman of the plaintiff “and is personally able to carry out on behalf of Safco the services specified above.”

On this view Cl. 9(b) specifies an event which will have the legal effect of rendering the contract inoperative upon and from the happening of that event. 

It is argued on behalf of the plaintiff that Clause 9(b) of the written contract really specifies an event the happening of which gives each party to the agreement an option to terminate the contract but which does not of itself have the effect of rendering the contract inoperative or void.

Undoubtedly, the written contract was between the plaintiff and the defendant. At the time the agreement was made, Mr Salah Farid was Chairman of the plaintiff and his son Mr Ahmed Farid was a partner in that partnership.

Clause 9(b) of the written contract was obviously inserted for the benefit of the defendant.  Perhaps it may however in some circumstances have operated for the benefit of Mr Salah Farid and perhaps also for the benefit of the plaintiff partnership generally.

One  question then is whether upon the happening of the event contemplated by Clause 9(b) the agreement came to an end or ceased to be operative or became “void” to use the terminology considered in other cases where similar provisions have been considered, or whether under that clause the happening of the event specified simply made the agreement voidable at the option of one or both parties. 

The plaintiff is and was at all material times under Egyptian law an entity distinct from the persons who constituted it. 

On the facts of this case, it seems clear that no written election to terminate or notice of termination contemplated by Cl. 9(c) was ever given by the defendant to the plaintiff.

The contention of the defendant that upon its proper construction Cl. 9(b) does not make the agreement voidable but in effect specifies an event the happening of which makes the agreement inoperative or void is a bold one in light of the authorities.

In New Zealand Shipping Company v. Societe des Atieliers et Chantieres de France (1919) A.C. 1 Lord Atkinson at p. 9 observed:-

“It is undoubtedly competent for two parties to a contract to stipulate by a clause in it that the contract shall be void upon the happening of an event over which neither of the parties shall have any control, cannot bring about, prevent or retard.  For instance they may stipulate that if rain should fall on the thirtieth day after the date of the contract the contract should be void. Then if rain did fall on that day, the contract would be put an end to by this event whether the parties so desire or not. Of course they might during the currency of the contract rescind it and enter into a new one or on its avoidance immediately enter into a new contract but if the stipulation be that the contract shall be void on the happening of an event which one or either of them can by his own act or omission bring about, then the party who by his own act or omission brings that event about, cannot be permitted either to insist upon the stipulation himself, or to compel the other party who is blameless to insist upon it because to permit the blameable party to do either would be to permit him to take advantage of his own wrong. In the one case directly and in the other case indirectly in a round about way but in either way putting an end to the contract.”

At 12-13 Lord Shaw of Dumfermline observed:-

“When a contract describes an event or events which may happen and declares that on the occurrence of any of these the contract shall become void the results may be tabulated thus:

(1)Such a contract may be declared void as said at the instance of that party who has not by his own wrong or default brought about that event  --

(2)Therefore such a contract is voidable --

(a)Sometimes by one party --

and

(b)Sometimes by the other party --

(3)And such contracts are voidable by both or either when the impossibility to complete or deliver was something for which neither was responsible. Each party is innocent, neither is in default: the conduct of neither has brought about the event and in such a case the contract is interpreted with even and equal justice to both sides; and the law does not allow one party only to avoid while the other is held bound. If both parties go on, that is another and their own affair. But either can claim that the contract is void and then both are free.”

This question was considered by the High Court in Suttor v. Gundowda Pty Ltd (1950) 81 C.L.R. 418 and particularly at 440-442. After referring to the judgments of their Lordships in New Zealand Shipping Co Ltd v. Societe des Ateliers et Chantieres de France it was observed at 442:-

“Although the effect of a provision in a contract may differ according to the events which happen its construction cannot differ according to the events which happen.  If “void” means “voidable” it means “voidable” whatever happens. It cannot very well mean “voidable” if an event happens through the default of one party and “void” if the event happens without default by either party”.

There is nothing to suggest that the plaintiff partnership in this case was not able to replace Mr Salah Farid as Chairman or to so organize its affairs as to prevent him personally from providing the services specified in Cl. 4 of the agreement; it was obviously open to Mr Salah Farid as Chairman of the partnership simply to resign from that office or perhaps go for a world trip for a year or so making it impossible for him personally to provide the services listed in Cl. 4. 

Stated shortly, it was within the capacity of the partnership as an entity to so order its affairs as to make it impossible for Mr Salah Farid personally to carry out the services the partnership undertook to provide under the written agreement.

Mr Hassouna, a legal practitioner in Egypt explained that under Egyptian law the death of a partner, however important the skills and capacities of that partner to the performance of contractual obligations might be would not, in the absence of a specific term in the contract discharge that contract.  He said that under Egyptian law, such a contract would not terminate unless there was a specific provision to that effect in the contract. Interestingly he observed that in many cases, agreements provide that if one of the partners who was a party to the agreement moves out, then “they” have the right to terminate the contract - “so it’s up to the lawyer who drafted the contract to sort of predict what case can happen and to protect his client by putting into the contract various provisions.”

When shown the terms of Clause 9(b) of the written contract, he said  that it was the sort of clause that a lawyer would insert in a contract to protect the people from having contracts carry on after a partner’s death. As I understand his evidence such a clause would under Egyptian law give a party to a contract an option to avoid it.

In my view, upon its proper construction, Clause 9(b) of the agreement makes the event there contemplated an event which gave the defendant a right to elect to terminate the agreement in the way contemplated by Clause 9(c) i.e. by a written notice of termination on the ground of the death of Mr Salah Farid.

On the material it is clear that the defendant never did give such a written notice of termination of the agreement.

The reason for the failure to give notice was obviously the view taken by the defendant reflected in a letter from the defendant to Mr Ahmed Farid dated 12 November 1992 which contains the following observation:-

“As you will note both contracts specifically state that they are valid only while Mr Salah Farid remains Chairman of Safco and personally able to carry out on behalf of Safco the services provided. Accordingly, the death of Mr Salah Farid was a terminating event under the law governing the contracts. Given the clear language of the contracts we cannot accept your assertion that the contracts remain in force.”

In a letter from the solicitors for the plaintiff to the defendant dated 22 December 1992, the point is clearly made I think that non-compliance with Clause 9(b) of the written agreement had been waived and the contract affirmed.  In that letter, it was observed:-

“It is clear that both contracts remain in full force and effect notwithstanding the death of Mr Salah Farid.  Clause 9(b) of both agreements has been waived by BHP and the contracts affirmed by BHP’s conduct since his death which is evidenced inter alia by the correspondence and continued payment of commissions to our client in accordance with the terms of the contracts. The appointment by BHP of ICTC as its local representative in Egypt in place of our client is a clear repudiatory breach of the contract.”

In the circumstances our client reluctantly accepts BHP’s repudiation of the contracts but claims damages to compensate it in full for its losses.”

This stand is consistent with the view that the happening of the event contemplated by

Cl. 9(b) made the contract voidable only.

The acceptance by the plaintiff’s solicitors of the alleged repudiation of the contract on 22 December 1992 would result on the plaintiff’s case in the contract ceasing to have operative effect after that time.

In my view upon the proper construction of Cl. 9(b) the effect of the death of Salah Farid was not to bring the written contract to an end automatically.

Whatever may be the construction of that contract under Egyptian law having regard to the evidence of Mr Hassouna, its construction under the law of Queensland in my view makes it clear that the death of Mr Salah Farid simply gave the parties an option to bring the agency contract to an end and it was necessary while the terms of the contract were observed by the parties to it for the defendant to elect to terminate it if it so desired; of course it was open to the parties to agree orally that it should no longer remain in force irrespective of Cl. 9(c). Whether upon the evidence it should be inferred that the parties to the written agreement orally agreed that it should cease to have binding effect according to its terms, I will consider later.

I turn now to the second basis of the plaintiff’s claim which is the making of a new oral agreement on 7 August 1991 between Mr Ahmed Farid representing the plaintiff and Mr Vaughan Williams representing the defendant.   I observe only in passing that the express terms of clause 9(c) of the written agreement would not prevent the plaintiff from contending that the oral agreement on 7 August 1991 was to substitute Ahmed Farid for Salah Farid leaving the balance of the agreement to have full legal effect. Perhaps this was the effect of the plaintiff’s submissions.

There was undoubtedly an agreement made on that occasion whereunder the plaintiff through Mr Ahmed Farid undertook to represent the defendant as its agent in connection with the supply of coal in Egypt and I assume upon the whole of the evidence that the services which were in fact provided by Mr Ahmed Farid probably included at least some of the “services of the representative” enumerated in Clause 4 of the written agreement.

However, there was a great conflict between the evidence of Mr Ahmed Farid and that of Mr Vaughan Williams as director of the defendant and Mr Philip Gasteen, the General Manager of Transport Operations for the defendant as to facts from which the terms of the agreement might be inferred. Essentially for the plaintiff it is asserted that the whole of the terms of the written agreement with immaterial exceptions were incorporated in the oral agreement and in particular, Cl. 2(b) to which I have referred. For the defendant it is asserted, that initially the arrangement was for Mr Ahmed Farid to provide services of the sort provided by Salah Farid prior to his death on 4 August 1991 until the end of 1991 and that subsequently the parties assented to the continued provision of services while the defendant sought a new agent to be retained on a permanent basis.

Whatever the proper construction of Cl. 9(b), the real question in this action is the terms of the oral agreement if any reached on 7 August 1991. Clearly the legal effect of the written agreement will or may be governed by the terms of that oral agreement.

In resolving this conflict of evidence, I am assisted by contemporaneous letters and internal memoranda under the hand of Mr Vaughan Williams. There appear to have been no contemporaneous records of any sort kept by Mr Ahmed Farid.

Within a day or so of the funeral of his father in Cairo, Mr Ahmed Farid met Mr Williams at the Marriott Hotel in Cairo and accepted condolences with respect to the death of his father. His evidence as to the agreement then reached was very brief.   He said that Mr Williams said :-

“they don’t know what to do now particularly regarding the upcoming Chemicoke tender for new supplies of coking coals, whereupon I offered to fill in basically for my father.”

He said that he had been informed by his father that it was a very important tender for both the defendant and for Safco. According to Mr Ahmed Farid, Mr Williams said to him:-

“I am glad to hear of your offer and we will proceed accordingly and as soon as I get back I will inform both Chemicoke and AMSDK - which is the user of iron ore (i.e. and the user of coke supplied apparently by Chemicoke) that I will be filling in for my father.”

Mr Farid said that no reference whatever was made to the written agency agreement and that Mr Williams did not specify any time during which the agency agreement would subsist or suggest anything to indicate that the provision of services by Ahmed Farid was to be only a temporary arrangement.

He said that he regarded the most important part of his function would be to “liaise with” the clients and to ensure that “we submit the new tender”. According to Mr Farid at no time during the discussion with Mr Williams was anything said about the continuance of the existing contract in writing.

Mr Williams the Manager of BHP Coal Limited  lived in London. He was interested in the sale of BHP Coal in Europe and Africa. He had investigated the Egyptian market for BHP Coal in 1979-1980. He met Mr Salah Farid, the former Chairman of Chemicoke who was then in a partnership which appears to have been the precursor of the plaintiff. He said that Mr Salah Farid was of outstanding character. The first agreement between the precursor of the plaintiff, Nile Metal Company, and the defendant was made in 1980 and the equivalent of Clause 9(b) under the written contract upon which the plaintiff brings the action was inserted into that agreement.

When Mr Williams in London learnt of Mr Salah Farid’s death, he flew to Cairo to attend the funeral and on 7 August 1991, he met with Ahmed Farid at the Marriott Hotel in Cairo. He said that he wanted to do the right thing by Egyptian custom and after he had expressed his personal condolences:-

“Ahmed offered I think, in a very nice way to do whatever he could. I think his words were ‘BHP has been very good to us over the years and can I do anything for you?’ He said ‘if I can be of any help to you either short term or long term let me know’”.

Mr Williams replied:-

“Yes I would be grateful if you could carry on until the end of the year”

He said that he would continue to pay commission to Safco on the tonnage that had already been priced while Salah Farid was alive. He said that no mention was made as to the terms of any contract.

On 10 February 1992 Mr Williams confirmed that the defendant would continue to look for a new agent but would continue to pay commission to the plaintiff on all shipments until “the new agent was in place”.

In fact in respect of shipments of coal at a price agreed in February or March 1992 the plaintiff received payments of commission at the rate of US.50¢ per tonne.

All told between August 1991 and October 1992 the plaintiff was paid approximately US$150,000 in commission upon shipments of coal of about 300,000 tonnes.

The commercial reality facing the defendant upon the death of Salah Farid was that Chemicoke might in spite of the death of Salah Farid look more favourably upon the plaintiff as the defendant’s agent in negotiating another coal contract than it would upon a new agent with whom it had had no professional or social contact.

On 9 August 1991, Mr Williams sent an inter office memo by fax to the management of the defendant in the following terms :-

“Salah Farid

Ref : Y292/VW/cs

After Salah’s funeral, I discussed the agency arrangements with Ahmed Farid.

I continue to believe that Ahmed is not the man for the longer haul, but he, in quite a nice way, volunteered to do whatever he could short or long term.

I took the liberty of saying that whatever happened, both BUCL and Samarco would continue to pay commission to SAFCO for the tonnes that had already been priced, and which will be delivered. I think this is in accordance with both the agency agreements, despite existence of the “Salah Farid” clause.

I was able to talk to Mouzy. His opinion is that the decision is ours, but that he would like somebody “of the calibre of Salah” whom he respected enormously.  He realised it might take us a while to find such another man.

Under the above circumstances I have told Ahmed to carry on on our behalf, i.e. business as usual, until the end of this calendar year. This will give us a chance to seek out alternatives.

Trust above is OK with all parties. The exploration people will not be using Ahmed. Mike Friederich is already looking for another Government Relations Officer, which title they had recently bestowed on Salah on their behalf. They will probably continue to rent part of his office - although they expect to open an office shortly in Hurghada when drilling starts towards the end of the year.”

On 9 August 1991 Mr Williams faxed the following letter to Mr Ahmed Farid:-

“After our discussion last Wednesday I went around to see Chemicoke and
told Mr El-Sheikh that you would be for the time being carrying on exactly as before i.e. business as usual. Mouzi was in a board meeting and I know he has left today for two      weeks holiday. I also telephoned Mr El-Soufi at ANSDK to give him the same news and have today faxed them as per the attached.”

In my view the contemporaneous writings by Mr Williams to which I have referred are more consistent with his evidence as to the arrangement made with Mr Ahmed Farid on 7 August 1991 than is the evidence of Mr Farid. Those documents were written within a very short time of the making of the arrangement between Mr Williams and Mr Farid. One was made for the purpose of confirming the arrangement and the other, perhaps more importantly, for the purpose of informing Mr Williams’ superior in the defendant organization of the precise arrangement that had been made. The latter is evidence of the truth of its contents under s.92 of the Evidence Act.  The circumstances of its preparation make it persuasive evidence under s.102 of that Act.

On 20 December 1991, Mr Williams faxed a letter to Mr Ahmed Farid in the following terms -

“Dear Ahmed

May I first wish you a very happy Christmas season and New Year.

I very much appreciate how you have stepped into the breach following your family’s terrible and tragic loss last summer.

We can discuss the whole question in the New Year. Meanwhile, the pressing business will be the Chemicoke negotiations, and with all the competition from other Australian suppliers, we shall be relying heavily upon your input and support. Similarly with ANSDK.

My warmest wishes also to your mother and to the rest of your family, from all your friends in London.”

The evidence of Mr Williams as to events that occurred and conversations which took place in Cairo in July 1992 when he and Mr Gasteen together travelled to Cairo to sign on behalf of the defendant a contract for the supply of coal to Chemicoke was supported by that given by Mr Gasteen.   At that stage - more than six months after the close of the 1991 calendar year - Mr Ahmed Farid was still “filling in”, as he put it, for his father and the plaintiff was still being paid the commission fees which the plaintiff  would have received had his father still been alive and acting personally in the interests of the defendant. 

It is convenient to consider  the evidence of Mr Williams as to various discussions that he had with Mr Ahmed Farid subsequent to the agreement of 7 August 1991 in chronological order.  Mr Gasteen was present on only some of those occasions. 

Mr Williams said that he made a trip to Cairo on 10 February 1992 to see Mr Mouzi, the then Chairman of Chemicoke. He said that he confirmed with Mr Ahmed Farid that he would be looking for a new agent as soon as it was practical to do so and that he  would carry on, on “an ad-hoc basis” until the current negotiations with Chemicoke were all completed. He said that he informed him that the defendant would continue to pay the plaintiff commission on any shipments until the new agent was in place. Mr Farid did not demur to this proposal.

He said that on 8 July 1992, he had a telephone conversation with Ahmed Farid when he informed him he wanted shortly to pay a visit to Cairo to find a new agent and he wanted to have a discussion about it with him. Mr Williams said that Ahmed Farid said “I will be coming on the 10th in 2 days time”. Arrangements were then made for Ahmed Farid to visit Mr Williams in London on that visit.

On that visit to London on 10 July 1992 Mr Williams told Mr Ahmed Farid that the negotiations were complete and that he would be coming to Cairo soon to find a new agent and he asked if he would be able to give him any leads or suggestions as to somebody suitable to be the defendant’s  agent.

Mr Williams said that Mr Ahmed Farid said nothing to indicate any surprise;  Mr Williams “felt a bit sad about doing this” and Ahmed Farid volunteered “don’t feel bad about it, business is business” and said that he would try to propose some person who might be suitable as a new agent for the defendant.  He told Ahmed Farid  that if it would be of assistance to him in business, the defendant would state publicly that  BHP was not dispensing with his services but that he was leaving to be able to devote himself full time to his own business ventures. According to Mr Williams, Ahmed Farid simply said “Fine” and raised no objection.

On 14 July 1992, Mr Williams faxed yet another internal memorandum to Mr Robertson.  That document reads:-

“You will recall that after the death of Salah Farid in August 1991 his son Ahmed Farid agreed to continue acting on BHP Minerals behalf to preserve the continuity with particular thought to the forthcoming negotiations with Chemicoke and ANSDK.

Now that these have been virtually completed, Ahmed has expressed his wish to return full time to his own business in financial services and consulting but will continue to act for BM until we find a new agent.

I shall be in Cairo next week to talk to potential new agents.

Ahmed will, I think, be writing us a letter along the above lines at which point it will probably be appropriate for you/GDL/PBG to write a letter of appreciation to him.”

Mr Williams in evidence conceded that the second paragraph of the memorandum was in error and that Ahmed Farid had not expressed the wish referred to therein.   He said that  that he had simply suffered from a confusion in thought because that was the proposed explanation to be published which Mr Williams had worked out with Ahmed Farid’s acquiescence to avoid as far as possible any injurious effect on the business reputation of Mr Ahmed Farid upon his ceasing to be involved actively in  representation of the defendant.

Mr Williams then went to Cairo on 19 July and remained there until 24 July 1992. 

The purpose of this visit when he was accompanied by Mr Gasteen, was firstly to sign the new contract between the defendant and Chemicoke and secondly to interview “potential agents”. While in Cairo there was an official meeting held to sign the new contract between the defendant and Chemicoke.

In the offices of Chemicoke, Mr Williams told Mr Mouzi the Chairman of that company when the contract was signed in the presence of Ahmed Farid that he was trying to find a new agent and that he hoped it would be somebody good and that Mr Ahmed Farid would be returning to his own full time activities.  Mr Philip Gasteen attended that meeting and gave evidence to the same effect. According to Mr Williams, Mr Mouzi as Chairman of Chemicoke then thanked Ahmed Farid “for stepping in for the last few months” and wished him luck and said that he hoped that the defendant could find somebody of the calibre of Salah Farid. This conversation took place in the office of the Chairman of Chemicoke and according to Mr Williams and Mr Gasteen, Ahmed Farid was sitting at the table with them when it did occur, and appeared to accept what was said without demur.

I accept the evidence of Mr Gasteen that after the signing of the Chemicoke contract and the conversation that then took place. Mr Ahmed Farid observed with reference to the proposal to appoint a new agent to represent the interests of the defendant in Egypt -

“You shouldn’t really be quite so concerned Vaughan. This is business.”

During  that visit to Cairo Mr Williams interviewed a number of persons as prospective appointees as agent to represent the defendant and apparently made a short list of them. Finally it was decided to appoint ICTC as agent. Mr Williams made this recommendation to the defendant following a second trip to Cairo in early September 1992.

After the decision had been reached to appoint ICTC as the defendant’s agent, Mr Williams spoke to Ahmed Farid by telephone  on 24 September 1992. He told him that the agent would be ICTC which had at that stage been “formally appointed”. He said he then informed Ahmed Farid to the effect “it is all going to plan and your commissions will now cease”. He specified the coal ship delivery which would be the first one under which ICTC would collect commission as newly appointed agent. 

Mr Williams made an entry in his diary recording in essence the terms of this telephone discussion. The handwritten note extracted from the diary is Ex. 11. I am persuaded that it was a diary note made at the time of the conversation about which Mr Williams gave evidence.       According to Mr Williams he had discussed with Mr Mouzi of Chemicoke whether he should formally introduce the new agent to it and Mr Mouzi said that it was unnecessary to do so and that the choice of agent was a matter for the defendant.

On 6 October 1992, Mr Williams sent another letter by fax to Mr Ahmed Farid in which inter alia he wrote:-

“Further (to) our last telephone conversation 10 days ago Mr Mouzi does not feel it necessary for me formally to introduce ICTC to him.

I therefore do not now plan to visit Cairo next Monday.

I have now asked ICTC to make contact directly with Chemicoke and ANSDK and others formally as the local representatives of BHP Minerals.

This therefore marks the conclusion of your work for BHP Minerals.   I would like to thank you very much indeed for all your efforts over the past 14 months since the tragic death of your father which has seen us successfully through both the Chemicoke and ANSDK tenders. Your advice and support have been greatly appreciated by all concerned within the BHP family and all of us wish you continuing success in your own future ventures.

I personally shall look forward to keeping contact with you and Randa and your mother. Please ring me before you next come to London. I shall do the same when next in Cairo.”

Mr Williams was severely cross-examined about his reference to the “last telephone conversation” of  24 September to which he referred in his letter to Mr Ahmed Farid of 6  October 1992 as having occurred “10 days ago” when in fact 6 October 1992 was 12 days after the conversation of which he gave evidence and to which his contemporaneous diary note related.

I accept the explanation given by Mr Williams for the reference to 10 days and find nothing in that reference to cast any doubt on his reliability as a witness and in particular with respect to the evidence he gave concerning the content of the telephone conversation he had with Mr Ahmed Farid on 24 September 1992.

Mr Farid replied to this letter on 8 October 1992 in the following terms:-

“I have received your fax dated October 6, 1992.

I must inform you that the Agreements between BHP and SAFCO are still in force. Article 2(b) of the Agreements for coal and iron ore stipulate that to terminate the Agreements on 31 December of any year, written notice must be given by 30 September.

Needless to say, I will take every necessary action to protect SAFCO’s rights. As a personal friend I can take the liberty of telling you that BHP has an extremely dangerous legal problem on its hands.

I shall postpone taking any further action regarding this matter until I hear from you or until the end of October 1992.”           

I accept generally the evidence of Mr Williams and Mr Gasteen. I find their evidence reliable.

I was unimpressed with some aspects of the evidence given by Mr Ahmed Farid. In particular in the light of the express provisions of Clause 9(b) of the written contract and the fact that he had no experience in the coal industry or any association with Chemicoke, I find his version of the content of discussions with Mr Williams on 7 August 1991  improbable. Moreover the letters he received from Mr Williams on 9 August 1991 and 20 December 1991 on their face support a temporary or “ad hoc” arrangement rather than one of the sort contemplated by Clause 2(b) of the written agreement and neither letter provoked any query or comment by Mr Farid.   Neither did the matters discussed in his presence in the office of Mr Mouzi when the July 1992 contract was signed.   I was unimpressed by his explanations in evidence for his failure to make comments of the sort one would expect in the circumstances if he did not believe the arrangement made on 7 August 1991 was a temporary one only. 

I find that on 7 August 1991, it was agreed between Mr Williams and Mr Ahmed Farid that Mr Farid  on behalf of the plaintiff as surviving partner, would provide personal services to the defendant in lieu of his deceased father “until the end of the year”. I find that when the end of the year was reached and the contract then in contemplation between Chemicoke and the defendant had not been concluded, an “ad hoc” arrangement continued on.  It continued on the understanding by both the plaintiff and the defendant that the defendant was looking for a suitable new agent to represent it in the sale and supply of its coal in Egypt. I infer that both parties to this ongoing arrangement were aware that it was thought desirable by the defendant that there should be no new agent appointed prior to the completion of the negotiations for the sale of coal by the defendant to Chemicoke which occurred in about July 1992. Both the plaintiff and the defendant were aware that Ahmed Farid lacked the experience and reputation of Salah Farid, the provision of whose personal services was the basis of the written agreement. However each gained a commercial advantage from the arrangement made on 7 August 1991 and continued on from January to October 1992.

After the contract had been signed in the circumstances to which Mr Williams and Mr Gasteen swore, I am satisfied that Mr Williams then set about to interview a number of potential agents to determine which of them should represent the defendant on a permanent basis in Egypt.   Indeed he enlisted the aid of Mr Ahmed Farid in this endeavour.  I am satisfied that the plaintiff was well aware at all material times of what the clearly expressed intention of the defendant was and indeed did not at any time contemplate that he had been accepted by the defendant as a substitute for his deceased father on a long term basis with respect to the sale of its coal in Egypt.

It was not really contended on behalf of the plaintiff that if Clause 2(b) of the written contract had no application,  the notice given by the defendant in its letter of 6 October 1992 was not a reasonable notice in the circumstances. I accept the evidence of Mr Williams that at all material times  Mr Ahmed Farid was aware that his filling in for his deceased father was on an “ad hoc” basis and was well aware during 1992 prior to the receipt of the letter of 6 October 1992 that the defendant proposed to appoint a new long term agent to safeguard its interests in Egypt and was aware that upon the appointment of that agent, any payments to the partnership pursuant to the arrangements that had been made on the rather informal basis between the defendant and the plaintiff on 7 August 1991 would come to an end.

He accepted the offers of payment of commission by the defendant on the basis upon which they were expressly made and never at any time raised the point that no written notice of a sort contemplated by Cl.9(c) to terminate the contract had been or need be given. Had that matter been raised, I am satisfied that such a notice would have been given prior to 30 September 1991 and I infer that he was aware of this.

On the evidence I find that it would not be open to the plaintiff in the circumstances to mount any complaint about the length of the notice he received on 6 October 1992 as being “unreasonable”. Indeed such a contention was not advanced upon the hearing. 

It is clear upon the whole of the evidence that the “arrangement” made on 7 August 1991 and continued until 6 October 1992 was for Mr Ahmed Farid to provide the “services” listed in clause 4 of the written agreement - or at least such of them as were required  - leading up to the signing of the contract with Chemicoke and the appointment of a permanent agent to be effected after that event.

There is no evidence that prior to the arrangement between Mr Williams and Mr Ahmed Farid on 7 August 1991 Mr Ahmed Farid had any precise knowledge as to the content of the agreement made between the plaintiff and the defendant at a time when Mr Salah Farid was providing the services required by the defendant. In my view, the clauses in the agreement that were tacitly adopted by both parties when Mr Williams took up the  “nice” offer made by Mr Ahmed Farid include the following:-

Clauses 3, 4, 5, 6

In my view on the evidence of Mr Williams which I accept, it is clear that neither clause 2(a) nor 2(b) could on any conceivable basis be imported into the oral “arrangement” which I find was made between Mr Ahmed Farid and Mr Williams on 7 August 1991. Nor on any rational basis could those clauses have been imported into any agreement or understanding pursuant to which Mr Ahmed Farid continued to provide the services that would have been provided by his father if alive between the beginning of 1992 and 6 October 1992.

In my view, clause 8 of the contract in writing was not a term of any oral agreement made on or subsequent to 7 August 1991. Neither party to the arrangement of 7 August 1991 even adverted to questions of the proper law of the contractual arrangement then made - or indeed continued on between the beginning of 1992 and 6 October 1992.

Similarly in my view clause 9 of the agreement would not be imported into the new oral  “arrangement” or agreement made on 7 August 1991 and continued on until October 1992.

I do not propose to analyse the evidence and arguments concerning the various shipments of coal that were made subsequent to 6 October 1992 at prices fixed in accordance with the various schedules to the contract between the defendant and Chemicoke.

I accept the evidence of Mr Williams that the agreement was that the partnership over which Mr Ahmed Farid took control upon his father’s death was to be paid a commission of US50¢ per tonne in respect of coal shipped:-

(a)to which Cl. 2(c) of the written contract applied; and

(b) during the period of time that he “filled in” for his father to which Cl. 2(c) did not apply.

Under clause 2(c) of the written agreement, commission was payable only in respect of sales effected by the defendant prior to the date of termination of the arrangement or agreement on 7 August 1991. The obligation to pay commission was similar to that under 2(d) and applied only with respect to sales for which a price had been agreed prior to the date of termination of the agreement. 

It is clear that it was open to the parties to orally rescind or abrogate the terms of the written agreement in spite of  Cl. 9(c) of that agreement. I refer only to Morris v. Baronand Company (1918) A.C. 1 at 28 per Lord Dunedin. The written agreement in this case was not even one required to be in writing.

Upon the evidence of Mr Williams as to the “arrangement” made on 7 August 1991 and 10 February 1992 which I accept and the content of the communications which passed between the defendant and the plaintiff from 7 August 1991 to 6 October 1992 and what was said in the office of the Chairman of Chemicoke in July 1992, I find that on 7 August 1991 it was assumed and indeed impliedly agreed that the written agreement no longer governed the rights and obligations of the parties to it and that while Mr Ahmed Farid “filled in for” his deceased father until 31 December 1991, the plaintiff should with respect to that period be paid the same commission as would have been payable had Salah Farid not died. Thereafter, it was agreed that that arrangement should continue until a new agent was appointed by the defendant to permanently represent its interests subsequent to the signing of the Chemicoke contract.

That arrangement was inconsistent with the parties to it accepting that the written agreement remained on foot with Mr Ahmed Farid being substituted for his father under Cl. 9(9b) thereof.

The defendant wrongly assumed that the death of Salah Farid had automatically brought the operative effect of the agreement to an end.  Ahmed Farid gave evidence that  at that stage he made the same assumption and that that “could have been” on his mind on 7 August 1991 when he spoke to Mr Williams. There is no evidence that he had obtained any legal advice on the effect of Cl. 9(b)  prior to writing his letter of 8 October 1992 or really much before his solicitors raised the matter in their letter of 22 December 1992 to which I have referred. He did say that he had shown the defendant’s letter of 6 October 1991 to “a lawyer friend” of his before he replied on 8 October 1991. Had each of Mr Williams and Mr Farid obtained proper legal advice as to the effect to be given to Cl. 9(b) prior to 7 August 1991, I am satisfied that there would have been either an express abrogation of the written agreement or a written notice of termination given pursuant to Cl. 2(b) by the defendant. It was the absence of such advice that led each of them to proceed upon the basis and in effect to impliedly agree that the written agreement had ceased to have effect on 4 August 1991. Whatever suspicions one may have as to Mr Ahmed Farid’s appreciation of the legal effect to be given to Cl. 9(b) in the absence of a written termination of the agreement prior to 6 October 1992, I would be unwilling to infer upon the whole of the evidence that he was prior to 30 September 1991 aware of the defendant’s mistake as to that legal effect and led the defendant on to refrain from giving a notice of termination pursuant to Cl. 9(c) by appearing to adopt the defendant’s mistaken view. Upon the evidence I infer that each had the same mistaken view.   However their mutual belief that the operation of the written agreement had terminated on 4 August 1991 by reason of the death of Salah Farid supports the inference that the agreement made on 7 August 1991 was intended by both to replace that written agreement rather than merely to vary it. It would be difficult to infer an intent to merely vary  the contract if both parties believed in error that the contract no longer had operative effect.

In my view, on the material, the plaintiff was paid all moneys to which it  was entitled. The defendant paid all commission due in respect of shipments of coal made prior to 6 October 1992. As well it paid all commission due under the written agreement abrogated on 7 August 1991 to which Cl. 2(c) and (d) applied.

In light of the conclusion to which I have come with respect to the contractual arrangement made it is unnecessary for me to consider the interesting argument advanced on behalf of the plaintiff as to what the plaintiff’s entitlement would have been had the defendant failed to terminate the contractual arrangement between it and the plaintiff  by its letter of 6 October 1992. The contention was that because formal notice terminating the arrangement had not been given prior to 30 September 1992 (pursuant to clause 2(b) of the written agreement) the arrangement made on 7 August 1991 could only be terminated by a formal notice of the sort contemplated under clause 2(b) given not later than 30 September 1993 to operate as from 31 December 1993. 

Having rejected that contention of the plaintiff it is unnecessary for me to analyze the evidence as to commission that may have become due and payable had that contention been accepted.   No evidence in any event was called by the plaintiff as to damage suffered by reason of non payment of commission after 6 October 1991 i.e. as to the difference between the cost of providing the services necessary to earn the commission and entitlement to commission under Cl. 3 of the written agreement.

I give judgment for the defendant against the plaintiff.

I order that the plaintiff pay to the defendant its costs of and incidental to the action to be taxed.

Should any order be necessary with respect to security for costs given by the plaintiff, I will take submissions on that matter.