The Grain Pool of WA v New England Agricultural Traders Pty Ltd

[1999] WASC 56

THE GRAIN POOL OF WA -v- NEW ENGLAND AGRICULTURAL TRADERS PTY LTD [1999] WASC 56

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[1999] WASC 56
Case No:	CIV:1102/1999	Heard:	29 APRIL 1999
Coram:	MASTER BREDMEYER	Delivered:	11/06/99
No of pages:	8	Judgment Part:	1 of 1
Result:	Application dismissed
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Parties:	THE GRAIN POOL OF WA NEW ENGLAND AGRICULTURAL TRADERS PTY LTD
Catchwords:	Summary judgment Contract for the sale of barley subject to a special condition
Legislation:	Nil
Case References:	Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 Meehan v Jones (1982) 149 CLR 571 Webster v Lampard (1993) 177 CLR 598 Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 Charles Rickards Ltd v Oppenhaim [1950] 1 KB 616 Codelfa Constructions Pty Limited v State Rail Authority of NSW (1982) 149 CLR 337 Gough Bay Holdings Pty Limited v Tyrwhitt-Drake [1976] VR 195 Ian Stach Ltd v Baker Bosley Ltd [1958] 2 QB 130 Laurinda Pty Ltd v Capalaba Park Shopping Centre (1989) 166 CLR 623 Louinder v Leis (1982) 149 CLR 509 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 Nichimen Corporation v Gatoil Overseas Inc [1987] 2 Lloyd's Rep 46 Ogle v Comboyuro Investments Pty Ltd (1976) CLR 444 Pavia & Co, SPA v Thurman-Nielsen [1952] 1 All ER 492 Perri v Coolangatta Investments Pty Limited (1982) 149 CLR 537 Plasticmoda Societa per Azioni v Davidsons (Manchester) Ltd [1952] 1 LLLR 527 State Trading Corporation of India Ltd v Compagnie Francaise D'Importation et de Distribution [1983] 2 Lloyd's Rep 679 Stickney v Keeble [1915] AC 386 Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : THE GRAIN POOL OF WA -v- NEW ENGLAND AGRICULTURAL TRADERS PTY LTD [1999] WASC 56 CORAM : MASTER BREDMEYER HEARD : 29 APRIL 1999 DELIVERED : 11 JUNE 1999 FILE NO/S : CIV 1102 of 1999 BETWEEN : THE GRAIN POOL OF WA

Plaintiff

AND

NEW ENGLAND AGRICULTURAL TRADERS PTY LTD
Defendant

Catchwords:

Summary judgment - Contract for the sale of barley subject to a special condition

Legislation:

Nil

Result:

Application dismissed

(Page 2)

Representation:

Counsel:

Plaintiff : Mr R J Price
Defendant : Mr R L Le Miere QC

Solicitors:

Plaintiff : Freehill Hollingdale & Page
Defendant : Blake Dawson Waldron

Case(s) referred to in judgment(s):

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Meehan v Jones (1982) 149 CLR 571
Webster v Lampard (1993) 177 CLR 598

Case(s) also cited:

Carr v J A Berriman Pty Ltd (1953) 89 CLR 327
Charles Rickards Ltd v Oppenhaim [1950] 1 KB 616
Codelfa Constructions Pty Limited v State Rail Authority of NSW (1982) 149 CLR 337
Gough Bay Holdings Pty Limited v Tyrwhitt-Drake [1976] VR 195
Ian Stach Ltd v Baker Bosley Ltd [1958] 2 QB 130
Laurinda Pty Ltd v Capalaba Park Shopping Centre (1989) 166 CLR 623
Louinder v Leis (1982) 149 CLR 509
Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286
Nichimen Corporation v Gatoil Overseas Inc [1987] 2 Lloyd's Rep 46
Ogle v Comboyuro Investments Pty Ltd (1976) CLR 444
Pavia & Co, SPA v Thurman-Nielsen [1952] 1 All ER 492
Perri v Coolangatta Investments Pty Limited (1982) 149 CLR 537
Plasticmoda Societa per Azioni v Davidsons (Manchester) Ltd [1952] 1 LLLR 527
State Trading Corporation of India Ltd v Compagnie Francaise D'Importation et de Distribution [1983] 2 Lloyd's Rep 679
Stickney v Keeble [1915] AC 386
Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214

(Page 3)

1 MASTER BREDMEYER: This is an application by the plaintiff for summary judgment under Rules of the Supreme Court (WA) O 14 for damages under two contracts of sale. The first contract of sale No BFE97006 of 28 October 1997 was between the plaintiff as seller and the defendant as buyer of 30,000 tonnes of WA feed barley for the price of US$136 per tonne delivered FOB. It is said that the defendant failed to pay and thereby breached that contract and the plaintiff is suing for damages. The second contract No BME97016 dated 29 May 1998 was for the sale of 30,000 tonnes of WA Stirling (malting) barley for the price of US$150 per tonne delivered FOB. It is said there that the defendant failed to pay and the plaintiff terminated the contract. Again, damages are sought, being carrying charges and the price difference between the contract price and the price of barley at the date of termination.

2 There is a connection between the two contracts. According to the plaintiff, following the defendant's breach of the first contract, the parties entered into a written agreement dated 29 May 1998 contained in a letter signed by both parties, and referred to in the statement of claim as the "letter agreement", whereby the plaintiff agreed to overlook the defendant's breach of the first contract provided the defendant duly performed and fulfilled the terms of the second contract. The first contract required the defendant to deposit cash or a guarantee for US$100,000 to secure the defendant's performance of that contract. This was provided in the form of a bank guarantee from the defendant's bank, Banque Nationale de Paris ("BNP"). By the letter agreement this guarantee also became applicable to the second contract. In these circumstances, it is appropriate that I examine the second contract first.

3 The second contract is on a printed form headed "The Grain Pool of WA - FOB Contract" which I suspect is a standard form used by the plaintiff. The first page contains a schedule of key terms. As stated, the second contract dated 29 May 1998 was for the sale of 30,000 tonnes of "Western Australia Stirling barley of the 1997/98 season's crop" at a price of US$150 per tonne delivered FOB buyer's freight. The total price was US$4,500,000. Payment was to be made by way of a letter of credit or by cash prior to loading. The letter of credit was to be established by Friday 5 June 1998, ie within seven days of signing the contract. The delivery period was stated:

"1-31 July 1998. Buyers best endeavours to ship the tonnage by 15th July 1998."

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The buyer had to tender one or more vessels within the delivery period to load the grain.

4 The defendant is a company controlled by Mr Peter Howard and he has filed a long affidavit in opposition to this application. In this kind of application I consider I should accept the defendant's affidavit unless it is inconsistent with undisputed contemporary documents or other statements by the same deponent or inherently incredible, Webster v Lampard (1993) 177 CLR 598 at 604. In general terms, I accept Mr Howard's evidence as truthful. It is clear from his affidavit that at no stage was his company able to provide a letter of credit for US$4,500,000 unless he was able to on-sell the barley. His company's financial difficulties were well known to the plaintiff. Mr Howard had informed the plaintiff of that. The reason why the defendant had breached the first contract which required the defendant to take delivery of the barley between 1 April and 31 May 1998 and to provide a letter of credit for US$4,080,000 not later than 45 days before 1 April, was that he was unable to find a purchaser for the barley. Also, he had been let down on other contracts. He had sold 4500 tonnes of dun peas from Western Australia to a Bangladeshi buyer who had defaulted on payment. He had also sold 30,000 tonnes of durum wheat in December 1997 to a French buyer who had reneged on the deal and the wheat had to resold at a loss to the defendant of US$600,000. Mr Howard explained his company's financial difficulties to the plaintiff's officers and that is the background to the letter agreement and to the second agreement. According to Mr Howard, prior to signing the second agreement, he told the plaintiff's General Manager - Marketing, Mr Alan Dagg, after reading cl S 14 that he could not guarantee that his company would open a letter of credit by 5 June 1998 because of the financial difficulties to which he had referred prior to lunch, and that his company was waiting for a letter of credit to be opened from Bangladesh so that it could clear its line of credit by shipping dun peas from Western Australia. Relevantly, Mr Dagg said that the defendant "should use its best endeavours to find a buyer and open a letter of credit by 5 June". He said that during the meeting Mr Dagg played down the time stipulations in the contract and said words to the effect "as long as New England Agricultural Traders intends to perform the malting contract, the details could be worked out between us, but the Board will want to see something in writing".

5 Following the signing of the contract Mr Howard endeavoured to sell the barley in China. He contacted the Simon Joscelyne, the principal of Halifax Rural Exports Pty Ltd, which is a trading company in Australia, which had a big client in China, COFCO. Through Halifax, Howard

(Page 5)

endeavoured to find a buyer in China. On 22 June 1998 Halifax sent to the defendant a draft contract for the sale of 30,000 tonnes of malting barley. Howard's bank could not supply a letter of credit unless the Chinese purchaser supplied a back-to-back letter of credit. On 7 July Halifax informed him that its buyer COFCO had made a 10 per cent deposit with a Chinese letter of credit. He was later informed that COFCO had made a 30 per cent deposit and that a Chinese letter of credit would be opened by 25 July. Mr Howard kept Mr Dagg informed of these developments. On 20 July Mr Howard was informed by Halifax that COFCO had deposited funds for the Chinese letter of credit, but that Halifax would not fully "confirm" with the defendant until a fully workable letter of credit was in place and that a Halifax employee was flying to Beijing on the next day. Mr Crang (of Halifax) told Mr Howard that COFCO would take a minimum of three cargoes. On the same day Mr Howard sent a fax to the plaintiff, as follows:

"Please understand we are doing our utmost to fulfil malting barley contract under difficult circumstances. We would appreciate if you can be patient a few more days. Buyers say they will take three cargoes in total and that is why we agreed to delay the opening which was originally agreed to be open by latest 10 July 1998."
On 28 July the plaintiff sent a fax to the defendant stating:

"The Grain Pool require NEAT to execute this contract. To provide comfort to the Grain Pool that the contract will be completed satisfactorily, would NEAT please deposit AUS$1,000,000."

On 29 July the defendant sent a fax to the plaintiff which stated:

"Confirming NEAT will execute malting barley contract ... on basis of terms and conditions faxed here last week. Buyers have again confirmed this morning that they are proceeding but financing has taken longer than expected."

6 On 4 August 1998 Mr Howard was told by Mr Crang of Halifax that he remained confident about finalising the deal. On the same day Mr Howard phoned Mr Dagg and told him everything was proceeding well but he had not yet sighted the letter of credit from the Chinese buyer. Mr Dagg told him that he was attending a Grain Pool Board meeting tomorrow and he would be quizzed by the Board on this deal and that the Board would require some comfort, "not verbal comfort but material
(Page 6)

comfort in the form of a significant guarantee". Mr Dagg asked that the performance bond be increased from $100,000 to $500,000 to provide comfort for the market differential. Mr Howard disagreed with Dagg's assessment of the market differential. He said that the market differential on malting cargo was US$10 per tonne, based on NEAT sales and the most recent sale by the ABB. Mr Howard instructed his bank to increase the guarantee to US$285,000 to cover the market differential on 28,500 tonnes (being 5 per cent less on the purchase of 30,000 tonnes, 5 per cent more or less at B/O) until such time as NEAT shipped the grain the subject of the contract. On 7 August 1998 the bank guarantee to the plaintiff was increased to US$285,000. On 9 September 1998 the plaintiff gave notice to the defendant in these terms:

"Please ensure a letter of credit acceptable to the Grain Pool of WA is opened by 5.00pm 16 September 1998 to satisfy the requirements of the contract. I am of the firm belief that the Grain Pool has been more than accommodating in relation to this contract and also contract BFE97006, however time is now of the essence and we require you to perform the contract."

7 Mr Howard has deposed that, based on his experience as a trader and on his dealings with financial institutions in relation to letter of credit, the requirement that his company open a letter of credit in relation to the Chinese market within seven days was not reasonable in the circumstances and he has produced a letter from his bank to that effect. He says that at the time his company received the letter he was negotiating for the sale of the barley to a Chinese buyer through Halifax, and also for another sale through another agent, Ms Ogilvy Stewart. He said that his company's efforts to sell the malting barley in China had been frustrated by the plaintiff's sale of feed barley to China and that a number of Chinese sources had informed him that Australian feed barley had been used for malting purposes.

8 On 23 September 1998 the plaintiff by letter terminated the contract for repudiation and claimed damages. The next day the plaintiff called upon the performance bond of US$285,000 which was paid by the defendant's bank.

9 I consider that Mr Dagg's affidavit and the documents annexed support the plaintiff's statement of claim alleging breach of the second contract. I therefore must ask myself if there is an issue or question in dispute which ought to be tried or if there ought to be a trial for some other reason: see O 14 r 3(1)? The power to order summary judgment is

(Page 7)

one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99.

10 The first defence offered by the defendant relates to special term S 14(d) of the second contract, which reads:

"This contract is subject to the Buyer declaring an end user acceptable to the Seller by no later than 5 June 1998".

The words "subject to" normally mean a condition precedent to the formation of the contract, or a condition precedent to the performance of the obligations under the contract. I think it arguable, on a proper construction of this term, that the performance of the contract is subject to the buyer declaring an end user acceptable to the seller by no later than 5 June 1998. There are three parts to that. The performance of the contract is subject to: (1) The buyer declaring an end user. This arguably implies, I think, that the buyer has first found an end user. (2) That the end user (so found and declared) is acceptable to the seller; and (3) the declaration and the acceptance have to be given no later than 5 June 1998. This arguably means that if the buyer does not find an end user then it is relieved from having to perform it. The third condition is not a problem because that means the declaration and the acceptance must be by 5 June 1998 or such later period as may be allowed by the seller. It can be seen from the facts related above that the seller, at least tacitly, gave extensions of time up until 9 September 1998 and 14 days thereafter.

11 The plaintiff has argued that this condition was imposed for the benefit of the seller. If the seller does not accept the buyer's proposed end user then the contract goes off. I fail to see why that interpretation is the only one. When a contract is expressed to be subject to a condition, that condition can be for the benefit of the vendor or seller, or both. In the case of a contract for the sale of land expressed to be subject to finance, it has been held that that condition is normally for the benefit of the purchaser: see Meehan v Jones (1982) 149 CLR 571. I consider that it is arguable that this special term means that the contract is subject to the buyer finding an end user and to the seller declaring that end user to be acceptable to it by 5 June or such later period as the seller might allow. On that basis the buyer was unable to find an end user within the period, and the extended period, allowed. I consider that as arguably a condition precedent to the performance of its obligations under this contract and that amounts to an arguable defence.
(Page 8)

12 In view of that finding, it is not necessary for me to consider other defences raised and I propose to dismiss this application and give the defendant leave to defend.