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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Port of Tilbury (London) Ltd v Stora Enso Transport & Distribution Ltd & Ors  EWHC 992 (TCC) (07 May 2008)
Cite as:  EWHC 992 (TCC)
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL
B e f o r e :
| Port of Tilbury (London)Ltd
|- and -
|Stora Enso Transport & Distribution Ltd
Stora Enso Transport & Distribution AB
(now known as Stora Enso Logistics AB)
David Streatfeild James QC and Patrick Clarke (instructed by Campbell Hooper Solicitors) for the Defendants
Hearing dates: 25 April 2008
Crown Copyright ©
The Hon Mr Justice Ramsey:
(1) By Clause 5, the Services included unloading paper shipped to the Facilities, storage of paper at and retrieval of stored paper from the Facilities, loading of paper orders for despatch from the Facilities and provision of an electronic management system and the production of various documents and reports.
(2) By Clause 8.1.2 Stora Enso were obliged to pay Tilbury the "freight price" of £13.30 per tonne of paper sent to the facilities during the "first contract year", which ran from 1 July 2005 to 30 June 2006.
(3) By Clause 8.4 if the total tonnage of paper sent to the facilities in the first contract year was less than a 'minimum tonnage', calculated in accordance with a formula set out in the clause, then Stora Enso were also obliged to pay to Tilbury £13.30 for every tonne short of the minimum tonnage which Stora Enso sent to the facilities ("the minimum tonnage payment").
The Relevant Contractual Provisions
(1) By Clause 4 Tilbury was to procure the design and construction of the Facilities. By Clause 4.3 Stora Enso was to use its reasonable endeavours to procure that the Facilities were available for use by 1 July 2005, with provision being made for a commissioning period.
(2) By Clause 4.3.2, once the Facilities had been completed and commissioned, Tilbury was to notify Stora Enso that the Facilities were available for the commencement of the provision of the Services. This was the Services Commencement Date as defined in Clause 1.1.1.
(3) By Clause 5.1, Tilbury was to provide the Services (defined in Clause 1.1.1 to mean those referred to in Clause 5) from the Services Commencement Date.
(4) By Clause 8.1, Stora Enso were to pay the Freight Price for Cargo shipped to the Facilities. The Freight Price was expressed at a rate per tonne. Payment was to be by way of Billing Statements, usually prepared by Stora Enso under a self-billing system (Clause 8.8) with the 'due date' for payment being the last day of the month in which the Billing Statement was received.
(5) By Clause 8.10.1, the sum to be paid was the sum shown on the Billing Statement "subject to Clauses 8.10 and 8.11 (Disputed Sums), without any claim, deduction, counterclaim or set-off'.
(6) Clause 8.11.1 provides:"If either [Stora Enso or Tilbury] genuinely and bona fide disputes that any sum or part thereof (the "Disputed Sum") due in terms of this Agreement is payable, then, provided that on or before the due date for payment of the Disputed Sum, such Party shall have given notice to the other Party of its intention to withhold the Disputed Sum stating in reasonable detail the bases upon which it so genuinely and bona fide disputes that the Disputed Sum is payable it shall be entitled to withhold, pending resolution of such dispute, the Disputed Sum".
(7) Clause 15 provides that"Save as expressly permitted in terms of this Agreement, all payments to be made by any party under this Agreement shall be made:-(a) without set-off, deduction or counterclaim, save to the extent that any such set-off, deduction or counterclaim is expressly permitted in terms of this Agreement;"……
"Subject to the terms of Clause 10 (Maintenance, Insurance and destruction of, or Major Damage to, the Facilities) if in any Contract year the aggregate tonnage of Cargo in respect of which the Freight price is paid to [Tilbury] is less that the Minimum Tonnage then with the payment in respect of the last month of that Contract Year [Stora Enso] shall pay to [Tilbury] a sum calculated by reference to the formula:
((MT-T) x FP)
MT is the Minimum Tonnage;
T is the tonnage of Cargo (other than Cargo within Direct Transit Trailers) discharged at the Facilities in the relevant Contract Year;
FP is the Freight Price per tonne for the Minimum Tonnage."
"…that Tilbury would not be entitled to claim the minimum tonnage payment in respect of periods in which Tilbury was not ready willing or able to carry out the Services in respect of products in quantities equal to or above the minimum tonnages provided for in the Agreement, consistently, reliably or at all."
"I am prepared to accept the principle as stated in Chitty subject to the reservation that as an exercise in construction the requirement of "clear express provisions to the contrary" it should not be read as meaning more than a clear contractual intention to be gathered from the express provisions of the contract. In my view, any exercise in construction must be considered in the context of the particular contract, and must pay particular regard to the nature and purpose of the term in relation to which the party seeking the remedy is said to have been in breach and to the nature of the benefit or advantage said to accrue by permitting recovery on his part. It seems to me that this is particularly so bearing in mind that, treating the matter as one of construction (at least in a case where no question of morality or policy arises) the application of the so-called presumption that no man may take advantage of his own wrong (in the sense of his own breach of contract) so as to deprive him of the benefit of a provision which on its face entitles him to recover the sum claimed, is to do no more than imply a term that the right expressly given shall not be available whenever the plaintiff is in breach of some parallel term in the contract."
"for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is ineffective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."
"The court's usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision. It is because the implication of terms is so potentially intrusive that the law imposes strict constraints on the exercise of this extraordinary power."
"The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong. For, as Scrutton LJ said in Reigate v Union Manufacturing Co (Ramsbottom) Ltd  1 KB 592 at 605:
"A term can only be implied if it is necessary in a business sense to give efficacy to the contract; that is, if it is such a term that it can confidently be said that if at the time the contract was being negotiated someone had said to the parties, 'What will happen in such a case', they would both have replied 'Of course, so and so will happen; we did not trouble to say that; it is too clear'. Unless the court comes to such a conclusion as that, it ought not to imply a term which the parties themselves have not expressed …"
In the familiar cases already mentioned there could be little room for doubt what the parties' joint answer would have been had the question been raised at the outset. There would, almost literally, have been only one possible answer. But this may not be so where a contract is novel, known to involve more than ordinary risk and known to be more than ordinarily uncertain in its outcome. And it is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would, without doubt, have been preferred; Trollope & Colls Ltd v Northwest Metropolitan Regional Hospital Board  2 All ER 260,  1 WLR 601 at 609-10, 613-14."
(1) There is no need for the implied term because if Stora Enso succeed on their counterclaim, they will be entitled to compensation for all Tilbury's alleged breaches and that, consistent with Clause 15 which precludes set-off, Stora Enso are required in common with many commercial agreements, to pay first and argue later;
(2) The Agreement is perfectly effective without the implied term;
(3) There was a comprehensive written contract showing signs of careful professional drafting in respect of which the parties had the benefit of legal advice;
(4) The Agreement relates to an operation which was known to be novel, to involve more than ordinary risk and to be more than ordinarily uncertain in its outcome; and
(5) If the parties had addressed their mind at the outset to the eventuality, it is by no means clear how they would have agreed that the risk should be allocated or, if they had agreed that the plaintiffs should be protected, what form that protection should take.
"Where the parties have made an express provision as regards some matter with regard to the contract, it is, and must be, extremely difficult for either of them to say in regard to that subject matter, as to which there is an express provision, there is also an implied provision or condition in the contract."
(1) I do not consider that it is "reasonable and equitable". In the terms set out, Tilbury would not be entitled to claim for particular periods when, for instance, Tilbury were not able to provide certain Services in terms of documents or reports, even if this did not affect the ability of Stora Enso to discharge Cargo at the Facilities. Unlike Clause 10(5)(b) which applies a pro rata reduction for the period in respect of which the parties' obligations are suspended.
(2) I do not consider that the terms is "necessary to give business efficacy to the contract". The contract operates without it. The sum payable under Clause 8.4 can, subject to Clause 15 and the other provisions of the Agreement, be diminished or extinguished by the remedy at law. If the parties have agreed to exclude that remedy then Stora Enso would be left with an unliquidated cross-claim which would have to be tried separately.
(3) As expressed, the term is not "so obvious that it goes without saying". If, at the time of the contract, this question had been posed: "what would happen to the sum payable under Clause 8.4 if the failure to achieve the minimum tonnage were caused by a breach of contract by Tilbury?" there might have been a number of different solutions, including the remedy at law of diminishing the sum due.
(4) Again the term is not "capable of clear expression". There would be a number of possible ways in which the term might be expressed.
(5) The term would "contradict an express term of the contract". It would contradict the terms of Clause 8.4 by making that clause inapplicable in certain circumstances.
Set-off and Counterclaim
(1) Clause 8.10.1 which provides that:
"The sum (the "Payment Sum") shown payable by [Stora Enso] as such on a Billing Statement rendered pursuant to Clause 8.8 (Self Billing)" shall be paid, subject to Clauses 8.10.2 and 8.11 (Disputed Sums) without any claim deduction, counterclaim or set-off by [Stora Enso] not later than the last day of the month in which the Billing Statement is received………(the date upon which the Payment Sum is so payable being hereinafter referred to as "the due date")."
(2) Clause 8.11.1 which provides that:
"If either [Stora Enso] or [Tilbury] genuinely and bona fide disputes that any sum or part thereof (the "Disputed Sum") due in terms of this Agreement is payable, then, provided that on or before the due date for payment of the Disputed Sum, such party shall have given notice to the other party of its intention to withhold the Disputed Sum stating in reasonable detail the bases upon which it so genuinely and bona fide disputes that the Disputed Sum is payable it shall be entitled to withhold, pending resolution of such dispute, the disputed sum."
"It is of course open to parties to a contract for sale of goods or for work and labour or for both to exclude by express agreement a remedy for its breach which would otherwise arise by operation of law or such remedy may be excluded by usage binding upon the parties (cf Sale of Goods Act 1893 s.55). But in construing such a contract one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption….
So when one is concerned with a building contract one starts with the presumption that each party is to be entitled to all those remedies for its breach as would arise by the operation of law, including the remedy of setting up a breach of warranty in diminution or extinction of the price of materials supplied or work executed under the contract. To rebut that presumption one must be able to find in the contract clear unequivocal words in which the parties have expressed their agreement that this remedy shall not be unavailable in respect of breaches of that particular contract."
(1) The party (Stora Enso or Tilbury) must "genuinely and bona fide dispute" that any sum (the "Disputed Sum") due in terms of the Agreement is payable.
(2) The party must, before the due date for payment of the Disputed Sum give notice of its intention to withhold the Disputed Sum, stating in reasonable detail the basis upon which it so genuinely and bona fide disputes that the Disputed Sum is payable.