Plaintiffs dismissed for failing to surrender documents and bearing risk of goods under Sale of Goods Law.

[*452] 1978 May 13

(PIKIS, P.D.C.)

IN THE DISTRICT COURT OF LARNACA

Fratelli Frattini, S.p.a. ,

Plaintiffs,

and

N. Fysentzides (Fydes) Ltd.,

Defendants.

(Action No. 904/76).

Sale of goods P.O.B. contract Failure of sellers to surrender the documents for collection And failure to furnish buyers with notice enabling them to insure Section 39(3) of the Sale of Goods Law, Cap. 267 Sellers responsible for the goods And in the absence of evidence that they were unloaded at Famagusta or any other Cyprus port they should bear the loss.

G. Pelaghias, for the Plaintiffs.

Ach. Emilianides, for the Defendants.

JUDGMENT

The following judgment was delivered by:-

PIKIS, P.D.C.: The plaintiffs are [*453] Italian manufacturers of sanitary equipment and the defendants a Cyprus trading company. The plaintiffs agreed to sell to the defendants, a quantity of specified sanitary fittings in accordance with a written agreement embodied in a proforma invoice dated 22nd February 1974 (exh. 5), The managing director of the defendants Mrs, Lyghia Fysentzidou, maintained that the aforesaid document embodied only part of their agreement alleging that their contract included additional terms concerning notification of shipment and insurance arrangements . Their written agreement makes no mention of any additional terms nor is the agreement recorded therein made subject to any further stipulations. In my judgment exhibit 11 recorded the terms of the agreement reached between the parties whereas what has been put forward by Mrs. Fysentzidou as additional terms was nothing other than a reminder of what is usual in such circumstances that it was expected of the plaintiffs to furnish the defendants with adequate information as to the shipment of the goods in order to enable them to take out an insurance.

According to the agreement of the parties the goods would be exported on a f.o.b, basis that is the plaintiffs would have discharged their part of the bargain upon shipment of the goods whereupon the defendants would be under an obligation to pay the purchase price on the surrender of the documents evidencing shipment, by the plaintiffs' agents namely the Larnaca branch of the Bank of Cyprus. It was a term of the agreement that shipment would be effected from an Italian port. [*454]

The Contract did not specify the time of shipment but one can infer, given the nature of the agreement and the nature of the business of the defendants that the goods would be shipped within a reasonable time. Implying such a term it is absolutely essential in order to give business efficacy to the agreement of the parties. (See Trollope & Colls

v. N.W. Hospital Board (1973) 2 All E.R. 260 (H.L.) Brown and Davies Ltd. v. Galbraith (1972) 3 All E.R. 31 (C.A.).)

On 1st June 1974 the defendants addressed a letter to the plaintiffs regretting the lack of news about shipment of the goods, requesting information, at the earliest possible opportunity, about shipment, the name of the carrying vessel, as well as, her anticipated arrival in Cyprus. On 29th June 1974 a reply was received (exh.12) informing them that the goods had been shipped aboard vessel "PEULI" on 25th June 1974. No mention was made of the date of the expected arrival of the boat in Cyprus.

It is common ground that the information given by exhibit 12 was erroneous and admitted that the goods were never shipped on board vessel "PUELI" on 25th June 1974 or on any other date. It is the case for the plaintiffs that the goods were shipped aboard vessel "PELIKI" at Trieste on 5th July 1974 and unloaded at the port of Famagusta on 13th July 1974 The documents evidencing shipment, namely the bill of lading (exh.1 ) and other accompanying documents (exhs 2, 3 and 4), were tendered for collection to the defendants through their agents in [*455] Cyprus but defendants in their allegation failed to collect them and pay the price. Hence the present action for recovery of the sale price, an amount of £1, 66l.720 mils, the equivalent of 2,936,920, It. Lire, according to the rate of exchange prevailing on 5th July 1974· At the trial the plaintiffs adduced evidence in their effort to establish (a) that defendants failed, in breach of their agreement, to collect the documents and pay the purchase price and (b) that the merchandise had been unloaded at Famagusta.

The defendants denied liability and maintained that (a)the documents were never surrendered as agreed,(b) they never received any notification indicating that the goods were unloaded at a Cyprus port and (c) they were never notified of the shipping arrangements made for the dispatch of the goods until a long time after the alleged arrival of the goods in Cyprus and then they had no opportunity whatever to verify this allegation as the port of Famagusta was under the control of the Turkish army barring access thereto of citizens of Cyprus. In their contention the first they heard of the shipment of the goods was on 8th October, 1974 by means of a telegram (exh. 15). It is manifest from the contents of this telegram that the plaintiffs were in the dark whether the goods had actually been unloaded at the port , of Famagusta indicating that they received no notice to that effect from the ship owners or their agents. Witness MavroMichalis testified that the port of Famagusta was closed on 15th July 1974 and remained out of action since. [*456]

It is the case for the defendants that lack of information about the shipment of the goods prevented them from making the necessary arrangements for the insurance of the cargo contrary to the business understanding they had on the subject with the plaintiffs. They maintained that the bank was in any event unwilling to surrender the documents in the absence of evidence indicating arrival of the goods in Cyprus. By way of counterclaim the defendants seek a declaration that the agreement between the parties is invalid. The claim and the counterclaim were heard together given the close nexus between the two.

In fact the self same facts are relied upon in support of the defence and counterclaim of defendants. No effort was made by the defendants to adduce any evidence additional to that offered by way of defence, understandably so, given that the same set of facts and circumstances are relied upon in support of both. The gravamen of the case for the plaintiffs is that the documents envisaged in their agreement with the defendants were tendered for collection and that defendants refused to collect them and pay the agreed purchase price. Therefore the defendants are answerable in damages for the equivalent of the sale price of the goods.

The plaintiffs mainly relied on the evidence of Mr. Michalakis MavroMichalis (P.W. 1 ), an employee of the Bank of Cyprus, in charge of the documents section at their Larnaca branch. On any interpretation of the evidence of Mr. MavroMichalis the case for the plaintiffs is not borne out. This witness testified that the documents were received on 18th August, 1974 whereupon they addressed [*457] written notification of the fact to the defendants on 23rd August 1974(exh.5)· It is the evidence of Mr. MavroMichalis that notwithstanding this notification they would not have surrendered the documents to the defendants under any circumstances in the absence of evidence indicating the arrival of the goods in Cyprus and he explained that these were their instructions from the Central Bank of Cyprus, given in order to cope with the very anomalous situation resulting from the tragic events of the summer of 1974.

He explained that in the absence of specific authority from the Central Bank, and none had been given in the present case, they could not surrender documents relating to goods in respect of which there was no verification confining their arrival in Cyprus. The witness added significantly that even today they would be unwilling to surrender the documents to the. defendants even if they had volunteered to pay the price.

There is a discrepancy between the testimony of Mr. MavroMichalis and that of Mrs. Fysentzidou, the managing director of the defendants, as to whether the defen dants had been specifically notified of the unwillingness on the part of the bank, the collection agents of the plaintiffs, to surrender the documents. It is the evidence of Mrs. Fysentzidou that she did call at the bank to be told that the documents could not be surrendered to her in the absence of evidence that the cargo, subject matter of the documents had, in point of fact, been discharged at the port,of Famagusta. Mr. MavroMichalis, on the other hand testified that Mrs. Fysentzidou made no such call. [*458]

The plaintiffs in an effort to mitigate the effects of the evidence of their own witness, Mr. Mavromichalis, called Mr. Spyros Plousiou (P.W.3), the chief exchange control officer of the Central Bank, who testified on the subject of the instructions that had been issued to commercial banks in the summer months of 1974 following the Turkish invasion. The witness produced a circular (exh.6) that was issued to commercial banks in order to guide them on the subject of collection of documents. In his evidence the circular was meant to regulate the remittance of money abroad and not the payment of the purchase price against the surrender of documents.

That may well be so but in my judgment its wording was apt to give rise to the interpretation placed on it by witness Mavromichalis and as I can assume the Larnaca branch of the Bank of Cyprus, for that matter, given the emphasis laid on verification of the fact of arrivals of the goods in Cyprus. Certainly by withholding the surrender of documents in the absence of satisfactory evidence that the goods arrived in Cyprus no possibility would arise for the export of exchange in respect of goods that never reached Cyprus ports. But what is significant is not the precise interpretation of the circular (exh.6) but the fact that the Larnaca branch of the Bank of Cyprus, the nominated agents of the plaintiffs, were unwilling to surrender the documents and still are, as Mr.

Mavromichalis testified. Evidence was adduced on behalf of the defendants in an effort to establish that the goods had been unloaded at the port of Famagusta on 13th July 1974. [*459] Two employees of the ship’s agents in Cyprus, namely the shipping, agency of Orphanides & Murat, testified about the arrival of motor vessel "PELIKI" at the port of Famagusta on 13th July 1974 and other details concerning the operations of this vessel. The evidence, of Mr. Andreas HadjiSymeou (P.W.2) amounts to practically nothing and need not concern us. On the other hand the testimony of Mr.

Georg hios Loizides (P.W.4) sheds more light on the subject though not conclusive by any means. The witness confirmed that the aforementioned vessel arrived at the port of Famagusta on 13th July 1974, discharged her cargo on the same day and sailed off on the morning of the following day, 14th July 1974. He produced a true copy of the ship’s manifest (exh.

7) indicating that the goods destined to reach the defendants in Cyprus had been loaded abroad vessel "PELIKI" and formed part of her cargo. However the witness was unable to indicate with any certainty whether the goods had actually been discharged at the port of Famagusta. Speaking of experience he stated that if the cargo of a boat is not discharged in its entirety during one trip it will inevitably be discharged on her next call to a Cyprus port. The firm of Orphanides & Murat vacated Famagusta on 15th August 1974, in the wake of the Turkish invasion and moved its offices to Limassol.

Mr. Loizides stated that since setting up office at Limassol no notification was addressed to the defendants informing them of the arrival of the goods. He was unable to say whether any such notification was addressed to the defendants Prior to that date as their records remained at Famagusta. [*460] He testified that as a matter of practice notification was invariably addressed to the importers as soon as the cargo was discharged at the port. Mrs. Fysentzides testified that defendants never received any notification from any source or quarter informing them of the arrival of the goods in Cyprus.

In his final address learned counsel for the plaintiffs correctly submitted that a shipped bill of ladings that is a bill of lading that indicates that the goods had been shipped, constitutes prima facie evidence of the shipment of the goods. (See Benjamins Sale of Goods, para 1365 Smith v. Bedwin Steam Navigation Co. (1896) A.C. 70.) This presumption, arising from the contents of the bill of lading, not only was it not rebutted but on the contrary it is strengthened by the contents of the ship’s manifest. A fair inference from the evidence before me is that the goods subject matter of the agreement between the plaintiffs and defendants were shipped aboard vessel "PELIKI" at an Italian port, viz. Trieste, on 5th July 1974., In the submission of the plaintiffs the plaintiffs performed their part of the bargain for in a f.o.b. contract the responsibility of the seller ends with the shipment of the goods, the risk passing thereafter to the buyers. On the other hand the liability of the buyers to pay in this case according to the very terms of the agreement between the parties would arise on the surrender of the documents and inasmuch. as the agents of the plaintiffs were unwilling to surrender the documents for the reasons above given the defendants have committed no breach of their agreement with plaintiffs. [*461]

I believe the testimony of Mrs. Fysentzidou that she did call at the bank and that she was informed that the bank was unwilling to surrender the documents. The object of this visit was to make inquiries on the matter. Very probably the defendants would be unwilling to pay if the bank was ready to surrender the documents; but that is not something that arises for consideration. What is material - and this is the pertinent finding is that the agents of the plaintiffs were unwilling to surrender the documents. Therefore no obligation arose on the part of the defendants to pay the purchase price.

Another area to which I must direct my attention and make my findings is that concerning the arrival of the goods in Cyprus. The shipment of the goods as such does not give rise to any presumption that the goods were unloaded in due course at the port of destination. Even if I was to presume that, the presumption would be totally weakened in view of the following facts: The defendants were liable under the agreement to pay the freight; no one ever asked them to pay the freight. Furthermore they received no notification from any quarter indicating arrival of the goods in Cyprus nor is there anything before me to suggest that such notice was addressed to the defendants. The plaintiffs themselves were, as indicated earlier in this judgment, totally in the dark as to whether the cargo destined for the defendants was unloaded at the port of Famagusta. In my judgment the plaintiffs failed to prove that the cargo had been unloaded at the port of Famagusta. [*462] Indeed there is not evidence before me establishing that fact. The making of such a finding would ordinarily be unnecessary on a f.o.b. contract had it not been for the provisions of section 39(3) of the Sale of Goods Act, Cap. 267.

Section 39(3), Cap. 267 lays down that when goods are sent by a route involving sea transit in circumstances in which it is usual to insure, as in this case, the seller is under an obligation to furnish the buyer with notice enabling him to insure; for if the seller fails to discharge this obligation then the goods shall be deemed to be at his risk during such sea transit. It was settled some time ago that the provisions of the Englsih statute corresponding to the aforesaid enactment of Cyprus law apply to a f.o.b.contract notwithstanding the general rule that after shipment risk passes to the buyer. (Re the general rule see, inter alia, Stock v. Englis (1884) 12 Q.B.D. 564; Broome v. Pardess Co-Operative Society of Orange Growers (l94O) 1 All E.R.603; Benjamin’s Sale of Goods, paragraph 1704 et seq.) The leading authority establishing that the provisions of s. 39(3) Cap. 267, corresponding to the provisions of s.32(3) of the Sale of Goods Act 1893 apply to a f.o.b. contract is the decision of the Court of Appeal in Wimble v. Rosenberg L.J. 1913 - Volume 82, K.B. 1251. However the seller need not give specific notification for the purpose and is deemed to have discharged his obligations if the agreement itself contains sufficient information to enable the buyer to take out an insurance [*463] or if the buyer is in any event in the possession of information, be it from an independent source, that would enable him to take out an insurance. It is therefore incumbent on the Court to decide whether the buyer had adequate notice to take out an insurance. The agreement of the parties, evidenced by exhibit 11, did not contain such information as would enable the buyer to insure. It did not specify the anticipated date of shipment nor the vessel by which shipment would be effected. In Wimble (supra) the majority inclined to the view that the naming of the vessel is not in itself a prerequisite to taking out a proper insurance. It is, in the last analysis, a question of fact whether the buyer had adequate information to effect an insurance. And in resolving this question the Court must have regard, inter alia, to the expectations of the parties as they may have been signified by the one party to the other.

In the present case the defendants had indicated to the plaintiffs their anxiety to receive knowledge about the name of the vessel and the anticipated time of shipment. The information addressed by the plaintiffs to the defendants in reply thereto was erroneous and misleading. If the defendants had taken out an insurance to cover sea transit by means of vessel "PEULI" that would not have helped them at all. In the result, the plaintiffs failed to indicate to the defendants the date at which the goods would be shipped and not only failed to name the vessel but instead gave erroneous and misleading information on the subject. [*464]

In my judgment the plaintiffs failed to comply with their obligations under section 39(3), Cap. 267 and risk for the safety of the goods remained with them. (For a discussion on the subject see Benjamin's Sale of Goods, Paragraph 1432 et seq.) Therefore the plaintiffs were responsible, for the safety of the goods and in the absence of evidence that the goods were unloaded at Famagusta or any other Cyprus port they must shoulder the loss and cannot hold the defendants answerable for the purchase price.

I have carefully examined the contents of two letters addressed by the defendants to the plaintiffs, namely exhibits 9 and 10 in order to ascertain whether any admission is made therein on the part of the defendants to the effect that the goods had been unloaded at Famagusta. The answer is in the negative. It is specifically mentioned in exh.

9 "nobody had the chance to check whether goods of your invoice 1033 have been discharged.....".

In the light of the above the action of the plaintiffs fails for two independed reasons: (a) failure on the part of the sellers manifested through their agents, the Larnaca branch of the Bank of Cyprus to surrender the documents for collection as envisaged in their agreement, a prerequisite.to liability on the part of the defendants to pay the purchase price; and (b) loss of the goods at a time at which risk for their safety rested with the plaintiffs. On the other hand I am not prepared to make, in the light of the evidence before me and my findings, the declaration sought by the defendants in their counterclaim [*465] and in consequence both the claim and counterclaim are dismissed. The plaintiffs are adjudged to pay the costs of the defendants to be assessed by the Registrar and approved by the Court subject to this: There will be no order as to costs with regard to the counterclaim.

Claim and counterclaim dismissed. Order for costs as above.