Mr. P.A. Awolaja & Ors. V. Seatrade G.B.V (2002)

LAWGLOBAL HUB Lead Judgment Report

O. AYOOLA, J.S.C.

This is an appeal from the decision of the Court of Appeal whereby the judgment entered by the Federal High Court for Seatrade Groningen B. V the respondent in this appeal (which was plaintiff), and dismissing the appellants’ counterclaim was confirmed and the appeal of the appellants (defendants in the High Court) was dismissed. This is a second appeal in the case. For convenience the appellants are referred to as “the defendants” and the respondent as “the plaintiff’ in this judgment. The plaintiff claimed against the defendants jointly and severally the total sum of US $229,713.3 and N304,410.64 together with interest being discharging fees, transportation and storage charges and legal expenses in respect of two cargoes of frozen fish ordered by the defendants and severally brought to Nigeria in the plaintiff’s vessels M.V. “Frost Castor” and MV “Normandic.” The defendants counterclaimed for a total sum of N750,233.80 being cost of 6,464 cartons of unsound fish, transportation, additional storage charges, short delivery and the cost of disposing the unsound fish. The basis of the plaintiff’s claim was that its two vessels were chartered to carry cargoes of frozen fish from Holland for delivery in Apapa, Lagos to the 1st defendant who apparently was also acting for the other defendants. The ships arrived in Lagos on schedule but the cargoes of frozen fish were not off loaded by the defendants on time. The sums claimed were the total amount of loss that the plaintiff alleged it suffered.

At the trial and in the appeal to the Court of Appeal the main issue was whether or not the defendants were liable under the charter parties which the plaintiff claimed embodied the contract of affreightment. The defendants contended that they were not parties thereto and that the terms of such charter parties so claimed by the plaintiff were not incorporated in the bills of lading issued on behalf of the Masters of the vessels in which said bills of lading the 1st defendant was named as Notify Party. They went further to contend that there were no charter parties because the documents relied on by the plaintiff as being the charter parties were unsigned.

The trial Judge rejected these contentions. Significantly, he said: “Since the 1st defendant was the receiver of the cargo in both vessels M.V. ‘Frost Castor” and M. V. “Normandic” whereby he presented the Bill of Lading Exhibits L to L5 and P to P5 he and the other defendants are bound by the contents of the Bills of Lading which include the words ‘to be used with charter parties” I have no doubt that the 1st defendant is aware of (sic: that) their bills of lading were to be used with charter parties.” Confirming the view of the trial Judge, Kalgo, JCA (as he then was) who delivered the leading judgment of the Court of Appeal, relying on the custom and practice of charter party and carriage of goods by sea as narrated by the second witness for the plaintiff held that once the parties agreed on the main terms and conditions of agreement (the charter party) they were bound by that agreement. He also held that if the main terms and conditions of the charter party are cleared and fixed by telex negotiations, the agreement becomes binding on the parties without necessarily signing the charter party.

By their brief of argument the defendants contested these conclusions. Counsel on their behalf argued that by virtue of section 132 of the Evidence Act, the charter parties described as “Gencon” contracts which were unsigned and undated could not be incorporated in the bills of lading and could not be binding on the defendants. It was argued that there was nothing contained in the telexes Exhibits DD-DD4 to show that they embodied the “Gencon” terms and conditions and that in the premises the court would be invited to hold that the documents Exhibits EE-EF could not be proof of the charter parties pleaded in the statement of claim. Counsel for the plaintiff argued in this court, as in the court below, and both courts accepted, that by the use of words “to be used with charter parties” in the bills of lading (Exhibits L – LS and P-PS) the charter parties have been incorporated in the bills of lading. On the question whether the absence of signatures on the documents rendered them inoperative, it was submitted that the faxes and telexes (Exhibits DD to DD4) constituted the charter parties. However, more importantly, it was submitted that once negotiations were settled by the parties, the charter party was binding notwithstanding that the documents were unsigned. It is expedient to set out some of the guiding principles about which there is no controversy. A charter party is a document embodying the terms of a contract of affreightment. Another document in which a contract of affreightment may be expressed is the bill of lading. In Halsbury’s Laws of England: Vol. 43 (2) (4th Edition) para. 1410 it was clearly stated that: “A contract for the carriage of goods in a ship is called a contract of affreightment. In practice these contracts are usually written and most often are expressed in one or other of two types of documents called respectively a charter party and a bill of lading ….. In some cases the terms of a contract of affreightment are contained partly in a charter party and partly in a bill of lading.”A signed contract is not always, an essential formal requirement for a valid charter party to come into being although, as put in Halsbury’s (op cit) para. 1423: “A charter party usually consists of a signed contract embodying the terms already negotiated and agreed by the parties or their agents.” (emphasis mine)

What is essential to a valid charter party, as in any other contract, is that the parties must have agreed to be bound by identifiable terms. (See Halsbury’s (op cit) para. 1423) whether the parties are bound before the charter is signed will depend upon

(i) whether they are ad idem and

(ii) whether on the true construction of the language used in the negotiations, it was the intention of the parties that they should be bound before signature of the formal document.

(See Scutton on Charter parties (18th Edition) p 3). A charter party may be made by word of mouth although the intention of the parties is to reduce it to writing at a later stage. The express terms of a charter party are those agreed by the parties, whether orally or in writing. (See Halsbury’s (op cit) para. 1425). This action is not between the ship owner and the charterer, but between the ship owners and the defendants who have been held to be the receivers of the cargo by reason of their presenting the bills of lading. As between these parties the bills of lading were prima facie the contract on which the goods were carried. The law as put in Halsbury’s (op cit) at para. 1540 is that: “Even where there is a charter party, the bill of lading is prima facie, as between the ship owner and an indorsee, the contract on which the goods are carried. This is certainly so when the indorsee is ignorant of the term of the charter party, and may be so even if he knows of them.” However, the terms of a charter party may be made part of a bill of lading by incorporation. Whether there is such incorporation and the extent thereof will depend on a number of tests which do not now arise for consideration.

In regard to the decisive issues, the defendants relied mainly on an absence of signatures on the charter parties. It was argued that there was no charter party and nothing to incorporate in the bills of lading. From the law as set out above it is manifest in my opinion that the defendants’ case so put is misconceived. A signed document though valuable as putting it beyond per adventure what terms the parties have agreed to is not essential to the existence of a contract of affreightment. Where the immediate parties to the agreement do not deny their agreement or the existence of the contract of affreightment and there is no doubt about their intention that they should be bound, barring statutory provision to the contrary, (and none has been cited by the defendants) the existence of the contract cannot be impugned on the ground that the document embodying the terms they have agreed to was unsigned, unless the parties have made such a condition of their being bound. In this case the evidence of the 2nd witness for the plaintiff relating to the practice in chartering of fridge vessels was not challenged by cross-examination nor was it controverted by contrary evidence. He said: “It is the general practice in chartering of fridge vessels that when both parties have agreed on the terms and conditions agreed in the telexes, the agreement by telexes is considered binding. The need to draw up a formal charter party agreement is for reference purposes as we now have.” Then he added: “These are the two original formal charter party agreement for “M.V Frost Castor” and “M. V. Normandic” which was not signed. The broker was paid and the amount paid to the broker was shown in the two original charter party agreement.” The 1st defendant in his evidence said that the shipper told him orally that there was no charter party. The shipper was not called to testify in denial of the existence of a charter party or to deny that the documents in which the terms agreed to were embodied did not contain such terms as the parties agreed to. In these circumstances, the decision of the trial Judge that failure to sign the charter, parties was not fatal to the main issue because they have been incorporated in the bills of lading cannot be faulted . It is clear that as held by the trial Judge and the court below the charter parties were incorporated in the respective bills of lading by the statement “to be used with charter parties” contained on each of them. There was really no argument placed before us on this appeal as to the sufficiency of such general incorporation clause; nor was there any controversy as to the extent to which the terms of the charter parties could be incorporated in the bills of lading by such general statement. To discuss cases in which the issues concern identification of the terms of the charter party incorporated by reference in the bill of lading can only obfuscate an otherwise straight forward matter.

The main issue in the case does not call for an inquiry as to which of the terms are or could be incorporated. The question whether the words used in the bills of lading were operative words of incorporation must be distinguished from and must precede the question what terms were incorporated. Although the main issue in Skips A/S Nordhein & Or v. Syrian Petroleum Co. Ltd. and another (1983) 3 All ER 645 was whether an arbitration clause in the charter party was incorporated in the bill of lading, Donaldson, M. R. in that case said (at p. 648): “Operative words of incorporation may be precise or general, narrow or wide. Where they are general and wide they may have the effect of incorporating more than can make any sense in the con of an agreement governing the rights and liabilities of the ship owner and of the bills of lading holder. In such circumstances, what one might describe as ‘surplus’, ‘insensible’ or ‘inconsistent’ provisions fall to be ‘disincorporated’ ‘rejected’ or ‘ignored’ as surplus. That words of incorporation are general and wide and should not lead to a conclusion that they cease to be operative by that fact alone. Before I part with this aspect of the appeal it must be added that reliance on section 132 of the Evidence Act by learned counsel for the defendants do not advance their case on title. Section 132 provides that:

“Where any contract has been reduced to the form of a document or series of documents, no evidence may be given of the terms of such contract except the document itself or secondary evidence of its contents in cases in which secondary evidence is admissible.” This is an enactment of the parol evidence rule. It is clear that the rule embodied in section 132, does not apply to a contract that has incorporated by reference the terms of another document. Such contract, in my judgment, would fall into the category of a contract that “has been reduced to the form of …series of document.” I venture to think that extrinsic evidence is permitted to identify the series of document containing the terms of the contract. The parol evidence rule does not apply until it is ascertained that the terms of the parties’ agreement are wholly contained in the written document or in a series of documents, as the case may be. An operative incorporation clause is a clear manifestation of the intention of the parties that the terms of one document be incorporated by reference in the other. I adopt the law as stated succinctly in Treitel: The Law of Contract (5th Edition) thus at p 141: “A document which is contractual within the test laid down in Hutton v. Watling (1948) eh. 398, 404) may incorporate another document by reference. In such a case, evidence of the second document is of course admissible: the parol evidence rule only excludes evidence extrinsic to both documents.”

The words of incorporation must be found in the document into which terms are incorporated by reference. In this case the bills of lading themselves contained the words of incorporation, albeit in wide terms, incorporating the charter parties. There is no foundation, therefore, for the suggestion that the charter parties constituted extrinsic evidence of the terms binding on the parties bound by the bills of lading. Enough I believe, has been said to dispose of this appeal in regard to the plaintiff’s claim. The attempt by counsel for the defendants to raise any question relating to the Exchange Control Acts, 1962, for the first time at this stage in the proceedings without leave to raise fresh issues not addressed at the court below must fail. Besides, it is difficult to see how section 8(1) of that Act could be of any relevance to the issues in this case. That subsection provides that: “Subject to the provisions of this section, no person resident in Nigeria shall without the permission of the minister, make any payment outside Nigeria to or for the credit of a person resident outside Nigeria or take or accept any loan, bank overdraft or other credit facilities.” For the reasons that I have stated, I find no substance in the appeal from the decision of the court below affirming the decision of the trial court by which judgment was entered for the plaintiff on its claim.

There is no reason to dwell at any length on the dismissal of the appeal from the confirmation of the judgment of the trial court dismissing the defendants’ counterclaim. This aspect of the appeal had been all on facts. There are concurrent findings of fact by the trial court and the court below. Learned counsel for the defendants merely urged that we set aside the judgments of the trial court and the court below because, as he put it, ‘no credible evidence was offered by the plaintiff to challenge’ certain facts deposed to by the first defendant. The Court of Appeal described the trial Judge’s evaluation of the evidence as painstaking and his conclusions of fact as unassailable. To ask us to reopen the question of credibility flies in the face of well established principles of law as regards the attitude of appellate courts to findings of fact based on the credibility of witnesses. Nothing has been urged to make me depart from those principles nor to persuade me, agree that this court should interfere with concurrent findings of fact. In the result the defendants appeal must also fail in regard to the decision on the counterclaim.

In the result, this appeal fails in its entirety. It is therefore dismissed with N10,000 costs to the plaintiff which is the respondent in this appeal.

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SC.136/1997