ON APPEAL FROM THE QUEEN'S BENCH DIVISION COMMERCIAL COURT
MR JUSTICE BLAIR
2010 FOLIO 371
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LONGMORE
LORD JUSTICE PATTEN
| GESNER INVESTMENTS LIMITED
||Claimant / Appellant
|- and -
||Defendant / Respondent
Mr Pushpinder Saini QC & Mr Fred Hobson (instructed by Messrs Jones Day) for the Respondent
Hearing dates : Thursday 9th June 2011
Crown Copyright ©
Lord Justice Rix :
"2.2 The Aircraft shall be ready for Buyer's inspection and acceptance at Seller's facility in the city of Dorval, Quebec, Canada within 30 days of 15 September 2009…
Article 5. Delivery and Inspection
5.1 Seller shall give Buyer reasonable notice to Buyer of the date on which the Aircraft will be ready, in compliance with the Specification except for minor defects or discrepancies which can be corrected in accordance with this Article 5 for Buyer's inspection and acceptance ("Readiness Date")…
5.2 Within 10 days of the Readiness Date, the Buyer agrees to perform such Aircraft inspection and if no defect or discrepancy is revealed, Buyer shall accept delivery of the Aircraft before the end of such 10 day period (the time of the acceptance of delivery of the Aircraft being the "Delivery Time"). If, within such 10-day period, Buyer or his inspection team fails to provide Seller with identified defects and/or discrepancies, then Buyer shall be deemed to have accepted the Aircraft on the tenth day.
5.3 Any defect or discrepancy revealed by Buyer's inspection and/or acceptance flight test shall be corrected before (or at the Buyer's option acting in good faith) after Delivery Time depending on the nature of the defect or discrepancy and the time required for correction. Such correction shall be at no cost to the Buyer. If such correction requires an additional flight test, it shall be conducted in accordance with Article 5.1. Buyer shall accept delivery of the aircraft within three days after any defect or discrepancy has been corrected…
Article 7. Loss or Destruction
7.1 If the Aircraft is lost, destroyed or damaged beyond economic repair before Delivery Time, this Agreement shall automatically terminate upon Seller giving written notice of such occurrence to Buyer. Subject to Article 12, Seller's sole obligation and liability shall then be promptly to return to Buyer all amounts previously paid to Seller under this Agreement with interest at the rate stipulated in Article 6.2…and such reimbursement constitutes Buyer's sole right, remedy and recourse, and Seller's sole obligation and liability to Buyer for a loss or destruction of the Aircraft…
Article 8. Excusable Delay and Non-Excusable Delay
8.1 Seller shall not be liable for any failure to deliver or delay in delivery of the Aircraft or delay in performance of any of its other obligations under this Agreement, due directly or indirectly to force majeure, acts of God, violence, fire, explosion, action of the elements or weather conditions, or other catastrophe or accident, any legislation, act, order, directive or regulation of any government or governmental body, labour trouble, delay or failure of carriers, subcontractors or suppliers (provided Seller commits to use reasonable efforts to find an alternative source of supply or carriage) or any other cause beyond Seller's reasonable control or without Seller's negligence ("Excusable Delay"). If the performance of Seller's obligations hereunder are, or in the reasonable belief of the Seller may be, affected by an Excusable Delay, Seller shall give prompt notice thereof to the Buyer. When the Excusable Delay has ceased to exist, then Seller shall promptly give notice thereof to Buyer by fax or electronic mail (to be followed by courier). In the event of any Excusable Delay, the time required for the performance of any obligation of this Agreement shall be extended for a period equal to the period during which any such cause and the effects thereof persist.
8.2 If delivery of the Aircraft is delayed by reason of Excusable Delay for more than 3 months, Buyer may (i) terminate the Agreement upon giving written notice to Seller, which notice shall be given within 15 days immediately following such period of 3 months or (ii) the parties shall agree on a revised Readiness Date. If Seller fails to comply with the revised Readiness Date due to excusable delay, Buyer may terminate this Agreement by providing written notice in the same manner as (i) above. Upon termination by Buyer pursuant to this Article 8.2, Seller's sole obligation and liability shall be, subject to Article 12, to promptly return to Buyer all amounts previously paid to Seller under this Agreement together with interest at the rate stipulated in Article 6.2…
8.3 If delivery of the Aircraft is delayed by Excusable Delay for more than 12 months, Seller may terminate this Agreement upon giving written notice to the Buyer, which notice shall be given within 15 days immediately following such period of 12 months. Upon such termination, Seller's sole obligation and liability shall be, subject to Article 12, to promptly return to Buyer all amounts previously paid to Seller under this Agreement together with interest at the rate stipulated in Article 6.2…
8.4 In the event the Aircraft is not ready for Buyer's inspection and acceptance within the time period stated in Article 2.2, for reasons of "Non-Excusable Delay" which shall be defined as any delay other than: (i) an Excusable Delay, (ii) an event described in Article 7.1, or (iii) a delay caused by Buyer, then Seller shall pay to Buyer as a credit against the Balance of the Purchase Price pursuant to Article 2.1 (iv) [the final instalment payable at delivery] as liquidated damages, but not as a penalty, an amount of (i) US $6,500 dollars per day for the first 30 days of Non-Excusable Delay; (ii) US $7,500 dollars per day from the 31st to the 60th days of Non-Excusable Delay; and (iii) US $8,500 dollars per day from the 61st to the 90th day of the Non-Excusable Delay, from the start of the Non-Excusable Delay until the earlier of (a) the date on which the Aircraft is presented to Buyer for final inspection and acceptance or (b) the elapse of 90 days of Non-Excusable Delay (the "LD Period") up to a maximum amount of USD $675,000. During the period that such liquidated damages are accruing, Buyer shall not have the right to terminate this Agreement pursuant to Article 9. In the event the Aircraft has not been offered for Buyer's inspection and acceptance after 90 days of Non-Excusable Delay, then Buyer shall have the right to terminate this Agreement pursuant to Article 9. In the event Buyer terminates this Agreement, then no liquidated damages shall be credited or owed to Buyer. This Article is provided for the sole benefit of Buyer and is not assignable or transferable and constitutes Buyer's sole, remedy and recourse, and Seller's sole obligation and liability to Buyer for Non-Excusable Delay. Additionally, in the event any major defect or discrepancy is revealed during Buyer's inspection which has to do with airworthiness or safety of the Aircraft or which makes the Aircraft non compliant with the Specification (but excluding defects or discrepancies which are commonly known in the industry as "snags" or "squawks"), then the period during which Seller corrects such discrepancy shall also be considered a Non-Excusable Delay and the provisions of this Article 8.4 shall apply.
Article 9. Termination
9.1 Either party may terminate this Agreement before Delivery Time by written notice of termination to the other party upon the occurrence of any of the following events: (i) the other party makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts; (ii) a receiver or trustee is appointed for the other party or for substantially all of such party's assets and, if appointed without such party's consent, such appointment is not discharged or stayed within 30 days; (iii) proceedings under any law relating to bankruptcy, insolvency or reorganization or relief of debtors are instituted by or against the other party and, if contested by such party, are not dismissed or stayed within 30 days; or (iv) a writ of attachment or execution or any similar process is issued or levied against the other party or any significant part of its property and is not released, stayed, bonded or vacated within 30 days after its issue or levy.
9.2 Buyer may terminate this Agreement before Delivery Time if, subject to Article 8.4, Seller is in default or breach of any material term or condition of this Agreement and does not act to cure such default or breach within 10 days after receipt of written notice from Buyer specifying such default or breach and does not continue thereafter to diligently correct or cure the alleged default or breach.
9.3 Upon termination of this Agreement pursuant to and in accordance with this Article 9, all amounts received by Seller on account of the Purchase Price shall, subject to Article 12, promptly be reimbursed to Buyer together with interest at the rate stipulated in Article 6.2 (the LIBOR component of such rate to be as published on the first day of the Excusable Delay), calculated on all payments made by Buyer to Seller from the date each payment was received by Seller until reimbursed to Buyer. Such reimbursement shall constitute the Buyer's sole right, remedy and recourse against Seller and Seller's sole obligation and liability to Buyer.
9.4 Seller may terminate this Agreement before Delivery Time if Buyer is named on any list published by a governmental body which would prohibit Seller from engaging in transactions with Buyer or the transaction is otherwise prohibited by law, or if Seller determines as a result of due diligence that it may not sell the Aircraft to Buyer without substantial risk of violating the law. In the event of termination under this Article 9.4, the rights of the parties shall be governed by Article 9.5 provided that (A) Seller shall retain the 10% liquidated damages provided for in Article 9.5 and (B) Seller's termination obligations pursuant to Article 9.4 shall be subject to all applicable governmental legal requirements…
9.5 Upon termination of this Agreement by Seller pursuant to and in accordance with this Article 9 or if Buyer fails to make any of the payments provided for in Article 2 on or before the stipulated date or within 3 calendar days following Buyer's receipt of written notification from Seller that such payment has not been made, all rights which Buyer may have or may have had in or to this Agreement or the Aircraft shall be extinguished; and except for termination in accordance with Article 9.4, Seller shall be entitled to retain an amount equivalent to 10% of the Purchase Price as liquidated damages for default and the parties shall thereafter be released from all further obligations to each other. Buyer agrees that such liquidated damages do not constitute a penalty and are a reasonable and agreed amount of the anticipated or actual harm or damages to be suffered by Seller as a result of or in connection with Buyer's default. All other amounts received by Seller on account of the Purchase Price shall, subject to Article 12, be promptly returned to Buyer."
Article 12. Cape Town Registration
12.3 In the event of termination of this Agreement for any reason whatsoever, any reimbursement to be made to Buyer shall be conditional upon Buyer discharging or causing the discharge of any registration created by or through Buyer or by persons claiming by or through Buyer…
Article 15. Sound Level Study
15.4 Seller guarantees that, at Delivery Time, the average sound level in the Aircraft will be 55 dB SIL (Speech Interference Level) or less based on a standard interior configuration with typical finishing materials. The actual sound level will be determined by the final interior mechanical layouts, equipment location and Customer-selected finishes and design details and will be verified through actual measurements performed as described above prior to Delivery Time…
15.6 Provided the Buyer has followed Seller's advice as indicated in Article 15.5 above and that the Buyer's selected interior configuration and finishing materials do not have a negative impact on the average sound level in the Aircraft, then:
a) in the event the average sound level is between 56 dB SIL and 60 dB SIL, Seller agrees to pay an amount, as liquidated damages, but not as a penalty, of US$20,000 per 0.5 dB SIL over 55 dB SIL. The total amount of such liquidated damages shall be credited against the final payment due at Delivery Time; or
b) in the event the average sound level exceeds 60 dB SIL, then Buyer shall right the right to terminate this Agreement pursuant to Article 9.
15.7 Buyer understands and agrees that the above described liquidated damages and termination right constitute the Buyer's sole right, remedy and recourse if the average sound level in the aircraft exceeds 55 dB SIL."
"The Aircraft was not made available for inspection on or before 14 January 2010. This constitutes a breach of the Agreement and in accordance with its rights under clause 8 and the provisions of clause 9 of the Agreement, Gesner hereby terminates the Agreement and demands reimbursement of all amounts received in respect of the purchase price together with interest at the stipulated rate."
It will be observed that although clause 9 was referred to, no notice under clause 9.2 was served. The buyer submits that the reference to clause 9 was intended to be a reference to article 9.3 and the obligation to return the previously paid instalments with interest.
The judgment below
" I prefer Bombardier's submissions on the construction question to those of Gesner. I reject the contention that the effect of article 8.4 is that after the 90 day period has expired, the buyer may terminate without more. In my view, the words "…then Buyer shall have the right to terminate this Agreement pursuant to Article 9" mean that Gesner's righ to terminate arose pursuant to article 9, which entailed the exercise of its right in accordance with the procedure set out in article 9.2. It is not suggested that there is any other applicable procedure in article 9. I see no reason to adopt a construction that encompasses the reimbursement provisions in article 9.3 alone. It is true that this construction produces the result that there is potentially a period during which liquidated damages are not payable, whereas Gesner's construction avoids that outcome. But I do not think it thereby flouts business common sense. In a finely balanced contract for the construction and sale of an aircraft, it is (in my judgment) what the parties agreed. I agree with Mr Pushpinder Saini QC for Bombadier that where the language used by the parties is relatively clear, the court should be cautious of being led into an inquiry as to the commerciality of the transaction."
"It is obvious that this is a badly drafted contract. This of course, affords no reason to depart from the fundamental rule of construction of contractual documents that the intention of the parties must be ascertained from the language they have used interpreted in the light of the relevant factual situation in which the contract was made. But the poorer the quality of the drafting, the less willing any court should be driven by semantic niceties to attribute to the parties an improbable and un-businesslike intention, if the language used, whatever it may lack in precision, is reasonably capable of an interpretation which attributes to the parties an intention to make provision for contingencies inherent in the work contracted for on a sensible and businesslike basis."
"41…But, read in its context, the dictum in The Antaios provides no support for the reformulation by the court of contractual provisions which are relatively clear in their meaning simply because they balance the interests and obligations of the parties in a way which the judge considers to be one-sided or unfair. The starting point has to be that commercial parties can look after themselves and are sufficiently organised and well advised as to be able to ensure that the contractual documents which they sign accurately reflect their intentions.
42. In this case (as in most others) the court is not privy to the negotiations between the parties or to the commercial and other pressures which may have dictated the balance of interests which the contract strikes. Unless the most natural meaning of the words produces a result which is so extreme as to suggest that it was unintended, the court has no alternative but to give effect to its terms. To do otherwise would be to risk imposing obligations on one or other party which they were never willing to assume and in circumstances which amount to no more than guesswork on the part of the court."
Lord Justice Longmore:
Lord Justice Patten :