England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		13/06/2008

Mr Justice Field:

Introduction

The First Agreement

1. In the late 1990s Mr Paul Magnus and Mr Jacques Dewilde conceived the idea of a short sea RoRo ferry service between Ostend and Ipswich to be operated by a company incorporated in Belgium. Mr Dewilde persuaded a state-owned Belgium investment company, Gimvindus NV ("Gimvindus") to invest in the project and also sought support from Mr Jean Marie Denis, the Managing Director of MSC Belgium NV ("MSCB"), the second defendant. MSCB is indirectly controlled by Mediterranean Shipping Company (SA) Geneva Group ("MSC"), the second largest liner container shipping company in the world. MSCB did not want to become involved directly but it agreed that MSCB and MSCB's sister shipping agency company, D&W Agencies NV ("D&W"), could invest in the new venture. As a result, the first defendant, Ferryways NV ("Ferryways") was incorporated with its share capital being held as to 40% by D&W (which is 50% owned by Deckers & Wirtz BVBA), 40% indirectly by Gimvindus and the remaining 20% by a company owned by Mr Magnus and Mr Dewilde, Mast (GB) Limited.
2. In 2001, the 40% stake owned indirectly by Gimvindus was acquired by D&W and by 2003 the 20% stake owned by Mast (GB) Limited was owned by a Panamanian company, Maritime Supplies SA.
3. On 5 January 2000, Ferryways signed a 5 year agreement ("the First Agreement") with the claimant, Associated British Ports ("ABP"), under which ABP guaranteed a five-hour turnaround of 160 units at its port at Ipswich at designated slot times. ABP's charges for handling the units carried by Ferryways were set out in clause 4 which provided, inter alia:

The following charges have been agreed:-

a) Handling charges, excluding lashing.

i) For the first 12 months of the service

	£ per trailer
First 30,000 units	20.00
30,001-50,000 units	21.00
50,001-70,000 units	22.50
70,001-82,500 units	24.00
82,500 +units	25.00

ii) Years 2 – 5

First 50,000 units	25.00
50,001+ units	22.50

NB - These rates will be subject to annual increases in line with RPI from the commencement of year 2 to the commencement of year 5.

4. Also set out in b) of Clause 4 were port charges per call for the next five years.
5.  The original intention was that the RoRo service would be offered to shippers and freight forwarders requiring sea transport for trailers that would carry goods and which would be hauled to and from port by tractor units operated by road hauliers. The tractor units would either accompany the trailers on board the vessel or would pull the trailers to and away from the terminals, leaving them unaccompanied during the crossing. In either case, ABP's handling charge was for pulling the trailer on to and off the vessel at Ipswich. It soon became apparent, however, that it would be profitable to extend the service to the carriage of containers. A container cannot be carried lying on the deck. Instead it has to be brought into the terminal by a road vehicle and then offloaded and loaded onto a trailer which is wheeled onto the vessel and on which the container is carried to the port of destination. Such a trailer is provided by the vessel, not the customer, and is called in the trade a "ship's trailer" or a "slave trailer".
6. Many more containerised goods were imported into Ipswich from Belgium than were exported to the Continent. The result was that many slave trailers were loaded with a container on the trip from Ostend to Ipswich but were empty when the vessel travelled back to Ostend. To begin with, ABP exacted the same charge for handling slave trailers, whether or not they were to be or had been carried empty, the charge being the agreed "per trailer" charge set out in the First Agreement. However, by a letter dated 15 January 2000, ABP agreed to charge only 50% of the trailer rate for empty slave trailers.
7. In January 2001, 2002, and 2003 the revised annual charges applicable under the first agreement were set out in letters sent by ABP to Ferryways. These revisions included charges for such things as "de-vanning flats of bricks/tiles", "stacking empty brick trailers," and "receiving and delivering of lift units", the latter being the charge for lifting a container onto and off a slave trader. Under the heading "Handling charges, excluding lashing" the new rates per unit were specified and beneath that were included the following words:

(Empty slave trailers (vessel's equipment) at 50% of above rates ….).

8.  Also under this heading was included a rate for cars, which was significantly lower than the rate for trailers. It seems that a rate for cars was agreed in light of the opportunities the parallel imports grey market business appeared to present.
9. When returning the empty slave trailers to Ferryways, ABP stacked up to six on top of each other, depending on type. ABP charged Ferryways a "lift" fee for each of the stacked empty trailers but as the stack could be pulled together onto and off the ship, ABP raised only one charge per "pull" at the agreed 50% rate for empty slave trailers. The stacked empty slave trailers were therefore in effect pulled for 1/6^th of the slave trailer rate.

The First Minimum Throughput Obligation

10. On 16 June 2001 an Addendum to the First Agreement in the following words was signed:

This confirms that (always provided Ferryways NV continues to operate, regardless of ownership, and that Associated British Ports Ipswich continues to supply the required and agreed service levels) …. Ferryways NV will guarantee an annual throughput of 25,000 units through Ipswich from 7^th February, 2001, until 6^th February, 2005.

11. Whilst this Addendum was operative, the parties proceeded on the basis that the "units" it referred to did not include cars, but only trailers other than slave trailers.

The Second Agreement

12. The Ostend/Ipswich RoRo business expanded rapidly. In the year ended 31 December 2002, ABP's total revenue from the business was £2.687 million. There were problems, however, with ABP's linkspan over which the trailers were moved from vessel to shore and vice versa. The linkspan was not in good condition and was prone to breakdowns. Ferryways asked ABP to provide a new linkspan, a project that ABP estimated would cost £6.1 million. ABP said that it was prepared to do this if a new 20 year agreement were concluded under which Ferryways would be subject to an annual minimum throughput requirement and another more substantial company than Ferryways in the MSC group would guarantee Ferryways' performance of the agreement, at least for the period required for ABP to recoup the expenditure on the linkspan and berth.
13. On 1^st September 2003, ABP and Ferryways entered into a Second Agreement ("the SA") that replaced the First Agreement. The term of this new agreement was 1^st September 2003 to 31^st December 2024. Under clauses 2 and 3, ABP agreed: (i) to grant Ferryways the right to use the appropriate berths in priority to any other user of the port; (ii) subject to agreement of schedules, to provide sufficiently resourced stevedoring services to enable a vessel turnaround of up to 160 Units in aggregate within 5 hours of the vessel becoming available for unloading; and (iii) to maintain and make available the existing linkspan and construct a new linkspan and berth.
14. By clauses 4.1 and 4.2, payments under the SA were to be calculated in accordance with the Schedule and the charges were subject to upwards only adjustment in accordance with a formula based on the RPI or by 6%, whichever was the lesser.

The Empty Trailer Rate

15. The Handling Charges were set out in the Schedule as follows:

Charges

Handling Charges	Ostend Service	£26.66 per Unit for first 50,000 Units
	Trailers	£23.99 per Unit thereafter
	Other Services	£23.99 per Unit for all Units
	Trailers
	Containers and swap bodies
	Receiving and Re-delivery	£13.33 per unit
	Empty Trailers	50% of trailer rate
	Cars/Tractors	£16.00 each

16. The wording "Empty Trailers 50% of trailer rate" was a mistake. The draftsman, Mr Smith, ABP's Port Manager for the Port of Ipswich at the time, had meant to adopt the same wording as in the revised charges letters issued under the first agreement ("Empty Slave Trailers (vessel's equipment) 50% of trailer rate"). The mistake was spotted by ABP in December 2003 and the opportunity was taken to try to correct matters in ABP's 2004 Schedule of Charges which specified that the reduced 50% rate would apply to "Empty Slave Trailers (vessel's equipment)".

The Second Minimum Throughput Obligation

17. Ferryways did not undertake to run a RoRo service into Ipswich. Instead, clause 4.3 provided:

If after the end of a Year the total number of Units discharged from and loaded to Services at the Port pursuant to this Agreement is less than the Minimum Throughput for the relevant Year then ABP will be entitled to be paid by Ferryways a sum equal to the amount ABP would have received had the Minimum Throughput been met provided that if the shortfall is less than 10% of the Minimum Throughput for the relevant Year no invoice will be issued therefor and the Minimum Throughput for the following Year will be increased by the amount of such shortfall and provided further that any shortfall which has been carried forward from a previous Year shall be disregarded when calculating whether a shortfall in any Year is less than 10% of the Minimum Throughput.

18. "Minimum Throughput" was defined in clause 1 as:

25,000 Units per Year from the date of this Agreement to 31 December 2004

110,000 Units per Year from 1 January 2005 to 31 December 2007; and

120,000 Units per Year from 1^st January 2008 and thereafter

19.   "Unit" was defined in clause 1 as:

(i) a trailer loaded or empty (accompanied or unaccompanied) or a freight container or swap body up to 13.6 metres long or to any replacement standard length

(ii) such other parcel or unit of goods as the parties agree from time to time

provided that two 6 metre containers carried on a single chassis will be classified as a single Unit;

20. Under clause 4.1 payments due under the SA were to be calculated in accordance with the Schedule and paid within 60 days of the invoice date.
21. Clause 6.1 of the SA incorporated ABP's General Regulations and Conditions and provided that in the event of any conflict the SA should prevail.
22. By Clause 6.6, any variation of the agreement had to be in writing and signed by the parties' respective authorised representatives.
23. Clause 37 of ABP's Trading Terms and Conditions provided that if the Customer went into liquidation or a petition were presented for the administration of the Customer, ABP was immediately entitled to recover all sums then due to ABP and all losses as a result of such circumstances arising.

The Letter Agreement

24. At the same time as the second agreement was executed, a written agreement ("the letter agreement") was concluded between ABP and MSCB which, inter alia, was in the following terms:

Dear Sirs,

We hereby confirm that Ferryways NV ("the Company") is a member of the same group of companies as MSC Belgium NV.

In consideration of Associated British Ports ("ABP") entering into an agreement relating to the Port of Ipswich of even date with this letter (the "Agreement"), we assume full responsibility for ensuring (and shall so ensure) that, for seven years from the date of this letter, the Company (i) has and will at all times have sufficient funds and other resources to fulfil and meet all duties, commitments and liabilities entered into and/or incurred by reason of the Agreement as and when they fall due and (ii) promptly fulfils and meets all such duties commitments and liabilities.

We are aware that ABP will rely on this letter in deciding whether to enter into the Agreement with the Company.

The construction validity and performance of this letter shall be governed by English law, and we submit to the exclusive jurisdiction of the High Court in London in connection with any disputes arising out of this letter.

25.   The letter agreement was drafted by ABP's General Counsel, a qualified solicitor.

Ferryways claims that it has been overcharged for customers' trailers

            

26. In about August 2004, Ferryways began to contend that given the wording "Empty Trailers 50% of trailer rate" in the Schedule to the SA, it been overcharged in respect of empty customers' trailers.

The August 2004 Concession Agreement

27. On 23 August 2004 there was a meeting at Ipswich attended by Mr Robert Smith, ABP's Port Manager for the Port of Ipswich, and two representatives of Ferryways, Mr Jacques Dewilde and Mr Filip Bijvank. Mr Smith's evidence was that Mr Dewilde and Mr Bijvank accepted at this meeting that the wording in the Schedule was a mistake and should be treated as stating "Empty Slave Trailers (vessel's equipment) 50% of trailer rate". Mr Smith also testified that in recognition of this favour he agreed that the 2004 charges should not be increased in accordance with RPI for 2005 but should remain at the 2004 level.
28. Mr Dewilde and Mr Bijvank said that all that was agreed was that the claim for overcharging to date would be dropped in exchange for the 2005 charges remaining at the 2004 levels and that a revised Schedule to the SA would be issued making it clear that all empty trailers, whether ship's trailers or customer's trailers, would be charged at 50% of the trailer rate.

Ferryways claims that empty slave trailers are "Units"

29. Following the August 2004 Concession Agreement, Ferryways paid ABP's invoices on the basis that the 50% discount applied only to empty slave trailers. By letter dated 21^st December 2004 Mr Smith sent to Ferryways a revised Schedule of charges which included four additional items and contrary to the agreement made in August, uplifted the 2005 prices in line with the RPI. However, the Schedule did not provide that all empty trailers should be charged at 50% of the full rate. Acting on the instructions of Mr Dewilde, Ferryways' Managing Director and CEO, Mr Bijvank protested about the RPI uplift and the four additional items but said nothing about the absence of an amendment making it clear that the 50% rate applied to all empty trailers.
30. Then, on 27^th March 2006, Ferryways issued an invoice claiming £390,608.99 which it alleged had been overpaid to ABP in respect of empty customers' trailers. This claim was made in the context of a separate dispute over a claim by ABP that Ferryways owed £365,062.60 under the minimum throughput clause (clause 4.3) for 2005. That figure was arrived at on the basis that empty slave trailers were not "Units" for the purpose of clause 4.3 (minimum throughput clause) and on the basis of a mistaken belief held by Mr Smith that Ferryways were to be allowed to carry forward 10% of the 2005 minimum to 2006 and would be liable only for the balance, even though the shortfall exceeded 10% of the Minimum Throughput. Thus, instead of Ferryways being invoiced for a shortfall of 25,980 Units against a minimum of 110,000, it was invoiced in the sum of £365,062.60 for a shortfall of 14,980 Units at £24.37 per Unit, the trailer rate for 2005 under the SA.
31. Ferryways disputed ABP's shortfall claim contending that empty trailers and/or cars and/or tractors were "Units" for the purposes clause 4.3 and the definition of "Minimum Throughput" in the SA.

The February 2006 Time to Pay Agreement

32. At a meeting on 8 February 2006 between Mr Smith representing ABP and Mr Bijvank and Mr Mike Percival of Ferryways, Mr Smith offered to reduce the shortfall liability to £324,414.27 but this offer was rejected, prompting Mr Smith to threaten to withhold payment of £500,000 due to Ferryways in respect of its operations into Immingham. Subsequently, it was agreed on 17^th February 2006 between Mr Jukes of ABP and Mr Bijvank that Ferryways would pay off this sum over a six month period with interest at 5% pa on the basis that, if following discussions Ferryways' contentions as to the meaning of "Unit" were accepted, APB would reimburse Ferryways in the event that an alternative calculation were agreed. The terms agreed were set out in a memorandum signed on behalf of both parties as follows:
Agreement Relating to the Port of Ipswich Dated 1^st September 2003 Associated British Ports And Ferryways NV

Supplementary memorandum to the above agreement.

In accordance with Clause 6.6 of the above agreement it is necessary to record that the payment due under Clause 4.3 for the agreement year end 31^st December 2005, now agreed as £324,414.27 is to be paid as per the payment schedule below.

Already paid £34,822.45.

Balance to be paid in 18 weekly instalments from week commencing 27^th February 2006 to week commencing 26^th June 2006 inclusive of £16,032.88 plus a final payment of £2,383.01 as a "schedule payment supplement".

In the event of any future agreed adjustment to the payment due under Clause 4.3, a new supplementary memorandum to the above agreement will be made, which will supercede (sic) this supplementary memorandum.

The payment aforementioned amount does not constitute an acceptance by either party of the respective interpretations of the agreement dated 1^st September 2003 such as, but not limited to, those reflected in recent exchanges.

33. This memorandum was preceded by an earlier signed document which did not contain the last paragraph and in which after signature Ferryways substituted "provisionally" for the word "now" in the second paragraph. However, ABP refused to accept this change but did agree to the inclusion of the final paragraph which was added at the request of Mr Bijvank.
34. In fact shortly after the meeting held on 8 February, Ferryways had begun making payments on account of sums due under clause 4.3.
35. At a meeting on 6 March 2006 attended by Mr Jukes, Mr Bijvank and Mr Percival, the Ferryways representatives proposed that Ferryways be allowed to conduct its own stevedoring at Ipswich in order to reduce its costs so that it could compete more effectively with the other companies, particularly Cobelfret, operating in the North Sea RoRo market. ABP's stance was that the SA could not be amended unless the new agreement generated the same internal rate of return as under the SA. At the same time, Ferryways resurrected their contention that the 50% rate empty trailer rate applied to all empty trailers, including those that were customer owned, and on 31 March 2006 and 19 June 2006 invoiced ABP for £390,608.99, £95,934.72 and £69,257.10 respectively for alleged overcharging for empty customer owned trailers. Further, from 22 May 2006 Ferryways ceased paying the 2005 shortfall instalments agreed to be paid in February 2006 and from 17 June 2006 began withholding payment of ABP's invoices for handling charges, first as to 100% (£249,557) and then after 21 July 2006 7% and 25% (totalling £326,365). As a consequence, the negotiations over a new agreement to replace the SA broke down irretrievably.

Ferryways ceases trading

36. ABP refused to accept Ferryways' overcharging claims and on 31 December 2006 invoiced Ferryways for a shortfall of £951,711.75 under clause 4.3 for 2006. Neither Ferryways' overcharging invoices nor ABP's last shortfall invoice were paid but otherwise the parties operated the SA until 13 June 2007 when Ferryways ceased trading.

Ferryways is acquired by a competitor -- the Cobelfret Group

37. Ferryways' cessation of trading followed upon the acquisition of Ferryways' share capital by the Cobelfret Group on 1^st June 2007 from D&W Agencies NV (as to 80%) and Maritime Supplies (as to remaining 20%). On the same date, the four vessels that had been used by Ferryways under the SA under bareboat charters were sold to Cobelfret which time chartered them back to Ferryways. A few days later Cobelfret made allegations of accounting irregularities within Ferryways to Ferryways' bankers, ING Bank NV and the Bank of Scotland, both of which immediately withdrew their credit lines to Ferryways thereby shutting down its cash flow. Cobelfret also withdrew the four vessels. The dockworkers at Ostend then commenced legal proceedings in Belgium and Ferryways was put into administration which led to the company being put into liquidation on 27^th June 2007. On 7^th February 2008 Ferryways was declared bankrupt by the Ostend Court in Ostend.

ABP's claims in summary

38. ABP seeks judgement against Ferryways in respect of: (i) sums alleged to be due for handling charges under the SA; (ii) sums alleged to be due under clause 4.3 of the SA down to June 2007 when ABP purported to accept Ferryways' repudiation of the SA; and (iii) damages for breach of clause 4.3 in respect of the period June 2007 to 31 December 2024.
39.  ABP seeks judgement against MSCB under the letter agreement for the sums claimed in (i) and (ii) against Ferryways and for the damages claimed in (iii) but limited to those recoverable in respect of the period 1 September 2003 to 1 September 2010.
40. It is to be noted that MSCB accepted at trial that from the outset "Empty Trailers 50% of trailer rate" was to be read as if it said "Empty slave trailers (vessel's equipment) 50% of trailer rate." This, in my view, was a sensible and realistic concession. Following a strong indication from the court, Ferryways did not argue to the contrary.

The issues to be decided

41. The court is not asked to determine in this judgement what precise sums are due to ABP under the SA for handling charges and under Clause 4.3 down to June 2007^[1]. Instead, what I am asked to decide are the following issues of principle relevant to claims (ii) and (iii):

(1) Are empty slave trailers, and/or cars and/or tractors, "Units" for the purposes of clause 4.3 and if they are: (a) is clause 4.3 void by reason of being a penalty or because it is too uncertain to be enforced; and (b) (alternatively) is the shortfall to be calculated by reference to an average of the rates applicable to all of the items that fall within the definition of a "Unit"?

(2) What sums are recoverable for breach of clause 4.3 for the period 1^st January 2007 to the end of the term of the SA (31^st December 2024)? In particular, can ABP recover the gross sums that would have been due under clause 4.3 if the SA had continued, less a discount for early payment, or must ABP also give credit for the expenses saved from not providing port services to Ferryways and for any substitute business it has procured and/or could reasonably be expected to procure over the period in question?

(3) Are such sums as are due from Ferryways recoverable from MSCB under the letter agreement, or does that agreement contain guarantees that have been rendered unenforceable by reason of the August 2004 Concession Agreement and/or the February 2006 Time to Pay Agreement?

The position of Ferryways at trial

42. Ferryways was represented at trial by Mr Christopher Smith who was only instructed the day before the trial began. Sensibly, Mr Smith did not apply for an adjournment; he also took no part in the calling of witnesses and their cross-examination. Following an indication from the court, Mr Smith said that he was instructed to adopt the same position on the empty trailers issue as that adopted by MSCB, namely, that from the outset "Empty Trailers 50% of trailer rate" was to be read as if it said "Empty slave trailers (vessel's equipment) 50% of trailer rate."
43. Mr Smith's role in the trial was therefore to make closing submissions on the first two issues of principle identified above.

The first issue

Are empty slave trailers, and/or cars and/or tractors "Units" for the purposes of clause 4.3 and if they are: (a) is clause 4.3 void by reason of being a penalty or because it is too uncertain to be enforced; and (b) (alternatively) is the shortfall to be calculated by reference to an average of the rates applicable to all of the items that fall within the definition of a "Unit"?

44. Mr Smith submitted that as a matter of ordinary language an empty slave trailer is an "unaccompanied" empty trailer within (i) of the definition of "Unit". He further submitted that the plain and ordinary meaning of "unit" in the context of the SA was "item carried" and he referred, inter alia, to numerous instances where the word "unit" was used in documents generated under the First Agreement in which charges were set in respect of particular types of goods carried to Ipswich. He also contended that, unless empty slave trailers were within the definition of "Unit", Clause 4.3 would work as a penalty because Ferryways would have to pay not only the 50% charge levied on empty slave trailers, but also a further 100% charge for each unit of shortfall. As for cars and tractors, he argued that the parties had agreed a rate for each of these categories and therefore they constituted a parcel or unit of goods agreed by the parties within (ii) of the definition.
45. The submissions of Mr Irvin for MSCB followed a similar line. In addition, he argued that since ABP accepted that a loaded slave trailer was a unit, there was no justification for the view that an empty slave trailer was not a unit. Further, fastening on the words "ABP will be entitled to be paid … a sum equal to the amount ABP would have received had the Minimum Throughput been met," Mr Irvin submitted that clause 4.3 was void for uncertainty because the Schedule provided that the rate for containers and swap bodies, which were unquestionably within the definition of "Unit, was £13.33, whereas the trailer rate was £26.66, reducing to £23.99, and, accordingly, it was impossible to postulate what amount ABP would have received if the Minimum Throughput had been met. He submitted that the contention was a fortiori if slave trailers, cars and tractors were within the definition because each of these was also charged at a rate different from the trailer rate.
46. It is trite law that the SA must be construed against the background of its factual matrix, which in my opinion includes: (i) the First Agreement and the manner of its operation; (ii) the contemplated services to be performed by ABP under the SA in receiving and unloading and loading items carried on Ferryways' RoRo ferries; (iii) the function performed by slave trailers, these being trailers that belong to the vessel and which are always unaccompanied, in contrast to the function of trailers belonging to the customer which may or may not be accompanied; and (iv) the obligation on ABP to construct a second linkspan at an estimated cost of £6.1 million.
47. The SA must also be construed with a view to giving effect to its provisions, rather than to the contrary, if the relevant language is not plainly inconsistent with such a construction.
48. In my judgement, construing the definitions of "Minimum Throughput" and "Unit" and clause 4.3 in the manner indicated, empty slave trailers are not within the definition of "Unit". In the first place, empty slave trailers are always unaccompanied and therefore the words "accompanied or unaccompanied" in (i) of the definition signify that the empty trailers being referred to are the other type of trailer, namely a customer's trailer. Secondly, the words "the sum equal to the amount ABP would have received had the Minimum Throughput been met" contemplate a sum readily arrived at, namely one that is the product of multiplying the shortfall by a standard rate and if empty slave trailers were within the definition, such a calculation would be impossible because such trailers are charged at only 50% of the trailer rate, whereas if they are outwith the definition, no such difficulty arises. This is because, for the reasons given below, cars and tractors are not within the definition, and the relevant rate for the items within the definition is plainly the rate for moving the items on or off the vessel, namely, the uniform trailer rate; it is not, in respect of containers and swap bodies, the rate for receiving and re-delivery, which is just the charge for lifting them onto or off the trailer.
49. I also think that the fact that ABP was seeking an entitlement to an income stream to recoup at the very least the capital cost of the new linkspan supports the conclusion that empty slave trailers are outwith the definition of "Unit," since, as the parties well knew, empty slave trailers were to be charged at only 50% of the trailer rate.
50. In my opinion, this construction of the definition of "Unit" does not mean that clause 4.3 is a penalty hanging over Ferryways in terrorem to procure obedience to a contractual obligation. Instead, by clause 4.3 Ferryways promises to provide ABP with an annual revenue stream calculated by reference to a fixed number of Units and the contract rate for those units. The obligation on Ferryways under clause 4.3 is therefore not a secondary obligation that is triggered by a breach of the SA, but is itself a primary obligation given in exchange for ABP's promise to provide a new linkspan, and as such cannot be a penalty. Moreover, I do not accept that the effect of clause 4.3 is that Ferryways pays twice for shipped empty slave trailers if the Minimum Throughput is not achieved (50%, plus 100% of the trailer rate). The point is that the obligation to pay the 100% is in respect of a failure to ship sufficient "Units", and empty slave trailers are not within the definition, for the reasons I have given.
51. The parties have agreed handling charges for cars and tractors but have not agreed that these types of goods should be within the definition of "Unit". It follows, in my opinion, that cars and tractors are not within the definition of a "Unit" because, correctly construed, the words "such other parcel or unit of goods as the parties agree from time to time" contemplate that the parties agree not just that a handling charge should apply to a particular type of goods, but that that type of goods should fall within the definition of "Unit".
52. Finally, it follows from my conclusion that empty slave trailers, cars and tractors are outwith the definition of "Unit" that the question whether an average of the agreed handling charges is taken to calculate the shortfall under clause 4.3 does not arise. Since there is a common rate for all the items that are within the definition, the shortfall is calculated by multiplying the difference between the number of "Units" delivered and the Minimum Throughput by the trailer rate applicable to the year in question.

The second issue

What sums are recoverable for breach of clause 4.3 for the period 1^st January 2007 to the end of the term of the SA (31 December 2024)? In particular, can ABP recover the gross sums that would have been due under clause 4.3 if the SA had continued, less a discount for early payment, or must ABP also give credit for the expenses saved from not providing port services to Ferryways and for any substitute business it has procured and/or could reasonably be expected to procure over the period in question?

53. It is common ground that ABP's claims under clause 4.3 in respect of 2005 and 2006 are claims in debt. The claim under clause 4.3 in respect of the period after ABP had accepted Ferryways' repudiation of the SA can only sound in damages. What about the claim in respect of the first half of 2007? In my opinion, this cannot be a claim in debt because as of mid June 2007 it could not be said that the Minimum Throughput would not be achieved. It follows that ABP's claim under clause 4.3 in respect of the first half of 2007 must form part of a claim for damages relative to 2007 as a whole.
54. ABP pleads three repudiatory breaches by Ferryways: (a) unilaterally ceasing all ferry services into Ipswich; (b) refusing to pay sums due under the SA; and (c) placing itself in a position where it was unable to perform its future obligations under the SA by selling its business to Cobelfret Group. Ferryways and MSCB each accepted the correctness of this plea and all three parties proceeded on the basis that Ferryways was under a contractual duty to provide ferry services into Ipswich. However, in my judgement it is plain that Ferryways did not undertake to provide any ferry services into Ipswich but instead were obliged only to pay for the handling of items actually carried to Ipswich at the agreed rates and to pay any sum due under clause 4.3. This said, I have come to the conclusion that little turns on whether Ferryways was under an obligation to provide ferry services as well as to pay sums due under clause 4.3, and the parties having conducted their respective cases on the aforementioned basis, I propose to proceed on the same basis.
55. Pursuant to basic principle, having accepted Ferryways' repudiatory breach, ABP is discharged from further performance under the SA and is entitled to be put in the position it would have been if Ferryways had complied with its obligations under clause 4.3 of the SA. Prima facie, therefore, ABP is entitled to recover a sum calculated by taking the shortfall of Units delivered for each of the years in the period 1^st January 2007 to 31^st December 2024 and multiplying that figure by the 2007 trailer rate. If the SA had remained on foot, ABP would have had to have had sufficient resources available to provide stevedoring services to enable a vessel turnaround of up to 160 Units in aggregate within 5 hours of the vessel becoming available for unloading (clause 3.4), whether or not Ferryways provided any ferry services into Ipswich. It follows in my judgement that ABP must give credit for any expense it has been or will be spared by not having to handle the shortfall on the Minimum Throughput of goods for each of the years in question, unless it will incur broadly equivalent expense in handling substitute business for which it has already contracted or for which it should be assumed it will contract pursuant to its duty to take reasonable steps to mitigate its loss. If such substitute business will involve using the new linkspan for the period of its useful life, ABP will not need to give credit for any residual value in the new linkspan. If, however, there is no economic point in keeping the linkspan, ABP will have to bring into account its resale value. ABP must also give credit for the gross income it will earn by taking substitute business or would earn by taking substitute business pursuant to its duty to mitigate. ABP must additionally bring into account savings made on the costs it would have incurred in handling the Minimum Throughput where those costs are saved in periods when, without being in breach of the duty to mitigate, no substitute business is undertaken. Finally, the overall sum payable as damages must be discounted to reflect early receipt.
56. In support of his contention that the only credit ABP has to bring into account is a discount to reflect the benefit of early payment, Mr Cavender submitted that credit should be given for the fact that if the ferry service had continued to be operated, ABP would have earned handling charges in addition to sums payable for "Units". I reject this submission. As I have held, Ferryways was under no obligation to provide ferry services into Ipswich; and it does not follow from the fact that I am not going to go behind the defendants' acceptance that the SA was repudiated in the manner pleaded by ABP that Mr Cavender should be allowed to advance this submission in the face of the true meaning and effect of the SA.

The third issue

Are such sums as are due from Ferryways recoverable from MSCB under the letter agreement, or does that agreement contain guarantees that have been rendered unenforceable by reason of the August 2004 Concession Agreement and/or the February 2006 Time to Pay Agreement?

Guarantee or Indemnity?

57. As is well known, the hallmark of a guarantee is an assumption of a secondary liability to answer for a debtor who remains primarily liable to a creditor. Whether the liability assumed is of this character or involves the assumption of a primary liability is a matter of construction, regard being had to the substance and not the form; see Moschi v Lep Air Services Ltd [1973] AC 331, per Lord Diplock at p.349 B-D and Harburg India Rubber Comb Company v Martin [1902] 1KB 778, per Vaughan Williams LJ at 784.
58. Mr Cavender for ABP contended that neither limb (i) nor limb (ii) in the second paragraph of the letter agreement was in the nature of a guarantee. In his submission, limb (i) was a contractual undertaking giving rise to a primary liability, or it was an indemnity; and limb (ii) was an indemnity. In support of his submission that limb (i) was a contractual undertaking giving rise to a primary liability, Mr Cavender relied in particular on the words "we assume full responsibility for ensuring (and so shall ensure) that …..the Company …has and will at all times have sufficient funds and other resources…" and on the confirmation that Ferryways is a member of the same group as MSCB. He also argued that: (a) the absence of the usual provision found in a guarantee drafted by a commercial lawyer allowing the giving of time and variations indicated that the letter was not a guarantee; (b) the parties cannot have objectively intended that the mere giving of time to Ferryways for the payment of sums due under the SA would discharge the obligation undertaken by MSCB, given that the purpose of the letter agreement was to secure ABP's (£6.1 million) investment in a new linkspan; and (c) letter was not a guarantee in light of the interest MSCB had in Ferryways' successful operation of the SA, see Pitts and Others v Jones [2007] EWCA Civ 1301
59. Mr Cavender's submissions in respect of limb (ii) were essentially the same as those he advanced in respect of limb (i), although he accepted that an obligation to ensure that Ferryways promptly fulfilled its liabilities under the SA, as distinct from an obligation to ensure that Ferryways had sufficient funds to fulfil such liabilities, was akin to being a contract of surety, albeit in his submission it was in the nature of an indemnity.
60. I decline to accept Mr Cavender's submissions. As Mr Irvin contended, the obligations provided for in both limbs are defined by reference to the duties, commitments and liabilities of Ferryways under the SA and will only become concrete and of practical significance on such duties, commitments and liabilities accruing and if Ferryways is in default thereof. The substance of both limbs is therefore an obligation to see to it that Ferryways performs its obligations under the SA and accordingly both are properly to be characterised in my judgement as giving rise to a secondary liability, rather than a primary liability. This conclusion is more readily reached in respect of limb (ii). My view that limb (i) is a guarantee is reinforced by the holding of the majority in Motemtronic v Autocar^[2] that an undertaking to make sure that a company would have the money to meet a contractual obligation was a promise to answer for the debt of another within s.4 of the Statute of Frauds, assuming that the undertaking was an enforceable contractual warranty.
61. With respect to Mr Cavender, his argument based on the absence of the usual provision found in a professionally drafted guarantee allowing the giving of time and variations was a hopeless attempt to paper over the deficiencies in the drafting of the letter agreement. Every commercial lawyer knows or ought to know that a guarantee is rendered unenforceable by the giving of time to pay to the debtor or by a non-trifling variation of the underlying contract, and that to guard against these consequences a term permitting them ought to be included in a guarantee. Accordingly, if the intention had been to secure to ABP an income stream in order to recoup the cost of the new linkspan, one would have expected ABP's General Counsel to take the basic step of including such a term in the agreement or to have provided expressly that MSCB was assuming a primary liability alongside that of Ferryways. Thus, far from signifying an objective intention that MSCB should incur a primary liability, the absence of the usual protective term is at best neutral.
62. In submitting that because MSCB had an interest in Ferryways profiting from the SA, the letter agreement should not be construed to be guarantee or was not as a matter of law a guarantee, Mr Cavender pointed out that although MSCB did not own any of Ferryways' share capital, the two companies were part of the same group and had common directors in the persons of Mr Maurizio Aponte and Mr Jean Marie Denis, both of whom were also directors of Deckers & Wirtz BVBA. Mr Cavender also drew attention to the fact that two of the ships used by Ferryways under the SA were owned by MSC and that MSCB had guaranteed the purchase by Ferryways of two other vessels used on the Ostend – Ipswich route. Further, after the execution of the SA, MSCB made two loans of € 1 million each to Ferryways to finance balloon payments due under the purchase agreements for two vessels.
63. Pitts and Others v Jones [2007] EWCA Civ 1301 comes at the end of a line of cases beginning with Couturier v Hastie (1852) 8 Exch 40 where it was held that a del credere agent's liability to indemnify his principal in respect of the performance of the persons with whom he deals is not founded on a promise falling within section 4 of the Statute of Frauds because the main object of a del credere agent charging a higher rate of commission was in respect of his employment generally and not in respect of his liability to his principal as a surety. In Sutton & Co v Grey [1893] 1QB 285, the Court of Appeal held, following Couturier v Hastie and the later case of Fitzgerald v Dressler 7 CB (NS) 374, that the defendant's oral agreement to introduce clients to a firm of stockbrokers on terms that he should receive half the commission earned by the firm in respect of any resulting transactions and should pay half of any loss suffered by the firm in respect of such transactions was also not caught by section 4 because he had an interest in the transaction. Referring to Couturier v Hastie Lord Esher MR said

There the test given is, whether the defendant is interested in the transaction, either by being the person who is to negotiate it or in some other way, or whether he is totally unconnected with it. If he is totally unconnected with it, except by means of his promise to pay the loss, the contract is a guarantee; if he is not totally unconnected with the transaction, but is to derive some benefit from it, the contract is one of indemnity, not a guarantee, and section 4 does not apply.

64. In Harburg Rubber Comb Company v Martin [1902] 1KB 778 the defendant had orally promised judgement creditors of a company in which he had a large interest and on whose land they were seeking to execute a writ of fi fa that he would endorse bills for the amount of the debt. The Court of Appeal held that the promise was within section 4 of the Statute of Frauds. Stirling LJ said (at p 791):

Both in the judgment of Cockburn CJ in Fitzgerald v Dressler and in the judgment of Lord Esher MR in Sutton v Grey, the word "interest" means some species of interest which the law recognises. In the present case the defendant had no such interest in the property which was about to be seized by the sheriff. He was a director of the syndicate who had, no doubt, a deep interest, in the popular sense of the word, in its proceedings. He held a large number of shares: I believe he was the largest shareholder in the syndicate. He had also financed the syndicate, but he had nothing in the nature of a charge on their property; he was at the utmost a general creditor of the syndicate.

It has been contended that we ought to read the words "interest in the transaction" in a wide sense, and importing a "business interest" in the syndicate – that kind of interest which a creditor and a shareholder of a company has in its prospects. To do this would, I think, go a long way to repeal s.4 of the Statute of Frauds, and to extend the doctrine of Couturier v Hastie very much further than I am prepared to extend it.

65. Vaughan Williams LJ said (at p 787)

It is suggested that the true definition of cases which do not come within s.4 should be not those in which the obligation to pay the debt of another is an incident of a larger contract, but those in which the main object is to secure the promisor's own personal interest. But, I think, if such a definition were adopted, there would be nothing left to come within s.4 because in every case there must be a consideration for which the promisor bargains to come to him from the promisee…. If the contract is that the promisor will be answerable for the debt due to the promisee if he will forbear, if the main object is that forbearance, and the promisor wishes to obtain it, that would be sufficient to take the case out of the statute. In my opinion so to hold would be simply to repeal s.4

66. In Davys v Buswell [1913] 2 KB 47, Kennedy LJ said (at p 57):

Whether Lord Esher MR was right …. and what he meant by "interest in the transaction," I do not think it necessary to inquire, for these expressions, and those used by Stirling LJ in Harburg India Rubber Comb Co v. Martin, appear to me to have relation to a class of cases which in my opinion, have no relevance to a case like the present, where the facts merely are that a man who has a considerable interest in and holds a debenture of a company, and therefore, no doubt, desires that goods should continue to be supplied to it, gives a guarantee for payment of the price of goods supplied to it, in the event of default of payment thereof by the company …. It seems to me illogical to say that, where you have a contract which according to the terms of the statute must be in writing, the application of the statute can be affected by the circumstance that one of the parties is induced to make the contract by the fact that he is interested in that which is the consideration for it.

67. Vaughan Williams LJ said (at p 55):

He did not, however, give the guarantee in performance of an obligation under any antecedent contract, or of any obligation or liability under which he lay, independently of the particular promise which constituted the guarantee. His motive – I deliberately use the word "motive" and not "object" – in giving the guarantee was that he thought that it would be to his advantage that the business of the company should continue to be carried on. I do not think that, in any sense in which the word "interest" has been used in any of the prior cases on the subject, the plaintiff here had any such interest as would make it true to say that he gave the guarantee by reason of any liability or obligation which existed independently of the guarantee or that he was contracting for the protection of any right.

68. In Pitts and Others v Jones the parties were all shareholders in HM Shopfitting Ltd who wished to sell their shares to a corporate vehicle, ("Birch"), controlled by a third party. The sale and purchase of the respondent's shares depended on HM Shopping Ltd lending the purchase price and guaranteeing payment of the price, the guarantee to be secured by the grant of a debenture, all of which required the approval of the shareholders at an Extraordinary General Meeting. For their part, the respondents were to be granted a put option for the sale of their shares to Birch that had been negotiated by the respondent and which was to be exercisable at a later date. The parties met in anticipation of an EGM and upon the respondents expressing reluctance to sign the put option because Birch's obligations thereunder were unsecured, the respondent orally promised to pay them for their shares if Birch failed to do so. The appellants sought to enforce the respondent's promise and relying on Sutton & Co v Grey argued that the promise was outside section 4 because the respondent was interested in the whole package whereby he sold his shares to Birch and the appellants took the option agreement. The respondent had negotiated the option agreement and had not been introduced into it merely to promise to guarantee Birch's obligation to pay the purchase price.
69. The Court of Appeal held that respondent's promise fell within section 4. There was no larger contract of which the respondent's undertaking was a part. It was given solely to support the appellant's share options and the respondent had no other role or interest in those transactions than that of promising to pay the appellants if Birch failed to do so. In the course of giving the lead judgement, Lady Justice Smith referred to the judgement of Vaughan Williams LJ in Harburg and said:

In short, it appears that the court in Harburg was saying that Lord Esher's formulation should not be taken literally. Not every interest in the transaction would serve to take the promise out of the statute; there had to be more than a motive for offering the promise; there had to be a real interest in the subject matter of the contract. If the promisor had no real interest in the subject matter of the contract but only a motive for offering his promise, the promise would be a contract of guarantee. On the facts of Harburg, the defendant promisor had 'an interest' in the contract or transaction between the syndicate and the plaintiff in that he wanted the plaintiff to forbear to execute judgment against the syndicate. That was his motive for offering his promise. However, his promise was not an incident to the main contract or transaction and he did not have the kind of legal interest in the subject matter of the main contract which would make his promise an indemnity. (Para 32)

70. Mr Cavender did not suggest that the letter agreement was part of a larger transaction and for that reason it was not a guarantee. He was wise not to do so, for it was plainly not part of a larger transaction to which MSCB was a party. Instead, Mr Cavender's submission was that MSCB had such a clear interest in the SA that its undertakings in the letter agreement must be taken to involve the assumption of a primary, as distinct from a secondary, liability to ABP.
71. I agree that as a member of the MSC Group, MSCB had an interest in the SA being a success for Ferryways. Indeed, I am prepared to assume that its interest was the same as that of the ultimate parent in the SA, since MSCB took on the role as guarantor and subsequently dealt with Ferryways on the instructions and under the ultimate control of MSC. However, it is clear that this interest was not a legal interest in the subject matter of the SA. It was an interest no greater than the promisor had in the company in Davys, and as such it is plainly insufficient in my view to render the undertakings in the letter agreement indemnities rather than guarantees, whether as a matter of construction or as a matter of law.

The effect on the guarantees of the August 2004 Concession Agreement

72. In my judgement, although clause 6.6 of the SA contemplates variations of the SA, "the Agreement" referred to in the letter agreement is the SA as it stood at the time the letter agreement was concluded. I agree with Mr Irvin's submission that this is so because generally all agreements are capable of being varied whether or not they contain a clause in the nature of clause 6.6 and that it would take particularly clear words before a court would conclude that a guarantee operated in respect of contractual terms that have been agreed by amendment after the guarantee has been executed. It follows that ABP cannot rely on clause 6.6 for the proposition that under the letter agreement the duties, commitments and liabilities referred to are those contained in the SA from time to time and not only at the time the letter agreement was executed.
73. The effect on a guarantee of a variation of the contract between the principal debtor and the creditor is succinctly expressed in para 44-089 of Chitty on Contracts, Vol 2 (29^th ed):

It is a well established and strictly applied principle that any variation in the terms of the agreement between the creditor and the debtor which could prejudice the surety will, unless he consents thereto, discharge him from liability, unless the contract of suretyship provides to the contrary. It is immaterial that the variation has not in fact prejudiced the surety, or that the likelihood that it may do so is remote. If the variation could prejudice the surety it alters the nature of the risk which he has undertaken and he is entitled to decide whether he wishes to continue to be bound or not …. The principle is applied very strictly so that even the most trifling variation may discharge the surety.

74. There is a conflict on the evidence as to whether the agreement reached on 23^rd August 2004 between Mr Smith, Mr Dewilde and Mr Bijvank applied not only to 2003 and 2004 but also to the balance of the term of the SA. However, it is certainly clear in my judgement that the parties agreed that the 2005 charges would not be set in accordance with the RPI formula in clause 4.2 of the SA and that for 2003 and 2004 the charge for empty customers' trailers should be 100% of the trailer rate and only empty slave trailers should be charged at 50% of that rate.
75. In Mr Irvin's submission, this agreement was enough to discharge the guarantees contained within the letter agreement. He accepted that the Concession Agreement did not conform to clause 6.6 of the SA and therefore was not a binding amendment of SA, but submitted that at the very least the parties were estopped from denying the Concession Agreement and that this was enough to discharge the guarantees. He further submitted that MSCB was potentially prejudiced because by compromising the point whether "empty trailers" meant only empty slave trailers, Ferryways increased the enforceability and value of ABP's rights and gave up an argument that was otherwise available to reduce its liability. He also relied on a passage in para 43-30 of Snell's Equity (31^st ed) to the effect that any dealings behind the surety's back between the creditor and the principal debtor which have the effect of varying the liability of the surety or of prejudicing the exercise of his rights will discharge him personally from liability.
76. Mr Cavender submitted that the guarantees were not discharged because: (i) there had to be a contractually enforceable variation of the contract between the debtor and the creditor before the surety was discharged and here there was no such variation because of the failure to comply with clause 6.6 and because of a lack of consideration –- in any event, it was only empty slave trailers that were to be charged at 50% of the trailer rate; and (ii) it is to be inferred that MSCB, through Mr Aponte, consented to the agreement.
77. In my judgement, whether a surety suffers a potential detriment from a variation of the contract between the debtor and the creditor is to be judged by reference to the meaning and effect of the contract in the absence of the postulated variation. It is common ground that from its inception, the effect of the SA was that only empty slave trailers were to be charged at the 50% rate. It follows, in my view, that MSCB suffered no actual or potential detriment from the Concession Agreement, only a benefit in the form of a waiver of the operation of clause 4.2 in respect of the 2005 prices.
78. Nor in my opinion was Ferryways' liability varied by agreement for the purposes of the proposition set out in para 43-30 of Snell's Equity, both because from Ferryways' point of view the effect of the Concession Agreement was simply to confirm the true meaning and effect of the SA and because the agreement was not in the form required by clause 6.6.
79. It follows in my opinion that the August Concession Agreement did not discharge MSCB from the guarantees contained in the letter agreement. It is accordingly unnecessary to consider whether the Concession Agreement had to be an enforceable contract for the guarantees to be discharged or whether the agreement was consented to by MSCB, and I decline to do so.

The effect on the guarantees of the February 2005 Time to Pay Agreement

80. Mr Cavender argued that the February 2006 Time to Pay Agreement was not a binding agreement but was an arrangement simply aimed at maintaining cash flow and which recorded each side's position at that stage in the negotiations over the extent of the shortfall. In support of this submission he relied on: (i) the instalment payments that Ferryways made before the memorandum was executed; (ii) the term in the memorandum "In the event of any future agreed adjustment to the payment due under clause 4.3, a new supplementary memorandum will be made, which will supersede this supplementary memorandum" which he said was included at Ferryways behest because it considered both the amount to be paid and the instalments to be "provisional"; (iii) the evidence of Mr Dewilde and Mr Bijvank that neither party intended to accept the other's interpretation of the agreement; and (iv) the subsequent conduct of Ferryways in issuing the invoice dated 27^th March 2006 seeking the sum of £390,608.99 by way of overpayment and in suggesting on 19^th June 2006, prior to the expiry of the instalment period, that a different amount was due under clause 4.3 that would be set off against future invoices.
81. On the basis that the memorandum did constitute a binding variation of the SA, Mr Cavender contended that: (i) the variations were contemplated by the principal contract and so did not discharge the guarantees: see Andrews and Millet, The Law of Guarantees (5^th ed) at p 364 (bottom paragraph); (ii) the variations were too insubstantial and could not have prejudiced MSCB; and (iii) the court should infer that the variations were consented to by MSCB, acting by Mr Aponte.
82. In my judgement, by executing a formal document that was expressed to be in accordance with clause 6.6 of the SA and which contained the terms it did, the parties entered into a binding contract varying the SA and giving Ferryways time to pay. The provisions in the memorandum to the effect that: (i) a superseding supplementary memorandum would be executed if a further adjustment to the payment due under clause 4.3 was agreed: and (ii) neither party was accepting the other's interpretation of the SA, are nothing to the point. Unless and until there were a superseding agreement, the eighteen instalments were to be paid on the dates specified.
83. For the reasons given in paragraph 72 above, I reject Mr Cavender's submission that the variations to the SA provided for in the memorandum were contemplated by the principal contract. I also decline to accept Mr Cavender's submission that the variations were too insubstantial to discharge the guarantees.
84. The substance of the variation of the SA resulting from the memorandum was the giving of time to pay the sum due under clause 4.3 in respect of 2005, and it has long been held that even the shortest extension of time will discharge the surety. Thus in Polak v Everett (1876) 1 QBD 669 Blackburn J said:

It has been established for a very long time, beginning with Rees v Berrington to the present day, without a single case going to the contrary, that on the principles of equity a surety is discharged when the creditor, without his assent, gives time to the principal debtor, because by so doing he deprives the surety of part of the right he would have had from the mere fact of entering into the suretyship, namely, to use the name of the creditor to sue the principal debtor, and if this right is suspended for a day or an hour, not injuring the surety to the value of one farthing, and even positively benefiting him, nevertheless, by the principles of equity, it is established that this discharges the surety altogether.

85. Mr Cavender cited Frank v Edwards (1852) 8 Exch 214 and The York City and County Banking Company v Bainbridge [1881] LT 732, but the variation in the first of those authorities was not the giving of time to pay, and in the second, Hawkins J held: "[T]here was no agreement to allow any specified time nor indeed any time at all to the debtor for payment."
86. As to Mr Cavender's submission that MSCB, acting through Mr Aponte, consented to the memorandum, the only way that Mr Aponte would have learned of this agreement was through Mr Dewilde, yet Mr Dewilde told me that he did not tell Mr Aponte anything about it. Mr Cavender sought to undermine this part of Mr Dewilde's evidence by pointing to an email that he (Mr Dewilde) sent to Mr Aponte dated 13 February 2006 which, whilst it makes no mention of the negotiations that eventually led to the execution of the memorandum, states that ABP was still refusing to pay the sum due under the Immingham contract. In Mr Cavender's submission, this document showed that the two men had talked about ABP's refusal to pay the Immingham sum and since this refusal arose in the context of the negotiations over the shortfall sum due under the SA, Mr Dewilde must have told Mr Aponte about the memorandum. Mr Cavender's submission was based on pure speculation and I reject it. It does not follow for a moment that because Mr Dewilde told Mr Aponte about the withholding of the Immingham sum, he must have told him about the memorandum. Mr Dewilde was an honest and truthful witness. I accept his evidence that he did not tell Mr Aponte about the memorandum. It follows that the contention that MSCB consented to the variations of the SA contained in the memorandum must be and is rejected.
87. Accordingly, I find that the guarantees contained in limbs (i) and (ii) of the letter agreement were discharged by the February 2006 Time to Pay Agreement and that MSCB is not liable under the letter agreement for any of the sums due from Ferryways to ABP under the SA. This means that MSCB escapes liability on a technicality in circumstances where they have suffered no detriment from the arrangement agreed by ABP and Ferryways. Like Blackburn J in Polak v Everett, I have considerable doubts about the justice of the time to pay rule but as that most learned judge went on to observe, the rule has been undisputed law from the time of Rees v Berrington and nothing but the legislature can interfere to alter it.

Conclusion

88. If the sums owed by Ferryways to ABP in debt and in damages cannot be agreed, there must be another hearing to decide all questions of quantum.
89. ABP's claim against MSCB is dismissed.

Note 1   The parties hope to be able to agree these sums, failing which there will have to be a separate quantum hearing.    [Back]

Note 2   CA 20th June 1996 unreported    [Back]