Before: The Hon. Mr. Justice Toulson
 
 

B E T W E E N

JUDGMENT
 
DATED: 15 January 1999

Mr. Justice Toulson

This is an application by the plaintiffs under Order 14A for the determination of certain questions of law or construction arising from two agreements between the parties made in September 1997 and November 1997.

Directions for the hearing were given on a previous occasion. Those directions did not identify the precise questions to be decided, but it is agreed that the issues which I am presently asked to determine are as set out in the plaintiffs' skeleton submissions.

Before coming to those issues it is necessary to summarise the background facts. The plaintiffs provide transportation services and storage facilities at the Muuga Grain Silo in Muuga, Estonia. Under the September contract the plaintiffs agreed to transport 100,000 metric tonnes, plus or minus 10 per cent, of barley of Russian origin from any of a number of Russian towns to the Muuga silo and to load them on vessels nominated by the defendants. The contract set out rates for this all-in service varying according to the town where the goods were to be received. The contract specified that the rates were to include the following:

"Rail freight from free on rail different stations in Russia to free-on rail Muuga, unloading of wagons into silo, weighing of cargo, loading of cargo from silo onto ocean vessel, Quarantine Certificate, Veterinary Certificate, cleaning of wagons, taking samples and analysis, include, storage (under storage, it is understood that period of wagons arriving to the elevator as per Silo receipt until the actual shipment of cargo) of up to 30 days. For storage from 31 to 45 days the rate of US$0.10 pmt/day and from 46th day till 60th day the rate of US$0.45 pmt/day to apply. Maximum total storage period allowed is 60 (sixty) days. If extra storage is incurred through the delay of vessel fixed through Agent, no storage expense to be charged for the period of delay."

The contract also contained a penalty clause if the defendants failed to deliver the contracted quantity within the agreed period. Provisions were contained in the agreement for the conditions in which the grain was to be stored in the silo. That agreement was subsequently amended to provide for an additional delivery of grain.

The November contract was similar in its nature. The quantity was different, 300,000 metric tonnes of barley, and there were differences in rates, but the only material differences for the purposes of the matters which I have to consider today are that under the November contract the maximum permitted time for storage in the silo was 45 days, the rate from the 31st to the 45th day being US$0.45 pmt/day. The agreement further stated:

"Maximum time of storage is 45 days after which if the commodity is not shipped the agent has the right to claim proven losses."

In the event, a number of consignments of grain delivered under the contracts were left in the silo for longer than the maximum permitted period and the defendants conceded that they were in breach of the agreements in that regard.

The questions in dispute are what sums were to be paid for storage during the permitted storage period; and what are the plaintiffs' rights in respect of the period or periods when the defendants were in breach of contract by failing to remove their goods from the silo or give instructions for their loading at the port.

The issues are stated in the plaintiffs' skeleton submissions as follows: one, is it an implied term of the September contract that the defendants would pay additional remuneration for storage services in excess of the maximum period? Two, in the alternative, are the plaintiffs entitled to additional remuneration as quantum meruit for storage services provided in excess of the maximum period? Three, if the plaintiffs are entitled to additional remuneration, are the plaintiffs entitled to remuneration at the contractual or daily rate or at a reasonable rate to be fixed by the court in due course? Four, in respect of the November contract is the position the same or is it altered by the additional clause which provides maximum time of storage up to 45 days after which, if the commodity is not shipped, the agent has the right to claim proven losses? Five, in respect of the period in excess of 30 days up to the maximum period of 60 days and 45 respectively, whether the defendants are under an unqualified obligation to pay at the contractual rate or whether the defendants are only obliged to pay such charges for such periods if, by reason of delay in removing grain from the silo, the defendants exceeded a total storage of 50,000 tonnes in the silo?

It is convenient to take the last issue first. The defendants submit that on the proper construction of the September agreement, as a whole, the words (in the paragraph specifying the rates and what they were to include) "for storage from 31-45 days the rate of US$0.10 pmt/day and from 46th day till 60th day the rate of US$0.45 pmt/day to apply" should be read as including the additional words of proviso "if but only if by reason of delay in removing the cargo from the silo the defendants' of the silo exceeded its available storage capacity of 50,000 metric tonnes in any delivery period". They make the same submission, of course, in relation to the parallel clause in the November contract.

The foundation of that argument is twofold. Firstly, they rely upon an affidavit of the managing director of the plaintiff's commercial managers, Mr. Uwe-Jertrum, in which he said:

"At certain times of the year particularly where a good harvest is anticipated, demand for the storage facilities is strong. Accordingly the plaintiffs agree to provide facilities for defined quantities of grain in advance and a penalty is paid if the full quantity is not provided. As the sole providers of storage facilities at Muuga, the plaintiffs are concerned about the risk of a bottleneck at the silo if goods are not removed. Therefore, the contracts provide for a fixed period of storage as part of an overall price for the services and then a daily rate up to a maximum period of storage".

The submission is made that since the underlying purpose in imposing the rates charged in the case of the September contract from the 31st to the 45th days and from the 46th to the 60th days, and in the case of the November contract from the 31st to the 45th days, was to avoid a bottleneck, it follows that as a matter of construction those higher rates should not be deemed to be payable if in fact there was no bottleneck at any particular time.

Secondly, it is submitted that this conclusion is reinforced by reference to the penalty clause which provided that if the customer failed to deliver grain in the contracted quantity it would pay a penalty at the rate of US$150 pmt not delivered. It is submitted that if the rates clause is limited in the way for which the defendants contend, then such clause, taken in conjunction with the penalty clause, would serve fairly to fulfil the underlying commercial objective.

I do not accept that, as a matter of construction, the rates clause is to be read in the way for which the defendants contend. In my judgment, the rates clause is entirely clear on its face and means what it says. It is to be so applied. If there were ambiguity, then reference to the underlying commercial purpose might assist in resolving which of two or more possible interpretations should be adopted. But I can see no ambiguity in it. If the apparent result of applying the natural and ordinary meaning of the words were so plainly contrary to the apparent underlying commercial purpose of the agreement as to cause the court to consider that the parties cannot so have intended, that again would be a ground for adopting an alternative construction. It does not seem to me that the arguments which have been advanced come anywhere near to that standard. The parties might have included in the rates clause the proviso for which the defendants contend, although it would have made matters rather more complicated if they had. They have not done so and it cannot plausibly be contended that the suggested proviso is either necessary in order to give efficacy to the agreement or so plainly obvious that the parties must be taken to have intended it, although they did not say so.

The remaining issues go to the principal point of controversy, namely: what are the plaintiffs' rights in respect of the periods when grain remained in the silo beyond the permitted maximum period? It has not been suggested that the defendants could have supposed that they were entitled to leave their goods at the silo beyond the permitted period gratis.

The plaintiffs' primary submission is that they are entitled to a restitutionary claim for the benefit, wrongly taken by the defendants, in leaving their goods in the silo. Their alternative submission is that each contract should be construed as containing an implied term that, if the defendants left their goods in the silo longer than was permitted, the plaintiffs would be entitled to charge at the previous contractual rate (i.e. 45 cents per day), alternatively a reasonable rate, as an alternative to any claim for damages for breach of the contract.

The defendants' case is that no such term should be implied nor should the court recognise any restitutionary remedy. The plaintiffs' proper remedy is for damages for beach of contract. As it happens, the plaintiffs have not pleaded a claim for damages for breach and, say the defendants, if the plaintiffs have not suffered any loss by reason of the breach, then they should not be entitled to recover any sums in respect of such periods.

Since there is no claim on the pleadings as they stand for damages for breach of contract, I am not directly concerned with what would be the appropriate measure of damages if such a claim were to have been pleaded. But, underlying some of the arguments which have been addressed, there would appear to have been an assumption as to what the plaintiffs' right in damages would be. There seems to have been an assumption that the plaintiffs would be limited in damages to any pecuniary loss which they might be able to prove. If that assumption has been made, it seems to me likely, at the least, that the assumption is wrong.

There is no shortage of cases in which a person who has made improper use of another's property, whether land or movable property, has been held liable to pay the equivalent of a fee or market rent for the use made of it, regardless of any pecuniary loss to the other party. The principle involved has sometimes been referred to as the "user" principle. A number of cases of that kind were considered by the Court of Appeal in Stoke-on-Trent City Council v. W. & J. Wass Ltd. [1988] 1 W.L.R. 1406. They include wayleave cases, cases of tenants holding over at the end of a lease and cases of persons holding on to the goods of another. A more recent example of the same principle in the case of a landlord and tenant can be found in the decision of the Privy Council in Inverugie Investments Ltd. v. Hackett [1995] 1 W.L.R. 713.

However, I am immediately concerned with the question whether the plaintiffs have, as a matter of law, an independent right to assert a cause of action in restitution as distinct from a right to claim damages based on what might be regarded as a restitutionary approach. There is no dispute as a general proposition that where a person obtains the use of the property or services of another in circumstances where such benefit is non-contractual but could not be expected to be gratuitous, the law of restitution imposes on him an obligation to pay for it and, in the absence of any better basis for assessment, the value of the benefit is to be assessed by what is reasonable.

Mr. Tselentis on behalf of the defendants submits that such a general proposition is not applicable in the context of the present case because he says that here there is effectively a contractual code which covers the situation. Therefore, there is no room for principles of restitution to apply as a separate cause of action, whatever relevance they might have when it came to assessment of any claim for damages not currently made.

In support of that proposition Mr. Tselentis has referred to Pan Ocean Shipping Ltd. v. Creditcorp Ltd. [1994] 1 All E.R. 470, and in particular a passage from the speech of Lord Goff of Chieveley at p.473. The House of Lords was there concerned with a claim under a charter party for repayment of hire where the charterparty contained provision dealing with that very subject. Lord Goff said:

"... the charter will usually make express provision for the repayment of hire which has been overpaid. In the present charter, such provision is to be found in cl 18 of the printed form, which provides that 'any overpaid hire' is 'to be returned at once'. This provision gives rise to a contractual debt payable in the relevant circumstances by the shipowner to the charterer. But even in the absence of any such express contractual provision, advance hire which proves to have been paid in respect of a period during which the vessel was rendered off hire under a term of the contract must ordinarily be repaid, and if necessary, a term will be implied into the contract to that effect ...

"All this is important for present purposes, because it means that, as between shipowner and charterer, there is a contractual regime which legislates for the recovery of overpaid hire. It follows that, as a general rule, the law of restitution has no part to play in the matter; the existence of the agreed regime renders the imposition by the law of a remedy in restitution both unnecessary and inappropriate."

That principle does not apply in the present case, for this reason. The September contract contains no regime specifying what was to happen if the defendants wrongly kept grain at the silo for longer than the permitted period. The contract is entirely silent on that point. Of course, it would be open to contracting parties to define the remedies available in the event of a particular breach. But in the September contract they did no such thing. Accordingly, there is no contractual debt in relation to the period of storage beyond the permitted period, analogous to the contractual debt referred to by Lord Goff, unless the plaintiffs were right in their argument about an implied term, which the defendants themselves vigorously resist. The November contract contains the statement that, if the commodity is not shipped within 45 days, the agent has the right to claim proven losses, but I agree with Mr. Tselentis' submission that that statement adds nothing. It is merely a recognition of what would be the law in any event, namely that, if one party breaks the contract, the other party has the right to claim any loss which he can prove has arisen from the breach. I cannot read that term as excluding any other remedy or defining the damages or losses which might be recoverable.

The law of restitution could have developed in a way so as not to include situations where the facts relied upon to found a claim for restitution also constitute a breach of contract, so that the innocent party should, in such circumstances, be confined to his remedy in damages. But the law of restitution has not developed in that way. In The Law of Restitution (5th edition) 1998, under the heading "Benefits conferred in pursuance of a valid common law equitable or statutory obligation", Goff and Jones state, at p.48:

"If the contract is terminated for breach of the primary contractual obligations, the breach gives rise to a secondary obligation to pay damages, but does not preclude a restitutionary claim."

In Ministry of Defence v. Ashman and Another [1993] 2 E.G.L.R. 102 the Ministry of Defence made accommodation available to the first defendant, an RAF serviceman, and his wife. Later it brought a successful claim for possession of the premises and mesne profits. A question arose as to what sums the Ministry was entitled to recover. In the Court of Appeal there was argument whether the Ministry was entitled to recover on a restitutionary basis rather than merely damages. Lord Justice Hoffmann said:

"A person entitled to possession of land can make a claim against a person who has been in occupation without his consent on two alternative basis. The first is for the loss which he has suffered in consequence of the defendant's trespass. That is the normal measure of damages in the law of tort. The second is the value of the benefit which the occupier has received. This is a claim for restitution. The two bases of claim are mutually exclusive and the plaintiff must elect before judgment which of them he wishes to pursue."

Lord Justice Kennedy's judgment is capable of being analysed in more than one way, but he was certainly understood by Lloyd L.J. (who took a different view) as agreeing with Hoffmann L.J. that the plaintiff was entitled to a remedy in restitution. Indeed the judgments of Hoffmann and Kennedy L.JJ. were so understood by Lord Lloyd (as he had by then become), giving the judgment of the Privy Council in Inverugie Investments Ltd. v. Hackett. In the Ashman case he considered that the Ministry was not entitled to advance a restitutionary claim, for two reasons. First, the pleadings in the case before the court on that occasion contained a claim for damages for trespass and nothing else. Second, he considered it doubtful as the law stood whether a restitutionary remedy was available in the case of wrongful occupation of land. He went on to say:

"The reasons for this anomalous exception to the general rule are set out in Goff and Jones on Restitution 3rd Ed. at p.607. Three reasons are discussed. The substantial reason is that it was so decided by the majority of this court in the case of Phillips v. Homfray (1883) 24 Ch D. 439."

It is clear that a majority of the court, therefore, considered that, in the case of a person who wrongly remained in occupation of land at the end of a tenancy, the landlord was entitled to maintain a cause of action in restitution distinct from any claim for damages, and that Lloyd L.J.'s disagreement on that point was based not on any disagreement as to general principle but on disagreement as to the application of that general principle in the specific case of a lease.

It is true that the case there pleaded was one of trespass and not breach of contract. But a landlord whose tenant fails to vacate at the end of the contractual period could equally plead his case in breach of contract, as in trespass. Similarly a person who deposits rubbish on another person's land commits trespass just as much as a person who walks over another's land or wrongly occupies it. Therefore, a person who wrongly leaves his goods on the land of another without his permission could equally be sued in trespass. It does not seem to me, therefore, that the answer in the present case should depend on such fine distinctions.

Given the recognition of the general restitutionary principle, and that it can provide a distinct cause of action to the owner of property against another who wrongly obtains for himself the benefit of using it as in the Ashman case, it seems to me that the plaintiffs in the present case are entitled to maintain an action against the defendants in restitution for the wrongful benefit arrogated to themselves of keeping their goods in the silo longer than they were permitted. The plaintiffs had little that they could do about it. Under the contract they were obliged to load the goods when called on to do so. They cannot be said to have consented to keep the goods there free, and justice requires in the circumstances that they should be entitled to reasonable remuneration for the extra contractual service which they found themselves put upon to perform.

The assessment of what would be a reasonable sum is not a matter for me to decide today. Of course, the preceding contractual rate will be a relevant factor for the court to take into account. In the case of a tenant who holds over at the end of a lease, the rental figure under the agreement is ordinarily taken as cogent evidence of what is a reasonable figure. But there are distinctive features about this case and both parties should have the opportunity to put evidence before the court to support their rival contentions as to what would be a reasonable figure on the particular facts.

Since I have accepted the argument that the plaintiffs have a right against the defendants in restitution, it follows that I do not have to consider their alternative claim that they have an implied contractual right to payment either at the contractual rate or at a reasonable rate. I would not have accepted that argument. In some cases, the courts have found implied contracts in circumstances which might be regarded as bearing some analogy to the present. In particular, Mr. Parsons relied on Stephens v. Bromley , where charterers loaded discrepant goods on to a vessel, and it was held that there was an implied contract varying the charterparty so as to entitle the shipowners to claim for what would have been the appropriate rate of freight if they had known what they were shipping. That case seems to me to be an example of the sort of fiction into which the courts were driven before the law of restitution developed in the way that it now has.

In the present case the parties agreed what was the maximum time that the goods could be stored. The only provision which they made for what was to happen in the event of breach was the mere statement in the November contract recognising the plaintiffs' right in that event to claim damages, which the plaintiffs would have in any event. It does not seem to me that it is necessary either to give efficacy to that contract to imply the term contended for, nor can it be said that it is necessarily obvious that both parties would have agreed to pay at the previous contractual rate or at a reasonable rate. It might be that the plaintiffs would have wanted the higher rate and the defendants would have wanted a reasonable rate. But the present development of the law of restitution makes it unnecessary to adopt the fiction of an implied contract in this case, for reasons which I have already given.

MR. PARSONS: In the normal course of events I would invite your Lordship to give judgment for the storage charges, and what I would be inviting your Lordship to give would be judgment for the storage charges to be calculated for any period over 30 days up to the maximum contractual period of the contract at the contractual rates and for any period thereafter at a reasonable daily rate to be assessed. That is what I propose to invite your Lordship to do, subject to one matter, which is the matter your Lordship raised with me in argument about this question of damages.

Technically, what I suppose I should do is ask your Lordship to put that over. I then make a formal application to amend to put the claim for damages in. I would in any event have to elect which one I wanted to go in for and I would want to go for the restitution of the claim, so I would not actually be pursuing it before your Lordship, and I would simply be wasting a lot of time. The only reason I raised it at all is if the matter went further I would obviously wish to reserve my right to amend to put in damages should it be necessary. Unless there is any objection to doing that and simply keep it over should the matter arise, I would invite your Lordship to give judgment.

MR. JUSTICE TOULSON: I am not quite sure what that all adds up to. I have made a determination of the issues. The matter can rest there or a judgment can be entered. But I think you are making the prayer of St. Augustine of Hippo, "God make me chaste, but not yet".

MR. PARSONS: Well, God make me chaste next week!

MR. JUSTICE TOULSON: Ah! Right.

MR. PARSONS: But, rather than waste a lot of time in prayer for no reason, I would like to go straight to heaven. What I am saying is that the matter could rest there and then I could come back and make an amendment for this loss of use damages which your Lordship has indicated.

Then the next stage would be that your Lordship would ask "Well, are you pursuing this? Or, in the light of my judgment, would you elect to the restitution claim in any event?" And I would.

MR. JUSTICE TOULSON: Yes. The long and short of it, if I understand it correctly, is that you are not asking for a judgment today, but you are asking for liberty to mention the matter?

MR. PARSONS: Unless my learned friend was prepared to say that if the matter went further I could have the right to amend should it be necessary, if your Lordship's judgment was overturned on this issue, if my learned friend was quite happy to do that -

I am not saying that by seeking today I have somehow precluded it - it would be sensible for your Lordship simply to give judgment today rather than mention the matter later.

MR. TSELENTIS: I do not propose to contend that my learned friend would be precluded from seeking judgment later by not seeking judgment today, but it does not follow from that that I need commit myself at this stage to accept an amendment at a later stage ----

MR. PARSON: No.

MR. TSELENTIS: My learned friend would have the right to make an application for that.

MR. PARSONS: My Lord, I certainly was not trying to get my friend to accept that I could have. It is simply by your Lordship granting judgment today there was not some sort of judgment estoppel against an amendment to plead damages.

MR. JUSTICE TOULSON: Right. I think I follow that.

MR. TSELENTIS: In any event, the essential point I wish to make is that your Lordship had before you certain issues of law and construction which your Lordship has determined. That suffices for the moment. The next step is for the reasonableness of the charges claimed to be assessed by the Admiralty Registrar, there need be no further judgment entered or steps taken at this stage. The matter would simply ----

MR. JUSTICE TOULSON: He would want to protect himself in case you successfully seek to challenge my judgment is really what it comes to.

MR. TSELENTIS: Yes.

MR. PARSONS: Well, my Lord, I do not see how by entering judgment at this stage the matter is advanced in any way.

MR. JUSTICE TOULSON: No. What is your position otherwise?

MR. TSELENTIS: My Lord, we are content with your Lordship's ----

MR. JUSTICE TOULSON: You are not going to seek leave to appeal is what it comes to.

MR. TSELENTIS: My Lord, I would have to take instructions. I do not have instructions at the present time. If leave be needed, it might well be that your Lordship's determination is a final order which does not require leave.

MR. JUSTICE TOULSON: I think since 1st January you need leave in practically everything.

MR. TSELENTIS: My Lord, I would have to take instructions. I do not have instructions.

MR. PARSONS: Perhaps we can short-circuit this. The only reason I thought it necessary for your Lordship to say there should be judgment on liability is that is to trigger the assessment. But the alternative could simply be, we have your Lordship's judgment as to where we are going, and we simply have directions in due course for the assessment.

MR. JUSTICE TOULSON: I forget, what is the amount of the claim?

MR. PARSONS: US$750,000.

MR. JUSTICE TOULSON: This I should have thought is now a case which ought to be settled.

MR. PARSONS: One would anticipate that.

MR. JUSTICE TOULSON: Because - just thinking ahead slightly - if you applied for leave to amend to plead damages, unless I can see some prejudice I grant it. It is hardly imaginable that there would be prejudice because the other side have been trumpeting throughout that your proper remedy is damages. Unless there is some answer to the user principle why that should be distinguished in this case, it seems to me that that would be plainly applicable.

I would have thought that all roads are going to lead to Rome, whether it is via the user principle or whether it is via restitution. If that is so, then I cannot think that it is in the parties' interest to spin out time and money arguing legal niceties, least of all over a claim which is this sort of order. So I suspect that the most sensible course is for me, unless somebody presses me to do otherwise, to say nothing more.

I have given my adjudication; I will make any order as to costs which anybody would make. Then I would have thought that it is sensible for both parties to consider their position in the next few days. If the other side are going to seek leave to appeal, they will have to come back and argue the point in front of me. If they are, then you may want protectively to make sure that you have every possible bullet in the revolver that can be fired if that bit of the barrel comes round into play. But these are all matters which the parties will want to think about. The plain view I have come to and expressed is that you are entitled to a reasonable figure. I have held you are entitled as a matter of restitution; I have given a pretty broad hint that I think you would be entitled to exactly the same thing by way of damages, and there matters presently stand.

MR. PARSONS: In that case, that seems entirely sensible and I am quite content with that for my part.

MR. TSELENTIS: We accept that, too.

MR. PARSONS: Therefore, the only thing left is costs, and I ask for my costs because I am successful.

MR. TSELENTIS: The only argument I wish to advance is that there was a discrete issue in respect of which the plaintiff was unsuccessful, that is whether the recovery ought to be at the contractual rate. That was an issue until this morning. It was not pursued in the course of my learned friend's argument this morning. Its rejection was fortified by your Lordship's finding on the implied terms and your Lordship's indication as to what your Lordship's finding would have been, the implied being an avoidance issue. So I would ask for those costs to be disallowed.

MR. JUSTICE TOULSON: Yes. Do you want to say anything more?

MR. PARSONS: My Lord, there are no costs relating to that because it is a matter of argument and we have not argued about it.

MR. JUSTICE TOULSON: Yes. What I had in mind to say was plaintiffs' costs in cause. But I am just wondering whether there are any circumstances where that could be live?

MR. PARSONS: It cannot be, my Lord, because the admission of the US$275,000 was predicated on my learned friend's US$50,000 limits case. Now that has gone, we were always going to get more money anyway ----

MR. JUSTICE TOULSON: So, effectively, plaintiffs' costs in cause and the plaintiffs' costs would come to the same ----

MR. PARSONS: Because we are bound to have more -- Yes, that is right.

MR. TSELENTIS: That is not necessarily so, my Lord, because the 250 included the contractual period and a portion of the extra contractual period. My learned friend's submission assumes that there would be a sufficient recovery in respect of the extra contractual period to take the total bill over the US$257,000. That cannot be so at the present stage.

MR. JUSTICE TOULSON: Well, I will say plaintiffs' costs in causes. If they are right, they get them anyway. If they are wrong, then whether they get them at the end of the day depends on the justice of the ----

MR. TSELENTIS: As your Lordship pleases.

MR. JUSTICE TOULSON: Are there any other matters?

MR. PARSONS: No, my Lord.

MR. JUSTICE TOULSON: Thank you both very much for your arguments in this interesting matter.