Port of Tilbury (London) Ltd v Stora Enso Transport & Distribution Ltd & Anor [2009] EWCA Civ 16

Friday January 23rd, 2009
Neutral Citation Number: [2009] EWCA Civ 16
Case No: A1/2008/1224

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEENS BENCH DIVISION, TECHNOLOGY & CONSTRUCTION COURT
MR JUSTICE RAMSEY
[2008] EWHC 992 (TCC)

Royal Courts of Justice
Strand, London, WC2A 2LL
23/01/2009

B e f o r e :

LORD JUSTICE RIX
LORD JUSTICE TOULSON
and
LORD JUSTICE RIMER

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Between:

Port of Tilbury (London) Ltd
Appellant / Claimant
- and -

Stora Enso Transport & Distribution Ltd
Stora Enso Transport Distribution AB (now renamed Stora Enso Logistics AB)
Respondents / Defendants

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Mr John McCaughran QC and Mr Laurence Emmett (instructed by McGrigors LLP) for the Appellant/Claimant
Mr David Streatfeild-James QC and Mr Patrick Clarke (instructed by Campbell Hooper LLP) for the Respondent/Defendant
Hearing dates : Monday 15th December 2008

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HTML VERSION OF JUDGMENT
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Crown Copyright ©

    Lord Justice Rix :

  1. In practical terms this is a case about cash flow. In legal terms it is about whether the parties’ contract contains a no set-off provision or on the other hand permits the set-off of a cross-claim pending the determination of the parties’ dispute.
  2. The claimant, here the appellant, is the Port of Tilbury (London) Ltd (the “Port”). The defendants, here the respondents, Stora Enso Transport & Distribution Ltd and its Swedish associate company (Stora Enso Transport & Distribution AB, now renamed Stora Enso Logistics AB), are the English and Swedish subsidiaries of a huge Finnish group which makes paper products (together, “Stora”). Those products are supplied to the users of newsprint paper and other customers in England. Stora has an ongoing need to import, handle, store and distribute its paper in England. It has therefore entered into a long-term contract with the Port whereby the Port agreed to construct or procure the construction, at its cost, of facilities for the handling of Stora’s paper at Tilbury, and the parties agreed on the use of those facilities for the handling of Stora’s paper for a period of 15 years. Stora agreed a minimum annual throughput of 680,000 tonnes of paper (in the early years, building up to a minimum of 800,000 tonnes). The Port agreed to provide services which included unloading paper shipped to the facilities, storage of paper at and retrieval of stored paper from the facilities, loading of paper orders for despatch from the facilities and provision of an electronic management system and the production of various documents and reports (the “services”).
  3. In payment for those services Stora agreed to pay a price per tonne (as amended) of £13.30. Stora also agreed to pay that price on any shortfall between the contractual minimum tonnage and the amount of paper actually imported in any year. In this respect the contract provided for a familiar “take or pay” approach. In the first year of operation, which ran from 1 July 2005 to 30 June 2006, Stora imported only 542,438 tonnes through Tilbury, which has led to the Port’s demand for a minimum tonnage payment of £1,829,574.60. The Port invoiced Stora for that amount by an invoice dated 17 July 2006. Stora alleges, however, that the shortfall concerned was entirely the fault of the Port. Stora was, it says, willing and able to import the minimum tonnage, and had to turn elsewhere to get the shortfall tonnage imported into England, and blames the inadequacy of the Port’s facilities or systems for the debacle. Stora claims unliquidated damages in the sum of over £6 million (including the return of the minimum tonnage payment) in respect of these difficulties. The Port in turn says that the fault was Stora’s: it was, it says, Stora’s breach of its own obligations under their contract which led to the failures concerned. It is common ground that this dispute cannot at present be resolved and will have to go to trial.
  4. The question is whether, under the terms of their contract, Stora must pay up front, without set-off, the minimum tonnage payment. There is no question but that this is a pure question of cash flow. If, in due course, Stora sustains its cross-claim, any minimum tonnage payment it may have paid will, in principle, form a part of the cross-claim for damages it will be entitled to recover.
  5. The contract in question is dated 19 November 2003. I shall have to set out its critical terms below. The Port sought summary judgment on its minimum tonnage payment invoice, and succeeded before Master Fontaine, whose judgment is dated 1 October 2007. Stora obtained permission to appeal, and that appeal was allowed by Ramsey J, whose judgment is dated 7 May 2008, [2008] EWHC 992 (TCC). Permission to appeal to this court was given by Waller LJ.The contract
  6. The preamble to the contract sets out its purposes, as follows: “WHEREAS:-

    (A) POTLL [the Port] has agreed to provide to SE [Stora] services for the handling of Cargo at Tilbury Docks;

    (B) Provision of these services and also services to other third parties will require POTLL to undertake certain construction and other works at Tilbury Docks;

    (C) POTLL has agreed to construct, or procure the construction of, the Facilities; and

    (D) The Parties have agreed to join in this Agreement for the purposes set out in this Agreement.”

  7. Clause 2 provided that the Port would provide the contractual services for 15 years from the commencement date (which was contemplated to be and in fact was 1 July 2005). Clause 4 provided for the Port’s procurement of the design and construction of the facilities at its cost, to a specification scheduled to the contract. Clause 5 set out the services to be provided by the Port, which it is not necessary further to list. Clause 8 is headed “Payment” and provided for a freight price (to include all the services promised) of £12.63 per tonne (as it was originally, but this figure was amended to £13.30). That initial level of freight price was posited on certain assumptions which were set out in clause 8.1.3 but the contract allowed for adjustment under clause 8.1.4.
  8. Clause 8.4 contained the take or pay provisions, as follows:

    Payment for Minimum Tonnage Not Taken

    Subject to the terms of Clause 10 (Maintenance, Insurance and Destruction of, or Major Damage to, the Facilities) if in any Contract Year the aggregate tonnage of Cargo in respect of which the Freight Price is paid to POTLL is less than the Minimum Tonnage then with the payment in respect of the last month of that Contract Year SE shall pay to POTLL a sum calculated by reference to the formula

    ((MT – T) x FP)

    where:

    MT is the Minimum Tonnage

    T is the tonnage of Cargo (other than Cargo within Direct Transit Trailers) discharged at the Facilities in the relevant Contract Year

    FP is the Freight Price per tonne for the Minimum Tonnage.”

    It will be observed that the minimum tonnage payment is to be paid “with the payment in respect of the last month of that Contract Year”.

  9. Clause 8.8 contains a “Self Billing” provision:

    “8.8.1 Not later than the 7th day of each month, SE shall submit to POTLL a statement (a “Billing Statement”) (such Billing Statement to be in a form to be agreed between SE and POTLL) setting out the sum which SE believes it owes to POTLL in terms of this Agreement in respect of the previous month.

    8.8.2 In the event that SE fails to provide to POTLL any Billing Statement within the timescale specified in Clause 8.8.1 above, POTLL shall be entitled (but not bound) to render to SE a Billing Statement.”

  10. Clauses 8.10 and 8.11, together with clause 15 below, are at the heart of the parties’ dispute: “8.10 Due Date for Payment

    8.10.1 The sum (the “Payment Sum”) shown payable by SE as such on a Billing Statement rendered pursuant to Clause 8.8 (Self Billing) shall be paid, subject to Clauses 8.10.2 and 8.11 (Disputed Sums), without any claim, deduction, counterclaim or set off by SE not later than the last day of the month in which the Billing Statement is received (or, if such day is not a business day, the business day falling immediately thereafter) (the date upon which the Payment Sum is so payable being hereinafter referred to as “the due date”).

    8.10.2 SE shall be entitled to retain, withhold or set off any sums due by SE to POTLL under this Agreement in circumstances where any of the events set out in Clause 12.7 (Termination Following Insolvency etc) have occurred in respect of POTLL.

    8.10.3 POTTL shall be entitled to retain, withhold or set off sums due by POTTL to SE under this Agreement against any sums due by SE to POTLL under this Agreement in circumstances where any of the events set out in Clause 12.7 (Termination Following Insolvency etc) have occurred in respect of SE.

    8.11 Disputed Sums

    8.11.1 If either SE or POTLL genuinely and bona fide disputes that any sum or part thereof (the “Disputed Sum”) due in terms of this Agreement is payable, then, provided that on or before the due date for payment of the Disputed Sum, such Party shall have given notice to the other Party of its intention to withhold the Disputed Sum stating in reasonable detail the bases upon which it so genuinely and bona fide disputes that the Disputed Sum is payable it shall be entitled to withhold, pending resolution of such dispute, the Disputed Sum.

    8.11.2 The Disputed Sum, to the extent that it is subsequently agreed or determined to be payable shall be deemed to have been due and payable on the due date and interest in terms of Clause 14 (Default Interest) shall be payable, on the Disputed Sum from the due date.

    8.11.3 If the Disputed Sum is part only of a Billing Statement or other invoice the Party receiving notice of the Disputed Sum will as soon as reasonably practicable thereafter issue two replacement invoices, one for the Disputed Sum and one for the remaining part of the invoice which is not disputed.”

  11. It will have been observed that clause 8.4 is expressed as being subject to clause 10 regarding Maintenance, Insurance and Destruction of, or Major Damage to, the Facilities. Clause 10.5 of clause 10, headed “Destruction of or major damage to the Facilities”, provides as follows:

    “10.5 In the event that the Facilities, or any substantial part thereof, are destroyed or suffer material damage then:-

    (a) POTLL shall, as appropriate, re-instate or repair the Facilities as soon as reasonably practicable;

    (b) The Parties’ obligations (other than any outstanding obligation to pay any sum then due) shall be suspended and the Minimum Tonnage in the Contract Year(s) in which suspension occurs shall be reduced pro rata to reflect the period of such suspension; and

    (c) POTLL and SE shall discuss what, if any, services POTLL can reasonably provide to SE in substitution for the Services and the terms on which substitute services can be provided.”

  12. Finally, clause 15 contains a no set-off provision: “15 NO SET-OFF OR COUNTERCLAIM

    Save as otherwise expressly permitted in terms of this Agreement, all payments to be made by any Party under this Agreement shall be made:-

    (a) without set-off, deduction or counterclaim, save to the extent that any such set-off, deduction or counterclaim is expressly permitted in terms of this Agreement; and

    (b) free and clear of and without deduction for or on account of any taxes except to the extent that the paying Party is compelled by law to make payment subject to any such taxes.”

  13. Thus, clause 15 is a general clause prohibiting set-off, deduction or counterclaim “Save as otherwise expressly permitted in terms of this Agreement”. Clause 8.10 states that any sum shown to be due on a Billing Statement shall similarly be paid by Stora “without any claim, deduction, counterclaim or set off” but “subject to Clauses 8.10.2 and 8.11 (Disputed Sum)“. Clause 8.10.2 is confined to insolvency and does not concern us further. Clause 8.11, however, states that either party shall be entitled to withhold, pending resolution of its dispute, any sum or part of any sum which it genuinely and bona fide disputes, provided that it has also given timely notice to the other party, that is to say before the due date for payment, of its intention to withhold the amount in question together with a reasonable explanation of its position.
  14. In this litigation Stora relies on clause 8.11 as an express exception to the no set-off regime of clause 15, putting forward its unliquidated cross-claim arising out of its complaint that the Port failed to provide the services it was bound to provide. There is a separate issue as to whether Stora brought itself properly within clause 8.11′s notice provisions, but it is common ground that that issue too cannot be resolved without trial.
  15. Stora also relies on an additional argument to support both that cross-claim and its position under clause 8.11, which is an implied term designed to undercut the minimum tonnage payment obligation itself. Thus in its defence and counterclaim Stora pleads the following implied term:

    “that the Claimant would not be entitled to claim the minimum tonnage payment in respect of periods in which the Claimant was not ready willing or able to carry out the Services in respect of products in quantities equal to or above the minimum tonnages provided for in the Agreement, consistently, reliably or at all.”

    The judgments below

  16. Master Fontaine rejected both Stora’s defences. As to the implied term, she considered Stora’s evidence about the importance of just in time distribution of its paper products which it contended was a feature of the industry that the Port must have known at the time of contracting. She considered the (well-known) authorities relied on by both parties and concluded that the term relied upon was neither reasonable (in circumstances where the rationale for a minimum tonnage clause was the need of the Port, as the party investing in the construction of the facilities, for a stream of income), nor was it necessary to give business efficacy to the contract, nor was it so obvious that it went without saying. In sum, the implied term was an attempt to undercut the no set-off provisions of the contract.
  17. As for clause 8.11, her view was that this was not directed to a cross-claim. She observed that it had not been relied on by Stora until October 2006, and that even then its reliance depended on the implied term. It would make a nonsense of clause 15 if clause 8.11 could give rise to the set-off of a cross-claim which clause 15 had excluded.
  18. On appeal, Ramsey J agreed with Master Fontaine on the implied term issue, although he appears to have considered that his reasons differed from those of Master Fontaine. It may be that they did in part, given that he differed from her as to the relevance of clause 8.11: but in essence he too agreed that the implied term relied upon was neither reasonable nor necessary nor obvious.
  19. As for clause 8.11, however, he was in Stora’s favour and therefore he concluded that summary judgment in favour of the Port was not possible. In brief, he was of the opinion that clause 8.11 overrode clause 15 or clause 8.10.1. He said:

    “58. As set out by Lord Diplock in Gilbert Ash a party is entitled at law to “the remedy of setting up a breach of warranty and diminution or extinction of the price of materials supplied or work executed under the contract“, that is, to set-off any counterclaim for breach of the same transaction. I do not consider that Clause 8.11.1 is to be read down to exclude the defence of set-off, whilst permitting other defences.

    59. Rather, by Clause 8.11.1, which overrides Clauses 15 and 8.10.1, the parties have agreed that provided there is a genuine and bona fide dispute and proper notice is given then a party may withhold sums otherwise payable under Clause 8.10.1 until it is agreed or determined to be payable, at which stage interest is payable at 3% over base rate if the sum is found to have been payable. The dispute includes the contention that there is a set-off arising from a counterclaim.”

    The submissions

  20. On this appeal, the Port sought to show that the judge was in error about clause 8.11, whereas under a respondent’s notice Stora sought to show that both master and judge had been wrong about the implied term.
  21. Logically the question of an implied term comes first. On behalf of Stora, Mr David Streatfeild-James QC submitted that it was absurd commercially to think that the Port could be entitled to its minimum tonnage payment in circumstances where it was unable or unwilling to perform its services so as to allow the minimum tonnage throughput. It was equally absurd to think that it made sense to say that Stora should pay first and dispute later. This absurdity was highlighted by what Stora said were the facts: that the Port had actually asked Stora not to send cargo and that more than the amount of the shortfall was actually rerouted through other ports. The principal authority relied upon was The Bonde [1991] 1 Lloyd’s Rep 136, where Potter J spoke of the need for an implied term to prevent a party taking advantage of his own wrong (at 144/5).
  22. As for clause 8.11, Mr Streatfeild-James submitted that there was no conflict between it and clause 15. As clause 8.10.1 itself demonstrated, the exclusion of any set-off or counterclaim was itself expressly made subject to clause 8.11 in the case of disputed sums. And clause 15 was likewise expressly subject to contrary provision (“Save as otherwise expressly permitted”). Both those clauses therefore operated subject to the gateway allowed by clause 8.11. It was entirely reasonable and commercial to find that a contract’s no set-off provisions were made subject to a regime which required a bona fide dispute and timely notice of it where that notice would itself have to give a reasonable account of the bases of the dispute as seen through the eyes of the notice giver.
  23. On behalf of the Port, however, Mr John McCaughran QC submitted that to construe clause 8.11 as widely as Stora sought to do would drive a coach and horses through the provisions of clauses 15 and 8.10.1. He submitted that clause 8.11 only operated where the quantum of the Disputed Sum was in dispute. That is why clause 8.11.1 did not in terms refer to set-off or counterclaim. It was one thing genuinely to dispute the quantum of a claim (as for instance where the parties may have been in dispute as to the tonnage throughput): it was quite another to seek to set off a cross-claim for unliquidated damages, as Stora was seeking to do. Mr McCaughran was not asked to respond on the question of an implied term, but his written submissions relied on the reasoning in the judgments below. Implied term
  24. Stora faced in my judgment three grave difficulties in supporting its implied term.
  25. The first was that it was expressed in such a way that any breach, however small, of the Port’s service obligations, as long as it affected Stora’s minimum tonnage obligation, had the effect of destroying the minimum tonnage payment obligation. Of course, the implied term might have been expressed in a less unreasonable form, so as to operate only pro rata, but no doubt Stora expressed it in the form it did in order to wield the greatest possible impact on the take or pay provisions of the contract. Moreover, the fact that an implied term may take several different formulations is a classic sign that it is neither necessary nor obvious.
  26. Secondly, the implied term rubbed up in an unhappy way against the express limitation of the minimum payment obligation in circumstances where there was destruction of or major damage to the facilities. The solution in such circumstances was for a pro rata reduction of the minimum tonnage requirements. That contrasts with the nature of Stora’s implied term. The minimum tonnage payment obligation contained in clause 8.4 was made expressly subject to the terms of clause 10. It would be difficult in a carefully worked out agreement of such a kind to find that the same clause 8.4 obligation was also subject to an implied term: see the restatement of the rationale and jurisprudence of the implied term to be found in the judgment of Sir Thomas Bingham MR in Phillips Electronique Grand Public SA v. British Sky Broadcasting Ltd [1995] EMLR 472 at 481 at 483. Of particular relevance in this context is the reference made there to Trollope & Colls Limited v. North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 (HL) at 609/10, 613/4.
  27. Thirdly, if Stora is right about clause 8.11, so that in the circumstances which occurred the contract provides its own solution by permitting the set-off of a cross-claim, then there is no need of its implied term. If on the other hand, Stora is wrong on its second point, then the implied term is inconsistent with the contract’s no set-off requirements.
  28. In truth, Stora’s whole rationale for its implied term is flawed. There is nothing absurd about a take or pay minimum obligation. Such provisions are common, and they are particularly used where, as here, one party has to expend significant sums of money for the purposes of the contract and needs to look to the contract for a secure annual income stream which will pay the ongoing financial cost of its investment. The minimum payment obligation does not override the Port’s service obligations: it merely provides, together with a no set-off provision, for a situation where the investor is assured its income stream, despite disputes, on the basis of “pay now, dispute later”.
  29. The single authority which Stora chiefly relied upon (at any rate below and in its written submissions) was Richco International Ltd v. Alfred C Toepfer International GmbH (“The Bonde”) [1991] 1 Lloyd’s Rep 136. However, no implied term was admitted there. I would agree with both judgments below that no term is to be implied here. Clause 8.11
  30. The critical question is as to the width of clause 8.11.1. If, upon its true construction it permits the set-off of Stora’s cross-claim, then the Port’s appeal will fail. If, however, upon its true construction it is limited to sums which are disputed as to their quantum, so that the claim itself is disputed, without reference to any cross-claim, then the Port’s appeal will succeed.
  31. Ramsey J referred in this context to Lord Diplock’s dictum in Gilbert-Ash (Northern) Ltd v. Modern Engineering (Bristol) Ltd [1974] AC 689. The issue there was whether an apparent rule of law for which an earlier decision of this court was cited (Dawnays Ltd v. F G Minter Ltd [1971] 1 WLR 1205) about the payment of sums certified by an architect as due to sub-contractors without deduction could survive the true construction of the parties’ contract. The critical clause there (clause 14 of the sub-contract form) said that if the sub-contractor was in breach of any condition the contractor could “suspend or withhold payment…the contractor also reserves the right to deduct from any payments certified as due…the amount of any bona fide contra accounts and/or other claims which he, the contractor, may have against the sub-contractor in connection with this or any other contract”. Subject to Dawnays, there could be little doubt that clause 14 in Gilbert-Ash made complete allowance for the set-off of any cross-claims, indeed even those arising out of other contracts. That is what the House of Lords decided. On the way to that result, however, Lord Diplock spoke (at 717/8) of the competing demands of the law’s remedies for breach of contract and of business’s requirements for cash flow. Despite the importance of the latter, Lord Diplock said that one should begin with what he described as a presumption in favour of the former. He said (at 717H):

    “It is, of course, open to parties to a contract for sale of goods or for work and labour or for both to exclude by express agreement a remedy for its breach which would otherwise arise by operation of law or such remedy may be excluded by usage binding upon the parties (cf. Sale of Goods Act, 1893, section 55). But in construing such a contract one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption.”

  32. That dictum was in play again (outside the building context) in BOC Group plc v. Centeon LLC (1999) 63 Con LR 104, [1999] 1 All ER (Comm) 53, 970. That was a case where a deferred instalment of the price for the sale of the share capital of a company was expressed to be absolute or unconditional and not to be affected by a number of expressly mentioned matters “or by any other matter whatsoever”. The question was whether that language, which did not expressly exclude rights of set-off or counterclaim, nevertheless amounted to such an exclusion. This court, upholding the decision of the commercial court, held that it did not. Evans LJ said (at 130/1, 979/980):

    “Secondly, it seems to me that the parties are taken to be aware of their legal rights. That certainly was the effect of what Lord Diplock said in the Gilbert-Ash case. Whether there is such a presumption or not, the fact is that if the parties did appreciate the possibility of set-off, the question is: would the reasonable man have expected them to exclude it by clear words? If so, the question becomes: were the words which they used clear enough to have that effect?…

    Finally, I would ask: does this clause provide with sufficient clarity that the purchaser is to pay subsequent instalments of the price, regardless of any lawful rights of cross-claim which it may have? I regard the word ‘whatsoever’, for the reasons given, as ambivalent. There is no specific reference in the clause to deduction, withholding or payment in full, and in those circumstances I do not think that the clause does have that effect.”

  33. Both parties seek to rely on these dicta. The Port relies on them to point to the absence of express words of set-off from clause 8.11.1 itself. Stora relies on them for the starting-point whereby set-off must be sufficiently clearly excluded.
  34. In my judgment, however, this case falls to be decided on its own language. There is plainly an exclusion of set-off, deduction or counterclaim to be found in clause 15, but this is made subject to contrary express provision in the contract. The question is whether such express provision is to be found in clause 8.11.1.
  35. The language of clause 8.11.1 speaks in terms of a “Disputed Sum” and the right to “withhold” it. That is not prima facie speaking of set-off and counterclaim, but rather of the non-payment (withholding) of a sum otherwise allegedly due but also genuinely disputed and thus allegedly not due. As the first sentence states, the premise of the clause is that either party “disputes that any sum or part thereof…due in terms of this Agreement is payable”. Nothing turns on the difference between “due” and “payable”. The sum in question is prima facie due but it is disputed that it is payable. It might have said that it was disputed that it was due. It is not said, however, that the reason why the sum may be disputed is that it is subject to a set-off of a cross-claim.
  36. The question therefore is whether the clause should be given that wider meaning. In my judgment it should not. Given the express language of set-off and counterclaim found elsewhere in the contract (such as clause 15 but also clauses 8.10.1, 8.10.2 and 8.10.3), it is remarkable that such language is not found also in clause 8.11.1. It is quite sufficient therefore that clause 8.11.1 should be confined to what appears to be its proper sphere, which is the challenging of a “Billing Statement or other invoice” (see clause 8.11.3). Such disputes are matters of quantum, not cross-claim as in the present case. If it were otherwise, then the apparent primary position under the contract, which is that set-offs of cross-claims are not permitted, would be turned on its head.
  37. Moreover clause 8.10.1 would have to be given a strange meaning whereby a Billing Statement had to be paid “without any claim, deduction, counterclaim or set off” unless it was genuinely disputed under a notice given in time by reason of, inter alia but without expressly mentioning, “any claim…counterclaim or set off”. It is true that the prima facie position under clause 8.10.1 would not be entirely reversed: for the sum billed could only be withheld for these purposes by a proper and timely notice of a genuine dispute. However, this would be an extraordinary (and coy) way in which to express such a huge limitation on the prima facie regime.
  38. In my judgment, the limited, or rather as I would prefer to say the non-expanded, meaning of clause 8.11.1 fits well into the structure of the contract as a whole. The Port puts up all the initial investment needed to design and construct the facilities. It is guaranteed a minimum throughput. To protect that guarantee, it is entitled to charge a minimum tonnage payment. The billing regime puts the initial responsibility of stating how much is due to the Port each month in respect of the previous month’s imports on Stora itself (clause 8.8.1). If, however, Stora does not live up to that responsibility, the Port may itself render a Billing Statement (clause 8.8.2). In any event, each party may call on the other to disclose to the other all information and records necessary to verify the accounting position between the parties: if any inaccuracy in the billing previously rendered is revealed, the necessary adjustments must be promptly made. The minimum tonnage payment is to be paid “with the payment in respect of the last month” of each contract year (clause 8.4). The amounts billed on a Billing Statement are to be paid without set-off by the end of each month (clause 8.10.1). There is a special regime for insolvency which expressly mentions the mutual right to set off amounts due to each other under the contract (clauses 8.10.2 and 8.10.3). There is then the special regime for a bona fide disputed sum which may be withheld. All this is in the context of clause 8 as a whole which is concerned with the detailed working out of “Payment” of the freight price on tonnage imported. Nothing in this overall regime prepares the reader for a general right of set-off (subject only to timely notice of a genuine dispute) of a sum billed, whether in the form of a strict Billing Statement or otherwise. On the contrary, the clause 8 regime which I have described is exactly what one would expect to find in circumstances where the Port has financed the total cost of the facilities in advance and looks to the minimum tonnage guarantee in order to meet its finance obligations. Clause 15 is an overall reminder of that situation.
  39. In sum, I can find neither in the words of the contract, nor in its structure or purposes, any support for the conclusion of the judge, briefly expressed, that the disputes being spoken of in clause 8.11.1 “includes the contention that there is a set-off arising from a counterclaim”. That is why Stora has gone to great lengths to develop an implied term to undercut the obligation to pay a minimum tonnage payment in the first place. If that implied term were in place, then Stora would be in a position to say that the minimum tonnage payment was never properly due, which is what it pleaded in its defence, before going on to set off its counterclaim. Once, however, the implied term fails, Stora puts forward no other argument, other than its counterclaim and set-off, for disputing the minimum tonnage payment due. Conclusion
  40. I would therefore give summary judgment against Stora for the minimum tonnage payment concerned of £1,829,574.60. There is, as Master Fontaine’s careful and well-reasoned judgment decided, no defence to Stora’s obligation to pay first and dispute later. But, of course, Stora may, as it pleads at the end of its counterclaim, reclaim the minimum tonnage payment as part of its damages under its cross-claim. Lord Justice Toulson :
  41. I agree. Lord Justice Rimer :
  42. I also agree.

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