012-SLLR-SLLR-2003-V-2-TRANSASIA-TRADING-COMPANY-v.-D.-B.-S.-FINANCE-LIMITED-M.-V.-MENG-KIAT.pdf
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Transasia Trading Company v D.B.S. Finance Limited.
(M. V. Mena Kiat”) (Fernando, J.)
105
TRANSASIA TRADING COMPANY
v.B.S. FINANCE LIMITED(M.V. MENG KIAT”)
SUPREME COURTFERNANDO, J.
J.A.N. DE SILVA, J., ANDWEERASURIYA, J.
SC APPEAL NO 62/2002CA APPLICATION NO. 617/98 (REV.)H.C.COLOMBO ACTION IN REM NO. 69/9729TH JULY, 2003
Action in rem – Sale of ship by auction – Forfeiture of deposit of “unsuccess-ful bidder” – Interpretation of “unsuccessful bidder” – Does it apply only to thehighest bidder who fails to complete purchase?
A vessel was sold by auction on 13.2.98 by the Marshall upon the order of theHigh Court of Colombo, in the exercise of its admiralty jurisdiction, in an actionin rem against that ship.
All prospective bidders were required to deposit with the Marshal US$ 50,000each before the auction, to become eligible to make bids at the auction. A bidwill be accepted subject to the order of the Court which will normally be thehighest bid. The successful bidders deposit will be applied against the pur-chase price and the balance has to be paid within 14 days from the auction. Ifthe highest bidder fails to complete the purchase, other bidders in their respec-tive orders will be considered subject to the same procedure applying to thedeposit and payment of the full price less the deposit. The deposits of theunsuccessful bidders will be refunded.
There were two bids. The highest bid was US$ 775,000. The next bid by theappellant was US$ 770,000.
The highest bidder defaulted payment. Consequently the appellant suggesteda reduced offer of US$ 600,000. By his order on 17.3.1998 the High Courtaccepted the appellant’s original bid of US$ 770,000 and directed the paymentof the balance US$ 720,000. The appellant failed to make payment and movedthat his deposit of US$ 50,000 be refunded. The High Court rejected the claim.
It was argued that the appellant was an “unsuccessful” bidder and hence enti-tiled to the refund of his deposit.
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Held :
Even though the appellant was the 2nd highest bidder, he was a successfulbidder though not a successful purchaser. Thus he was not an unsuccessfulbidder who was entitled to the refund of the deposit.
APPEAL from the judgment of the Court of Appeal.
ShiblyAziz, P.C. with R.S. Srikantha and S.Ahamedfor appellant.
K.Kanag-lswaran, P.C. with Chandaka Jayasundera and Shivan Kanag-Iswaran for respondent.
Cur.adv.vult
August 08.2003.
FERNANDO, J.
This appeal involves the interpretation of the conditions upon whicha vessel was sold by auction on 13.2.98 by the Marshal upon theorder of the High Court of Colombo, in the exercise of its admiraltyjurisdiction, in an action in rem against that vessel.
The advertisement of the auction set out the following condi-tions of sale:
“… All prospective bidders will be required to deposit with theMarshal a sum of US Dollars 50,000.00 each before the com-mencement of the auction by bank draft in favour of… in orderto become eligible to take part and make bids at the auction.This deposit will be applied towards the amount of the bid thatis to be deposited by the successful bidder… The successfulbidder will be required to deposit the balance bid amount…within 14 bank working days of the date of auction in SriLanka Admiralty Account No. … The deposit of US Dollars
will be forfeited if the successful bidder fails to depositthe balance bid amount as set forth above. Time is of theessence of the contract and no extensions of time will begranted under any circumstances whatsoever….
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Transasia Trading Company v D.B.S. Finance Limited.
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In the event of the first highest bidder failing to complete thepurchase within the stipulated time, then the next highest bid-ders in their respective orders may be called upon to depositthe balance amount of their bids within 14 bank working days,from being called upon to do so, and complete the purchaseas set forth above if their bid is accepted by Court. Deposits ofunsuccessful bidders will be refunded within 30 days of thecompletion of the sale of the vessel. All bids will be subject tothe final approval of the Court in the exercise of its absolutediscretion….” [emphasis added]
At the auction there were only two bids: the “first highest bid-der” offered US$ 775,000, while the petitioner-appellant company(“the appellant”) offered US$ 770,000. It was common ground thatthe sale was confirmed by the High Court, and that the highest bid-der became obliged to deposit the balance sum of US$ 725,000 onor before 6.3.98, but failed to do so.
On 16.3.98 the appellant’s agent in Sri Lanka sent the follow-ing fax message to the plaintiff-respondent’s attorneys-at-law:
“We understand that the highest bidder… has defaulted pay-ment… and therefore the second highest bidder… will auto-matically be entitled for the purchase of the above vessel.
This development has been advised to us by our principal.
We wish to bring to your notice that it is more than (30) daysfrom the date of the auction… and that the condition of the ves-sel is rapidly deteriorating.
In order to resolve the sale of this vessel speedily we suggesta revised price of US$ 600,000 for the vessel.
On confirmation of your acceptance of our proposal, we canarrange for remittance…”
On 17.3.98. the High Court ordered the Registrar and theMarshal to inform the appellant that the Court had accepted its bid,and had directed the deposit of the balance sum of US$ 720,000within the required period. The Marshal so informed the appellant,which failed to make payment, and moved that the deposit of US$
be refunded.
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' The High Court rejected that claim, and ordered the forfeitureof the deposit. The appellant filed an application in revision in theCourt of Appeal, which was dismissed. Against that order, theappellant now appeals to this Court having obtained special leaveto appeal. The Appellant also applied, unsuccessfully, to the Courtof Appeal for leave to appeal against the High Court order, and nowseeks special leave to appeal from this Court (in SC SLAApplication No 176/2002). Counsel agreed that the same questionsof law are involved, and that if this appeal succeeds the appellantwill withdraw that application; and that if this appeal fails, that appli-cation will be dismissed.
Learned President’s Counsel for the appellant contended thatthe conditions of sale only provide for the forfeiture of the depositof “the successful bidder”, and not of an “unsuccessful bidder”; thatthe “first highest bidder” was the only “successful bidder” contem-plated in the conditions of sale, and that the appellant was an“unsuccessful bidder”; that in the absence of any specific provisionfor the forfeiture of the deposit of the “next highest bidder”, the con-ditions of sale ought not to be interpreted as authorising forfeiture;and that, at the least, there was some ambiguity or doubt in theconditions of sale, which ought therefore to be interpreted contraproferentem and in favour of the appellant.
The conditions of sale must be interpreted in their entirety, andnot piece-meal. In regard to the deposit, they made express provi-sion: that the deposit will be applied towards the amount of the bidthat is to be deposited by the successful bidder, that if the suc-cessful bidder fails to deposit the balance the deposit will be for-feited, and that the deposits of the unsuccessful bidders will bereturned. Immediately upon the conclusion of the auction, the “firsthighest bidder” would be (subject to High Court approval) the only“successful” bidder. But it does not follow that all the other bidderswould immediately become “unsuccessful” bidders. Their statuswould be uncertain. If the “first highest bidder” completes the pur-chase, then the other bidders would be “unsuccessful” bidders. Butif the “first highest bidder” defaults and if the Court accepts the bidof the second (or failing him, the third) highest bidder, that bidderwould then become a “successful” bidder, though not yet a suc-cessful purchaser. The conditions of sale do not treat such a bidder
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Transasia Trading Company v D.B.S. Finance Limited.
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as being an “unsuccessful" bidder at any stage thereafter. The con-sequence of the Court order of 17.3.98 was that the appellantbecame a “successful” bidder, and was thereupon not entitled tothe refund of its deposit.
Furthermore, when the Court decided to accept the bid of theappellant, and notified the appellant, and called for payment withinthe required period, the appellant became obliged to complete thepurchase “as set forth aboveT. That made the preceding provisions 90of the conditions of sale – in regard to the completion of the pur-chase – binding upon the appellant. Those provisions as to com-pletion of the purchase included, but were not restricted, to thebank account to which payment had to be made. They includedalso other stipulations regarding forfeiture, time, and extensions.
The conditions of sale set out a mechanism for recovery of thepurchase price, in situations in which many bids would be receivedfrom persons outside the jurisdiction. Providing for deposits and forforfeiture of deposits upon default by bidders, despite acceptanceof their bids, was part of that mechanism – uniformly applicable to 100all such bidders.
I find no ambiguity or doubt in the conditions of sale, andaccordingly the contra proferentem rule is inapplicable.
I therefore hold that the appellant’s deposit was liable toforefeiture, and was lawfully forfeited. The orders of the High Courtand the Court of Appeal are affirmed, and the appeal is dismissedwith costs in a sum of Rs 50,000 payable by the appellant to theplaintiff-respondent. In terms of the agreement between Counsel,
SC SLA Application No 176/2002 is dismissed without costs.
DE SILVA, J.- I agree.
WEERASURIYA, J.- I agree.
Appeal dismissed.