A v B

JurisdictionEngland & Wales
JudgeMr Justice Flaux
Judgment Date16 December 2010
Neutral Citation[2010] EWHC 3302 (Comm)
Docket NumberCase No: 2010 FOLIOS 904 AND 905
CourtQueen's Bench Division (Commercial Court)
Date16 December 2010
Between
A
Claimant (Respondent in the Arbitrations
and
B
Defendant (Claimant in the Arbitrations)

[2010] EWHC 3302 (Comm)

Before: The Honourable Mr Justice Flaux

Case No: 2010 FOLIOS 904 AND 905

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Michael Collett (instructed by Clyde & Co) for the Claimant

Fionn Pilbrow (instructed by Ince & Co) for the Defendant

Hearing date: 10 December 2010

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HON MR JUSTICE FLAUX

Mr Justice Flaux

Mr Justice Flaux:

1

There are before the Court two applications by the Defendant, to which I will refer as “B”:

(1) An application under section 70(7) of the Arbitration Act 1996 for security for the sums awarded to B by the Board of Appeal of the Federation of Oils, Seeds and Fats Associations (“FOSFA”) in two arbitrations between B as Claimant and A as Respondent, pending the determination of A's applications to the Court under section 67 of the 1996 Act challenging those Awards as to the substantive jurisdiction of the Board of Appeal and under section 69 of the 1996 Act seeking permission to appeal on a question of law;

(2) An application under section 70(6) of the 1996 Act for security for B's costs of opposing those section 67 applications.

2

At the end of the hearing on 10 December 2010, I gave a short judgment on the security for costs application, granting security in the amount of £55,000 (against which was to be set off the £14,000 costs I awarded A in respect of its costs of the section 70(7) applications). I indicated that the section 70(7) applications would be dismissed but that I would give judgment setting out my reasons for that decision at a later date. This is that judgment.

3

The underlying disputes concern two contracts which B alleges were entered into between A as sellers and B as buyers, for the sale of two parcels of Kazakh rapeseed, each for 2,500 metric tons, for delivery October/November 2007 and November/December 2007 respectively, in each case DAF Petropavlovsk. B's case is that binding contracts were made orally on 18 June 2007, alternatively by the return by B to A by post of signed and stamped contracts as amended by A on 27 June 2007. B contends that those contracts both incorporated FOSFA Form 28, including the FOSFA arbitration clause. A's case is that there were no binding contracts concluded, alternatively that any contract concluded incorporated GAFTA Form 125 not FOSFA Form 28.

4

The two parcels were not delivered and on 30 July 2008, B commenced two arbitrations against A under the FOSFA Rules of Arbitration and Appeal, claiming damages for non-delivery of US$865,000 and US$855,000 respectively. In its Defence Submissions, A raised the objection that the tribunal lacked substantive jurisdiction and asked the tribunal to rule on its jurisdiction (as it was entitled to do under section 30 of the Arbitration Act 1996).

5

The First Tier arbitrators disagreed on the issue of jurisdiction and the same umpire, Mr Smid, was appointed in both arbitrations. On 19 November 2009, he published Awards in both arbitrations in which he found that no binding contracts had been made on 18 June 2007 and that although thereafter A had signed and sealed contracts and returned them to the broker for onward transmission, B did not sign, seal and return those contracts, so no binding contracts had ever been concluded. Accordingly, he concluded that the tribunal had no jurisdiction.

6

By Notice of Appeal dated 11 December 2009, B appealed against that First Tier Award to the Board of Appeal of FOSFA. It served Outline Reasons for Appeal dated 23 December 2009. It was in its submissions to the Board of Appeal that B raised for the first time its contention that it had posted stamped and sealed contracts back to A. In its response submissions dated 9 February 2010, A not only invited the Board of Appeal to uphold the decision of the umpire in full, but raised a defence of time bar.

7

A two day hearing took place before the five man Board of Appeal in May 2010 at which the Board heard oral evidence from Mr Aigro of Copenhagen Merchants, the broker between the parties and from Mr Grishanov and Mr Kadralin of A. On 1 July 2010, the Board of Appeal issued awards in both arbitrations, allowing the appeal, concluding that the arbitrators did have jurisdiction, that the claim was not time barred and that, accordingly, B's claims for damages succeeded.

8

In relation to jurisdiction, the issue relevant for present purposes, the findings of the Board of Appeal can be summarised as follows:

(1) Mr Aigro had acted as broker between the parties. He had taken a previous contract form for a contract between the parties (contract 15, the conclusion of which is also disputed by A) and amended its terms in English to reflect the differences as regards essential negotiated and agreed terms of the two contracts (contracts 16 and 17) currently in dispute. On 18 June 2007, he had then sent those contracts to A for it to amend the Russian versions. The Board concluded that binding contracts between the parties were made on 18 June 2007.

(2) Although the contracts sent by Mr Aigro did not contain a FOSFA Arbitration Clause but stated “Arbitration by GAFTA 125”, this was an “obvious error” because the pro-forma being used was the one for contract 15, which was subject to GAFTA arbitration and A had picked up on the error and amended the contracts it sent back to provide for incorporation of FOSFA Form 28, which included the FOSFA Arbitration Clause.

(3) A sent back to the broker amended versions of the contracts which it had signed and stamped, dated 27 June 2007. The Board found that the changes being made and requested by A were no more than minor corrections to the drafts sent by the broker on 18 June 2007.

(4) The Board noted that A claimed that it never received properly signed and stamped copies of the contract as required by clause 11 of the contracts which provided so far as material:

“Each Contract between the Seller and Buyer shall become binding if it is properly stamped and signed by persons authorised to sign on behalf of the parties. The facsimile copies of the Contract shall be valid and therefore binding until the originals are exchanged. Each binding Contract shall be valid until it is executed in full….”

(5) Although the Board did not make a specific finding that, contrary to A's evidence, A had received signed and stamped contracts dated 27 June 2007 through the post from B, the Board found that if A had been relying upon the return of signed and sealed copies of the amended contracts dated 27 June 2007 by B, it is likely that A would have raised that issue at a meeting between the parties in Almaty on 12 July 2007, which it did not.

(6) The Board found that both parties were already in receipt of “facsimile copies of the Contract[s]” from the broker on 18 June 2007 and the “contract offer” documents from A dated 27 June 2007 were simply corrected versions of the contracts which contained no fundamental changes to any of the essential negotiated terms as had been agreed by the parties.

(7) After the conclusion of the contracts, B forwarded their railway instructions to A on 22 October 2007. Subsequently B requested copies of the so-called GU12 certificates for carriage by rail applied for by A. On 13 December 2007, B received a GU12 certificate for 2,500 metric tons of “seeds of oil yielding crops” from Petropavlovsk during the month of January 2008. The Board found that this matched B's railway instructions and was further clear evidence that the contracts existed and that A was planning to extend the delivery periods to the end of January 2008.

(8) On 8 January 2008, the broker sent a confirmation to both parties confirming their agreement to extend both contracts to the end of January 2008, which A did not dispute at the time.

9

On 29 July 2010, A issued Arbitration Claim Forms seeking orders under section 67 of the Arbitration Act 1996 that the Appeal Awards were of no effect, because the tribunals did not have substantive jurisdiction and, in the alternative, seeking permission to appeal the Appeal Awards under section 69 of the Act. The application for permission to appeal concerns the Board of Appeal's exercise of its discretion to extend time for commencement of arbitration under the FOSFA Rules and consequent conclusion that the claims were not time-barred. A contends that the Board took account of wholly extraneous matters in exercising its discretion and its decision was obviously wrong.

10

The present applications under section 70(7) of the Act were issued on 5 October 2010. The provisions of section 67 and 70, relevant to these applications, are as follows:

67 Challenging the award: substantive jurisdiction. E+W+N.I.

(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the Court—

(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or

(b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.

A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).

70 Challenge or appeal: supplementary provisions. E+W+N.I.

(1)The following provisions apply to an application or appeal under section 67, 68 or 69.

(2)An application or appeal may not be brought if the applicant or appellant has not first exhausted—

(a) any available arbitral process of appeal or review, and

(b) any available recourse under section 57 (correction of award or...

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