Ayhan Seyzer v Agroinvest

Hearing dates: 11 December 2023

Approved Judgment

This judgment was handed down remotely at 10.00am on 05 March 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

INTRODUCTION

This is an Arbitration Claim arising from an award (“the Award”) by a Board of Appeal of the Grain and Feed Trade Association (“GAFTA”) on an appeal from the First Tier Tribunal (“the FTT”). The award was made by Ms S Bell, Ms S Kosorog, Mr B Tappy, Mr D Lucas and Mr P G Davies (“the Board”). It is dated 18 November 2022 and identified as “Appeal Award No. 4646.”

The underlying contract to which the Award related (“the Contract”) involved the sale of rape meal and soybean meal by the Defendant to the Claimant. The contract was concluded on 2 April 2018. By the award, the Board determined that the Claimant was in repudiatory breach of contract by an email dated 27 April 2018, accepted by the Defendant on 7 May 2018. The Board determined that the Defendant was entitled to damages in the sum of US$484,921.29 calculated by reference to evidence adduced by the Defendant and based on the date of default as found by the Board; but that this claim was extinguished by the prepayment of US$494,500 (“the Advance Payment”) made by the Claimant, described in the Contract as an “advance payment/guarantee”, which the Defendant was entitled to retain.

The claim is brought on two questions of law:

a. What was the “date of default” for the purpose of clause 23(3) of the Grain and Feed Trade Association contract 100 (“GAFTA 100”)?

b. On the true construction of the contract between the parties, was the Advance Payment non-refundable in the event of breach on the part of the Claimant?

Permission to bring the claims on both grounds was granted by HHJ Pelling KC on 27 April 2023.

The matter came before me for hearing on 11 December 2023, when I reserved judgment.

EVENTS LEADING TO THE CONCLUSION OF THE CONTRACT

It is common ground that the Contract was on the terms annexed to an email of 2 April 2018. The relevant background to the entering conclusion of the contract is as follows:

a. On 22 March 1, the Defendant sent to the Claimant a draft contract including the terms later annexed to the email of 2 April as to payment and shipment. Those terms were:

i. In respect of shipment:

“ 1st vessel – prompt

About 1,200 – 2,000 MT +/- 10% Sellers' option, EU Non Gmo 2 Soybean

Meal in bulk

About 1,500 MT +/- 10% Sellers' option, EU rape meal in bulk.

2nd vessel – 15 April – 15 May 2018

Balance quantity of EU Non Gmo soybean meal in bulk.”

ii. In respect of payment:

“a. US$494,500 advance payment/guarantee upon signing of the contract.

“b. net cash by bank transfer within 24 hours from presentation of emailed/fax copies of shipping documents (as described hereinafter) and in any way before breaking bulk”.

b. The contract incorporated the standard terms of GAFTA Contract No. 100, including:

“ 23. DEFAULT

In default of fulfilment of contract by either party, the following provisions shall apply:-

(a) The party other than the defaulter shall, at their discretion have the right, after serving notice on the defaulter to sell or purchase, as the case may be, against the defaulter, and such sale or purchase shall establish the default price.

(b) If either party be dissatisfied with such default price or if the right at (a) above is not exercised and damages cannot be mutually agreed, then the assessment of damages shall be settled by arbitration.

(c) The damages payable shall be based on, but not limited to, the difference between the contract price and either the default price established under (a) above or upon the actual or estimated value of the goods, on the date of default, established under (b) above…”

c. On 23 March, the Claimant sent the Advance Payment to the Defendant. It is common ground that this sum was paid pursuant to the term referred to in paragraph (a)(ii) above as “ advance payment/guarantee.” However at this stage, contractual terms had not been finalised and there followed a debate about whether the meal would be treated as non-GMO in Turkey.

d. On 26 March, the Defendant sent another version of the contract to the Claimant to be signed and stamped.

e. On 27 March, the Claimant asked the Defendant not to charter a vessel for the meal before they had seen the draft contract from the Claimant. Later on the same day, the Claimant sent their comments on the contract to the Defendant, adding the comment:

“Please note that we have paid the mentioned 492,500 USD as deposit to your side, before contract. In case we cannot agree on the contract, you return the said amount to our bank account.”

f. The Defendant responded to the Claimant's comments and, on 28 March, the Claimant first sent a holding message reiterating that the Defendant should not charter a vessel until the terms had been agreed (to which the Defendant responded that they had a vessel outside the intended load port and that the owners were in a hurry to conclude the trip) then later responding to the Defendant's comments on the contract.

g. On 29 March, the Defendant emailed the Claimant with further comments on outstanding matters to be resolved in respect of the wording of the contract, but prefacing the message with:

“ According to my understanding, when we concluded the business and further more when you remitted the advance payment of US$494 500. I considered that it was fully booked and I released my alternative Buyer to buy from elsewhere. That means that, we have to find together the details of the contract and there is no other way.”

h. There were further discussions on 30 March, including an email from the Defendant to the Claimant in the following terms:

“ After we concluded the business and moreover, after collecting the 20% down payment, the foods of the 1 ^st shipment have been transferred to the loading station of our port facility and they should be loaded shortly.

I'm receiving big pressure from the port administration to charter the performing vessel and arrange the soonest removal of the goods from the loading stating. We have put in the contract everything according to our agreement and we have made all the possible amendments according to you wish. There is no room for further changes in our contract.

1 ^st thing next Monday, we have to arrange chartering of a spot vessel for removing the goods from the loading station.”

i. On 2 April, the Claimant sent to the Defendant the document upon which it is agreed that the contract was concluded.

EVENTS LEADING TO REPUDIATION

The Board found that the Contract was repudiated by the Claimant. This finding is not challenged, albeit that the findings as to the date of default under the contract and, by implication, the date of its repudiation are challenged. The relevant events following the conclusion of the contract are as follows:

a. On 4 April, the Claimant wrote to the Defendant:

“ We regretfully see that nothing we write can be understood.

Please note that we have not sent the stated amount to your side definitely for this contracts realization. Amount is of course in accordance with the contract-to-be's price, quantity and advance percentage but we had made no comment on your contract text at the time of payment and stated from the beginning, the amount is paid “in case we agree.” It is not necessarily advance payment definitely for this negotiation.

It seems that we can not agree in this business; therefore, we request you to return the paid amount to us (everything we wrote about trust, friendship etc is still valid; this is not a sudden reaction but repeating one of the probabilities stated before).”

b. On 6 April, the Claimant again requested repayment of the Advance Payment.

c. On 13 April, the Defendant wrote to the Claimant with details of the pre-shipment analysis of the products and suggested loading a quantity of soybean meal as soon as possible. However the Claimant continued to request repayment of the Advance Payment.

d. On 27 April, the Defendant provided further reports to the Claimant supporting the contention that the soybean meal was non-GMO, saying that they would advance the chartering of the performing vessel.

e. The Claimant replied on the same day:

“ Please definitely not attempt the charter a vessel or any action to send these goods to us; you would cause huge and terrible happenings. Please return the amount we have paid to your side, to our bank account. Mr Sezer has been informed of your below e-mail and report and above are his comments. Please return the amount to us and provide us with the relevant information. This is the only way all these can finalize.”

f. On 2 May, and again on 4 May, the Claimant demanded repayment of the Advance Payment.

g. On 7 May, the Defendant replied:

“1) The down payment foreseen and been effected as per our contract, is not refundable.

2) We kept good notice of your refusal to receive, for your own reasons, the contracted non-gmo soybean meal.

3) We suggest to deliver instead, regular gmo soybean meal at our contract price.

4) Otherwise, we might wash out our contract for a fee to be agreed.”

PROCEEDINGS BEFORE THE FTT

The Claimant brought arbitration proceedings seeking repayment of the...