Black Sea Commodities Ltd v Lemarc Agromond Pte Ltd

JurisdictionEngland & Wales
JudgeSir Michael Burton GBE
Judgment Date15 February 2021
Neutral Citation[2021] EWHC 287 (Comm)
Date15 February 2021
Docket NumberCase No: CL-2020-000292
CourtQueen's Bench Division (Commercial Court)

[2021] EWHC 287 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice,

Rolls Building

Fetter Lane,

London, EC4A 1NL

Before:

Sir Michael Burton GBE

SITTING AS A JUDGE OF THE HIGH COURT

Case No: CL-2020-000292

Between:
Black Sea Commodities Ltd
Claimant
and
Lemarc Agromond Pte Ltd
Defendant

Oliver Caplin (instructed by HFW LLP) for the Claimants

Francis Hornyold-Strickland (instructed by Clyde & Co) for the Defendants

Hearing date: 27 January 2021

Approved Judgment

Sir Michael Burton GBE
1

This has been the hearing of an application under s 67 of the Arbitration Act 1996 (the 1996 Act) by the Claimant, Black Sea Commodities Ltd, to challenge an Arbitration Award, by Arbitrators, Messrs Burneski, Lucas and Sipos, dated 14 April 2020, in favour of the Defendant Lemarc Agromond Pte Ltd as buyer against the Claimant as seller (on jurisdiction and liability, subsequently followed by an Award on quantum dated 8 July 2020, also challenged by the Claimant).

2

The issue depends upon the question of what occurred between 9 and 14 March 2018, and whether the Arbitrators had jurisdiction to decide that there was a binding arbitration agreement in place between the Claimant and Defendant in respect of the sale of a consignment of Ukrainian corn FOB Odessa (and subsequently to make substantial findings in favour of the Defendant). The Claimant, represented by Mr Oliver Caplin, submits that there was no arbitration agreement and the Defendant, by Mr Francis Hornyold-Strickland, that there was. There was oral evidence before me, since the issue of jurisdiction was reopened, from Mr Heston, the COO of the Claimant and from Mr Gurov, a senior trader of the Defendant. The exchange of communications in March 2018 was carried out through a broker, Mr Gligoric, and there is no dispute about agency or authority.

3

The Defendant submits, by a late amendment at the hearing which I permitted, to add a case not run by it before the Arbitrators nor pleaded before me, that there was a binding contract of sale on 9 March. which allegedly contained a term implied by trade custom, a GAFTA arbitration clause, alternatively as his original, and still main, case, that between 12 and 14 April an exchange of draft conditions including a GAFTA arbitration clause had led, before a breakdown of communications between the parties on 14 March, to a binding arbitration agreement, whether or not there was a binding sale contract on 9 March, alternatively it constituted a variation of the 9 March agreement so as to include such an arbitration clause.

4

It was common ground before me that it was not my task to decide whether or not there was a binding sale agreement, but rather whether there was a binding agreement for arbitration. Mr Caplin submitted that if, contrary to his contention, there was a binding contract of sale on 9 March (as the Arbitrators found at paragraph 6.17 of their Award) it did not contain a GAFTA or any arbitration clause, and that although, in the draft conditions which the Claimant's agent sent to the Defendant on 12 March, a GAFTA arbitration clause was included, those draft conditions were never agreed, and there was no consensus ad idem by 14 March when the negotiations broke down. Hence there was no arbitration agreement agreed on 9 March, and none thereafter.

5

I will reserve to later in this judgment the question of the Defendant's amended case, which only materialised towards the end of the hearing.

6

The Defendant's primary case is as to there having been a binding agreement on 9 March, varied/supplemented by agreement as to a GAFTA arbitration clause by virtue of the subsequent exchanges. Mr Hornyold-Strickland made it clear at the outset of his opening that his case was not that there was an arbitration clause agreed on 9 March as part of the key terms then agreed, but that subsequently, in the exchange of draft conditions, whereas there was dispute about other terms, there was no dispute as to the GAFTA clause, so that the arbitration agreement became binding, either by virtue of a variation of the contract or as an independent agreement. He relied on the definition of separability of an arbitration agreement in s 7 of the 1996 Act and the obiter dicta of Lord Hoffmann in Fiona Trust v Privalov [2007] Bus LR 1719 at [10], whereby he referred, in the context of construction of contract, to the fact that businessman frequently do want the question of whether their contract was valid, or came into existence, or has become ineffective, submitted to arbitration and that the law should not place conceptual obstacles in their way. So here the Court should not place conceptual obstacles arising out of a strict interpretation of offer and acceptance in the way, when, as he submits, the parties intended to be bound by the GAFTA arbitration clause. Hence the pleading by the Defendant that the contract was made between 9 and 14 March.

7

The Arbitrators concluded, after considering the position of the parties, and the law as to sufficiency and certainty of terms of contract, particularly as set out by Lloyd LJ in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyds 601 at [619], as follows at paragraph 6.17: The Tribunal finds that there was a valid contract entered into through the broker which was binding on those parties as of 9 March.” But they then continued at paragraph 6.18 The Tribunal having found that there was a valid contract which included ….the GAFTA .. arbitration rules… explicitly referenced in the written Contract agreed…finds that it has jurisdiction in this matter.”

8

The Claimant submits however that, whether there was or was not a binding contract on 9 March, there was no arbitration agreement contained in it, as there was no mention or discussion of the GAFTA or any arbitration clause on 9 March, and no consensus ad idem by virtue of the subsequent exchanges of draft conditions (including the GAFTA clause), which never led to agreement.

Was there a binding agreement on 9 March?

9

I was referred by the parties to a large number of valuable authorities in addition to Pagnan as to whether and when there is a sufficient and complete contract, particularly where there is a perceived need to have subsequent documentation. The cases included Perry v Suffields [1916] 2 Ch 187, May & Butcher Ltd v the King (Note) [1934] 2 KB 17, The Bay Ridge [1999] 2 Lloyds 227, Mamidoil Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery AD [2001] 2 AER (Comm) 193, Cheverney Consulting v Whitehead Mann Ltd [2006] EWCA Civ 1303, RTS Flexible Systems Ltd V Molkerei Alois Muller GmbH [2010] 1 WLR 753, Immingham Storage Co Ltd v Clear plc [2011] EWCA Civ 89, Air Studios (Lyndhurst) Ltd v Lombard North Central plc [2013] 1 Lloyds 63 and Proton Energy Group SA v Orlen Lietuva [2014] 1 Lloyds 100.

10

The facts in these cases tend to fall into two categories (though they are sometimes both present):

i) Whether there was an understanding, express (e.g. ‘subject to contract’ – not the case here) or implied, that there was no binding agreement until documents were complete, or some other condition precedent to being bound such as the effecting of a letter of credit – ‘condition precedent cases’, and – but often overlapping

ii) Whether there was objectively agreement as to the essential/cardinal terms or sufficient terms as allow it to be concluded objectively that there was a complete and binding contract even if negotiations continued as to lesser terms, or documents had to be signed or agreed – ‘consensus ad idem’ cases.

11

The parties here were agreed by the end of 9 March as to the following terms:

i) Seller – to be one of two associated companies – Mr Caplin submits that this uncertainty was material, but I am not persuaded – and in any event there was clarification between the broker and the Defendant by WhatsApp on 9 March:

ii) Buyer:

iii) Quantity of Ukrainian corn — 50,000 MT:

iv) Either in one or two shipments/‘bottoms’:

v) Quality:

vi) Price: US$ 205.20 FOB Odessa

vii) CAD 48 hours via Singapore bank:

viii) Delivery period: 5/20 April:

These were arrived at in a series of communications, not always setting out each time all the terms agreed, but in appropriate cases by using the words “ rest as per below”.

12

The parties were not then agreed as to other terms, which were set out in the draft conditions sent by the broker, after approval by the Claimant, to the Defendant on 12th March, dated 9 March, (subject to an extra condition sent on by the Claimant via the broker later in the day). These included the following:

i) GAFTA terms including the arbitration clause:

ii) Loading instructions and fumigation procedures:

iii) Detail of demurrage charges in the event of a time charter:

iv) No extension to the delivery period:

v) In case there was delivery in two bottoms, providing for a spread between the Notices of Readiness (‘NOR spread’) – this was the later condition.

These proposals and draft amendments were described variously as “ fine tuning” (by the Defendant) and minor (by the broker).

13

By 14th March after three exchanges of drafts using 3 colours, red, yellow and blue for changes and comments, there was one issue left in dispute between the parties, namely the NOR spread, to which the Defendant would not agree.

14

If it were for me to decide whether there was a binding agreement on 9 March, I would agree with the Arbitrators' decision that there was, in their paragraph 6.17:–

i) The words used by the Defendant and the broker on 9 March – “ firm offer”/“ firm counter-offer”/“ Pls book it” “ Ok book it” “ Booked on 205.20” – “ Super”) — are...

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