Bunge SA v Nidera BV (formerly known as Nidera Handelscompagnie BV)

JurisdictionEngland & Wales
JudgeLord Sumption,Lord Neuberger,Lord Mance,Lord Clarke,Lord Toulson
Judgment Date01 July 2015
Neutral Citation[2015] UKSC 43
CourtSupreme Court
Date01 July 2015
Bunge SA
(Appellant)
and
Nidera BV (formerly known as Nidera Handelscompagnie BV)
(Respondent)

[2015] UKSC 43

before

Lord Neuberger, President

Lord Mance

Lord Clarke

Lord Sumption

Lord Toulson

THE SUPREME COURT

Trinity Term

On appeal from: [2013] EWCA Civ 1628

Appellant

Simon Rainey QC Mark Stiggelbout

(Instructed by Reed Smith)

Respondent

Philip Edey QC Leonora Sagan

(Instructed by Hill Dickinson)

Heard on 27 and 28 April 2015

Lord Sumption

(with whom Lord Neuberger, Lord Mance and Lord Clarke agree)

Introduction

1

This appeal concerns the effect of the default clause in a standard form of contract which is widely used in the grain trade. On 10 June 2010 the respondents, Nidera BV, whom I shall call "the buyers", entered into a contract with the appellants, Bunge SA ("the sellers"), to buy 25,000 metric tonnes (+/- 10% in buyer's option) of Russian milling wheat crop 2010, FOB Novorossiysk. The shipment period was August 2010, but there were provisions for narrowing that period by notice. In the event it was narrowed to 23–30 August 2010. The contract incorporated GAFTA Form 49 (as in effect from 1 January 2006), which is the standard form of FOB sale contract of the Grain and Feed Trade Association, for goods delivered from central or Eastern Europe in bulk or bags.

2

Clauses 13 and 20 of GAFTA 49 are the main provisions relevant to the present dispute. They provided:

"13. PROHIBITION— In case of prohibition of export, blockade or hostilities or in case of any executive or legislative act done by or on behalf of the government of the country of origin of the goods, or of the country from which the goods are to be shipped, restricting export, whether partially or otherwise, any such restriction shall be deemed by both parties to apply to this contract and to the extent of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this contract or any unfulfilled portion thereof shall be cancelled. Sellers shall advise buyers without delay with the reasons therefor and, if required, Sellers must produce proof to justify the cancellation."

"20. 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.

(d) In all cases the damages shall, in addition, include any proven additional expenses which would directly and naturally result in the ordinary course of events from the defaulter's breach of contract, but shall in no case include loss of profit on any sub-contracts made by the party defaulted against or others unless the arbitrator(s) or board of appeal, having regard to special circumstances, shall in his/their sole and absolute discretion think fit.

(e) Damages, if any, shall be computed on the quantity called for, but if no such quantity has been declared then on the mean contract quantity and any option available to either party shall be deemed to have been exercised accordingly in favour of the mean contract quantity."

3

On 5 August 2010 Russia introduced a legislative embargo on exports of wheat from its territory, which was to run from 15 August to 31 December 2010. On 9 August 2010, the sellers notified the buyers of the embargo and purported to declare the contract cancelled. The buyers did not accept that the sellers were entitled to cancel the contract at that stage. They treated the purported cancellation as a repudiation, which they accepted on 11 August 2010. On the following day, the sellers offered to reinstate the contract on the same terms, but the buyers would not agree. Instead, they began arbitration proceedings under the GAFTA rules, in support of a claim for damages of US$3,062,500.

The proceedings below
4

At the hearing of the arbitration, there was a measure of common ground about the basis for assessing damages. It was agreed (i) that clause 20 applied to anticipatory repudiation, (ii) that the buyers had not bought against the sellers pursuant to sub-clause (a); (iii) that the date of default for the purpose of clause 20(c) was 11 August 2010, when the sellers' repudiation was accepted, and (iv) that the difference between the contract and the market price at that date was US$3,062,500. The sellers' case was that they had been entitled to terminate the contract under clause 13 upon the announcement of the export ban, and that even if the termination was premature, the fact that shipment under the contract would have been subject to the ban when the time for shipment came meant that no loss had been suffered.

5

GAFTA's first tier arbitration tribunal issued its award on 1 November 2011. It held that the sellers had repudiated the contract because their notice of cancellation was premature. The embargo might have been lifted in time to permit shipment within the laycan period. It was therefore impossible to say, as at the date when the sellers cancelled, that shipment would necessarily be prevented by the embargo. But the tribunal declined to award substantial damages. They held, in agreement with the sellers, that none had been suffered because in fact the embargo was not lifted. It followed that the contract would have been cancelled in any event when the time came for delivery.

6

Both parties appealed to the GAFTA Appeal Board, which issued its own award on 22 June 2012. The Board agreed with the first tier tribunal that the sellers had repudiated the contract by cancelling too early. It accepted that if the contract had not been repudiated on 9 August 2010 it would have been cancelled because of the embargo. But it awarded damages of US$3,062,500, representing the difference between the contract and the market price on 11 August 2010, the date that the repudiation was accepted. In the Appeal Board's view, such an award was required by clause 20(c) of GAFTA 49.

7

The sellers' argument, as summarised in the Appeal Board's award, was that at common law it was necessary to take account of events occurring after the breach which showed that the same loss would have been suffered even without the repudiation. They relied on Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164, and Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] 2 AC 535. The issues were (i) whether that was indeed the position at common law in the case of a contract of this kind; and (ii) if so, whether the common law principle had any application to a contract containing clause 20.

8

The Appeal Board doubted whether at common law subsequent events would be relevant to the assessment of damages under a contract for the sale of a single cargo, as opposed to a contract for delivery by instalments. But they considered that the issue on damages turned wholly on the effect of clause 20 as that clause was "commonly understood in the trade". They concluded that sub-clause (c) was intended to produce an "easily understood and readily applied" formula for computing damages in a case where agreement was not reached under sub-clauses (a) and (b). That formula might produce a figure more or less than the actual loss. Proceeding from the common ground that the default date for the purpose of sub-clause (c) was 11 August 2010 and from the parties' agreement on figures, they awarded the full amount of the buyers' claim.

9

This conclusion was also determinative, in the view of the Appeal Board, of the sellers' further argument that the buyers had failed to mitigate their loss by accepting the sellers offer to reinstate the contract on the same terms. As the Appeal Board saw it, the buyers acted reasonably in rejecting the offer, because at the time it was made they had a vested right to a large sum by way of damages and acceptance of the offer would have substituted a right to delivery that would probably have been defeated by the embargo.

10

On 10 October 2012, Andrew Smith J gave permission to appeal against the award under section 69 of the Arbitration Act 1996, limited to the following issues:

"2.1. Is the application of the GAFTA prohibition clause limited to a case where it can be seen after the event that performance of the contract has in fact been prevented by the prohibition in question?

2.2. Does the GAFTA default clause exclude common law principles for the assessment of damages for anticipatory repudiatory breach and in particular (i) the principle of mitigation and/or (ii) the compensation principle identified in The Golden Victory [2007] 2 AC 353?

2.3. Is the 'overriding compensatory principle' established by The Golden Victory limited to instalment contracts?

2.4. Was the board wrong in law to conclude that the buyers' rejection of the sellers' offer to reinstate the contract did not constitute a failure to mitigate on the ground that the sellers did not offer to reinstate the contract on different and more favourable terms than contained in the original contract?"

11

Hamblen J, who heard the appeal in the Commercial Court, dismissed the appeal on issues 2.1, 2.2 and 2.4: [2013] EWHC 84 (Comm); [2013] 1 Lloyd's Rep 621. Since he agreed with the Appeal Board that clause 20 determined the measure of damages whether...

To continue reading

Request your trial
44 cases
  • Sprint Electric Ltd v Buyer's Dream Ltd
    • United Kingdom
    • Chancery Division
    • 24 July 2020
    ...(The Golden Victory) [2007] 2 AC 353, para 36 and the “fundamental principle of the common law of damages” in Bunge SA v Nidera BV [2015] UKSC 43 at [14]. It was recently endorsed in Morris-Garner v One v One Step (Support) [2018] UKSC 20; [2019] AC 649 at [32]. Causation 44 Baron Parke's......
  • Ayhan Seyzer v Agroinvest
    • United Kingdom
    • King's Bench Division (Commercial Court)
    • 5 March 2024
    ...of the estimated time of arrival. 42 In any event, the Defendant relies on the judgment of Lord Sumption JSC in Bunge SA v Nidera BV [2015] 2 Lloyds Rep 469 at [28(3)] in support of the proposition that “date of default” in the GAFTA default clause means “ the date of the ‘default of fulfi......
  • Farol Holdings Ltd v Clydesdale Bank Plc
    • United Kingdom
    • Chancery Division
    • 19 March 2024
    ...contract, these are assessed as at the date of breach, so that subsequent market movements are irrelevant. 124 In Bunge SA v Nidera BV [2015] UKSC 43; [2015] Bus LR 987, in affirming the decision of the majority in The Golden Victory, Lord Sumption, at §16, similarly distinguished between......
  • Stanford International Bank Ltd ((in Liquidation)) v HSBC Bank Plc
    • United Kingdom
    • Supreme Court
    • 21 December 2022
    ...All of this, along with the ratio of The Golden Victory, is clearly explained by Lord Sumption and Lord Toulson in Bunge SA v Nidera BV (formerly Nidera Handelscompagnie BV) [2015] UKSC 43; [2015] Bus LR 987, paras 15–23 and 64–86; and see also A Dyson and A Kramer, “There is No ‘Breach D......
  • Request a trial to view additional results
5 firm's commentaries
  • Force Majeure: Could The Contract Be Fulfilled 'But For'?
    • United Kingdom
    • Mondaq UK
    • 10 January 2020
    ...by Lord Justice Males, the judge considered two Supreme Court cases: The Golden Victory [2007] 2 A.C. 353 and Bunge SA v Nidera BV [2015] UKSC 43. The Golden Victory was a case concerned with whether, when assessing damages for anticipatory breach of a long-term charterparty, account had to......
  • Court Of Appeal Considers GAFTA Default Clause And Damages For Non-Acceptance Of Goods (Sharp v Viterra) (Video)
    • United Kingdom
    • Mondaq UK
    • 10 March 2023
    ...judgment of the Court, based his conclusion on certain statements from the judgments of Lords Sumption and Toulson inBunge SA v Nidera BV [2015] UKSC 43, [2015] 2 Lloyd's Rep. 469 which he accepted were obiter because the construction and working of sub-clause (c) was not directly relevant ......
  • Bunge Jumping The Gun
    • United States
    • Mondaq United States
    • 13 October 2015
    ...on which awards of contractual damages ought to be based.” Bunge v Nidera The decision of the Supreme Court in Bunge SA v Nidera BV [2015] UKSC 43 lays this issue to rest. Post-breach events can be taken into account in the assessment of damages in a one-off sale of goods contract. The conc......
  • GAFTA Default Clause And Damages For Non-Acceptance ' Sharp v Viterra [2022] EWHC 354 (Comm) - Chirag Karia QC
    • United Kingdom
    • Mondaq UK
    • 22 February 2022
    ...from the absence of tariff." The Judge was particularly influenced by dicta of the Supreme Court inBunge SA v Nidera BV [2015] 2 Lloyd's Rep. 469 to the effect that sub-clause (c) assumed a "notional substitute contract" concluded on the same terms as the contract With respect to the Learne......
  • Request a trial to view additional results
2 books & journal articles
  • NAVIGATING THE MAZE
    • Singapore
    • Singapore Academy of Law Journal No. 2016, December 2016
    • 1 December 2016
    ...to £2.5m instead of £309,000. Had the Supreme Court upheld substitutive compensation, the solicitors would be liable to pay £2.5m. 134[2015] UKSC 43; [2015] 3 All ER 1082. 135 A strictly compensatory analysis of the common law remedies is, however, incorrect. See Justice Edelman, “An Englis......
  • Fog in the Gateway: Brownlie v Four Seasons Holdings Inc
    • United Kingdom
    • Wiley The Modern Law Review No. 82-2, March 2019
    • 1 March 2019
    ...Robinson vHarman (1848) 1 Exch 850.12 One Step [2018] n 1 above at [32]; Bunge SA vNidera BV (formerly Nidera Handelscompagnie BV)[2015] UKSC 43, [2015] 3 All ER 1082.13 ibid at [21].14 One Step [2018] n 1 above at [76].15 ibid at [91].16 ibid.17 ibid at [54], [76]; or, as Lord reed puts it......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT