Glencore Grain Ltd v Agros Trading Company Ltd ; Agros Trading Company Ltd v Glencore Grain Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE CLARKE,LORD JUSTICE OTTON,LORD JUSTICE KENNEDY |
| Judgment Date | 01 July 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0701-11 |
| Docket Number | QBCMI 1998/1219/3 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 July 1999 |
[1999] EWCA Civ J0701-11
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION (COMMERCIAL LIST)
(MR JUSTICE TUCKEY)
Royal Courts of Justice
Strand
London WC2
Lord Justice Kennedy
Lord Justice Otton
Lord Justice Clarke
QBCMI 1998/1219/3
In The Matter Of The Arbitration Act 1950
MR T YOUNG QC (Instructed by Messrs Richards Butler, London, EC3A 7EE) appeared on behalf of the Appellant.
MR I MILLIGAN QC (Instructed by Messrs Middleton Potts, London, EC1 7NP) appeared on behalf of the Respondent.
Thursday 1 July 1999
Introduction
This is an appeal from an order of Tuckey J made on the 23rd July 1998 when he gave judgment for Agros Trading Company Ltd ("Agros") against Glencore Grain Ltd ("Glencore") for US$32,494.42. There were two applications before the judge. They were both for leave to enforce GAFTA arbitration awards and were made under section 26 of the Arbitration Act 1950. The first was made by Glencore, previously known as Richco Commodities Ltd ("Richco"), for leave to enforce an award for US$361,883.50 plus interest and costs against Agros. The award was no 3591 made by GAFTA on the 23rd December 1994.
The second application was by Agros for leave to enforce award no 11248 dated the 16th June 1993. The award was made against Richco and was for US$546,525 plus interest and costs. It was not however made in favour of Agros but in favour of Agropol Nederland BV ("Agropol"). Agros sought leave to enforce the award as assignees of Agropol's rights under the award. The assignment is dated the 13th January 1995 and notice of it was given to Glencore a week later.
It is common ground that in these circumstances, other things being equal, the correct course would be to set off the amounts unpaid under each award and to give judgment for the balance as appropriate. It was agreed that such a set off is or would be a set off of mutual debts at common law. However, it was submitted that other things are not equal because Glencore claimed to be entitled to set off against their liability under award 11248 debts which were admittedly due to them from Agropol before the assignment under what are known as washout agreements. Agros disputed Glencore's alleged right to set off such debts. The judge held that Glencore were not entitled to set them off and Glencore now appeal against that decision.
The total net amount due to Agros as assignees of Agropol's rights under award 11248 inclusive of interest under section 19 of the Arbitration Act 1950 was US$583,524.66 as at the 22nd July 1998. The total net amount due to Glencore under award 3591 calculated in the same way as at the same date was US$551,030.24. Thus on the 22nd July 1998 (which was treated as the day of the judgment for this purpose) Glencore owed Agros US$583, 524.66 and Agros owed Glencore US$551,030.24. The obligation of each to the other was a common law debt. The set off was effected on that day with the result that judgment was given for the difference, namely US$32,494.42.
The washout agreements
Richco were grain traders and have been renamed Glencore. Agropol were grain traders and are in liquidation. Agros were but are no longer shareholders of Agropol. The debts arose out of washout agreements which were wholly unrelated to the contracts which gave rise to either of the awards, just as the contracts which gave rise to the awards were unrelated to each other. There were two such washout agreements.
The first washout agreement
The first agreement was evidenced by a telex dated the 12th August 1992 from Richco to Agropol which was in these terms:
RE CTR. 010592 NO. 476923—ABT. 11000 TO. POLISH FEED OATS—SEPT/15TH OCT 92—FOB SZCZIN/GDY/GDANSK
AND
CTR. 290492 NO. 476908—ABT. 11000 TO POLISH FEED OATS—SEPT/15TH OCT92—FOB SZCZIN/GDYN/GDANSK
HEREWITH WE CONFIRM THAT WE SOLD BACK THESE TWO CONTRACTS TO YOU AT A PRICE OF USDOLLAR 88,00/1000 KOS.
REST AT CONTRACT CONDITIONS.
WILL SEND YOU INVOICES FOR THE PRICE DIFFERENCE.
The contract price under both contracts had been US$81 per metric ton. The effect of the washout agreement was that Richco sold back the two contracts to Agropol at US$88 per metric ton. The effect of the agreement was thus that Agropol became liable to Richco for the difference in price. The expression "rest at contract conditions" was a reference to the conditions of the two contracts namely nos 476908 and 476923. The conditions in both contracts provided as follows:
All other terms and conditions not conflicting with above as per GAFTA no 64.
…
Arbitration Clause:
A. Any dispute arising out of or under this contract shall be settled by arbitration in accordance with the Arbitration Rules No. 125, of the Grain and Feed Trade Association, in the edition current at the date of this contract, such Rules forming part of this contract and of which both parties hereto shall be deemed to be cognisant.
B. Neither party hereto, nor any person claiming under either of them shall bring any action or other legal proceedings against the other of them in respect of any such dispute until such dispute shall first have been heard and determined by the arbitrator(s) or a Board of Appeal, as the case may be, in accordance with the Arbitration Rules and it is expressly agreed and declared that the obtaining of an award from the arbitrator(s) or a Board of Appeal, as the case may be, shall be a condition precedent to the right of either party hereto or of any person claiming under either of them to bring any action other legal proceedings against the other of them in respect of any such dispute.
The relevant GAFTA form 64 provided (so far as material) as follows:
11. PAYMENT
…
Any monies due by either party to the contract to each other in respect of final invoices and/or accounts for other items on deliveries fulfilling this contract, shall be settled by either party without delay (except as otherwise provided under Awards of Arbitration or Appeal as governed by other provisions in the contract).
If not so settled, a dispute shall be deemed to have arisen which may be referred to arbitration as herein provided.
12. INTEREST
If there has been unreasonable delay in any payment interest appropriate to the currency involved shall be charged. If such charge is not mutually agreed, a dispute shall be deemed to exist which shall be settled by arbitration. Otherwise interest shall be payable only where specifically provided in the terms of the contract or by an award of arbitration. The terms of this clause do not override the parties obligation under the Payment Clause.
…
26. CIRCLE
Where Sellers repurchase from their Buyers or from any subsequent Buyer the same goods or part thereof, a circle shall be considered to exist as regards the particular goods so repurchased, and the provisions of the Default Clause shall not apply…
Subject to the terms of the Prohibition Clause in the Contract, if the goods are not delivered, or, having been delivered documents are not presented, invoices based on the mean contract quantity, (or the goods have been delivered on the delivered quantity), shall be settled by all Buyers and their Sellers in the circle by payment by all Buyers to their Sellers of the excess of the Sellers' invoice amount over the lowest invoice amount in the circle. Payment shall be due not later than 15 consecutive days after the last day for delivery, or, should the circle not be ascertained before the expiry of this time then payment shall be due not later than 15 consecutive days after the circle is ascertained Where the Circle includes Contract(s) expressed in different currencies the lowest invoice amount shall be replaced by the market price on the first day for contractual delivery and invoices shall be settled between each Buyer and his Seller in the Circle by payment of the differences between the market price and the relative contract price in the currency of the contract.
…
28. DOMICILE
Buyers and Sellers agree that, for the purpose of proceedings either legal or by arbitration, this contract shall be deemed to have been made in England, and to be performed there, any correspondence in reference to the offer, the acceptance, the place of payment, or otherwise, notwithstanding, and the Courts of England or arbitrators appointed in England as the case may be shall expect for the purpose of enforcing any award made in pursuance of the arbitration clause hereof, have exclusive jurisdiction over all disputes which may arise under this contract. Such disputes shall be settled according to the law of England, whatever the domicile, residence or place of business of the parties to this contract may be or become. Any party to this contract residing or carrying on business elsewhere than in England or Wales, shall for the purpose of proceedings at law or in arbitration be considered as ordinarily resident or carrying on business at the offices of the Grain and Feed Trade Association, and if in Scotland, he shall be held to have prorogated jurisdiction against himself to the English Courts: or if in Northern Ireland to have submitted to the jurisdiction, and to be bound by he decision of the English Courts.
Clause 29(a) and (b) provided for arbitration in identical terms to those set out in conditions A and B of the Arbitration Clause which I have quoted in paragraph 7 above.
The relevant provisions of the GAFTA Arbitration Rules no 125 provided (so far as relevant) as follows:
1 PRELIMINARY
1.1 Any dispute arising out of a contract embodying these Rules shall be referred to arbitration in...
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