Libero Commodities S.A. v Alexandre Augustin
| Jurisdiction | England & Wales |
| Judge | Mr Christopher Butcher |
| Judgment Date | 24 June 2015 |
| Neutral Citation | [2015] EWHC 1815 (Comm) |
| Docket Number | Case No: 2014 FOLIO 781 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 June 2015 |
[2015] EWHC 1815 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building
7 Rolls Building
Fetter Lane
London, EC4A 1NL
Christopher Butcher QC
(Sitting as A Deputy High Court Judge)
Case No: 2014 FOLIO 781
Luke Pearce (instructed Holman Fenwick Willan LLP) for the Claimant
Philippa Hopkins (instructed by Watson Farley & Williams LLP) for the Defendant
Hearing date: 11 June 2015
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.
Mr Christopher Butcher QC (sitting as a Deputy High Court Judge):
Libero Commodities S.A., which I will call "the Buyer", appeals against an award of the Technical Appeal Committee ("TAC") of the International Cotton Association Ltd ("ICA") dated 30 May 2014. Permission to appeal was granted by Burton J by order dated 24 February 2015.
The facts and the Award
On 4 November 2011, Alexandre Augustin, whom I will call "the Seller", concluded a contract with the Buyer ("the Sale Contract") for him to sell and for the Buyer to purchase 10,000 mt of Brazilian raw cotton of 2012 crop. The title to the Sale Contract specified that it was in accordance with the ICA's Bylaws and Rules. It contained the following further provisions:
" 6. Price and Terms: If at the time of fixation July 12 ICE Futures prices is 74.99 or lower, basis shall be 2.00 USD cents/lb ON July 12; if between 75.00 and 99.99, basis shall be 1.00 USD cents/lb ON July 12; if between 100.00 and 124.99, basis shall be 1.00 USD cents/lb OFF July 12; if between 150.00 and 174.99, basis shall be 3.00 USD cents/lb OFF July 12; if 175.00 or higher, basis shall be 4.00 USD cents/lb OFF July 12.
…
15. Special Clauses
…
15. 10. Price fixation Seller's call, latest on the trading day prior to respective First Notice Day or 15 days before shipment whichever is earlier, failing which thereafter Buyer's call. All fixation orders must be received in writing. All fixation orders must state the ICE Futures price to be fixed at, the cover month, the quantity to be fixed and the validity of the fixation Order. In case of partial fixation for a similar shipment period, the final price will be the average of all fixations.
…
16. General:
– This contract incorporates the Bylaws and Rules of the International Cotton Association Limited as they were when the contract was agreed.
…
17. Arbitration Agreement:
1. All disputes relating to this contract will be resolved through arbitration in accordance with the Bylaws of the International Cotton Association Limited. This agreement incorporates the Bylaws which set out the Association's arbitration procedure.
…"
The price for 2000 mt of the Sale Contract quantity was fixed, in two instalments, without dispute. This left a balance of 8000 mt to be fixed by what came to be called the "Third Price Fixation".
On 22 June 2012, which was " the trading day prior to respective First Notice Day", the Seller purported to fix the price for the 8000 mt. He did so by an SMS message which stated: " I spoke to Alexandre, we have to fix at today's market, with minimum of 74.17."
The Buyer's position was that this was not a valid price fixation because the ICE Futures market was not trading at the time of the fixation due to a ' limit down stop' (a mechanism by which the ICE prevents futures trading from taking place in order to avoid the market price crashing). In those circumstances the Buyer purported, on 23 June 2012, to fix the price itself, at US $0.6987/lb. This price was based on the July — December 2012 spread market price at close of business on 22 June 2012 (US $0.6787), together with the 2 c./lb uplift provided for by clause 6 of the Sale Contract. The Seller did not accept that the Buyer was entitled to fix the price on this basis.
The remainder of the Sale Contract was not performed. On 28 September 2012 the parties entered into a further agreement ("the September Agreement"). In its recitals the September Agreement referred to the parties' desire to close out the Sale Contract. It also referred to an assignment which meant that the only remaining quantity at issue was an amount of 5,750 mt. It contained reference to the two competing prices for which the Seller and Buyer, respectively, contended. That contended for by the Seller, namely US $0.7617/lb, was termed the "Limit Down Price", and was the price at which July 2012 ICE Futures stopped being negotiated due to the limit down stop, namely US $0.7417, plus the 2c./lb uplift. The price contended for by the Buyer was, as has already been explained, the amount of US $0.6987/lb, and was termed "the Synthetic Price".
The September Agreement provided for the invoicing back of the unperformed portion of the Sale Contract. In essence, the Seller was to pay the difference between the market price at the date of the September Agreement (which was US $0.8153, the market having risen) and the Sale Contract price, whichever of the two contended for prices that was. This therefore resulted in the payment by the Seller of an undisputed sum; and a payment by him of a further amount, called the "contingent invoice back amount", in the sum of US $1,111,118.40, representing the difference between the application of the Limit Down Price and the Synthetic Price. This "contingent invoice back amount" was to be kept by the Buyer's Brazilian affiliate pending final resolution of which price was applicable.
Of particular relevance to the present appeal is clause 3 of the September Agreement, which provided as follows:
" 3. FINAL WASHOUT PRICE
3.1 The final price at which the 5,750 MT of Product under the Contract shall be invoiced back (hereinafter referred to as the 'Final Washout Price') shall be the average price for the Invoicing Back Weight, having the Final Fixation Price for the Third Fixation as reference for the third price fixation.
3.2 The parties hereby agree to submit the dispute of the Third Fixation Price under the Contract to arbitration by the International Cotton Association, which shall be initiated by the Seller/Debtor, and the parties agree to be bound by the decision.
3.3 The parties irrevocably agree that the price established by the International Cotton Association for the Third Price Fixation on 2012-06-25 (hereinafter referred to as the 'Final Price for the Third Price Fixation') shall be final and readily binding on the Buyer/Creditor and on the Seller/Debtor, regardless of homologation of the decision in Brazil.
3.4 In case the Seller/Debtor does not start the consultation or the arbitration proceedings by 2012-10-30, the Final Price for the Third Price Fixation shall be the Synthetic Price.
3.5 In case clause 3.3 is held to be invalid or for any reason does not reach the effect desired by the parties, the parties stipulate that the Final Price for the Third Price Fixation shall be the Synthetic Price."
On 30 October 2012 the Seller sent a fax to the ICA requesting arbitration. I have not seen that document. What is apparent is that he did not, at that point, pay any fee to the ICA.
The parties proceeded to make written submissions in the arbitration. These included the Buyer's contention that the September Agreement had required the commencement of arbitration to be by 30 October 2012; and that as the Seller had not paid the relevant fee at that stage, there had been no valid commencement of arbitration. On 11 October 2013 the first tier ICA arbitrators found by a majority that the Seller had not validly commenced the arbitration within the time specified by clause 3.4 of the September Agreement. They concluded that the result of this, in accordance with clause 3.4, was that the Synthetic Price applied, and therefore that the Buyer should retain the sum of US $1,111,118.40.
The Seller appealed to the TAC of the ICA. Its Award ("the Award") was dated 30 May 2014. In summary, the Award held as follows:
"(1) The Seller had commenced arbitration within time for the purposes of the September Agreement; and
(2) The price to be applied was the "Limit Down Price", based on an application of Rule 224 of the Bylaws and Rules of the ICA."
The Order for Permission
The Buyer applied for permission to appeal pursuant to s. 69 Arbitration Act 1996. The Seller had taken no part in these proceedings by the time that Burton J came to consider this application on paper. By Order dated 24 February 2015, Burton J gave permission to appeal on two points of law, as follows:
" (1) Whether a technical arbitration, pursuant to the Bylaws and Rules of the ICA, is validly commenced under Bylaw 302 in the absence of payment of the fee required by Bylaw 302(2).
(2) Whether the fixation clause, in clause 10 of the [Sale] Contract, was an agreement of the parties that displaced the default provisions of ICA Rule 224."
The Seller's involvement
Belatedly, the Seller indicated that he wished to be involved in the appeal. On 29 May 2015 he issued an application notice seeking, among other things, that the order of Burton J giving permission to appeal should be set aside, that he have a retrospective extension of time for service of a Respondent's Notice, and that he should be permitted to make submissions on the hearing of the appeal. I dealt with that application in a separate ruling. I dismissed the application for an order setting aside Burton J's order giving permission to appeal. I gave the Seller permission to rely on his Respondent's Notice, save in one respect. I also permitted him to make submissions on the appeal – which was not, in any event, opposed by the Buyer. Miss Hopkins has appeared and represented...
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