Al Nasr Company for Coke and Chemicals v Fairdeal Supplies Ltd (formerly Fairdeal Supplies Pvt Ltd)
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Males,Mr Justice Males |
| Judgment Date | 16 October 2013 |
| Neutral Citation | [2013] EWHC 3131 (Comm) |
| Docket Number | Case No: 2013 Folio 73 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 October 2013 |
[2013] EWHC 3131 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Males
Case No: 2013 Folio 73
Mr Alexander MacDonald (instructed by DAC Beachcroft LLP) for the Claimant
Mr Rupert Hamilton (instructed by Reed Smith LLP) for the Defendant
Hearing date: 11th October 2013
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.
Introduction
This is an appeal by Al Nasr Co for Coke & Chemicals pursuant to section 69 of the Arbitration Act 1996 against an award dated 6 December 2012, as amended by a memorandum dated 28 February 2013. The award was made by an arbitral tribunal consisting of Mr Edward Album, Mr Graham Perry and Dr Khaled El Shalakany. The arbitrators awarded damages of US $2,685,000 to Fairdeal Supplies Ltd. Essentially the issue raised is whether the contract remained alive for future performance at the time when the arbitrators found it to have been repudiated by Al Nasr or whether, by that stage, it had already expired unperformed. However, although this appears to be the real issue between the parties, it is not how Al Nasr formulated the questions of law on which permission to appeal was sought and the route by which this issue is reached is somewhat convoluted.
The sale contract
Al Nasr is a state-owned Egyptian company which produces (amongst other things) coke. I shall refer to it as "the seller". Fairdeal ("the buyer") is an Indian company principally involved in trading coal, coke and iron ore.
On 8 August 2007 the parties entered into a contract for the sale of "30,000 MT, three Cargoes + 10% at buyer's option" of low ash metallurgical coke at a price of US $224.50 per mt FOB Alexandria. The award records that this was not the first occasion on which the parties had dealt together. There had been two earlier contracts, in 2003 and 2004, but in both cases each party had for one reason or another been dissatisfied with the other's performance. It would seem, therefore, that the conclusion of this latest contract represented the triumph of hope over experience.
Unfortunately experience was to prove a more reliable guide than hope. Very quickly it transpired that the parties could not even agree whether they had contracted for the sale and purchase of 30,000 mt or 90,000 mt of coke. The buyer contended that the contract was for three cargoes each of 30,000 mt, while the seller contended that the overall total was 30,000 mt, to be spread over three cargoes. It may be that this dispute had something to do with the fact that, after the contract was concluded, the market price of coke increased substantially. The dispute about the quantity was eventually to be resolved by the arbitrators, who decided in favour of the seller that the contract was for an overall total of 30,000 mt. There is now no challenge to that conclusion, but throughout the events which I must describe the existence of this unresolved dispute was part of the background circumstances.
The contract provided for a shipment in each of October, November and December 2007. Payment was to be by irrevocable confirmed letter of credit payable at sight after presentation of documents at the seller's bank, and the buyer was required to nominate a ten day laycan spread for the performing vessel at least five days prior to the vessel's ETA at the load port.
Events leading up to the amendment agreement
On 3 October 2007 the buyer asked whether a laycan of 13 to 25 October 2007 would be acceptable to the seller for the first shipment. The seller responded the next day that it was unable to accept this laycan due to the excessive cost of coal which it was buying in and freight costs, which had led to a decrease in coke production, and also due to a sunken barge at the port facility. It asked the buyer to accept delayed shipment and not to open a letter of credit for the time being. The tribunal described this message as a waiver of the date or dates for opening the letter of credit, and found that the consequence was to amend the shipping dates in the sale contract. There is no challenge to this conclusion.
The buyer did open a letter of credit on 23 October 2007, but the seller raised a host of objections as to why the credit was not as required by the sale contract. The arbitrators found that on the key issues the letter of credit was compliant, but that there were some relatively minor discrepancies which could easily have been rectified, which would have been necessary for full conformity with the contract. However, they found also that the main reasons given by the seller for rejecting the letter of credit were invalid, and that the seller maintained a refusal to ship any goods without the changes on which it was insisting being made. Consequently, even if the buyer had rectified those discrepancies where the arbitrators found the seller's objections to be valid, that would not have made any difference so far as shipment of goods was concerned.
No goods were shipped in October 2007. Neither party suggested, however, that the time for performance of the first shipment under the contract had expired.
On 1 November 2007 the seller sent what the arbitrators described as an important message to the buyer referring to the production difficulties and the need for time to overcome them, as well as to the letter of credit being "full of discrepancies". The seller said that it had decided in these circumstances to perform its contracts with other customers "and hence we decided to suspend our contract due to the reasons of the tricks and non-transparency which were evident in the letter of credit opened by Fairdeal and to regain the confidence".
In response the buyer maintained that the letter of credit was in order and proposed 15 December 2007 as the last date for shipment but subsequently, on 22 November 2007, "and no doubt mindful of the rise in the market price of coke" as the arbitrators observed, the buyer did instruct its bank to make some changes to the credit, including an extension of the latest date for shipment to 15 December 2007.
No goods were shipped in November 2007. Once again neither party suggested that the time for performance of either of the contractual shipments had expired.
The amendment agreement
Despite this unhappy start, on 5 December 2007 the parties succeeded in agreeing terms of an amendment to the sale contract. This provided that the contractual quantity was to be a single cargo of 30,000 mt, plus or minus 10% (but without specifying expressly whose option this was), with a loading laycan of 15 to 20 January 2008, and that the buyer would amend the letter of credit according to the conditions in the sale contract and in the amendment (but without spelling out what amendments were needed).
Clauses 5 to 7 of the amendment agreement are central to this appeal. They provided:
"5. After loading the above-mentioned coke vessel, this contract signed dated 8–8–2007 will be considered as fully executed, and none of the seller or the buyer has any right or reason for any claim whatsoever.
6. After execution of this contract by exporting the A/M coke vessel, both parties can meet in good faith and to discuss further cooperation for exporting two or more cargoes at buyer/seller's option at the agreeable price between the two parties.
7. This amendment to the contract which is signed dated 5–12–2007 will be null and void if it is not executed and earlier contract signed dated 8–8–2007 will be valid."
Events following the amendment agreement
Despite this agreement, problems continued. The buyer wanted the maximum quantity permitted by the amendment, ie 33,000 mt, while the seller wanted to ship the mean quantity or even 10% less than that. This point was not resolved. Disagreements continued about the terms of the letter of credit even after a further amendment to the credit on 26 December 2007 extending the last date for shipment to 25 January 2008. On 31 December 2007 the seller sent a list of the amendments which it still required, including a further extension of the latest shipment date, this time to 15 February 2008.
On 15 January 2008 the buyer amended the letter of credit again, including an extension of the latest date for shipment to 15 February 2008 as requested by the seller. The arbitrators found that as a result of this amendment the credit was fully in accordance with the contract of sale save in one respect. In other words, such of the seller's objections as had any validity had now been corrected. The one respect in which the credit was not in accordance with the contract was that it was not confirmed by the seller's bank. The arbitrators found, however, that the reason for this was that the seller had instructed its bank not to confirm the credit.
On 23 January 2008 the seller claimed that the coke was ready for loading and expressed astonishment (somewhat disingenuously in view of the arbitrators' finding mentioned above) that its efforts to persuade the buyer to amend the letter of credit in accordance with its requirements had been in vain. It imposed a deadline of 31 January 2008 for the buyer to amend the letter of credit "in a...
To continue reading
Request your trial