Novasen S.A. v Alimenta S.A.

JurisdictionEngland & Wales
JudgeThe Hon. Mr Justice Popplewell
Judgment Date27 February 2013
Neutral Citation[2013] EWHC 345 (Comm)
Docket NumberCase No: 2012 FOLIO 650
CourtQueen's Bench Division (Commercial Court)
Date27 February 2013

[2013] EWHC 345 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Rolls Building, Fetter Lane,

EC4A 1NL

Before:

The Hon. Mr Justice Popplewell

Case No: 2012 FOLIO 650

Between:
Novasen S.A.
Claimant
and
Alimenta S.A.
Defendant

Mark Jones (instructed by Marine Law Solicitors) for the Claimant

Lawrence Akka QC (instructed by Liberty Commodities Ltd) for the Defendant

Hearing date: 19 February 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.

The Hon. Mr Justice Popplewell The Hon. Mr Justice Popplewell
1

This is an arbitration appeal which raises issues concerning the construction and application of the FOSFA Prohibition and Default Clauses, and the relevance of subsequent events to the assessment of damages in accordance with the common law principles considered by the House of Lords in Golden Strait Corporation v Nippon Yusen Kubishka Kayisha ("The Golden Victory") [2007] 2 AC 353.

2

By Award number 1057 dated 29 March 2012 the FOSFA Board of Appeal upheld a First Tier Award in favour of the Defendant ("the Buyers") against the Claimant ("the Sellers"). The claim arose pursuant to a contract by which the Sellers sold to the Buyers 2000 metric tonnes of crude groundnut oil in bulk of Senegal origin duty paid CIF Genoa for US$1,620 per metric tonne. The contract provided for shipment from Senegal during a shipment period of December 2007/10 January 2008.

3

The contract incorporated the terms of FOSFA Contract 201, which included the following prohibition and default clauses:

"22. PROHIBITION: In the event, during the contract shipment period, of prohibition of export or any other executive or legislative act by or on behalf of the Government of the country of origin or of the territory where the port/s of shipment named herein is/are situate, or of blockade or hostilities, 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 extended by 30 days.

In the event of shipment within the extended period still proving impossible by reason of any of the causes in this clause, the contract or any unfulfilled part thereof shall be cancelled. Sellers invoking this clause shall advise Buyers with due dispatch. If required, Sellers must produce proof to justify their claim for extension or cancellation under this clause."

"25. DEFAULT: In default of fulfilment of this contract by either party, the other party at his discretion shall, after giving notice, have the right either to cancel the contract or the right to sell or purchase, as the case may be, against the defaulter who shall on demand make good the loss, if any, on such sale or purchase. If the party liable to pay shall be dissatisfied with the price of such sale or purchase, or if neither of the above rights is exercised, the damages, if any, shall, failing amicable settlement, be determined by arbitration. The damages awarded against the defaulter shall be limited to the difference between the contract price and the actual or estimated market price on the day of default. Damages to be computed on the mean contract quantity. If the arbitrators consider the circumstances of the default justify it they may, at their absolute discretion, award damages on a different quantity and/or award additional damages.

Prior to the last day for making a declaration of shipment a Seller may notify his Buyer of his inability to ship but the date of such notice shall not become the default date without the agreement of the Buyer. If, for any other reason, either party fails to fulfil the contract and is declared to be in default by the other party and default is either agreed between the parties or subsequently found by arbitrators to have occurred, then the day of the default shall, failing amicable settlement, be decided by arbitration."

4

In the Award the Board made the following findings of fact:

(1) It was common ground between the parties that the shipment period had been held open after 10 January 2008, with several discussions as to part shipments, until the end of March 2008, such that the contract was still open on 2 April 2008 (paragraph 7.1).

(2) On 2 April 2008 there was in force in Senegal a prohibition of export which fulfilled the requirements of the Prohibition Clause, and the prohibition was properly notified by the Sellers to the Buyers on 2 April 2008 in accordance with the clause so as to extend the shipment period for 30 days (paragraphs 7.3 and 7.6).

(3) However in the Sellers' communication of 2 April 2008 they made a further statement which purported to be a termination of the contract (paragraph 7.7). This amounted to an anticipatory repudiation of the contract, which was accepted by the Buyers on the same day (paragraphs 7.9 and 7.10).

(4) The prohibition was still in force on 2 May 2008 when the 30 day extension provided for in the Prohibition Clause expired; the prohibition lasted until 6 June 2008 when the Senegalese Ministry of Trade permitted the Sellers to recommence exports (paragraphs 4.11 and 7.14).

5

The Sellers contended that no loss was suffered by the Buyers because but for the Sellers' breach of contract on 2 April 2008, resulting in termination on that date, the contract would in any event have come to an end without liability on the part of the Sellers upon the expiry of 30 days thereafter pursuant to the Prohibition Clause. The Sellers contended that the contract would automatically have come to an end on 2 May 2008 pursuant to the earlier notification given on 2 April 2008, without the need for the Sellers to have exercised any further right of cancellation by giving a further notice. The Board rejected this argument, and held that default damages were to be awarded at the difference between the contract price and the market price on 2 April 2008 (US$ 2,050 per metric tonne), calculated on the mean contract quantity. This resulted in an award in the Buyers' favour of US$ 860,000 together with interest and costs.

6

The Board's reasons for rejecting the Sellers' argument are contained in paragraphs 7.12 to 7.14 and 7.25 of the Award in the following terms:

"7.12 As commercial persons, familiar with FOSFA contracts and the default clauses, we have difficulties in grasping how the narrow issue of default damages can be "a legal issue" as both Parties have suggested. It is common ground between commercial persons dealing with FOSFA contracts that the default damages are the difference between the contract price and the market price at the date of default (with discretion for the tribunal to award additional damages, if the particular situation so requires).

7.13 The legal arguments have not been helpful in this respect and we will take this into account when we deal with allocation of costs.

7.14 Sellers have argued that as the Contract would have been automatically cancelled on 2 May 2008, no damages were due. We reject this argument as we have found that Sellers defaulted on 2 April 2008 and that is the only date that matters for the calculation of damages. Sellers, by terminating the Contract on 2 April 2008, deprived themselves from relying on the potential automatic cancellation of the Contract on 2 May 2008, under the provisions of the Prohibition Clause.

7.25 Buyers and Sellers claimed recovery and/or allocation of the costs of this Appeal, including legal costs. After having carefully considered this matter, we have concluded that the narrowed-down issue of determination of default damages based on a market price was a purely commercial matter, well within the competence of commercial persons and the addressing and evaluation of the commercial matters did not require legal guidance and/or advice. WE THEREFORE decline legal costs, declaring that both parties shall bear their own legal costs for this Appeal."

7

The Sellers appeal under section 69 of Arbitration Act 1996 with the permission of Mr Justice Christopher Clarke on the following point of law:

"Should the Tribunal have taken account of matters occurring after 2 April 2008 (in particular those relating to the ongoing export prohibition and the operation of clause 22 which would have resulted in the termination of the Contract on 2 May 2008 without any liability on the part of the Sellers) when assessing whether or not the Buyers suffered a loss, and hence whether or not the Buyers were entitled to substantial damages?"

8

The Sellers contend that the answer to this question is yes, and that the Tribunal should have awarded no more than nominal damages applying the principles set out by the majority of the House of Lords in The Golden Victory. The Buyers contend that the Tribunal was right to ignore subsequent events occurring after the date of default because the Default Clause is a contractual regimen which the parties have agreed in place of the common law principles reflected in The Golden Victory, and dictates that result. They contend in the alternative that the Award should be upheld on either or both of two grounds which were identified in a respondent's notice:

(1) The Prohibition Clause does not result in automatic termination after 30 days, but requires the exercise of the right of cancellation by giving a further notice upon expiry of the 30 days; the Sellers had failed to establish that had the contract remained alive, they would have exercised the right to cancel the contract pursuant to the Prohibition Clause when the time came for doing so; and/or

(2) The Sellers had in any event no right to cancel the...

To continue reading

Request your trial
7 cases
  • Bunge SA v Nidera BV (formerly known as Nidera Handelscompagnie BV)
    • United Kingdom
    • Supreme Court
    • 1 July 2015
    ...was suggested that the clause impliedly required the award of a head of damage which has not been suffered. This was the position in Novasen SA v Alimenta SA [2013] 1 Lloyd's Rep 647, the facts of which were indistinguishable from those of the present case. The contract incorporated a stand......
  • Alegrow S.A. v Yayla Agro Gida San Ve Nak A.S.
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 10 July 2020
    ...against the background of their prior dealings and of the trade and trade contract in question” (§ 21) 51 In Novasen v Alimenta [2013] EWHC 345 (Comm), [2013] 1 Lloyd's Rep 648, Popplewell J pointed out that the appropriate degree of deference may sometimes be tempered: “26. I would natur......
  • Sharp Corporation Ltd v Viterra B.v (Previously known as Glencore Agriculture B.v)
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 18 February 2022
    ...breach is non-delivery by the seller, it entitles the innocent buyer to “ buy[/sell] against the default”. Novasen SA v Alimenta SA [2013] EWHC 345 (Comm) 1 Lloyd's Rep. 648 at [23], per Popplewell J (approved in Bunge at [34]; Bunge at [31] – [32], per Lord 47 Thus, in the case of non-acc......
  • JH & W Lamont of Heathfield Farm v Chattisham Ltd
    • United Kingdom
    • Court of Session (Inner House)
    • 1 May 2018
    ...of Edinburgh Ltd [2006] CSOH 136; 2007 SC 12; [2006] BLR 474 Novasen SA v Alimenta SA [2013] EWHC 345; [2013] 2 All ER (Comm) 162; [2013] 1 Lloyd's Rep 648; [2013] 1 CLC 405; [2013] Bus LR D79 Pegler v Northern Agricultural Implement and Foundry Co Ltd (1877) 4 R 435 Pollock (W & S) & Co v ......
  • Request a trial to view additional results
1 firm's commentaries
  • Export Ban: Court Construes FOSFA 201 Prohibition And Default Clauses
    • United Kingdom
    • Mondaq United Kingdom
    • 12 March 2013
    ...S.A. v. Alimenta S.A [2013] EWHC 345 (Comm) The parties here entered into a contract for the sale of Senegalese crude groundnut oil in bulk. Before the goods were shipped, a Senegalese government prohibition on export that applied to this commodity was declared. This stayed in force for jus......

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