Pbo v Donpro
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bryan |
| Judgment Date | 16 June 2021 |
| Neutral Citation | [2021] EWHC 1951 (Comm) |
| Docket Number | Case No: CL-2020-000383 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 1951 (Comm)
The Honourable Mr Justice Bryan
Case No: CL-2020-000383
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
IN AN ARBITRATION CLAIM
AND IN THE MATTER OF AN ARBITRATION
Released for publication (as anonymised)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Liisa Lahti (instructed by Teacher Stern LLP) for the Claimant
Fiona Whiteside (instructed by Walker Morris LLP) for the Respondents
Hearing date 16 June 2021
APPROVED JUDGMENT
A. INTRODUCTION
The parties appear before me today on the hearing of the Arbitration Claims of PBO whereby PBO advances challenges under sections 67 and 68 (and if necessary under section 69 of the Arbitration Act 1996 (the “Act”) in respect of appeal proceedings brought before the Federation of Cocoa Commerce (“FCC”) Board of Appeal (the “Board”) which were determined on the basis of the parties' written submissions and without an oral hearing. More specifically five challenges are brought before me three pursuant to section 68 of the Arbitration Act 1996 and two pursuant to section 67 of the Act, as follows:-
(1) Pursuant to section 68, and in relation to the Respondents' claim (the “Claim”), a refusal of the Board to allow PBO to amend its statement of case on appeal which it is said amounted to serious irregularity that has caused PBO substantial injustice. It is said that such refusal prevented PBO from advancing its full defence to the Claim including arguments that were potentially determinative of the Claim and in circumstances where it is said that (a) there would have been no (or minimal) prejudice to the Defendants and (b) the Tribunal gave no consideration to the balance of prejudice between the parties and misunderstood the requirement of “necessity” in section 33(1)(b) of the Act.
(2) Pursuant to section 68, and in relation to PBO's counterclaim, that there was a serious irregularity that has caused PBO substantial injustice because the Board of Appeal departed from the way in which the case was presented by the parties and did so without warning such that PBO was not afforded a reasonable (or any) opportunity of putting its case in circumstances where the Board found that PBO had displayed an intention not to perform 11 contracts between PBO and CODON within the meaning of Rule 19.5 of the FCC Rules such that CODON was justified in “cancelling” them, in circumstances where the Respondents had not relied upon Rule 19.5, and the parties had not been given any opportunity to address the Board in relation thereto.
(3) Pursuant to section 68, and in relation to PBO's counterclaim, that there was a serious irregularity that has caused PBO substantial injustice because the Board departed from the way in which the case was presented by the parties and did so without warning such that PBO was not afforded a reasonable (or any) opportunity of putting its case in circumstances where the Board found that it did not have jurisdiction to deal with PBO's claim for “Jute Bag Losses” where there had been no jurisdictional challenge, and the parties had not been given any opportunity to address the Board in relation thereto.
(4) Pursuant to section 67, that the Tribunal did not have jurisdiction over the Second Defendant (“2DON”).
(5) Pursuant to section 67, that the Tribunal did have jurisdiction to consider the Jute Bag Losses.
PBO seeks an order that the entire Appeal Award be set aside and the dispute between PBO and the Defendants be heard by a new tribunal (alternatively that the Appeal Award be remitted to the Board of Appeal for reconsideration). PBO submits that this is appropriate even if the Court accepts PBO's section 68 arguments in relation to the Counterclaim but not the Claim.
The orders sought under sections 67 and 69 of the Act are only required if the Tribunal does not make the aforesaid orders under section 68. There is also a pending application for permission to appeal against the relevant award under section 69 of the Act. However, as contemplated in the order of Mr Justice Waksman dated 23 December 2020, whether or not it will ever be necessary for the Court to rule upon the section 69 application hereafter depends on the outcome of the current applications.
The dispute between the parties arose out of a series of agreements for the sale and purchase of cocoa beans. Arbitration proceedings were commenced by the First and Second Defendants (“DONPRO” and “2DON”) pursuant to three contracts that DONPRO had with PBO (the “Claim”). A counterclaim was brought by PBO against the Third Defendant (“CODON”) pursuant to eleven contracts that it had entered into with CODON) (the “Counterclaim”).
A feature of the arbitration proceedings is that PBO argued that the losses suffered by each party under the claim and the counterclaim should be compared and the difference awarded to the party showing the greater loss. CODON was joined to the arbitration proceedings. There was an initial arbitration (the “Arbitration”, the “Tribunal” and the “Award”) and a second tier or “appeal” arbitration (that permitted new submissions to be made) (the “Appeal Arbitration”, the Board and the “Appeal Award”). Both arbitrations were conducted on written submission and documents alone, as I have already noted. All PBO's applications relate to the Appeal Award. I am told the amount in dispute is approximately €500k on the Claim, and it is said £2.7m on the Counterclaim. I do not know whether or not that is so, and I have not been addressed in relation to such matters.
CODON was not in fact represented in the arbitration proceedings. However it was joined to the arbitration and the submissions filed by the lawyers representing DONPRO and 2DON contained arguments that it was apparent were made on behalf of CODON.
B: BACKGROUND AND THE DISPUTES BETWEEN THE PARTIES
PBO, a company engaged in the business of trading cocoa beans, purchased cocoa beans from DONPRO, a company engaged in the business of selling cocoa beans. A number of contracts were entered into between PBO and DONPRO in 2017 (the “2017 DONPRO Contracts”). The claim related to three of those contracts (the “Three DONPRO Contracts” and/or the “Three DONPRO Invoices”). 2DON is an entity to which DONPRO said it had assigned these debts to. There were also, certainly as per PBO, eleven contracts entered into between PBO and the Third Defendant (CODON) in 2018 (the “2018 CODON Contracts”). PBO's case is that the eleven 2018 CODON Contracts were replacement contracts entered into to replace the remaining 2017 DONPRO Contracts after DONPRO became unable to contract with PBO due to a tax investigation into DONPRO and frozen bank accounts.
Each of these aforesaid contracts were governed by English law and incorporated the Federation of Cocoa Commerce Contract Rules for Cocoa Beans (the “FCC Contract Rules”). The FCC Contract Rules in turn provide (at Rule 20) that any dispute arising out of the Contract Rules for Cocoa Beans must be referred to FCC Arbitration to be settled in accordance with the FCC Arbitration and Appeal Rules (“FCC Arbitration Rules”) applicable on the date of the contract in question. The FCC Contract Rules are standard form contract terms used in the cocoa bean trade.
As I have noted, DONPRO and 2DON claimed against PBO pursuant to the Three DONPRO Invoices. PBO successfully applied to have CODON joined as a party to the arbitration and counterclaimed against CODON arguing that CODON was in breach of the eleven 2018 CODON Contracts by wrongfully seeking to cancel those contracts and in failing to perform the contracts. PBO claimed that as a result of these breaches it had suffered pecuniary loss that exceeded the amounts claimed by DONPRO and 2DON. PBO further claimed that there had been a “wash-out” between the DONPRO Contracts and the eleven 2018 CODON Contracts. Per paragraph 18 of Mr Rabinowicz's first statement in support of the applications a “wash-out” means “ a situation where an old contract (or contracts) are replaced with a new contract (or contracts) between the same or other entities”. PBO argued that there had been a wash-out and that therefore the losses suffered by each party under the claim and the counterclaim should be compared and the difference awarded to the party showing the greater loss. In the event – and for reasons which will become apparent – the Board did not at that stage have to rule upon that point
Turning first to the Award, the Award is dated 12 December 2019. The Tribunal found (in summary) that sums were due under the Three DONPRO Invoices. PBO was ordered to pay two amounts to DONPRO and one amount to 2DON, The Tribunal accepted the validity of the assignment between DONPRO and 2DON, and PBO says it is accordingly unclear why some payments were said to be due to DONPRO and others to 2DON. As to the Counterclaim PBO's request to join CODON to the proceedings was accepted. The Tribunal found that the eleven 2018 CODON Contracts were a replacement of the relevant 2017 DONPRO Contracts.
The Tribunal also found that PBO had “ never declared the Claimants in default” and therefore pursuant to FCC Rule 19.1.1 the shipment periods of the 2018 CODON Contracts were implicitly extended beyond the original shipment periods such that all of the 2018 CODON Contracts “remain in force”, and PBO's counterclaim was rejected. Given that finding, following receipt of the Award and in order to comply with the provisions of FCC Rule 19.1.1 referred to in the Award, PBO sent CODON two notices of default, one dated 31 December 2019 and another dated 17 January 2020.
In the Appeal Arbitration PBO argued that as CODON had not attempted to make any deliveries since receiving the December 2019 notice of default CODON...
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...of adverse points in the decision against him.” 23 These principles were applied recently in the context of Section 68(2)(a) by Bryan J in PBO v DONPRO [2021] EWHC 1951 (Comm) and again by Butcher J in Ducat Maritime Limited v Lavender Shipmanagement Incorporated [2022] EWHC 766 (Comm). S......