R G Grain Trade LLP (UK) v Feed Factors International Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 20 July 2011 |
| Neutral Citation | [2011] EWHC 1889 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2010 FOLIO 1408 |
| Date | 20 July 2011 |
[2011] EWHC 1889 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Hamblen
Case No: 2010 FOLIO 1408
Michael Nolan (instructed by Swinnerton Moore LLP) for the Claimant
Henry Byam-Cook (instructed by Mills & Co) for the Defendant
Hearing dates: 8 July 2011
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
The Claimant Sellers ("the Sellers") appeal under section 69 of the Arbitration Act 1996 against Appeal Award No 4224 dated the 1 st November 2010 ("the Award") by which the GAFTA Appeal Board awarded the Defendant Buyers ("the Buyers") US360,374.52 and £13,071.92 by way of damages and dismissed the Sellers' claim for the balance of the purchase price, overturning the award of the first tier arbitrators. The Sellers appeal that decision having been granted permission to appeal by Teare J on 18 January 2011.
The questions of law in respect of which permission to appeal was given are as follows:
(1) Whether on a true construction of the contract, the certificates of quality and condition issued by the superintendent chosen by the Sellers were final and binding; and
(2) Whether the Buyers were entitled to reject the documents and the goods despite the terms of clause 5 of GAFTA No. 119.
Factual background
By a contract dated the 1 st July 2008, the Sellers sold to the Buyers 1,500 mt +/- 10 % in Buyers option Ukrainian origin sunflower expeller FOB Nicolayev sea port ("the contract").
The contract provided materially:
"Commodity: UKRAINIAN ORIGIN SUNFLOWER EXPELLER
In bulk, sound, loyal and merchantable quality.
Specifications:
Protein min 32%—Moisture max 7%—Fiber max 23%—Fat min 11%
All tests as per as is basis (GAFTA), allowances as per GAFTA.
Quality and condition to be final at time and place of loading as per certificate of first class superintendent approved by GAFTA at seller's choice and expense.
The buyers have the right to appoint their own GAFTA approved supervisor at their expense. In this case the sampling to be done conjointly, as per GAFTA terms and conditions.
2 nd analysis, if any, as per Salamon and Seaber, London.
Quantity: 1500 metric tons
10% +/- in Buyer's option at contract price.
Weight final at place and time of loading, as per first class superintendent certificate at Sellers' choice and expense.
Payment: 100% CAD by telegraphic transfer within 2 banking days after receipt of shipping documents at BNP Geneva.
Seller to provide the following documents:
……
Quality Certificate
Contract: Gafta 119…
Special Conditions: Other terms and conditions not in contradiction with above as per GAFTA 119…"
The contract accordingly incorporated other terms and conditions from GAFTA 119. These included the following:
"5. QUALITY
Official…………certificate of inspection, at time of loading into the ocean carrying vessel, shall be final as to quality.
Warranted to contain not less than
% of oil and protein combined and not more than 1.5% of sand and/or silica. Should the whole, or any portion, not turn out equal to warranty, the goods must be taken at an allowance to be agreed or settled by arbitration as provided for below, except that for any deficiency of oil and protein there shall be allowances to Buyers at the following rates viz:1% of the contract price for each of the first 3 units of deficiency under the warranted percentage: 2% of the contract price for the 4 th and 5 th units and 3% of the contract price for each unit in excess of 5 and proportionately for any fraction thereof. When the combined content of oil and protein is warranted within a margin (as for example 40%/42%) no allowance shall be made if the analysis ascertained as herein provided be not below the minimum, but if the analysis results below the minimum warranted the allowance for deficiency shall be computed from the mean of the warranted content. For any excess of sand and/or silica there shall be an allowance of 1% of the contract price for each unit of excess and proportionately for any fraction thereof. Should the goods contain over 3% of sand and/or silica the Buyers shall be entitled to reject the goods, in which case the contract shall be null and void, for such quantity rejected. For the purpose of sampling and analysis each mark/parcel shall stand as separate shipment. The right of rejection provided by this Clause shall be limited to the mark/parcel or marks/parcels found to be defective.
16. SAMPLING, ANALYSIS AND CERTIFICATE OF ANALYSIS- the terms and conditions of GAFTA Sampling Rules No.124, are deemed to be incorporated into this contract. Samples shall be taken at time and place of loading. The parties shall appoint superintendents, for the purposes of supervision and sampling of the goods, from the GAFTA Register of Superintendents. Unless otherwise agreed, analysts shall be appointed from the GAFTA Register of Analysts."
GAFTA 119 therefore incorporated terms and conditions from GAFTA Sampling Rules No. 124. Those Rules include the following:
"1. GENERAL
1.3 If one of the parties is not represented for sampling or refuses to draw and/or seal samples as called for under the contract, the other party shall under advice to that party call upon a competent independent organisation for the appointment of a superintendent to act on their behalf to draw and/or seal samples according to these Rules. Extra expenses incurred in this connection shall be borne by the defaulting party.
1.4 The word "sealed" shall mean jointly sealed samples by the Buyers and Sellers or their superintendents and shall be sealed in such a manner as to prevent any access to the sample without breaking or removing the seal. The seal's mark should be clearly identifiable and clearly visible.
…
4. QUALITY CERTIFICATION AT TIME OF LOADING
Where the contract provides that a certificate of inspection of a superintendent, government or authority at time of loading shall be final as to quality, then the superintendent, government or authority shall be solely responsible for drawing samples and Rules 1:3, 1:4 and 5 do not apply."
….
5. CONTRACTUAL SAMPLES REQUIRED FOR ANALYSIS TESTS AND ARBITRATION PURPOSES
….
5:1:6 For Marine and Animal Products Sold on Contracts No.9 at Discharge and No.113 and for Feedingstuffs on Contract No.119 at Loading
One Set of samples is required consisting of the following:-
MPC – analysis
MPC – arbitration
Buyers may accept Sellers' analysis but if required by Buyers, any one of the sealed samples together with instructions shall, within 14 consecutive days of sealing, be dispatched to Salamon & Seaber. In the event that this option is not decided at the time of arrival, the choice of analyst shall be that of the instructing party. This analysis shall be final and any claim arising from it shall be made within 14 consecutive days of the date thereof, accompanied by the certificate of analysis or a true copy."
When the cargo came to be loaded, the Buyers exercised their option to appoint their own supervisor, Control Union, to act on their behalf. Accordingly sampling was carried out conjointly by Control Union and Inspectorate Ukraine LLP ("Inspectorate"), the superintendent chosen by the Sellers. Inspectorate issued certificates showing that all analysis results of the cargo were in accordance with the contract specifications.
However, whilst loading was still underway, the Buyers wrote to the Sellers to say that their analysis results in respect of the first loaded portion suggested that the cargo was off specification for protein and fibre content. The Buyers followed this up by sending samples to Salamon and Seaber for analysis. That company produced a certificate stating that the protein content of the cargo was 26.8% (less than the minimum of 32% specified in the contract) and the fibre content was 26.57% (more than the maximum of 23% specified in the contract).
On the 24 October 2008 the Buyers rejected the goods and the documents. They were subsequently sold for US101 pmt by agreement between the parties.
Against that background, the Sellers claimed US670,296.61, the balance of the purchase price, and the Buyers counterclaimed damages of US360,374.52 and £13,071.92. The Sellers' claim succeeded before the first tier arbitrators. However, the Board of Appeal allowed the Buyers' damages claim and dismissed the Sellers' claim for the balance of the price.
st question – Whether on a true construction of the contract, the certificates of quality and condition issued by the superintendent chosen by the Sellers were final and binding
In finding for the Buyers, the Board held that pursuant to the terms of the parties' contract, the Salamon & Seaber analyses superseded the analysis certificates issued by Inspectorate.
The Sellers contended that this conclusion was wrong, relying on the words "Quality and condition to be final at time and place of loading as per certificate of first class superintendent approved by GAFTA at Seller's choice and expense" in the "Commodity" clause.
Having held that the certificates of Inspectorate showed that the cargo met the contract specifications, the Sellers submitted that the Board should have gone on to hold that that certificate conclusively determined, as between the parties, that the expellers were of the quality and met the specifications set out in the contract – see Toepfer v Continental Grain [1974] 1 Ll. Rep. 11 at 13.
In holding that it was the Salamon and Seaber certificate of analysis rather than the certificate of inspection of Inspectorate which was final and...
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