Sharp Corporation Ltd v Viterra B.v (Previously known as Glencore Agriculture B.v)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Popplewell,Lord Justice Phillips,Lady Justice Asplin |
| Judgment Date | 11 January 2023 |
| Neutral Citation | [2023] EWCA Civ 7 |
| Docket Number | Case No: CA-2022-000629 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 7
Lady Justice Asplin
Lord Justice Popplewell
and
Lord Justice Phillips
Case No: CA-2022-000629
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND
AND WALES COMMERCIAL COURT (KBD)
Mrs Justice Cockerill
Royal Courts of Justice
Strand, London, WC2A 2LL
Chirag Karia KC (instructed by Zaiwalla & Co Ltd) for the Appellant
Michael Collett KC and Talia Zybutz (instructed by Reed Smith LLP) for the Respondent
Hearing dates: 23–24 November, 19 December 2022
Approved Judgment
This judgment was handed down remotely at 2:00pm on 11 January 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
This is an appeal arising from two amended arbitration awards of the same five member GAFTA Appeal Board dated 1 April 2021 (collectively, ‘the Awards’), by which it awarded damages to the sellers of two cargoes, one of lentils and one of peas, for the buyers' default following delivery to Mundra, a privately owned port in Gujarat state in the north west of India.
Jacobs J granted the buyers leave to appeal pursuant to section 69 of the Arbitration Act 1996 on the following question of law arising from the Awards:
“Where goods sold C&F free out are located at their discharge port on the date of the buyer's default, is “the actual or estimated value of the goods, on the date of default” under sub-clause (c) of the GAFTA Default Clause to be assessed by reference to
A) the market value of goods at that discharge port (where they are located on the date of default); or
B) the theoretical cost on the date of default of (i) buying those goods FOB at the original port of shipment plus (ii) the market freight rate for transporting the goods from that port to the discharge port free out?”
The appeal was heard and dismissed by Cockerill J, who nevertheless granted permission to appeal to this court.
The defendant was formerly called Glencore Agriculture BV, and is a Dutch company in the well-known Glencore group engaged in international commodity trading. I shall refer to them as ‘the Sellers’. The claimant is an Indian company engaged at the material time in the business of sale and distribution of pulses in the Indian market. I shall refer to them as ‘the Buyers’. The cargoes with which this appeal is concerned were two of a larger number of cargoes which had been sold by Glencore group companies to the Buyers as part of a continuing trading relationship between them.
The facts
The following facts are taken from the Awards.
The two contracts were dated 20 January 2017 and were in identical terms save as to quantity, price and commodity. The lentils contract was for 20,000 mt of Canadian Crimson Lentils of Canadian origin in bulk, +/- 5 % at the Sellers' option, at US$600 per mt C&F free out Mundra. The peas contract was for 45,000 mt of Canadian Yellow Peas of Canadian origin, +/-5% at the Sellers' option, at US$339 per mt C&F free out Mundra. Payment under each contract was to be either by letter of credit against documents at sight, or by cash against documents (‘CAD’) at the Buyers' option. If the CAD option were exercised, payment was to be made 5 days prior to the vessel's arrival at the discharge port, against presentation at the Buyers' bank of freight prepaid bills of lading made out to order and endorsed in blank with the Buyers as the notify party, together with commercial invoice and other specified documents evidencing the origin and quality of the goods. Each contract had a bespoke “Non Payment Clause” which provided, amongst other things, that in the event of non-payment, the Buyers agreed to the Sellers reselling or transferring the goods to a new buyer, and would extend full cooperation to the Sellers by way of providing documents and authorisation to the authorities concerned to enable changes to the buyers' details accordingly. “Free out” connotes that the entire costs of discharge are for buyer's account (as distinct from a C&F contract simpliciter in which the seller bears the cost of discharge from hold to the ship's rail) as was confirmed by the express terms of the contracts. Demurrage was to be for the Buyers' account.
Each contract provided that all terms and conditions not conflicting with the express terms of the contracts should be as per GAFTA Contract No 24. GAFTA Contract No 24 has a default clause at Clause 25 which is common to many of the GAFTA standard contract forms. So far as material it provides as follows:
“25. DEFAULT
In default of fulfilment of contract by either party, the following provisions shall apply:
[a] The party other than the defaulter shall, at their discretion have the right, after serving a notice on the defaulter to sell or purchase, as the case may be, against the defaulter, and such sale or purchase shall establish the default price.
[b] If either party be dissatisfied with such default price or if the right at [a] is not exercised and damages cannot be mutually agreed, then the assessment of damages shall be settled by arbitration.
[c] The damages payable shall be based on, but not limited to, the difference between the contract price of the goods and either the default price established under [a] above or upon the actual or estimated value of the goods, on the date of default, established under [b] above.”
On 26 April 2017 the Sellers nominated the vessel RB LEAH (‘the Vessel’) under both contracts and sought the Buyers' declaration of payment method.
On 10 May 2017 the Sellers shipped 21,000 mt of lentils and 47,250 of peas on the Vessel under bills of lading numbered 1–14.
On 18 May 2017 the Buyers declared CAD as the payment option for both the cargoes.
On 30 and 31 May 2017 the Sellers sent the original shipping documents to their own bank for prompt onward presentation to the Buyers' bank. Copy documents were provided directly to the Buyers the same day.
The Buyers did not pay for the goods 5 days before arrival of the Vessel at Mundra. On 16 June 2017, 3 days before the ETA of Vessel at Mundra, the Buyers sent an email proposing payment by the end of July, paying 4% interest, with discharge of the goods without presentation of the bills of lading against a letter of indemnity.
The vessel arrived at Mundra on 19 June 2017. It appears from a message sent by the Buyers on that day that the Sellers agreed to accommodate the discharge of the cargo with a letter of indemnity in place of presentation of original bills of lading, as they had on a previous cargo.
The cargoes were granted customs clearance on 20 June 2017.
On 23 June 2017, pursuant to a request from the Sellers the previous day, the Buyers sent a letter addressed to the Sellers which is described in the Awards as a letter of indemnity. It is not clear from the Awards whether there was a single letter or one for each cargo, but nothing turns on that and I shall refer to it/them simply as ‘the LOI’. It recorded the Buyers' request to the Sellers to discharge the cargo “against buyers' LOI” in order to mitigate demurrage exposure. It listed the bill of lading details for the cargo or cargoes. It promised payment by the end of July. It went on:
“Since cargo will need to be custom cleared for shifting cargo out of port due to space shortage inside port, we hereby irrevocably and unconditionally confirm that all cargo will be discharged and stored in custody of Mundra Port and no delivery shall be taken by [the Buyers] or any party related to [the Buyers] or representing [the Buyers] or acting on behalf of [the Buyers] against above mentioned Bs/L unless written instructions are received from [the Sellers] after cargo has been made with Original Bs/L having been submitted to vessel agent.
We irrevocably and unconditionally confirm to comply with the above conditions and shall remain liable for all consequences for not adhering to the above.”
There is clearly something missing after the word cargo in the expression “after cargo has been made”, which might be the word “discharge” or “payment”. I shall return to the alternative possibilities below.
The peas and lentils were accordingly discharged, and placed into storage by the Buyers in the custody of the port owners (‘Adani Port’), customs cleared.
Following discussions in July and August 2017 about allowing the Buyers further time for payment for these and other cargoes purchased by the Buyers from Glencore, on 8 September 2017 the Sellers set a payment deadline for all cargoes of 30 September 2017.
On 15 September 2017 the Buyers issued “no objection” letters to the customs authorities in relation to 32,500 mt of the peas cargo, saying that they could not pay for them and had no objection if the customs clearance documents were changed into names of the Sellers' nominees.
On 25 September 2017 there was a meeting between the parties in Delhi. In relation to the 32,500 mt of the peas cargo which the Buyers said they no longer wished to take, a washout agreement was signed, terminating the peas contract to that extent, with the Buyers agreeing to pay compensation in the total sum of US$967,500 in two instalments on 1 March and 1 September 2018.
The next day, 26 September 2017, Addenda were signed in respect of the lentils and the remaining 15,000 mt of peas, giving the Buyers further time to pay. For the lentils it was agreed that the Buyers would pay $518 per mt, amounting to some 86% of the price, “upon signature of the amendment, to be paid latest Oct 15 2017”; and the balance in two further instalments of US$ 41 per mt on each of 1 May and 1 September 2018 against presentation...
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Court Of Appeal Considers GAFTA Default Clause And Damages For Non-Acceptance Of Goods (Sharp v Viterra) (Video)
...to value those goods on the alternative ex warehouse basis. Sharp Corp Ltd v Viterra BV (previously known as Glencore Agriculture BV) [2023] EWCA Civ 7 What are the practical implications of this The practical implications of this ruling remain to be worked out in future cases. However, par......