Thai Maparn Trading Company Ltd v Louis Drefyus Commodities Asia Pte Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Beatson |
| Judgment Date | 04 October 2011 |
| Neutral Citation | [2011] EWHC 2494 (Comm) |
| Docket Number | Case No: 2010 FOLIO 1089 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 04 October 2011 |
[2011] EWHC 2494 (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 Beatson
Case No: 2010 FOLIO 1089
Timothy Young QC (instructed by Elborne Mitchell LLP) for the Claimant
Philip Edey QC (instructed by Hill Dickinson) for the Defendant
Hearing date: 14 September 2011
Mr Justice Beatson:
These are appeals under section 69 of the Arbitration Act 1996 ("the 1996 Act") against arbitration awards Nos. 4188 and 4196 of the Board of Appeal of the Grain and Feed Trade Association Ltd ("GAFTA"), both dated 19 th August 2010.
Both awards (by identically constituted Boards) concern contracts for the sale of rice FOB Bangkok/Kohsichang based on GAFTA form 120. In both, the Board upheld the respective first tier awards (made respectively on 24 July and 13 August 2009) that the Claimant, as FOB seller (the "sellers") repudiated the contract by making it clear to the Defendant (the "buyers") that they did not and would not have cargo available to meet the vessel nominated in each case by the buyers. It was held that such repudiation was a "default" for the purposes of clause 23 of GAFTA 120; and that the buyers were therefore entitled to damages assessed as at the date of such default pursuant to clause 23. The commercial background is that, at the material times, the price of rice was rising and was higher than the contract price.
In the case of both awards, the sellers' case before the arbitrators was that the buyers had inter alia failed to serve Notice of Readiness on the sellers, to confirm the quantity to be loaded as required by the contract, given short notice of the arrival of the vessel which the sellers were entitled to regard as non-contractual, and that the nomination was a sham because there was no intention that the sellers' cargo would be loaded on the vessel nominated: paragraph 5 of each of the awards.
In the case of each award, the grounds of appeal identify three questions of law on which Mr. Young QC, on behalf of the sellers, submitted the Board erred. The first two questions (concerning liability) arise in both awards. There is a difference in the third question (concerning quantum) which results from factual differences concerning the date on which it is said the buyers accepted the sellers' default.
The first two questions are:—
"(a) Where an FOB contract expressly requires a buyer to give a vessel nomination notice a specified period of time before the vessel's estimated time of arrival (or readiness to load), is the seller entitled to reject (or not accept) a notice as given by that buyer which contains an uncontractual shorter period of notice?
(b) Is the seller in repudiation or renunciation of contract where, in receipt of an uncontractually short period of notice, he rejects that notice and says that he does not have cargo to meet the vessel as thus nominated to load on an uncontractual date?"
In both cases the third question is premised on the assumption that the sellers wrongly rejected the nomination notice, and relates to whether the sellers' liability is for substantial damages, as the Boards held, or only for nominal damages, because the buyers did not accept the sellers' renunciation in the case of award 4188 until after end of the shipment period, and in the case of award 4196 until the last date of the shipment period.
(c 1) In the case of award No 4188 the question is: Where a seller wrongly rejects such a nomination notice but the buyer neither accepts that rejection as terminating the contract before the end of the shipment period nor secures the lifting vessel's presentation to load within that period, is the seller in repudiation of the contract so as to generate a liability in damages (calculated by reference to the time of the wrongful rejection)?
(c 2) In the case of award No 4196 it is: Where a seller wrongly rejects such a notice but the buyer does not accept that rejection as a repudiation or present a vessel for loading at or about the time specified in the notice, or thereafter give any notice advising a fresh time of readiness to load of a vessel either at all or by 7 working days prior to the end of the contractual shipment period, is the seller liable for the repudiation or renunciation of the contract so as to generate a liability in substantial damages (calculated by reference to the time of the rejection of the notice as given)?
The contracts
The contracts were on materially the same terms save for the shipment period: see paragraph 3 of both awards. In the first contract (the subject of award 4188) it was 1 February 2008 – 31 March 2008. In the second contract (the subject of award 4196) it was 1 March 2008 – 30 April 2008.
The other relevant terms are:
" Quantity: Exact quantity to be declared on Buyers nomination of vessel. Partial shipment/cargo/part cargo allowed at buyers' option
Loading terms: Buyer to give minimum 7 (seven) working days written pre-advise [sic] of vessel's ETA.
Notice of Readiness (NOR) tenderable in writing between the normal business hours…
…
Governing contract(s) All other terms and conditions as per GAFTA 120 where not in conflict with terms contained herein…"
The relevant clauses of GAFTA 120 are:
" PERIOD OF DELIVERY
…
6…Nomination of vessel– Buyers shall serve not less than…..consecutive day's (sic) notice of the name and probable readiness date of the vessel and the estimated tonnage required…Provided the vessel is presented at the loading port in readiness to load within the delivery period, Sellers shall if necessary complete loading after the delivery period
…
…
Notification of the vessel's readiness to load at the port of loading shall be served on sellers at their office at the port between [specified hours].
…
Any time lost at Port of Loading through riots, strikes or any cause whatsoever beyond Seller's control, not to count as laytime.…
21 NOTICES
…
For the purposes of serving notices in a string, any notice received after 16:00 hours on a business day shall be deemed to have been received on the business day following.
…
23. DEFAULT– In default of fulfillment 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 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) above 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 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.
…"
The findings of the Boards of Appeal:
The material findings of fact in the two awards are, with the exception of the date on which the buyers accepted the sellers' renunciation, very similar. So are the questions in the grounds of appeal and the submissions. It is therefore convenient to set out the findings of fact and law in each award and then to consider the parties' submissions together. Unless otherwise stated, paragraph references are to the award under consideration.
(1) Award 4188
Award 4188 contains the following findings:
(a) On Friday 7 March 2008 the buyers nominated MV Med Salvador or substitute to the Sellers to load 17,500 mts in complete fulfillment of the contract and gave an estimated time of arrival at Kohsichang of 11 March, saying that they expected the sellers to bring the cargo alongside latest 17 March: paragraph 4.1.
(b) "Counting the seven days pre-advice requirement under the Contract [i.e. "7 working days"], effectively meant the vessel could not be contractually nominated to load until 19 March. Buyers had therefore failed to give the requisite seven working days notice of the vessel": paragraph 8.14.
(c) The buyers' breach "was not considered enough for the nomination to be rejected"; "both parties agreed this was an issue of warranty rather than of condition". "Sellers did not have to abide by the short notice of vessel as they were entitled to the seven working days before their obligation to load commenced", they were thus "protected by the contract", and "in other words Buyers' breach of serving the required notice period was remediable at no cost to Sellers as they only had to accept the vessel as per contract from 19 March": paragraph 8.15.
(d) The buyers "had fulfilled their obligation in declaring the exact weight of the goods to be loaded…. in complete fulfillment of contract in their nomination of MV Med Salvador…[and]…duly met their contractual obligation in terms of tonnage to be loaded": paragraph 8.16.
(e) "The Buyer's nomination of vessel [contained] all the information it was required to under the Contract" and the notice sent on 7 March was "valid and contractual": paragraph 8.17.
(f) "On 13 March Sellers sent the following message to Buyers:
'[Thanks] for [your] fax dated March 07, 2008…wish to advise you that as we are not ready with cargo and printed bags, and hence, we cannot accept your above nomination'": paragraph 4.2.
(g) The Sellers' words were clear: they said they could not accept the nomination "as they were not ready with cargo and printed...
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