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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Gulf Agri Trade Fzco v Aston Agro Industrial AG [2008] EWHC 1252 (Comm) (06 June 2008) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2008/1252.html Cite as: [2008] EWHC 1252 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
GULF AGRI TRADE FZCO |
Claimant |
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- and - |
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ASTON AGRO INDUSTRIAL AG |
Defendant |
____________________
Mr Henry Byam-Cook (instructed by Mays Brown) for the Defendant
Hearing dates: 9 May 2008
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Crown Copyright ©
Mr Justice Aikens:
i) Whether in the absence of any finding that Gulf was in breach of contract, the Board of Appeal was entitled to conclude that Gulf had wrongfully repudiated the contract;
ii) Whether a party who serves a premature Notice of Default, acting under a misapprehension as to the correct date of default, necessarily commits a repudiatory breach of contract;
iii) Whether a party incorrectly serving a Notice of Default under the GAFTA Default Clause, either alone or accompanied by an expression of hope that the parties might talk their way out of a crisis at the eleventh hour, thereby commits a repudiatory breach of contract.
A The facts as found by the GAFTA Appeal Board
"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, having 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) 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.
…… "
"We attach a copy of fax from our buyer which is self explanatory. Please treat this as coming from us. You are kindly requested to find an amicable settlement in order to close this file."
"………. Please note that we consider our contract as defaulted and we, hereby, claim the following amount to be paid as compensation ……. Consider this as legal notice and expect the amicable settlement of the case until October 15, 2004. Otherwise we have to claim against your company with the legal procedure. Waiting for your response."
I have set out the terms of the sub-buyers' email exactly as it appears at paragraph 9 of the Appeal Board's Award. There is no finding of fact by the Appeal Board on whether, in accordance with clause 24(a) of GAFTA Form 48, Gulf's sub-buyer had purported to exercise the right to purchase against Gulf and establish a default price. Nor does the GAFTA Appeal Board's Award state what (if anything) was the actual amount being claimed by Gulf's sub-buyers as compensation. There is also no finding by the Appeal Board that Gulf itself attempted to exercise a right to purchase against Aston.
"As you know we are entitled to buy goods afloat and are not obliged to ship them ourselves. The mere fact that the shipment period has passed without an extension being requested does not mean that we are in default. Under GAFTA's 48 Clause 24(f) (sic) we can only be deemed to be in default on the seventh business day following the end of the shipment period. This period has not yet expired. Your Notice of Termination is therefore premature and – as such – is a repudiatory breach of contract. We accept your repudiatory breach and consider the contract at an end. We will notify you with details of our damages shortly. All rights reserved."
"(1) In our email dated October 2, 04, we passed on the message from our buyer to reflect the kind of pressure we are under and it was not intended to put you on default, at least officially.
(2) Apart from above, the fact that sending you any notice before or after expiry of shipment period does not exhaust our rights.
(3) You at any point of time did not ask for extension of shipment period for above mentioned contracts and instead were offering washout. This is very clear evidence that you did not intend to ship the goods during or after the expiry of shipment periods.
(4) Nevertheless we still intend to settle the matter amicably and strongly believe that with some flexibility/improvement on your last offer, we can get our client approval and close this file.
The above are all without prejudice and all rights reserved."
"We noted your message as of today and reject the content in total and full. We consider the contract as closed.
Your message on 02/10/04 clearly stated that you consider the contract as defaulted.
We therefore reinforce our message sent to you on 05/10/04 which we repeat."
Aston's message of 5 October is then set out.
"We reject your purported acceptance of our alleged repudiatory breach. There was no breach on our part for you to accept. On the contrary, you are in repudiatory breach …… for failing …… to ship the goods within the shipment period. Your comments with regard to possible purchase afloat and clause 24(F) of Gafta 48 are irrelevant. You have not given notice of any extention (sic) and in any event, the Extention Clause 9 of Gafta 48 is not applicable in the contracts because the shipment periods in each case exceed 31 days. We hereby give you notice of default for the purposes of clause 24 of Gafta 48. All our rights, including our rights to claim damages are reserved."
B The case before the Gafta Board of Appeal
"(A) Was Gulf's message to Aston of 4 October 2004 a notice of default purporting to terminate the subject contract? [the "default" point]
(B) If Gulf's message to Aston of 4 October was a notice of default purporting to terminate the contract, then was this termination legitimate on either or both of two bases, i.e.
(i) that it was possible to conclude on that date that it was impossible for Aston to ship goods in performance of the subject contract? [the "anticipatory breach through impossibility" point] and/or
(ii) that it was possible to conclude on that date that Aston were unwilling to ship goods in performance of the subject contract [the "anticipatory breach through renunciation" point];
(C) If it was legitimate for Gulf to terminate the Subject Contract for either or both of the above reasons, what was the quantum of damages recoverable by Gulf from Aston?".
"……… In the context of a GAFTA contract, where the "Default" clause is clearly predicated on the termination of a contract, with sales or purchases against the defaulting party, a declaration of default, even a grammatically imperfect one, is likelier than not to be construed as a repudiatory notice."
"Now for this finding to assist Aston in establishing that Gulf's message of 4 October 2004 put Gulf in breach, a breach Aston then accepted on 5 October 2004, Aston would need to prove that Gulf's notice was premature and Aston's suggestion – not one, it must be said, seriously challenged by Gulf - was that Gulf were only entitled to declare default for non-shipment on the 5th not the 4th October. However, given the alternative manner in which Gulf put their case (anticipatory breach through renunciation or impossibility) – and given our findings in this regard it becomes unnecessary for us to make any finding as to whether Gulf were a day early in sending the notice of default and we decline to do so."
C. The Arguments of the Parties on this Appeal
D. Discussion: analysis of the Appeal Board's conclusions of fact
E. Discussion: the three points of law
"Whether a party incorrectly serving a notice of default under the GAFTA Default clause, either alone or accompanied by an expression of hope that the parties might talk their way out of a crisis at the eleventh hour, thereby commits a repudiatory breach of contract".
"….if prior to the date of completion….(iii) any authority having a statutory power of compulsory purchase shall have commenced to negotiate for the acquisition by agreement or shall have commenced the procedure required by law for the compulsory acquisition of the property or any part thereof".
Before completion, Wimpey, the purchasers, sent Woodar a notice purporting to rescind the contract under this condition, on the grounds that the Secretary of State had started the procedure for compulsory acquisition of part of the land. Subsequently a compulsory purchase order was made.
"….it would be a regrettable development of the law of contract to hold that a party who bona fide relies upon an express stipulation in a contract in order to rescind or terminate a contract should, by that fact alone, be treated as having repudiated his contractual obligations if he turns out to be mistaken as to his rights. Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations. To uphold the respondents'[Woodar's] contention in this case would represent an undesirable extension of the doctrine".
E. Conclusions
i) Not relevant, given the explicit and implicit findings of fact and conclusions of the Board of Appeal.
ii) Not relevant, given the lack of findings of fact of the Board of Appeal as to the state of mind of Gulf when it sent the Notice of Default on 4 October 2004.
iii) Yes, on the facts as found by the Board of Appeal in its Award.
Note 1 [1980] 1 WLR 277 at 280 [Back] Note 2 [1975] 2 Lloyd’s Rep 118
[Back] Note 3 [1980] 1 WLR 277
[Back] Note 5 [1953] 1 WLR 106
[Back] Note 7 Lords Keith and Scarman agreed: see particularly pages 294, 298 and 299. [Back] Note 8 [1975] 2 Lloyd’s Rep 118 [Back] Note 9 See page 125, left hand column. Orr LJ agreed with Lord Denning on this point: see page 126.
[Back] Note 11 [1980] 1 WLR 277 at 282H.
[Back] Note 12 [1975] 2 Lloyds Rep 118 at 125, left hand column and page 129 left hand column, respectively.
[Back] Note 14 The majority held that the shipowners’ orders were an anticipatory repudiatory breach: see Lord Wilberforce at page 778E, Lord Fraser of Tullybelton at page 782F, Lord Scarman at page 787D. Viscount Dilhorne considered the order an actual repudiatory breach: page 781B. Lord Russell inclined to the same view: page 787C.
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