Vinergy International (PVT) Ltd v Richmond Mercantile Limited FZC

A contractual notice-and-remedy procedure does not ordinarily govern the separate common-law right to accept a repudiatory breach as terminating a contract. The question depends on the construction of the particular contract, read as a whole and in its commercial context. A clause dealing with breaches capable of remedy may not apply to an incurable repudiatory breach. Where an alleged error cannot affect the outcome because another independently sufficient breach justified termination, the appeal fails.

Vinergy appealed under section 69 of the Arbitration Act 2016 against an arbitral award concerning Richmond’s termination of a long-term master supply agreement. Vinergy also challenged the award under section 68, but did not pursue that challenge substantively.

The tribunal found three repudiatory breaches, including breach of exclusivity, prolonged non-payment and non-payment of demurrage. It held that Richmond had lawfully terminated the agreement and awarded damages. The appeal raised four alleged errors of law, principally concerning contractual notice requirements, payment obligations and damages.

The appeal and the section 68 challenge were dismissed.

1. Clause 17.1.1 created an express contractual right to terminate following failure to observe a term and failure to remedy the breach after notice. It did not expressly govern the common-law right to accept a repudiatory breach. Reading clause 17 as a whole, the notice requirement applied only to the specific contractual right in clause 17.1.1.

2. The authorities concerned differently worded contracts. Stocznia Gydinia SA v Gearbulk Holdings Ltd [2010] QB 27 showed that the issue depended on the contractual language, the agreement as a whole and its commercial background. Lockwood Builders v Rickwood and BSkyB v HP Enterprise Services UK Ltd did not establish a rule requiring notice before every common-law termination.

3. The tribunal had found that the exclusivity breach was incapable of remedy. That finding could not be challenged on the appeal. Even if clause 17.1.1 applied to remediable repudiatory breaches, it could not apply to that breach. Richmond was therefore entitled to accept it as terminating the agreement without waiting 20 days.

4. The remaining grounds failed. The payment issue was unnecessary to decide because the exclusivity breach independently justified termination. The tribunal was also entitled, on the limited account of the without-prejudice agreement recorded in its reasons, to conclude that Richmond’s fixed discount did not constitute breach. Vinergy therefore lacked the necessary breach to support its damages argument.

The section 68 challenge disclosed no serious procedural irregularity. Such a challenge is a long-stop remedy available only in extreme cases.

The judgment concerned an appeal under section 69 of the Arbitration Act 2016 against an arbitral award dated 25 September 2014. Leave to appeal had been granted by Burton J. The High Court dismissed the appeal.