K v A

A contractual obligation to pay in cash requires a commercially recognised transfer giving the seller an unconditional and immediate right to use the funds. Where payment is to a seller’s bank, the buyer must provide the correct destination account details notified by the seller. Payment to the same bank using incorrect details does not discharge the obligation, although the buyer is not a guarantor of the bank’s subsequent processing. An arbitral tribunal commits a serious irregularity where it determines an unargued point without giving the parties an opportunity to address it, and the point might have affected the result. The appropriate remedy is ordinarily remission to the tribunal.

The claimant bought sunflower meal from the defendant under a contract providing for payment in net cash to the seller’s bank. Following email-account hacking and forged payment instructions, the claimant paid the full price to an incorrect account. Only part of the funds was ultimately recovered and credited to the defendant’s account.

A GAFTA Board of Appeal held that the claimant remained liable for the shortfall and awarded the balance and interest. The claimant challenged the award under sections 67, 68 and 69 of the Arbitration Act 1996. The central issues were the meaning of the contractual payment obligation, whether the Board had relied on an unargued provision of GAFTA 119, and whether the Board had failed to deal with the claimant’s arguments.

1. Disposition. The applications succeeded only to the extent that the award was remitted to the GAFTA Board of Appeal to reconsider its reliance on clause 18 of GAFTA 119 after receiving submissions from both parties. The applications were otherwise dismissed.
2. Payment obligation. Payment in net cash, against the background of modern banking practice, permits any commercially recognised method of transferring funds which gives the payee an unconditional and unfettered right to immediate use of the money. A payment to a seller’s bank must identify the beneficiary and destination account. The buyer’s contractual obligation was therefore to transfer the price to the seller’s bank for the seller’s account with the account details notified by the seller.
3. The buyer was not a guarantor of correct processing between the seller’s bank and its customer. Nevertheless, payment using incorrect destination details was not equivalent to cash and did not discharge the contractual obligation. The Board’s literal reference to ensuring receipt in the nominated account overstated the obligation, but its reasoning, read benevolently and as a whole, reached the correct legal conclusion.
4. The authorities concerning the time when funds transferred to a bank become payment to the customer did not assist where the transfer was made with incorrect account details. Those cases concerned transfers accompanied by the correct details.
5. Section 68. The Board’s reliance on clause 18 of GAFTA 119 was a serious irregularity because the defendant had not relied on that provision and the claimant had no opportunity to address it. Substantial injustice did not require proof that the result would probably have differed. It was enough that the Board might well have reached a different view.
6. Where an unargued point provides a successful section 68 ground, the proper course is remission to the parties’ chosen tribunal rather than determination of the merits under section 69. The Board had, however, dealt sufficiently with the claimant’s other arguments. A tribunal need not provide lengthy reasoning if its findings and conclusion show that the argument was considered and resolved.
7. The court declined to determine the challenge to interest on the full price because the defendant undertook not to enforce that part of the award, making the issue practically academic and disproportionate.

The arbitration award was made by the GAFTA Board of Appeal after a complete rehearing de novo. Butcher J directed that the section 68 application be heard with the section 67 application and the section 69 permission application. The Commercial Court remitted the award only for reconsideration of the reliance on clause 18 of GAFTA 119 and dismissed the remaining challenges.