SHARP CORP LIMITED v VITERRA B.V.

Under the GAFTA Default Clause, the value of goods for the purpose of assessing damages for non-acceptance is ordinarily assessed by reference to a true substitute transaction. The substitute must reflect the contract goods and the same material terms and conditions, rather than superior benefits arising from changed market circumstances.

The tribunal may use an estimated value where direct market evidence is unavailable. Selecting the best available proxy is generally an evaluative exercise. A court hearing an appeal on a question of law should not substitute its own assessment of competing evidence unless the tribunal adopted a legally erroneous approach.

Viterra sold pulses to Sharp on C&F Free Out Mundra terms under contracts incorporating GAFTA Contract No 24. Sharp failed to pay. The goods were discharged, customs-cleared and held in storage, but Sharp refused to co-operate in releasing them to Viterra. After a consent order enabled Viterra to obtain possession, the GAFTA Board of Appeal assessed damages by reference to the FOB Vancouver price plus freight to Mundra on the deemed date of default.

Sharp appealed under section 69 of the Arbitration Act 1996, arguing that the goods should instead be valued by reference to their customs-cleared domestic market value at Mundra. The central issue was the proper construction and application of sub-clause (c) of the GAFTA Default Clause.

1. The appeal was dismissed. The Board had not erred in law by valuing the goods by reference to FOB Vancouver prices plus market freight to Mundra.
2. The decision in Bunge SA v Nidera BV [2015] UKSC 43 established the relevant framework. Sub-clauses (a) to (c) form a complete contractual code for assessing the market price or value of goods in cases of non-delivery or non-acceptance. Sub-clause (c) permits assessment by the default price under sub-clause (a), or by the actual or estimated value of the contract goods on the date of default.
3. The second alternative assumes a notional substitute contract. It must be a true substitute, on the same material terms and conditions as the lost contract. The claimant cannot obtain the cost of superior benefits which the original contract did not provide. Customs-cleared goods available for domestic sale after the imposition of import tariffs were not a like-for-like substitute for goods sold in bulk on C&F Free Out Mundra terms.
4. The Board was entitled to use the FOB price plus freight as a proxy for the value of a true substitute transaction. It had considered the domestic-market evidence but found it deficient because it related principally to small quantities sold ex warehouse and lacked sufficient evidence of parity, location, quantity and quality. The choice between the competing imperfect proxies was evaluative and depended on the evidence before the tribunal.
5. The Board’s selection of 2 February 2018 as the date of default was not inconsistent with its valuation method. That was the date on which Viterra obtained possession and could resell the goods, while the value could properly be estimated by reference to a notional substitute sale. Storage and legal costs were awarded under the bespoke Non-Payment Clause, not under the Default Clause.
6. The authorities relied on by Sharp did not establish a contrary rule. The Selda [1999] 1 Lloyd’s Rep. 729 concerned different facts and did not decide the meaning of “value” under sub-clause (c). The Board’s approach was therefore legally permissible.

1. High Court (Commercial Court): Jacobs J dismissed Sharp’s section 68 challenge and refused permission on a second question of law. He granted permission under section 69 on the question concerning the valuation of goods under sub-clause (c) of the GAFTA Default Clause.
2. High Court (Commercial Court): Cockerill J dismissed the section 69 appeal and upheld the GAFTA Board of Appeal’s awards.