Ayhan Sezer Yag Ve Gida Endustrisi Ticaret Limited Sirket v Agroinvest SA

On an appeal under section 69 of the Arbitration Act 1996, the court may correct an arbitrator’s legal error but must respect findings applying the correct law to the facts. Under a GAFTA default clause, the date of default for an anticipatory repudiation is the date of the repudiatory breach, not the date when it is accepted or the date when performance would otherwise have occurred. Contract construction remains a question of law, informed by the factual matrix and commercial purpose. An advance payment is not forfeitable merely because it secures performance. Clear language, such as “deposit” or an express non-refundability provision, is required before it is treated as irrecoverable despite the absence of loss.

The claimant appealed under section 69 of the Arbitration Act 1996 against an appeal award of a GAFTA Board concerning a contract for the sale of rape meal and soybean meal. The Board had found that the claimant repudiated the contract on 27 April 2018, that the repudiation was accepted on 7 May 2018, and that the date of default was 7 May. It also held that a US$494,500 payment described as an “advance payment/guarantee” was non-refundable.

The issues were whether the date of default was the date of repudiation or acceptance, whether the claimant’s 4 April communication was itself repudiatory, and whether the advance payment was repayable.

1. Section 69 appeal. The court’s task was to identify whether the Board applied the correct legal principles. It was not entitled to rehear mixed questions of fact and law merely because another tribunal might have reached a different conclusion. An error of law exists where the tribunal misdirected itself or no properly instructed tribunal could have reached the conclusion reached.
2. Date of default. The court distinguished an actual breach from an anticipatory repudiation. For an actual breach, Toprak established that the date of default is the date of breach rather than the date of acceptance. Thai Maparn supported the same conclusion for an anticipatory repudiation. The court therefore held that the true construction of the GAFTA default clause made 27 April 2018, the date of repudiation, the date of default. The date could not be postponed to acceptance or to the date on which performance would otherwise have occurred. Bunge v Nidera did not decide that issue and did not assist the defendant.
3. The Board was entitled to find that the 4 April communication was equivocal and did not meet the threshold of repudiation. That was a mixed question of fact and law, and no error of law was shown.
4. Advance payment. Construction of the payment provision was a question of law, although the factual background and commercial purpose were relevant. The words “advance payment/guarantee” provided security and an available fund for loss, but did not clearly make the payment forfeitable irrespective of loss. The parties had not used the word “deposit” or expressly stated that the sum was non-refundable.
5. The appeal was allowed. The date of default was substituted as 27 April 2018 and the advance payment was held repayable. The loss issue was to be remitted to the Board if the parties could not agree.

GAFTA First Tier Tribunal: Held that the advance payment was refundable, that the date of default was 7 May 2018, and that the defendant had not proved loss by reference to that date.

GAFTA Board of Appeal: Reversed those conclusions, finding repudiation on 27 April 2018, acceptance on 7 May 2018, a 7 May default date, and a non-refundable advance payment.

High Court: Allowed the appeal on the date of default and repayment issues, and directed possible remission of the loss issue.