Olam Global Agri Pte Ltd v Holbud Ltd

On an appeal under Arbitration Act 1996, a wrongful declaration of force majeure does not relieve the innocent party from proving that, absent the repudiation, it could have performed the contract and thereby suffered substantial loss. The position may differ where the party in breach is estopped from enforcing the innocent party’s performance obligations, but the estoppel must be established by findings of representation, reliance and detriment.

Under a mercantile contract providing a deadline for substitution of a nominated vessel, the deadline remained effective despite an earlier breach or invalid load-port nomination. Time limits for substitution required strict compliance, and the expired delivery period was not extended by the innocent party’s decision to keep the contract alive.

The claimant appealed under section 69 of the Arbitration Act 1996 against a GAFTA Board of Appeal award concerning an FOB sale of Ukrainian or Romanian corn.

The Board had found the claimant in repudiatory breach after it nominated an unsafe Ukrainian load port during the Russian invasion and declared force majeure. It awarded the defendant substantial damages, rejecting summarily the claimant’s argument that the defendant had been unable to perform because its nominated vessel had been redeployed.

Permission was granted on two questions: whether the defendant had to prove that it could have performed despite the wrongful force majeure declaration, and whether it could nominate a substitute vessel after the contractual deadline and expiry of the delivery period. The appeal also raised whether recourse under section 57 had first to be exhausted.

1. Appeal allowed on the questions of law. The Board of Appeal had committed an error of law in treating the claimant’s wrongful force majeure declaration as sufficient to relieve the defendant from proving that it could have performed the contract. The court was not asked to make fresh factual findings.
2. The compensatory principle requires the innocent party claiming substantial damages for repudiation to prove, as part of the hypothetical assessment of loss, that it would have been able to perform its own obligations absent the repudiation. A wrongful force majeure declaration does not alter that requirement. An exception may arise if the party in breach is estopped from enforcing the obligation, but that requires findings establishing the relevant representation or promise, reliance and detriment.
3. The Board made no express findings of representation or reliance. Those matters did not inevitably follow from its findings. The defendant’s continuing assertion that it intended to perform was also difficult to reconcile with reliance on a representation that performance was unnecessary. The court therefore could not infer an estoppel.
4. Clause 6 of GAFTA 49 required substitution notice no later than one business day before the estimated arrival of the original nominated vessel. The original ETA was fixed by the initial pre-advice. The invalidity of the nominated load port did not make that ETA otiose, extend the substitution period or alter the contractual delivery period.
5. The substitution time limit was a condition requiring strict compliance. The defendant had not shown that it retained a contractual right to substitute on 26 April 2022. In any event, the Board had made no finding that the defendant could and would have substituted another vessel, and the court could not make that factual finding itself.
6. Section 70(2)(b) did not bar the appeal. The Award contained a clear legal error, not an ambiguity capable of correction under section 57. The matter was not remitted to enable the defendant to advance a new estoppel case or obtain further factual findings. The parties were directed to agree the order, with costs reserved for further submissions if necessary.

GAFTA First Tier Tribunal issued Award No. 18-721 on 14 November 2023, finding the claimant in repudiatory breach and awarding damages.

GAFTA Board of Appeal issued Award No. 4702 on 2 September 2024 and awarded substantial damages after rejecting the claimant’s arguments on force majeure and the defendant’s ability to perform.

High Court (Commercial Court) granted permission to appeal and allowed the appeal on the two questions of law. The Award was not remitted for further factual findings.