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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Huyton S.A. v Distribuidora Internacional De Productos Agricolas S.A. [2002] EWHC 2088 (Comm) (25 October 2002) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2002/2088.html Cite as: [2002] EWHC 2088 (Comm)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		25 October 2002

Mr Justice Andrew Smith :

1. This case is about a shipment of Ethiopian sesame seeds sent to Mexico and about its storage in Mexico. I first say something about sesame seeds, particularly Ethiopian seeds, about importing agricultural products such as sesame seeds into Mexico and about warehousing in Mexico.

Ethiopian sesame seeds

2. Ethiopian sesame seed is grown in the north of the country around the border with Sudan. It is generally harvested in late October or November. It is then transported south to Addis Ababa where it is stored in warehouses, being cleaned as and when it is required for export. It is packed into jute bags.
3. In order to be exported by sea from Ethiopia, the seeds are carried by road from Addis Ababa to the port of Assab in Eritrea on the Red Sea. Generally sesame seeds are carried to Assab only when the lifting vessel is more or less ready to load. This is because Addis Ababa is at a high altitude, and therefore is better for storage over extended periods than Assab. Moreover, there are only limited storage facilities in Assab. The goods are carried to Assab by trucks, which typically carry some 20-30 mt of seeds.
4. The greater part of the world's production of sesame seeds is crushed for the production of oil (a process which also produces a residual paste), although significant quantities are eaten and used to produce tahina and halva. Seeds that are crushed are often (but not always) first peeled, or hulled, which increases the oil yield because the skins would absorb oil when the seeds are crushed.
5. Sesame seeds are oil seeds and contain free fatty acid ("ffa"). A low ffa content is a sign of freshness, and the lower the ffa content, the longer the life of the product from the seeds. High ffa content is an indication of rancid and ill-tasting seeds.
6. Oil seeds for crushing are generally traded with a warranty as to the oil content and the maximum ffa content. The expert evidence was that peeled or natural sesame seeds with an ffa content of more than 2% cannot be marketed in Europe or the USA. Mr Ian Bollard, the defendants' expert witness, said that this applies to "most (if not all) other consumption areas of the world". Mr Bollard also explained the difficulty of blending with superior seeds those with a high ffa content. The evidence of Mr K. Karamanoukian, the claimants' expert witness, was that sesame seeds with up to 3% of ffa might be sold in developing countries, particularly Egypt. It is safe to conclude that seeds with a higher ffa content than 2% would be difficult to sell for human consumption. If seeds are traded on the basis that they are fair average quality (or "FAQ"), this connotes that their ffa content is not more than 2%.
7. The age of the seeds can affect the ffa, in that there is a danger, not an inevitability, that it will increase in older seeds, and once ffa starts to increase, it does so rapidly. (The connection is relied upon by the defendants, who plead that the specification describing the goods as "ffa 2%" designated them as being new crop). Storage conditions are also important. In good conditions seeds from one season can be stored into the next. If stored in poor conditions (that is to say at high temperatures, in moist conditions or without being properly aired) there are dangers both of infestation from insects and bacteria and also of increased ffa.

Importing agricultural products into Mexico

8. In accordance with article 23 of the Federal Law of Agricultural Health (or Ley Federal de Sanidad Vegetal) the importation into Mexico of products such as the sesame seeds in this case is controlled by the Mexican Agricultural Authorities, who grant phytosanitary certificates to permit importation. Article 24 of that law (together with subsidiary legislation) provides that in the circumstances of this case the importation of the goods must satisfy the phytosanitary authorities of the port or place of entry that the goods comply with the "Norm" (a form of subsidiary legislation) numbered NOM-006-FITO-1995 and dated 26 February 1996.
9. A person seeking to import an agricultural product must make a written request to the Ministry of Agriculture ("Sagar") for permission to do so. Within prescribed periods (ten days where the phytosanitary requirements are known to Sagar and 120 days where they have to be researched), Sagar have to approve or refuse the application to import; and if the application is approved, Sagar will set out the phytosanitary requirements that must be met by the importer.
10. As I shall describe, the defendants, Distribuidora Internacional de Productos Agricolas SA de CV ("Dipasa"), filed an application with Sagar for the importation of the sesame seeds on 8 June 1998. Sagar required that the importer, Dipasa, keep the goods under quarantine until processed and that a sample should be taken and analysed in an approved laboratory.
11. Once the specified phytosanitary requirements have been satisfied, Sagar issue a phytosanitary certificate of importation, which is to be presented to the customs authorities in order to obtain customs clearance for importation. In this case, Dipasa obtained a phytosanitary certificate of importation on 9 June 1998.
12. Upon receiving the phytosanitary certificate of importation, the importer, or his customs broker, prepares an import application, or "pedimento", to the customs authorities at the port or place of importation. Article 36 of the Customs Law (Ley Aduanera) stipulates the documents that are to be presented to the authorities with the pedimento. They include the applicable bill of lading or airway bill validated by the carrier or his agent, a certificate of origin, a commercial invoice and a document that evidences compliance with any regulation imposed by the Mexican authorities for the importation of the product, that is to say with the phytosanitary requirements.
13. The importer presents the pedimento, the phytosanitary certificate of importation and the documentation mentioned in article 36 to the customs authorities. Taxes and duties are paid. The customs authorities decide whether or not they require inspection of the goods. If no inspection is required or after inspection, as the case may be, the product is cleared by customs, who signify this by stamping the pedimento.
14. Article 60 of the Federal Law of Agricultural Health provides that, where, as here, the phytosanitary requirements provide that the import is to remain in quarantine until processed, the importer is obliged to keep it in a place that he designates, or if the importer does not designate a place, where the authorities designate. Until released by Sagar, the import may not be moved or sold, but Sagar might authorise its re-export (article 27 of the Law) or order that it be re-exported or destroyed if it did not comply with the applicable phytosanitary provisions (article 30).
15. Accordingly in this case the authorities issued to Dipasa a certificate of quarantine custody on 10 June 1998, after samples of the seeds had been taken for analysis. A certificate for the release of the goods from custody was eventually issued on 16 November 1998, and thereafter there were no sanitary restraints upon the sale and movement of the sesame seeds.

Warehousing in Mexico

16. Until the 1990's warehousing in Mexico was largely under the control of the government, the warehouses being owned by a state body called Andsa. Andsa worked closely with another state owned company, Conasupo, which dealt in agricultural produce, were the purchaser of last resort for Mexican farmers, set minimum prices and controlled imports. In the 1990's Andsa were privatised, and for this purpose their business was split into three separate entities covering different geographical areas of the country. The business in the central Western area was transferred to a new company called Almacenadora Centro Occidente S.A. Organizacion Auxiliar De Credito ("Acosa"). Acosa started operating as a state owned enterprise in the middle of 1996, and the government completed the transfer of business in July 1998. The commercial manager of Acosa is Mr Jose Mosqueda. He had worked for Andsa since 1971, left Andsa in 1993 and returned to join Acosa in October 1996.
17. Warehousing companies such as Acosa are classified in Mexico as auxiliary financial institutions, and are licensed by the Mexican Banking Commission and by the Ministry of the Treasury. They are closely regulated and controlled. They are authorised to issue certificados de deposito (or certificates of deposit, "cd's"), which are warehouse receipts, and which may be negotiable or non-negotiable.
18. Licensed warehouses can issue cd's in two different circumstances. The first is where goods are stored in a warehouse owned or leased by the warehouse company, whose own staff man the warehouse. Alternatively, a customer may request a licensed warehouse to be responsible for the storage of the goods in premises belonging to or leased by him. The warehouse assumes this responsibility under a procedure called "habilitacion" or "enabling". This procedure is very commonly used in Mexico. In order to be "enabled" for warehousing, premises must be surveyed and the financial status of the applicant must be examined. Once this procedure is completed, the warehousing company can, and in some circumstances must, issue cd's in respect of goods in the "enabled" premises. The warehousing company then undertakes full responsibility for the goods towards their owner or pledgee, although they are stored in the warehouse owned by the customer.
19. Generally speaking, a warehousing company's obligation to issue cd's is the same whether a warehouse is owned by the warehousing company or is "enabled" by them, and it will issue them only at the request of its customer. The exception is this, that if the warehousing company owns the warehouse, then it will issue a non-negotiable cd in favour of its customer when the goods are received even without a specific request from the customer that it do so. However, whether the premises are owned by it or enabled, a warehouse company will not issue a cd in favour of a third party or issue a negotiable cd without a written request from its customer.
20. The advantages of this enabling system are, in particular, that it allows goods to be stored at a location more convenient to the customer, so reducing transport and handling expenses and saving time. On the other hand, Mr Mosqueda explained that this procedure involves the expense of the warehousing company maintaining careful surveillance of the enabled warehouse. Acosa's practice is to charge 0.3% of the value of the goods each month for these services. However, they impose charges only after a cd has been issued.
21. The defendants, Dipasa, arranged for their premises at Cortazar to be "enabled" under an agreement with Acosa dated 30 June 1998. Acosa undertook to receive their goods owned by Dipasa or by third parties and in some circumstances to issue certificates of deposit and pledge bonds. (Pledge bonds, or "donus de prevda", can be issued with a negotiable cd and held by a third party so as to give him a security interest in the deposited goods).

The nature of the dispute

22. Huyton SA ("Huyton") are a Swiss company with offices in Geneva, who trade in agricultural commodities including sesame seeds. They negotiate sales and purchases through their agent, Agrimpex Co. Ltd ("Agrimpex"), who have offices in North London. The main shareholder and managing director of Agrimpex is Mr P.G. Philippas.
23. Dipasa are a Mexican company. They were formed in 1974 by Mr C.A.Coello, who has always been and still is their Chairman. In 1990 Dipasa Europe BV ("Dipasa Europe") were formed in Holland to distribute Dipasa's products in Europe and to process sesame seeds. Between 1994 and 1999 Mr Coello was based in Holland with Dipasa Europe. However, he remained, and remains, the driving force behind Dipasa. Mr Coello owns 70% of the shares in Dipasa. Mr Alberto Baptista, Dipasa's managing director, owns 15%. Mr Coello made the important decisions in relation to Dipasa's dealings with Huyton about which this case is concerned.
24. Dipasa deal in and process sesame seeds on a large scale. They have premises in Cortazar, Mexico, a small town near Celaya, north of Mexico City. The premises comprise a complex of buildings around a central square, including a production plant and a warehouse or storage area.
25. This litigation concerns part of a parcel of some 8,375 mt Ethiopean whitish sesame seeds which Huyton agreed to buy from Haleka Weldehaimanot Soquar ("Haleka") of Addis Ababa, Ethiopia. Haleka were owned by a Mr Haleka, an Eritrean citizen based in Addis Ababa. (For convenience, I refer here to Huyton and Haleka. As I shall explain, associated companies were also involved.)
26. Originally Huyton intended to sell the whole parcel to Guatemalan buyers. However, in the event they delivered only about 5,000 mt of the parcel to Guatemala. The balance, some 3,375 mt, was sent to Mexico, and was the subject of a Joint Venture Agreement ("JVA") made between Huyton and Dipasa and dated 4 June 1998. That agreement was made when the parcel had been shipped and was being transported from Ethiopia on the MV "Zarina 1". The parties were, according to the recitals to the JVA, "desirous of entering into a joint venture agreement to purchase and sell the goods to third parties, whether as is or further processed".
27. The 3,375 mt of sesame seeds were delivered to Mexico in June 1998. Before the vessel arrived, Dipasa had told Huyton that the goods would be stored with Acosa, and Huyton had given instructions to Acosa that they were to be stored in their name. In the event, in circumstances that I shall describe, the sesame seeds were taken to Dipasa's premises at Cortazar. The JVA did not proceed smoothly. At the end of August 1998 or thereabouts Huyton and Dipasa agreed to end the JVA and to replace it with a sale agreement (the "SA") under which Huyton agreed to sell the sesame seeds to Dipasa. Disputes between the parties, however, continued. By a faxed letter dated 29 October 1998, Huyton wrote that Dipasa were "in default" and that they regarded "our contractual relationship as at an end". In their reply dated 30 October 1998 Dipasa replied that Huyton were in repudiatory breach of "the contracts dated 4^th June and/or 27^th August 1998" (referring to the JVA and the SA), and that they accepted the repudiation.
28. In these proceedings Huyton are seeking damages from Dipasa for breach of the JVA on the grounds that, when they sent their fax dated 29 October 1998, Dipasa were in repudiatory breach of the JVA, and that they were entitled to elect, and did elect, to terminate it. They argue that they are free to sue on the JVA despite agreeing to replace it with the SA because they were entitled to rescind the SA, and by the fax of 29 October 1998 they elected to rescind it. Their claim is of the order for US$ 3 million, but it has been agreed that I should not determine the quantum of that claim in this judgment.
29. Dipasa bring a counterclaim in which they claim damages for breach of the SA and the JVA. The breaches of the SA that Dipasa allege are first that Huyton failed to provide proper documentation relating to the goods; and secondly that the sesame seeds did not correspond with their description because they were too old, not of the proper quality and infested. With regard to the JVA, Dipasa allege that the quality of the seeds was not that warranted. Again, determination of quantum has been deferred.
30. The shape of this litigation is explained in part by the fact that the SA, as ultimately agreed by the parties, contained an arbitration clause to which I shall refer. I was informed that Huyton have brought arbitration proceedings under the clause, and duly renewed the reference under the FOSFA rules. I have been given little information about the reference. However, in these proceedings Huyton have accordingly made no claim under the SA. Huyton have not, however, applied for a stay of Dipasa's counterclaim for damages for breach of the SA. Dipasa's position is that they would not object to their claim under the SA being stayed and being arbitrated (although no application to stay was made timeously), provided that no time bar is asserted against them in the reference, but they have not been given reassurance by Huyton about that. Therefore Dipasa's claim under the SA is pursued in these proceedings.
31. In order to determine the disputes between the parties, I must set out the history of the transactions between them, and of Huyton's transactions with Haleka and the proposed Guatemalan purchases in some detail. This is necessary particularly in view of Dipasa's case that the seeds were old crop. Throughout the relevant period Agrimpex acted for Huyton, and Dipasa Europe acted for Dipasa. In this judgment, I shall not specify whether Huyton were acting through Agrimpex or whether Dipasa were acting through Dipasa Europe unless it is of significance.

The Sale Agreement

32. Huyton's pleaded case is that they have rescinded the SA that they made on 27 August 1998 because they made it as a result of and in reliance upon misrepresentations, which they allege were fraudulent. As I shall explain, they have applied for permission to amend their pleadings first to plead that the sale agreement was concluded on 1 September 1998, and secondly to plead that they were entitled to rescind the SA not only on the grounds of misrepresentation but also on the grounds of mistake. I shall determine these applications later in this judgment. I first explain how the SA was made.
33. I do not understand it to be disputed, and in any event I find it to be the case, that a telephone conversation took place between Mr Philippas and Mr Coello on 27 August 1998. There are differences between the parties about what was said in it, and I shall return to these later in this judgment. However, it is common ground that Mr Philippas and Mr Coello agreed, at least in principle and whether or not to contractual effect, that Dipasa should buy the seeds from Huyton.
34. After the telephone conversation had taken place, on 27 August 1998 Huyton sent a fax message to Dipasa in which they confirmed that they had sold to Dipasa "all the cargo stored in Mexico" from the MV Zarina 1. They attached an agreement which they requested Dipasa to countersign and return.
35. The attached agreement read as follows:

"Between: Huyton S.A

Rue Adrien Vallin No 2

1201 Geneva

Switzerland (Huyton/sellers)

and Dipasa Mexico

P.O. Box 60

Cortazar, GTO 38300

Mexico (Dipasa/buyers)

The following agreement is in cancellation and replacement of the agreement dated 4/6/98, which is cancelled in its entirety at par without any recourse to either party. Accordingly, Huyton confirm having sold the following to Dipasa:-

Commodity:- Ethiopian whitish sesame seeds crop 1997/1998.

Quantity:- Min/Max 3434.872 gross metric tons.

Delivery:- Ex MV 'Zarina 1' stored at Almacenadora Centro Occidente S.A., Celaya, Mexico as per the schedule outlined under the payment clause here below.

Price:- US$ 695 per gross metric ton cost and freight free out Lazaro Cardenas, Mexico.

Packing/Quality/Description/Condition/Gross Weight/Analysis:-final in all respects as is stored at Almacenadora Centro Occidente S.A., Celaya, Mexico, which buyers have already inspected and approved.

Payment:- 100% cash by T/T at buyers cost upon presentation of sellers commercial invoice either by fax or mail prior release of the goods from the warehouse.

Buyers shall effect payment of the goods as follows:-

The value of 1500Mtons with value date latest 3/9/98

The value of 1000Mtons with value date latest 15/10/98

The value of 500 Mtons with value date latest 30/10/98

The value of 434.872 with value date latest 30/11/98

Therefore sellers shall present (either by fax or mail in sellers option) to buyers their invoice prior to taking delivery of the goods. However irrespective of when buyers do take delivery of the goods, buyers shall effect payment against each invoice within the value dates as mentioned here above.

Immediately upon receipt of payment by sellers bank, sellers shall instruct the warehouse to release the relevant quantity to Dipasa.

Other
Conditions:- Dipasa shall be responsible for and pay for all costs and expenses from when the vessel arrived at Lazaro Cardenas up to and including the storage charges in the said warehouse. Such costs and expenses shall include but not be limited to discharging, expenses, arranging import procedures, custom clearance, stevedoring, transport to the warehouse unloading at bonded warehouse, all storage costs/charges and surveyors.

Huyton shall only be responsible for any demurrage claims from vessel owners at Lazaro Cardenas, Mexico, insurance of the goods, and all costs/arrangements for vessel's call at Lazaro Cardenas, Mexico up to and including 28^th August 1998. Thereafter all costs of whatever nature shall be for the account and full responsibility of Dipasa.

Guarantee:- Dipasa Europe BV hereby join in this agreement as Guarantors of the performance of Dipasa under the agreement.

All other terms and conditions not in contradiction with the above as per FOSFA 79 including arbitration in London."

36. "FOSFA 79" is a reference to a standard form of contract of the Federation of Oils, Seeds and Fats Association Limited, which includes an agreement to refer to London arbitration "any dispute arising out of this contract, including any question of law in connection therewith". I should mention that Mr Philippas' evidence was, and I accept that, the reference to 3 September 1998 in the provision concerning payment was a mistake by Huyton for 30 September 1998.
37. There followed further telephone conversations between Huyton and Mr Coello. As a result, on 1 September 1998 Huyton sent a fax to Dipasa Europe confirming changes in the dates when Dipasa was to pay for the goods and that otherwise the terms and conditions in the fax of 27 August 1998 remained unchanged.
38. The form of agreement sent to Huyton on 27 August 1998 referred to the goods being sold "as is stored at Almacenadora Centro Occidente SA, Celaya". The goods were not stored there, but at Dipasa's premises in Cortazar. Huyton did not know this, as I find for reasons that I shall explain, and Dipasa did not mention this to Huyton or correct the form of agreement.
39. There are disputes between the parties as to the proper interpretation and effect of the SA agreement, in particular whether Huyton gave any warranty as to the age and quality of the goods and whether Huyton were under any obligation to provide to Dipasa commercial documents relating to the seeds.

The JVA

40. I should next set out the most relevant terms of the JVA. The parties to it are Huyton, Dipasa and Dipasa Europe as guarantor of Dipasa's obligations, and its terms are set out in a contract document signed by the parties and dated 4 June 1998. It is governed by, and is to be interpreted in accordance with, English law. There was a recital in these terms:

"1. Huyton holds to its order about 3,375 M/T of Ethiopian Whitish Sesame seeds ("The goods") currently on board M/V "Zarina 1". The specifications of the goods are as follows:-

Purity 98%

Moisture 6%

FFA 2%

2. Dipasa is a trader in sesame seeds which has aqua hulling and cleaning facilities in Mexico.

3. The parties being desirous of entering into a joint venture agreement to purchase and sell the goods to third parties, whether as is or further processed."

41. The agreed terms included the following:

"1. Huyton and Dipasa agree that the goods shall be valued at a price of US$ 700 per M/T Cost, Insurance, Freight Free Out Lazaro Cardenas, Mexico.

2. Huyton shall be responsible for all costs and arrangements for the vessel's call at Lazaro Cardenas, Mexico.

3. The goods shall be transported to a bonded warehouse in the port or to any other bonded warehouse in any city in Mexico near to Dipasa's factory where space is available and held in the name of Huyton. Such bonded warehouse shall be approved by Huyton's bank prior to vessel's arrival.

4. Dipasa shall be responsible for and pay for all costs and expenses from when the vessel arrives at the port up to and including storage charges in the said bonded warehouse. Such costs and expenses shall include but not be limited to discharging expenses, arranging import procedures, custom clearance, stevedoring, transport to the bonded warehouse, unloading at bonded warehouse, surveyors and insurance. It has been agreed that these costs and expenses shall not exceed US$ 51.27 Per metric ton. (In the event goods are transported to the bonded warehouse by rail then the above cost shall be reduced by $7/PMT)….

6. Storage costs at bonded warehouse shall be paid on behalf of the joint venture by Dipasa as follows:-

Storage (for the first month) $4.71 PMT
Storage (per month from second month onwards) $5.91 PMT

…

8. Goods may be released by the warehouse only against receipt by Huyton's bank of payment by Dipasa, and Dipasa undertakes to effect such payment prior to removal of the goods, or any of them, from the warehouse. Upon receipt of payment by the bank, Huyton shall immediately instruct the bonded warehouse by fax to release goods immediately to Dipasa….

10. Huyton shall appoint SGS or its nominated agents to carry out a survey of the weight and quality at time of discharge in order to obtain the actual weight and quality of the goods. The cost of such survey is estimated at US$0.37 PMT which shall be attributable to the joint venture. The parties agree that any quantity or weight loss established by the survey (Huyton's original purchase of the goods being on a "Shipped weight and quality" basis) shall be attributable to the joint venture. Only goods to the weight certified as discharged by SGS shall enter the joint venture as far as sales are concerned.

11. The parties agree that onward sale of the goods shall be a joint venture basis as is more particularly set out below.

12. The goods may be sold (the "sale goods") either:-

1. As is, or

2. As specially cleaned seeds, or

3. As aqua hulled seeds

Partial sales shall be permitted. All sales shall be subject to mutual consultation and agreement between the parties.

13. Dipasa shall be responsible for aqua hulling and specially cleaning the goods as the case may be, at its own risk and account, to prepare them for each onward sale. Dipasa shall further be responsible for all costs up to and including stuffing the sale goods into containers for sale, including all export formalities….

16. Either party may sell the sale goods on behalf of the joint venture; however since Dipasa owns the sale goods, in the case where Huyton sells the sale goods, Dipasa agrees to transfer ownership to Huyton at its (Dipasa's) purchase cost, plus Dipasa's share of the anticipated profit.

EXAMPLE

Huyton sells the goods (Hulled) at US$ 1,000 per MT FOB Manzanillo.

Purchase price US$ 700

Costs to whatever party (paragraphs US$ 100

4,5,6,7,9,10,13 and 14b) incurs

them

Total US$ 800
Profit US$ 200
Dipasa's share (50%) US$ 100
Huyton pays Dipasa US$ 900 (800+100)"

42. Dipasa plead that terms of the JVA were contained not only in the JVA but in other exchanges between Huyton and Dipasa. On 2 June 1998 Dipasa wrote to Huyton, saying that it was important that before the vessel's arrival in Mexico they had certain documents, without which, they said, they could not "proceed with the discharging, neither the import formalities", and asking to be kept informed of the date of delivery of documents. In reply on 3 June 1998 Huyton stated that they would "proceed and arrange for the necessary documents to be couriered to" Dipasa. I do not consider that the parties are to be taken to have intended that exchange to constitute part of the JVA. No contractual intent is evinced in the form or in the wording of the communications. The JVA was contained in the agreement of 4 June 1998.
43. It is Huyton's contention that, upon the proper interpretation of the JVA, Dipasa were obliged to pay Huyton's bank for the goods at a price of $700 per metric tonne before the release of the goods from the warehouse for the purpose of sale, cleaning or hulling pursuant to the JVA. In fact, Dipasa have never made any payment to Huyton or their bank. Dipasa take issue with this contention of Huyton about the meaning of the JVA. First, they say that the JVA did not oblige them to pay $700 per metric tonne but only "such sum as was due to Huyton upon performing the accounting exercise defined by the JVA once the goods had been sold pursuant to the JVA". Secondly, and for present purposes more importantly, they contend that Dipasa's obligation to pay was "necessarily subject to Huyton having first made available certain documents including a full set of bills of lading and a phytosanitary certificate in respect of the goods indicating Dipasa as the importer of the goods into Mexico, because without them and other documents storage and release of the goods as contemplated by the JVA could not lawfully be effected". Dipasa say that without such documents the goods were "effectively distressed" and their implied obligation was to "dispose of the goods on the best terms they could". They also say that there was an implied term of the JVA that Huyton would "forthwith" provide documents including a full set of bills of lading and a phytosanitary certficate.

The Witnesses

44. The claimants called to give oral evidence of fact Mr Philippos Philippas, the managing director of Agrimpex, Mr Yosif (or Joseph) Amaslides, Agrimpex's freight manager, and Mr Jose Mosqueda. Dipasa called as their witnesses of fact Mr Baptista and Mr Coello. Both sides also relied upon statements of persons who were abroad.
45. The parties called expert witnesses of Mexican law, Huyton's expert being Mr Enrique Garza and Dipasa's expert being Dr Ignacio Melo. The parties also had permission to call expert evidence of the market prices of sesame seeds: Dipasa did so, their witness being Mr Bollard; Huyton put in evidence the reports of Mr Karamanoukian (and I was provided with a Joint Memorandum to which Mr Karamanoukian and Mr Bollard subscribed), but they decided not to call him to give oral evidence and to be cross-examined.
46. Mr Philippas was an unsatisfactory witness. He sought to avoid answering difficult points in his evidence, and often would seek to argue Huyton's case rather than respond to questions. As will become apparent in this judgment, I have been driven to conclude that on occasions he was dishonest in the evidence that he gave. I consider that I cannot rely upon his evidence where it is not corroborated.
47. I consider that generally Mr Amaslides was trying to give truthful evidence, but cannot accept all that he told me. I do not believe that he could recall as much of the events and exchanges concerning this shipment as he said he could.
48. Mr Mosqueda does not speak English and he gave his evidence through an interpreter. Mr David Johnson QC, who represents Huyton, urges me to regard him as an independent witness, indeed the only independent witness of fact who gave oral evidence, and suggests that, for this reason, his evidence is reliable. However, two considerations prevent me from regarding him as entirely reliable and independent. First, Mr Mosqueda wrote a report dated 30 December 1998 for auditors in respect of claims following the privatisation of Acosa and in it set out a version of these events that seems to me in some important respects inconsistent with his evidence. Secondly, by an agreement between Huyton and Acosa dated 2 June 1999, Acosa agreed to provide documents to Huyton, to assist and co-operate with Huyton to pursue their claims against Dipasa and Dipasa Europe, and to make available witnesses available to them; and Huyton agreed to discharge and release Acosa from any obligations or claims in respect of those goods.
49. Furthermore, Mr Mosqueda made his affidavit, which constituted his evidence in chief, on 4 June 1999, two days after the agreement. Although Mr Mosqueda needed to give evidence through an interpreter, the affidavit was written in English, and translated into Spanish for him to approve it and swear it. This was not an ideal way to obtain the evidence of a witness who was presented as entirely independent of either party. In cross-examination Mr Mosqueda was constrained significantly to qualify statements in his affidavit, particularly with regard to his knowledge of the extent of Dipasa's involvement with the communications between Huyton and Acosa.
50. Like Mr Philippas, Mr Coello was an argumentative witness who appeared unwilling to answer some questions. He accepted that he lied in correspondence that he had sent to Huyton in October 1998 and Mr Timothy Young QC, who appeared for Dipasa, urged me that his candour about that enhances his credibility as a witness. I do not accept that submission. Mr Coello had no option but to accept that he wrote dishonest letters. I do not consider that he was an honest witness, and conclude that on occasions he was untruthful in his evidence. As with Mr Philippas, I cannot rely upon Mr Coello's uncorroborated evidence.
51. I have found it most difficult to assess Mr Baptista as a witness. He struck me as he was giving his evidence as an honest witness, who was trying to respond to the questions that he was asked. I must be wary about giving too much weight to matters of impression of this kind, the more so since Mr Baptista gave evidence through an interpreter. I recognise that some parts of his account of his role in this transaction were surprising, and his evidence must be examined carefully against the documents. Nevertheless, I have generally been inclined to accept his evidence.
52. I express my views about the expert witnesses on Mexican law when I consider the questions to which their evidence relates.
53. I consider that Mr Bollard, Dipasa's expert on the trading of sesame seeds, was generally a reliable witness. He seemed to me careful in the views that he expressed, and candid about the limitations of his experience and knowledge.
54. Mr Young, pointed out that Huyton have not called a number of witnesses who might have thrown light upon the issues in these proceedings. Mr Johnson responded by identifying further witnesses whom Dipasa might have called. Although on some issues it would have been of interest to have had evidence from other witnesses (and I have in mind particularly Mr Mosqueda's assistants, Ms Evangelina Ramirez and Mr Alonso Zurita), I have not generally regarded this consideration as much assisting in deciding the case.

The Purchases of the Sesame Seeds by Huyton from Haleka

55. In considering the dealings between Haleka and Huyton, I bear in mind that in 1998 there was an upsurge in the fighting in Eritrea's war for independence from Ethiopia. In May 1998 battles broke out between Eritrean armed forces and Ethiopian militia along the border, and in June 1998 Eritrean forces bombed the Ethiopian town of Mekele. The difficulties faced by Mr Haleka, an Eritrean seeking to carry on a business based in Ethiopia, are obvious.
56. Huyton's negotiations to purchase sesame seeds from Haleka were conducted by Mr Philippas, and also by Mr E Bourboulis, who runs Segum (Netherlands) BV ("Segum"), a Dutch business which cleans and hulls sesame seeds. Mr Bourboulis, like Mr Haleka, speaks Tigrinia, and since Mr Haleka speaks little English, it was helpful for Mr Bourboulis to be involved in discussions between Huyton and Haleka.
57. In April 1997 Huyton agreed to buy from Haleka 1,000 mt of Ethiopian whitish sesame seeds 1996/97 crop. (In this and the other sales by Haleka, quantities were subject to adjustment by 10% more or less at the buyer's option.) The goods were for shipment between 15 May and 15 July 1997 at a price of US$655 FOB Assab. Certificates of weight, quality and analysis were to be issued by Afro Star or by Gellantly Hankey at the time and place of loading. The quality and weight were "final during loading as certified". In the event the certificates were issued by Afro Star, a company associated with the Baltic International Group.
58. This and subsequent sales agreements between Haleka and Huyton incorporated FOSFA form 13 and stated "Arbitration in London as per GAFTA 125". Clause 9 of FOSFA form 13 provided that if sellers should fail to present shipping documents on the arrival of the ship at destination, the buyers should take delivery under an indemnity provided by them and pay for the documents when presented, the sellers bearing any reasonable extra expenses.
59. On 19 May 1997, an affiliated company of Huyton called Cobalt Ltd entered into a second agreement on similar terms to that of April 1997 for the purchase of 1,000 mt of Ethiopian whitish sesame seeds 1996/97 crop, the price again being US$655 FOB Assab. The seller was Genesis plc, another of Mr Haleka's companies. On the same date Cobalt and Genesis entered into a third similar contract for the purchase of another 1,000 mt of seeds. (The distinction between Huyton and Cobalt is largely immaterial to what I have to decide. So too is the distinction between Haleka and Genesis. For the sake of simplicity, I shall hereafter generally refer to the buyers as "Huyton" and the sellers as "Haleka").
60. No seeds were shipped under these contracts in 1997, according to Haleka because the purchasers failed to nominate a vessel to lift them. Certainly, it is the case that no vessel was nominated, but I cannot tell whether that was the fundamental reason that seeds were not shipped. Haleka complained that this caused them "a terrible cashflow crisis".
61. By two contracts dated 9 December 1997 Huyton agreed to buy from Haleka Ethiopian whitish sesame seeds, 1997/1998 crop. One contract was for 3,000 mt, and the other for 4,000 mt. The prices under the two contracts were US$ 600 per mt and US$ 610 per mt respectively. Shipment under both contracts was to be "during December/January 1998 at buyer's call."
62. The agreements of December 1997, like those of April and May, provided for the sales on FOB Assab terms. The sesame seeds were to be of fair average quality. Again, certificates were to be issued by Afro Star or Gellantly Hankey in Assab. The buyers or their appointed agents had the right to inspect the goods prior to shipment and during shipment. The contracts provided for payment by irrevocable letters of credit to be established by Huyton's bank, Credit Lyonnais Suisse SA of Geneva, in favour of Haleka or their nominees through Haleka's nominated bank for negotiation and payment at the counters of Credit Lyonnais. Among the documents to be presented under the letters of credit were phytosanitary certificates "Issued by competent Ethiopian authorities indicating that the product is suitable for home consumption and that it is free from Gorgojo Khapra (Trogodorma Granarium E)".
63. According to Mr Philippas these contracts of December 1997 followed a meeting, or meetings, between him and Mr Haleka in London. He claimed that an arrangement was also agreed at the meeting(s) about the April and May purchases of the 1996/97 crop, Haleka accepting that 1997/98 seeds should be provided instead of 1996/97 crop. Dipasa dispute that there was any such agreement about the April and May purchases, and maintain that the overall position between Haleka and Huyton was that Huyton were to buy 3,000 mt of 1996/97 crop and 7,000 mt of 1997/98 crop.
64. There is no document recording the agreement asserted by Huyton. On the face of it, it would have been a surprising bargain for Mr Haleka to have made without any compensating benefit, and there appears to be none. Of course, Huyton were agreeing to make further purchases, but, whilst according to Mr Philippas the market had fluctuated downwards since April 1997, there is no reason to suppose that Huyton were agreeing to pay particularly high prices for the seeds.
65. Mr Philippas' evidence was that his meeting with Mr Haleka took place and the agreement was made in early December in the Intercontinental Hotel, Park Lane. To support their argument that no such meeting took place, Dipasa put in evidence a statement from Mr Alan Thorn, the Duty Security Officer of the hotel, that the hotel's records show that Mr Haleka's only stay at the hotel during November and December 1997 was between 7 and 10 November. I do not consider that this evidence assists Dipasa. The evidence of Mr Philippas was that the meeting took place at the hotel, not that Mr Haleka was staying there; and I was told that, while Mr Haleka usually stayed at the hotel when he visited London, he sometimes stayed with relatives.
66. On 11 December 1997 Mr Haleka sent a fax asking that a letter of credit be opened immediately in respect of the "new business". In reply, on 12 December Huyton said that they had "incurred huge losses in order to conclude the above quantity thus allowing us to lift all the contracts, and to conclude with you the additional quantity". The term "above quantity" referred to the heading of the letter that was in the following terms: "10,000 Mtons Ethiopian whitish sesameseeds crop 1997/98". Huyton said that letters of credit would be opened "during the course of next week" and that they would nominate a vessel "within December/January 1998".
67. Dipasa point out that the communication from Huyton dated 12 December 1998 was untruthful in that they had not incurred huge, or any, losses. The letter was written at a time when Huyton appeared likely to make a profit from sales of the seeds to Guatemalan sub-buyers.
68. On 31 December 1997 Haleka sent a fax to Huyton. It said that letters of credit for the first 3,000 mt had expired on 10 October 1997, and after that there had taken place "our meeting in London in which you said you would lift goods half in November and half in December. As it is evident none of this materialised. Instead you have entered into contract with us for a further 7,000 metric tons to bring the total to 10,000 Metric tons of outstanding amount. … Mr Philippas, we are tired of "we'll get back to you today, tomorrow" business. We are running out of patience and we will give you until Monday 8^th January 1998 to establish L/C's in accordance with the contracts and nominate vessel".
69. On 6 January 1998 Huyton sent under Mr Philippas' reference another fax to Haleka. Again, the heading referred to the five contracts and to 10,000 mt of sesame seeds of 1997/98 crop. Huyton said that there were to be inspectors from the Guatemalan buyers and health authorities before and during loading, and said that the Guatemalan buyers were worried about the quality of goods to be shipped and were therefore dispatching "a whole team" in order to check the shipment. They stressed that the goods were to be ready upon their arrival in Ethiopia and that the goods were to be "Ethiopian whitish sesame seed crop 1997/98 in sound good condition properly cleaned free from any insects, dead or alive", and that the goods were to comply with the specification of the contract entered into between Huyton and Haleka, having a maximum ffa of 2%.
70. Dipasa suggest that the thrust of this fax is to tell Haleka to rebag the old crop and to produce paperwork representing it as new crop. It is true that it stipulated that the goods were to be packed in new jute bags (which was a reflection of the contracts between Haleka and Huyton), and that the outer bags were to be free of dust and other dirt (which did not reflect a contractual provision, but seems to me an unremarkable requirement). There is nothing in the document that seems to me to lend support to Dipasa's contention, and I do not accept it.
71. However that may be, at the end of December 1997 Haleka were asserting an agreement whereby half of the original order of 3,000 Metric tons was to be lifted in November 1997. That, as Mr Philippas acknowledged in cross-examination, was inconsistent with seeds from the 1997/98 crop being shipped, because the new year's seeds would not have been ready for shipment in this quantity in November. Haleka's fax of 31 December 1997 was also inconsistent with the agreement between Mr Haleka and Mr Philippas in early December 1997 that Mr Philippas claims to have made. Nevertheless, while Mr Philippas referred to the fax in his response of 6 January 1998 and apologised for the delay in establishing the letters of credit, he did not refute Mr Haleka's complaint, or suggest that it had been resolved or superseded by the subsequent agreement that Huyton assert.
72. I reject Mr Philippas' evidence of an agreement with Mr Haleka that the seeds to be supplied under the April and May 1997 contracts should be of the 1997/98 harvest. My main reasons for this conclusion, apart from my general assessment of the credibility of Mr Philippas, are these.

i) First, as I have observed, on the face of it there was no apparent commercial reason for Mr Haleka to agree to supply new seeds without extracting some commercial benefit from Huyton. Mr Young observed that Mr Philippas' evidence was conspicuously vague about how such a deal with Haleka was achieved. In my judgment, that observation was justified.

ii) Secondly, despite the headings to the letters of 12 December 1997 and 6 January 1998, the weight of contemporary correspondence, specifically Haleka's letter of 31 December 1997, is inconsistent with Mr Philippas' evidence.

iii) Thirdly, I cannot believe that, had so important an agreement been made, Huyton would not have confirmed it in writing. It would be inconsistent with their general practice for them not to do so. Mr Philippas' suggestion that this was an oversight was not, in my view, convincing. An oversight of this kind would surely have been noticed when the letter of 31 December 1997 was received.

iv) Fourthly, as I shall find, the shipment contained old seeds. I cannot believe that Huyton would not have complained to Haleka about this, and done so in writing by reference to the agreement between Mr Philippas and Mr Haleka, if such an agreement had indeed been reached between them.

The proposed sales to Guatemala

73. The first dealings between Huyton and Dipasa were sales by Huyton to Dipasa Europe of sesame seeds produced by Segum. From this relationship the suggestion emerged that Huyton might expand their sesame seed business to Central America. In late 1997 Mr Philippas accompanied Mr Coello on a visit to Mexico and Guatemala. During the visit to Mexico Mr Philippas was shown round Dipasa's premises in Cortazar.
74. When they went on to Guatemala, Mr Coello introduced Mr Philippas to a Mr S Layyous of Agropacific, who are dealers and processors of sesame seeds in Guatemala City. Mr Philippas was seeking a sale of the seeds that Huyton had bought or were to buy from Haleka. After two days of meetings on 2 and 3 December 1997 it was agreed that Agropacific SA ("Agropacific") would buy from Huyton 9,500 to 10,000 mt of whitish Ethiopian sesame seeds, 1997/98 crop, at a price of US$ 680 per gross mt c and f free out Puerto Quetzal for shipment in December 1997/January 1998 at seller's option. Payment was to be by a local letter of credit to be confirmed by a bank acceptable to Huyton not later than 17 December. The contract gave Agropacific the right to send their representative to Ethiopia to inspect the goods before shipment. Dipasa agreed to buy 2,000 mt gross of the sesame seeds from Agropacific. They were to pay the same price of US$ 680, but also to bear the discharging, trucking transport, financing and storage costs. (Huyton also agreed to sell Agropacific a further 15,000 mt of sesame seeds, Dipasa taking 3,000 mt of that quantity. However, Agropacific had an option not to proceed with this further purchase, and in the event they did not do so.)
75. Agropacific entered into agreements with two other Guatemalan companies for sub-sales of parcels of the seeds at a price of US$ 700 per mt, the arrangements being that the sub-buyers would open letters of credit in Huyton's favour and so pay Huyton directly. The sub-buyers were Promociones de Exportacion SA ("Pro-Export"), who agreed to take 3,500 mt, and Procesos Fabriles SA ("Profasa"), who agreed to buy 1,000mt.
76. On 7 January 1998 Pro-Export's bank, Dresdner Bank Lateinamerika AG of Miami, issued a letter of credit in Huyton's favour for maximum of 3,500 mt of the sesame seeds. That letter of credit expired on 31 March 1998. Profasa arranged that a letter of credit be opened on or about 13 January 1998 by Banco Immobiliario, SA of Guatemala for the purchase of 1,000 mt of sesame seeds, the letter of credit having a validity date of 28 March 1998. At about the same time Agropacific arranged for a letter of credit to be opened by Monteverdi International Bank of Guatemala to pay for 5,000 mt of seeds, that letter of credit having a validity date of 30 March.
77. As I shall explain, shipment at Assab was delayed, and the vessel sailed only on 15 April 1998. Profasa extended the validity of their letter of credit to 30 April 1998. Huyton tendered documents for presentation under it, but they were rejected on the grounds of discrepancies. Agropacific's letter of credit was also extended to 30 April 1998, but not thereafter, and the sale to them did not proceed. Huyton received no payment under these two letters of credit.
78. Pro-Export, on the other hand, agreed on about 7 or 8 April 1998 to buy the 3,500 mt of seeds directly from Huyton, and then by a further agreement made on about 14 April 1998 agreed to take an increased quantity of 5,000 mt, the price being varied to US$694 per gross mt. This was confirmed by Huyton's fax of 15 April 1998, which specified the goods as "Ethiopian whitish sesameseeds FAQ crop 1997/1998". A term of the sale was "Final in all respects at time and place of shipment as certified by independent surveyor or agents at loading port". Pro-Export extended their letter of credit accordingly. Huyton were paid US$1,920,524.24 under it on 18 May 1998.
79. Thus, by the beginning of May 1998 the MV Zarina I was on her way from Assab to Guatemala with a cargo of about 8,375mt of sesame seeds that Huyton had agreed to buy from Haleka and Haleka had shipped, but Huyton had only one effective sale agreement for the seeds, that being for 5,000mt of them. They had no buyer for the balance of 3,375 mt.

Shipment and carriage of the sesame seeds

80. Under the contracts of April, May and December 1997, Huyton had agreed to buy 10,000 mt of sesame seeds, 10% more or less at their options. In January 1998 they established letters of credit with the United European Bank of Geneva ("UEB"), which they used as their bank, rather than Credit Lyonnais as initially contemplated. Three letters of credit were opened: on 22 January 1998 Huyton opened in favour of Genesis a letter of credit ("l/c 92") in respect of the purchase of 3,500 mt (the quantity then to be bought by Pro-Export); on 30 January 1998 they opened in favour of Genesis a letter of credit ("l/c 99") in respect of 5,000 mt; and on 17 February 1998 they opened in favour of Haleka a letter of credit ("l/c 68") in respect of 1,000 mt (the quantity then to be bought by Profasa).
81. On 6 February 1998 Huyton chartered the Zarina I to carry the sesame seeds from Assab to "1-2 berth at 1-2 safe port at Mexico/Atlantic/Puerto Quetzal range". The charterparty was on revised Gencon terms. The owners warranted that the vessel would be ready to load at Assab on 11-12 February. Clause 48 of the charterparty provided: "In case original bills of lading are not available at discharge port(s), Owners undertake to release the Cargo to Receivers against Charterers' letter of indemnity not countersigned by a bank. Wording to be in accordance with standard P and I Club form". The charterparty also allowed the charterers to change at any time their nomination of discharge ports within the discharging range, and provided that if any change was required in the bill of lading, "it to be done against charterers' single letter of indemnity in owners' P and I club wording without banker's signature".
82. The Zarina 1 arrived at Assab on 11 February 1998. She proceeded to her berth on 17 February and started to load that night. The shipment of the cargo did not, however, go smoothly. The vessel was at Assab for some 63 days, whereas if she had loaded at the contractual rate of 800 mt per weather working day, she would have loaded in a little over 10 days. Moreover, she did not ship the full cargo that the shippers were obliged to supply, and, as I have mentioned, she eventually sailed with a cargo of some 8,375mt. This was because Haleka failed to bring cargo to the load port in time and in sufficient quantities.
83. In February 1998 Mr Philippas and Mr Coello went to Ethiopia to inspect the seeds. They arrived at Addis Ababa, and saw seeds stored in warehouses there. Mr Coello also spoke to Afro Star in order to form a view of their facilities for analysis. Mr Coello says that he saw cargo representing about 1,500 mt of the total consignment of the seeds. Mr Philippas and Mr Coello did not extend their inspection to Assab. According to Mr Philippas, this was because Mr Coello was satisfied with the goods that he saw in Addis Ababa, and saw no need to attend the loading at Assab. According to Mr Coello, he had wished to go to Assab, but he did not have time to do so because he was told by Mr Haleka that he would need a visa to do so and also because there was only one flight a week to Assab. I do not think that there is any necessary conflict between these explanations. If necessary, I would hold that Mr Coello was intending to go to Assab, but when he learned from Mr Haleka that it would be difficult and time-consuming to do so, he was content, having had the comfort of seeing the goods in Addis Ababa, not to make the journey.
84. Representatives of the Guatemalan purchasers also travelled to Ethiopia to inspect the cargo. Two of them were from the Guatemalan Ministry of Agriculture, one was from Pro-Export and the fourth was from Agropacific. According to Mr Mazariegos, the inspector from Agropacific, at the time of their visit about 7,000mt of the cargo were still in Addis Ababa and about 3,000mt were at Assab. The inspectors travelled first to Addis Ababa, and on 3 February 1998 they went on to Assab, returning to Addis Ababa later that day. The cargo at Assab was in a warehouse belonging to the port authorities. Mr Mazariegos described its condition (in a statement dated 7 August 2001 that he sent to Dipasa's solicitors) as follows:

"We were surprised to find out that the product was old crop and the bags had tags indicating the followings dates 15/06/97, 20/08/97, 14/06/97, 26/09/97 and by visual examination gave the impression that the product was old crop having some rancid smell. That usually cannot be detected in new crop product. We took 4 representative samples of the product of approximately 2 kilos each and took them back with us to Addis. Later the representative of Proexport made a final analysis of the seeds and indeed concluded that the product was old crop."

85. On 3^rd February 1998, Agropacific sent a fax to Huyton stating that their inspectors had flown to Assab that day and found that the goods had been in Assab "for a long time (since 14/06/97) also they noticed that some bags were old, damaged and torn". They said that they would reject any old stock, the agreement being for 1997/98 crop. Huyton responded by expressing surprise at the allegation that the goods in Assab were not 1997/98 crop, and stated that Haleka denied these suggestions. According to Mr Philippas' evidence in cross-examination, he himself spoke to Mr Haleka about the allegation.
86. Later that day Huyton sent a further communication to Agropacific purporting to quote from a fax sent to them by Haleka. In it Haleka, as it appeared, referred to Agropacific's fax, and reported that the inspectors were satisfied with the goods inspected in Addis Ababa and that after conducting analysis on the samples from Assab, they found the hulled sesame to be "just as good as the Addis batch". They refuted the suggestion that old bags were used; and they went on to say that Mr Mazariegos was inexperienced in dealing with sesame seeds and was a student who tended to make his reports prematurely; but that the Pro-Export representative was better acquainted with sesame seeds.
87. Huyton have not produced a copy of the fax from Haleka. The explanation for this given by Mr Philippas in cross-examination was that "it could be the fax has been lost or something like that. It could be instead of saying a phone [call], we said fax". The latter explanation is impossible since Huyton purported to quote at length from the document that they received from Haleka. The former explanation is possible, but it is remarkable that this document is missing from a generally complete file.
88. This is the only document that purports to reflect communications between Huyton and Haleka about the Guatemalans' complaints and concerns. In his witness statement, Mr Philippas said that Agropacific's concerns were "a serious matter", and that Huyton took them up with Haleka "immediately, initially be phone". In cross-examination, he told me that the word "initially" was a mistake. Mr Philippas told me that rather than convey them in writing, Huyton spoke to Mr Bourboulis about them and Mr Bourboulis passed them on to Haleka. I observe that Mr Bourboulis provided a witness statement for Huyton, but made no mention of this. Mr Philippas also stated that Mr Bourboulis was not sent copies of the communications from the Guatemalans.
89. I find this account implausible. The absence of any written communication about this with Haleka is telling. Huyton would not, in my judgment, have treated these complaints so lightly had they expected all the cargo to be of the 1997/98 harvest. Dipasa submit that I should reject Mr Philippas' evidence that the complaints and concerns were passed on to Haleka. They also submit that there was no fax from Haleka about this, and that Huyton did not send to Haleka the fax from Agropacific complaining about old crop because Huyton always knew that Haleka would be shipping seeds from the 1996/97 crop. Having accepted Dipasa's submission that there was no agreement between Huyton and Haleka that all the shipment was to be of the 1997/98 crop, I also accept these submissions of Dipasa.
90. The suggestion that the Pro-Export representative, Mr Guzman, did not share Mr Mazariegos' concerns is not, however, consistent with the contemporary documents, or indeed with Mr Mazariegos' statement. On 11 February 1998 Mr Guzman faxed his principals as follows: "Since 8 days of having informed that the product is of old crop, yet I have not received any response on how to solve it…Another situation is that as for today, they have only 4,500 tons at the port so that they must transport at once (max 8 days) another 5,000 tons. As minimum, this will complicate my supervision…Yesterday we arrived at the port and the port authorities informed us that they could not allow us to enter not to the facilities neither to the warehouses".
91. Huyton have put in evidence a statement of Mr Garcia, the General Controller of Pro-Export, dated 15 November 2000. As I shall explain, I have concluded that the statement is not entirely reliable. He refers to the inspection of the seeds before loading that was arranged for Pro-Export, and states that the cargo was found "to be perfectly in order and of good quality". However, he does not explain Mr Guzman's fax of 11 February 1998, and this omission much detracts from the value of his evidence about this.
92. The Guatemalan inspectors (or some of them, including Mr Mazariegos) returned to Assab on 10 February, arriving before the Zarina I reached there. Before she came to berth, Mr Mazariegos sent a radio message to the Master, warning him not to allow old crop to be loaded. The inspectors stayed in Assab until 26 February, but, according to Mr Mazariegos, they were not permitted on this visit to inspect the cargo in the warehouse and were allowed only once into the port to inspect the loading. Mr Mazariegos says that they "noticed that the old product we saw in the warehouse had been loaded into the vessel". Because they were refused facilities to inspect, they left Assab on 26 February.
93. Agropacific made complaints to Huyton as a result of Mr Mazariegos' reports. On 12 February 1998 they told Huyton by faxes that the inspectors had reported that they had not been given permission to enter the port in order to check the seeds before shipment. They reiterated that they held Huyton responsible to ensure that the product loaded was of the 1997/98 crop. In this context Mr Coello, who was then about to leave for Ethiopia with Mr Philippas to inspect the crop himself, sent a fax to Agropacific confirming that he would be "in Ethiopia supervising the shipment". He also said that it was guaranteed that the surveyor would inspect the goods, and that Agropacific's representatives in Ethiopia would be able to supervise all the cargo which would be loaded on board. However, throughout February exchanges along these lines continued, Agropacific complaining their inspectors were not allowed into the port and Huyton refuting their allegations.
94. Mr Philippas pointed out when giving his evidence that if old, torn or damaged bags were tendered for shipment, the Master should have rejected them, or claused the bills of lading. In fact, in the course of the loading, according to a fax sent by the Master dated 9 March 1998, cargo was rejected on the grounds that the bags were in poor condition and stained. He reported that some were "holed by rot, plenty insects", and that the cargo looked "very old". However, the bills of lading issued by the vessel were not claused.
95. On 21 February 1998 Huyton complained to Haleka about cargo not being available to load, pointing out that Haleka were claiming that the cargo had been "ready for months". Haleka's claim would have been demonstrably exaggerated if all the consignment was to be of the 1997/98 crop. Huyton's experience was such that they would have known this.
96. Afro Star issued certificates dated 28 February, 15 March and 13 April 1998 in respect of the cargo's weight, quality, sampling, analysis and packing list, stating that the seeds had been packed in new jute bags. There are two sets of certificates dated 28 February 1998 relating to 1,000mt shipped under bill of lading no 2 and 2,773.9 mt shipped under bill of lading no 3; one set of certificates dated 15 March 1998 relating to a shipment of 726.1 mt shipped under bill of lading no 3A; and three sets of certificates dated 13 April 1998 relating to 1,375mt shipped under bill of lading no 1, 1,000mt shipped under bill of lading no 5 and 1,500 mt shipped under bill of lading no 6. According to the certificates, samples were taken from all six shipments and were analysed. The result of each analysis is certified in identical terms as follows: the purity of the goods was 98.2%, the oil content was 50.35%, the ffa content was 1.79%, the moisture content was 5.45% and the goods were free of live weevils. Afro Star also certified in each case that the shipment was of goods of "Ethiopian whitish sesame seeds FAQ crop 1997/1998".
97. Further, at least in the case of the cargo delivered to Mexico, certificates were issued by Agro Chemical Pvt Ltd that the goods had been fumigated three days before the date of the bills. (Certificates of fumigation are not in evidence for the remaining cargo, which was delivered to Guatemala, but they were probably issued.) The certificates described the cargo as 1997/98 crop, but also stated that the certificates were not to be taken as proof of the accuracy of the description of the goods.
98. On 5 March 1998 Agropacific sent Huyton a fax in which they stated that, since the goods had not been loaded by 28 February, Huyton were in breach of contract. Huyton responded making allegations about Agropacific's failure to open appropriate letters of credit. Both parties held the other in default, but throughout March and into April 1998 Agropacific were pressing for the shipment of the cargo and for Huyton to perform their contract. Agropacific did not reject the cargo as old crop. Huyton advised Agropacific that they were "selling against" them, that is to say arranging other sales of the cargo, and threatened to bring claims against Agropacific in respect of any loss.
99. I should also mention the response of Agropacific's sub-buyers to these difficulties. Dipasa were to buy 2,000mt from Agropacific. Mr Coello's evidence was that, apart from a telephone call to Agropacific on his return from Ethiopia in February 1998 in which he said that he had been assured by Haleka that Mr Mazariegos would be allowed to do his job and given proper assistance, he heard nothing of the shipment until towards the end of May 1998. Huyton say that if Mr Coello had been concerned about the quality of the goods after his inspection, he would have kept himself better informed. However, it is no part of Dipasa's case that Mr Coello then had any cause for concern about the quality of the cargo.
100. Profasa, who were to take 1,000mt of the cargo, did not take delivery of any of it, but there is no evidence that they had made any complaints or expressed concern to Huyton about the quality or description of the goods. I accept Mr Philippas' evidence that they did not do so. However, he rightly observes that this is the less surprising since Huyton had no direct contractual relationship with them.
101. I have already explained that Pro-Export, whose representative had been to Assab during loading, agreed in April 1998 to buy 5,000 mt direct from Huyton. Moreover, they agreed to buy on terms that the quality of the goods was to be final at loading, from which it would appear that, despite the fax of 11 February 1998, they did not have major concerns about the quality of the goods. The 5,000mt were delivered to them between 21 and 26 June 1998.
102. By a letter dated 15 December 1998 from Mr E Grisolia, their General Manager, Pro-Export stated that the delivery of 5,000mt was all processed at their plant in Guatemala and had been "exported to the universal market without any claim regarding the quality". Mr Philippas prompted Mr Grisolia to write the letter, as he acknowledged when cross-examined about it.
103. However, according to Mr Garcia's statement, the sesame seeds "were of both 1997 and 1998 crop" and Pro-Export were entirely happy with the seeds which were of satisfactory quality. They processed them at their plant and sold the processed product without having any claims made against them. Some were mixed with seeds from other origins, including Guatemalan 1999/2000 crop and "Venezualan 1999/99 crop" (sic). Mr Garcia stated that Pro-Export tested samples of the goods both in June 1998 and when the hulling process had been completed between 23 August 1998 and 18 December 1998. They were, he said, found to be of an acceptable purity and quality. He also stated that Pro-Export had no difficulty selling the seeds, and gave the prices obtained in sales of them during November 1998, December 1998 and January 1999.
104. Mr Garcia's reference to the seeds being of both 1997 and 1998 crop is opaque. It suggests that Pro-Export took delivery of seeds from two crop years, and if that is so, Mr Garcia must be referring to the 1996/97 crop and the 1997/98 crop. However, the agreement that Pro-Export had made with Huyton was to buy seeds from the 1997/98 crop. If Pro-Export realised that the delivery included older crop, it is surprising that Pro-Export did not complain about this and that Mr Garcia did not mention it. I do not think that I can rely upon Mr Garcia's statement about the date of the crop.
105. Dipasa question the reliability of the evidence of Pro-Export more fundamentally. They say that the letter from them saying that the goods were all exported by them by December 1998 is inconsistent with the statement of Mr Garcia, and that both the letter and the statement are inconsistent with the documents evidencing Pro-Export's testing. They say that it is clear that the seeds were not processed for another year (for example, because they were mixed with crops from later harvests), and that the purity of the seeds was questionable. I agree with Dipasa's observations, and, being unable to reconcile Pro-Export's statements with the apparently contemporaneous documents, I do not consider that I can properly rely upon them.
106. Zarina I eventually sailed from Assab on 15 April 1998. The bills of lading described the goods as 1997/98 cargo and named Quetzal Port, Guatamala, as the discharge port. They were dated as follows: bill of lading no.1 was dated 13 April 1998; no.2 was dated 28 February 1998; no.3 was dated 28 February 1998; no.3A, 15 March 1998; no.5, 13 April 1998; and no.6, 13 April 1998. (I have already stated, when describing the Afro Star certificates, the quantities shipped under each bill.) No bill no.4 was issued, but neither this nor the order in which the bills were issued was explained in evidence. Pro-Export were named as parties to be notified on bills nos. 3, 3A and 6 (the earlier two representing their original consignment of 3,500mt and the last representing the additional 1,500mt that they agreed to take just before the vessel sailed), and the consignments under those bills were in due course delivered to them. The consignments under bills of lading nos 1, 2 and 5, said to be 3,375mt in total, were to be the subject of the JVA and were in due course delivered to Mexico. Genesis were said to be the shipper on all the bills apart from bill no 2, on which Haleka were named as shipper.
107. When the vessel sailed, she was, of course, bound for Guatemala. Before she sailed, the cargo was fumigated. (I so find on the basis of the Agro Chemical Certificates, although this was denied by Mr Amaslides). She stopped at Singapore, where the cargo was fumigated for a second time. It was also fumigated on arrival in Mexico. The evidence of Mr Bollard was that usually sesame seed cargoes are fumigated before, or sometimes during, shipment, and that live insects can be eradicated by fumigation, using methyl bromide or phosphine. He also said in his report that eggs and larvae cannot be eradicated in this way. Dipasa suggested that the repeated fumigation indicates that Huyton knew or suspected that the cargo included old, infested crop, and that the purpose was to eradicate insects that had hatched during the voyage. However, Huyton have produced a letter from a fumigation manager with SGS, that states that proper fumigation with methyl bromide or phosphine will kill insects at all stages of the life cycle, including eggs and larvae. In view of this, I conclude that Dipasa have not established the evidential basis for their contention.
108. In the course of her voyage the Zarina 1 received directions to sail for Mexico. From about 27 May 1998 there were exchanges about her going to either Manzanillo or Lazaro Cardenas, but eventually on 3 June 1998 the discharge ports were declared to be, first, Lazaro Cardenas and, second, Puerto Quetzal.
109. Mr Philippas was asked in cross-examination why he directed that the Mexican cargo be discharged first. He replied that he was concerned that Agropacific might arrest the cargo or otherwise impede the venture. Dipasa questioned whether this was the true reason for the order of discharge ports, suggesting (as I understood it) that it was really to do with Huyton's wish to discharge old seeds in Mexico rather than Guatemala. However, Mr Coello's evidence was that Dr Layyous of Agropacific had threatened Huyton that "if the vessel arrived in Guatemala they would arrest the cargo that had originally been sold to them in order to obtain security for their losses", and that the effect of first discharging the 3,500mt in Mexico was that "Agropacific were deprived of the opportunity of obtaining security for their claim". I therefore accept Mr Philippas' evidence on this point.

The Erstas Account

110. During the trial, Huyton disclosed a disbursement account sent by the Eritrean Ports Authority, Eritrean Shipping and Transit Agency Services ("Erstas") under cover of a letter addressed to Haleka "c/o Agrimpex Co Ltd" and dated 6 August 1999. The account is headed "Shipment on M/V Zarina 1 arr on 17/2/98". It includes two charges for storage of two parcels of seeds in Erstas' warehouse, the first parcel being 1,402 mt stored for Haleka's account from 21 January 1996 to 28 February 1998 and the charge being US$86,946.36; and the second being 1,590 mt stored for Genesis' account from 20 August 1997 to 28 February 1998 and the charge being US$20,255.52. Dipasa say that it lends support to their contention that some of the seeds that were loaded on the vessel were not of the 1997/98 harvest.
111. The account shows the storage charges as collected in respect of the disbursement account (as I interpret the notation "D/Acct") of the Zarina 1 and export operations. The account refers to a letter dated 14 February 1998 as providing an explanation of it, but that letter has not been produced in evidence. The covering letter calls for payment of a tiny outstanding balance (US $1.11) which appears to do with some related photocopying charges rather than the storage charges themselves.
112. In some ways, as Huyton point out, the document is a curious one. They rightly point out that it is not their account, and understandably say that it is unsurprising that they cannot explain it. First, there is no obvious reason that it should have been sent to Huyton. It might be that this is to do with difficulties that an Eritrean authority had sending letters to Addis Ababa in view of the war, but that is speculation. Certainly, Huyton having bought the seeds FOB, the storage charges were not, on the face of it, anything to do with Huyton.
113. Secondly, Huyton say that it is odd that the account was not rendered until 3 June 1999, and observe that the invoice itself is not on headed paper. However, the date when the account was first rendered for the storage charges is not clear from the documents, and the form of the invoice does not seem to me of great significance.
114. Next, Huyton say that the rates charged for storage appear to vary remarkably between the two tonnages. This is true, as far as the point goes.
115. Finally, Huyton say that the quantity of goods stored for Haleka's account, 1,402 mt, exceeds the quantity that Haleka, as opposed to Genesis, are said to have shipped under the bills of lading, namely 1,000mt under bills of lading no 2, and more than Haleka sold under the contracts of April and May 1997.
116. Huyton submit that in view of these considerations, together with the small balance shown in Erstas' favour, the account has the appearance of a "convenient" reconciliation rather than evidence of genuine dealings. I do not accept that. Despite Huyton's arguments, the document was in their files and there is no apparent reason that anyone should have created a fictional document of this kind. I consider that the document is evidence that the cargo had been in store with the Eritrean Port Authorites since 1996, albeit in itself far from conclusive evidence.

Huyton's dispute with Haleka

117. When there was delay in loading the vessel, Huyton repeatedly told Haleka that they held them responsible for the demurrage and other expenses and liabilities being incurred; and they had on 12 March 1998 told Haleka that their sub-buyer's patience had "already run out" and that they had become "very aggressive". On 27 March 1998 Huyton sent a fax to Haleka in which, having referred to demurrage, other costs and potential deadfreight, continued, "Our end buyers have put a claim against us for the delay of the vessel so far of $50/pmt – ie $475,000.-which we also claim against you". In fact, the previous day Agropacific had sent a fax in which they said that they "reserve all our rights under the ... contract to claim any and all damages including loss of profit because of your failure of timely delivery of the product", and also holding Huyton responsible for cargo damage. However, they did not put any figure on the claim. I reject Mr Philippas' evidence that what Huyton told Haleka reflected what Agropacific had told them on the telephone. It seems to me most unlikely in view of the volume of faxes passing between Huyton and others involved in these transactions that if Agropacific's claim had been quantified, this would not have been reflected in the documents passing between Agropacific and Huyton. Moreover, if, as Mr Philippas said, Agropacific were asserting a claim of at least $50 per mt, their claim was understated at $50 per mt when passed on to Haleka. It was not Huyton's style to make such understatements. I hold that what Huyton wrote in the fax about a claim of $475,000 was simply untruthful.
118. Before the "Zarina 1" sailed on 15 April 1998, in a fax dated 14 April 1998 Huyton claimed damages from Haleka in the total of US$ 729,400 in respect of "damages so far incurred". It included $333,920, which was said to be for a "claim received from buyers", calculated on the basis of US$40 per metric tonne, with the note "originally $50/pmt"; and $69,120, which was said to be "receivers' claim for non-shipment, 1152 mt at $60/pmt".
119. On 16 April Huyton reduced the claim to US$ 429,875. Haleka, or rather Genesis, agreed to pay this sum by a fax dated 16 April 1998, but said that payment would be effected in June 1998. Huyton pressed for earlier payment but did agree to delay it until 4 May 1998, and the dispute was settled on these terms by an agreement dated 20 April 1998. In that agreement the payment of US$429,875 is said to comprise demurrage of US$163,000, dead freight of US$61,875 and a claim from buyers of US$125,000.
120. It was put to Mr Philippas cross-examination that there was no proper basis for Huyton to assert these claims, and specifically it was put to him that there was no truth behind the assertion that the buyers were putting forward claims of $40, $50 and $60 per metric tonne. There is no documentary evidence recording the buyers' various claims. Mr Philippas told me that they were put forward by Agropacific in "several telephone conversations", that they repeatedly mentioned a claim of $50 per metric tonne, and that Huyton estimated that they could reduce it to $40 per metric tonne. When it was pointed out to him that this evidence was inconsistent with what Haleka were told, Mr Philippas said that Agropacific might have put forward the figure of $40.
121. I cannot accept this evidence. If such a claim had been asserted by Agropacific, it would have been reflected in documents passing between them and Huyton. I am driven to conclude that this part of Mr Philippas' evidence is another example of him telling untruths.
122. The dispute between Huyton and Haleka was complicated because in November 1997 Huyton had agreed to sell wheatflour and milling wheat to Haleka. Originally these goods were to be delivered in November/December 1997 and in February/March 1998. Haleka were to have opened the letters of credit, but did not do so. By March 1998 Huyton were complaining that Haleka's delay had put them "in a very difficult situation with their suppliers". They said that the first shipment had been in store for three months incurring costs of not less than US$ 7.50 per mt per month which "we have had to pay". In fact that was not the case. Mr Philippas says that Huyton were mistaken in making the claim, that Huyton probably mentioned three rather than two months because they anticipated that time would have elapsed by the time of shipment. He also acknowledged that the storage figure was also wrong, $7.50 being a mistake for $2.50. I cannot accept the explanation that Huyton was making mistakes. I conclude that Huyton were being dishonest with Haleka.
123. Haleka and Huyton met in London in mid-May 1998 with a view to resolving their differences about the wheatflour and the wheat, and they reached an agreement. The dates of shipment were postponed to June and August 1998, and the price was adjusted.
124. Mr Philippas' evidence was that during the meeting the parties also discussed the agreement by Haleka to pay US$ 429,875. He says that Mr Haleka agreed that that sum could be deducted from the payment of US$ 655,000 which was to be paid under one of the letters of credit opened by Huyton to pay for the sesame seeds. At the time Huyton were refusing payment under it in reliance upon the basis of a highly technical complaint of discrepancies. The intention of the agreement was, according to Mr Philippas, that Haleka should persuade their bank to allow the deduction of $429,875 from the letter of credit, and that then Huyton should waive the discrepancies and pay the balance under the letter of credit.
125. Mr Philippas goes on to say that Mr Haleka did not abide by this agreement when he returned to Addis Ababa. He told me that on 25 May 1998 there was a conference telephone call between Mr Haleka, Mr Bourboulis and Mr Philippas, and that they reached an agreement that was confirmed by a fax sent by Huyton to Mr Haleka. The fax purported to record an agreement that, if the problem about the letters of credit for the wheat contracts was not "rectified by [Mr Haleka] until the time the remaining shipping documents per MV Zarina I are presented Huyton is entitled to withhold payment of such documents and eventually deduct the amount of damages presently estimated at about $1,700,000.00 which Huyton will suffer as a result of the buyers' inability to open Letters of Credit. Although Huyton will endeavour to keep the amount of damages to a minimum. In addition a demurrage claim of $429,875.-as per agreement dated 20-4-98 signed by all parties also to be deducted." The fax went on to say that the parties agreed that "such verbal agreement is binding on all parties and shall be confirmed by this fax and signed agreement will follow when Mr Haleka visits Europe". Mr Philippas accepted that no signed agreement such as that contemplated in the fax was in fact entered into, and, so as far as Mr Philippas is aware, Mr Haleka did not visit Europe.
126. The document of 25 May 1998 referred to presentation of the "remaining shipping documents per MV Zarina 1". Huyton had paid US$3,116,7678.50 for 5,000 mt of the seeds on 20 May 1998, the value date being 25 May 1998, under l/c 92, which had been amended to cover the increased purchase of 5,000mt. This was payment for the shipment under bills of lading 3, 3A and 6, the shipment for Pro-Export.
127. Dipasa dispute that the fax dated 25 May 1998 is a genuine document and submit that it is a forgery. In my judgment, they have cogent reasons for this submission. First, it is not referred to, or reflected in, any other contemporaneous document. Given that it purports to record a conversation in which Haleka agreed to a deduction from the letters of credit of as much as US$2,129,875, I consider that extraordinary.
128. Secondly, I refer to a letter sent by Huyton to the UEB dated 19 August 1998 (a letter to which I shall make further reference in this judgment). In it, Huyton referred to discrepancies upon which they were relying so as not to make payment under the two outstanding letters of credit, and explained by way of background that "the beneficiaries [Haleka and Genesis] jointly and severally owe us a large sum of money. On receipt by us of such sum, but only on receipt, will we agree to waive the ... discrepancies". If Huyton and Haleka had reached the agreement recorded in the fax of 25 May 1998, I cannot believe that it would not have been referred to in this letter to the bank.
129. Thirdly, the document dated 25 May 1998 was on a form of writing paper bearing the address of Huyton's Geneva office that was never otherwise used for contemporaneous correspondence. Despite Mr Amaslides' evidence that Agrimpex did not use pre-printed letter paper when sending letters in Huyton's name and generated their own heading for letters on their computers, I find this surprising.
130. Fourthly, on other occasions, Haleka had provided their signature to agreements with Huyton by fax: for example, this was how the recent agreement of 20 April 1998 was signed. Mr Philippas put forward no credible explanation as to why on this occasion Haleka's signature was not sought by fax. It is the more remarkable that Mr Philippas did not press for Haleka to sign the agreement by fax because in his evidence he told me that Mr Haleka had previously shown himself willing to "change his tune" and renege on his word. It is true that the war in Eritrea might caused difficulty in communicating with Mr Haleka, but telephone communication was possible, and Huyton had no reason to think that Mr Haleka could not have sent a faxed signature to the agreement.
131. I should refer to two other points that Dipasa made in support of their contentions about the fax of 25 May 1998. First, they pointed out that the fax transmission sheet produced by Huyton as relating to the transmission of this document to Haleka has two sets of staple holes in it, and suggested that this evidences that at one time it was attached to a different document. I do not consider that this is a telling point: the most that can be said is that this is consistent with Dipasa's submission.
132. Secondly, Huyton bought arbitration proceedings against Haleka before GAFTA, alleging them to be in default under the wheat and wheatflour contracts. Haleka and Genesis did not take part in the arbitrations, and on 12 April 1999 Huyton obtained awards in the sums of $1,380,000 for the wheat contract and $274,000 for the wheat-flour contract (plus interest and costs). Huyton did not produce the fax of 25 May 1998 in those arbitration proceedings. By way of explanation Mr Philippas told me that Huyton were under no obligation to do so under the rules of disclosure governing the arbitration, and said that it was not relevant to the issues in the arbitration. He explained that he wanted to avoid complications by producing a document that referred to the sesame seed contract, because Haleka were trying to link the two transactions in their submissions in the arbitral reference, and Huyton feared that the fax would give them the material to support his submission. Mr Philippas also told me that Huyton feared that since the sesame seed contract provided for FOSFA arbitration, Haleka might seek to obstruct the GAFTA arbitration by trying somehow to involve FOSFA arbitrators. Although I did not find these explanations wholly convincing, I do not consider this point in itself a powerful one for Dipasa.
133. Mr Philippas denied that the document of 25 May 1998 is other than genuine. There is also in evidence a statement from Mr Bourboulis in which he states that the fax accurately records a telephone conversation on 25 May 1998 between Mr Philippas, Mr Haleka and himself. Nevertheless, I have concluded that Dipasa's submission on this point is correct. While it is possible that some fax was sent to Haleka on 25 May 1998, it was not the document put before the court and that document does not reflect an agreement reached between Huyton and Haleka.

The presentation of documents under the letters of credit opened by Huyton

134. The documents relating to the shipments under bills of lading nos 3, 3A and 6, which were for delivery to Pro-Export, were received by Huyton and presented to Pro-Export's bank. Huyton were paid by Pro-Export, and, as I have said, Huyton in turn paid Haleka.
135. Shortly after bill of lading no 2 dated 28 February 1998 was issued for the shipment then intended for Profasa, Haleka issued an invoice for the 1,000 mt of sesame seeds on 5 March 1998. In due course, documents were presented under the corresponding letter of credit (l/c 68), and on 27 April 1998 copy documents were received by UEB and faxed to Huyton. The documents included a phytosanitary certificate, but UEB noted a discepancy in relation to it in that "FAQ crop 1997/1998" was missing from the description of the goods. This was one of a number of discrepancies observed by UEB. By a telex sent on 30 April 1998, UEB were advised that the Ethiopian Ministry of Agriculture authorised Huyton to amend the certicifate to correct the omission from the description and the certificate was amended accordingly.
136. Payment was to be made for the goods shipped under bills of lading nos 1 and 5 under l/c 99. This lapsed on 14 April 1998 without documents being presented under it. It was reinstated on 12 June 1998, in respect of the reduced quantity of 2,375 mt. Huyton did not reinstate it earlier because they wanted to put pressure on Haleka in respect of the disputed $429,875.
137. On 25 June 1998 UEB reported that documents had been presented under this letter of credit. There were discrepancies, including discrepancies relating to the phytosanitary certificate, of which only a copy was presented.
138. On 19 August 1998 Huyton sent UEB instructions about l/c's 68 and 99 in a letter to which I have already referred. Huyton told the bank, "both sets of documents should be retained by you until all discrepancies are remedied. Kindly do not return the documents to the beneficiaries' bank unless you receive a specific request from the said bank for such return". The letter continues, "Dipasa will take up and pay for the shipping documents…the Zarina 1 has arrived in Mexico and discharged. All the sesameseeds are currently available in a public warehouse namely at [Acosa] to order of the vessel owners pending presentation of the bills of lading".
139. The letter was signed by Mr Philippas, although it was sent under the reference KV and was drafted by "KV" rather than Mr Philippas. Mr Philippas acknowledged that the letter was misleading in referring to Dipasa taking up and paying for the shipping documents, indicating a sale of the cargo to Dipasa against documents rather than an arrangement along the lines of the JVA. Mr Philippas attributed this to a mistake on Huyton's part, but it was a mistake for which he could give no satisfactory explanation. Possibly it derives from the invoices tendered by Huyton to Dipasa to which I shall refer, but that is speculation. I observe that the letter, taken at face value, indicated that Mr Philippas knew that the goods were in a public warehouse, with no suggestion that they were thought to be in bond, and also that they were not held in Huyton's name but were in the name of the owners of the Zarina 1.
140. When he was first cross-examined about the reference KV, surprisingly Mr Philippas said that he was unable to remember whose reference it was. I say that this is surprising because the next day he acknowledged that it was the reference of Mr Christopher (Kit) Villiers, who is an in-house lawyer working for Agrimpex, who had previously worked for Huyton's solicitors, Messrs Middleton Potts, and who had been in Court during the trial. Mr Philippas told me that, when he was first answering questions, he was hesitant about whether the reference was to Mr Villiers and that he wanted to check the position. I find that explanation incredible, and reject it. Mr Philippas was trying to avoid revealing that the letter, which he had to acknowledge is significantly inaccurate, was drafted by a lawyer for his signature. (I imply no criticism of Mr Villiers: there is no reason to think that he drafted the letter otherwise than in accordance with his instructions and understanding of the position.)
141. In circumstances which I shall describe later in this judgment, eventually in October 1998 Huyton authorised UEB to make payment under letters of credit nos 68 and 99, and UEB paid with a value date of 7 October 1998. By that time, Huyton had procured in Switzerland the arrest of the funds and prevented them from being transmitted to Haleka's bank. Huyton enforced the GAFTA arbitration awards in respect of the wheat and wheatflower contracts against these funds.

Huyton's entitlement to pass property in the sesame seeds under the JVA

142. Accordingly, at the end of May and the beginning of June 1998 when Huyton were negotiating the JVA, Huyton had not received documents relating to the shipment under bills of lading nos 1 and 5, and the documents presented under bill of lading no 2 had been rejected on the grounds of discrepancies. They had not paid for the documents or the seeds.
143. Dipasa plead that it was an implied term of the JVA that at the time of the JVA or, if later, when ownership of the goods was to vest in Dipasa under the JVA, Huyton had and could give good title to the goods; but that in fact Huyton did not own the goods and were not in a position to give good title to the goods. Huyton dispute this. The question is not, I think, ultimately important, and I shall deal with it shortly.
144. Huyton's first submission is that the effect of their agreement with Haleka made on 25 May 1998 was that title to the goods or the right to possession of the goods (or both) passed to them. I have rejected the factual basis for this submission.
145. Huyton, however, have two alternative arguments. First, they say that at all times they were in a position to acquire title to the sesame seeds from Haleka by paying for them, and that this suffices to give business efficacy to the JVA. I accept that submission.
146. Secondly, Huyton refer to clause 9 of the FOSFA terms that were incorporated into their contracts with Haleka. They were entitled, since Haleka had not provided them with the requisite shipping documents, to take delivery of the goods under an indemnity, and to pay for the documents when they were presented. It is said that Haleka knew that Huyton intended to take delivery under that provision and never objected to them doing so. Moreover, Haleka knew that the Zarina 1 would arrive in Central America during the first half of June 1998 or thereabouts, and that Huyton would have the goods discharged there. They raised no objection to Huyton doing so.
147. Mr Johnson referred to The Filiatra Legacy [1991] 2 Lloyds Rep. 337, in which, at p.343, the Court of Appeal said that the parties could "scarcely have intended that passing of the property should depend on payment of the price or on transfer of the bill of lading, at all events unless they expressly said so" – and they had not done so. So too in this case, Mr Johnson submitted, the parties cannot have intended that property in the seeds should remain with Haleka when they were discharged from the vessel. I accept this submission.

The Negotiation of JVA and the exchanges about Huyton providing documents

148. On 26 May 1998, a meeting between Mr Philippas on the one hand and Mr Coello and Mr Bourboulis on the other hand was held at Segum's offices in Holland. There is a dispute about whether Mr Philippas told Mr Coello before the meeting that he would like to discuss the cargo bound for Guatemala (as Mr Coello maintained) or whether Mr Philippas mentioned it only in the course of the meeting (as Mr Philippas stated). I consider that Mr Coello is likely to be right. The cargo must have been a major problem for Mr Philippas, it would be natural for him to think of enlisting Mr Coello to help and in these circumstances it is probable that he would have mentioned it before the meeting.
149. In the course of the meeting Mr Coello agreed to speak to Profasa to try to persuade them to buy direct from Huyton the 1,000 mt of sesame seeds that they had originally proposed to buy from Agropacific. Mr Coello spoke to Mr Ramila of Profasa by telephone, but Profasa were unwilling to buy any of the cargo.
150. Against this background Mr Coello and Mr Philippas agreed that Dipasa should take and store the cargo. In his witness statement Mr Philippas said that he agreed to this for two reasons: first, he had no buyer for 3,375 mt of the sesame seeds, the cargo shipped with bills of lading 1, 2 and 5. Secondly, he was concerned about the vessel going directly to Guatemala with the full cargo on board. He feared that Agropacific might arrest, or take other such action against, the cargo, and preferred that the vessel should go first to Mexico before proceeding to discharge Pro-Export's cargo at Puerto Quetzal.
151. In cross-examination Mr Phillipas sought to minimise the difficulties facing Huyton, and said that Huyton were "seriously negotiating" with Pro-Export, who would have been happy to take more of the seeds, but preferred not to take the cargo to Guatemala for fear that Agropacific might take an action against it. I reject that evidence: there is no documentary evidence suggesting such further negotiations between Huyton and Pro-Export, and, if there had been such negotiations, there is no reason that Mr Philippas should not have mentioned them in his witness statement. At all events, by the end of May 1998 Huyton were in a difficult position with regard to disposing of this part of the cargo.
152. When they negotiated and concluded the JVA, Huyton did not have the commercial or shipping documents relating to the cargo loaded under bills of lading 1, 2 and 5, but Mr Philippas acknowledged that Mr Coello was not told this. When he was first asked about this in cross-examination Mr Philippas said that "there was no talk at all about the documents". When shown Huyton's fax which was sent after the meeting and to which they attached "as requested" copies of various documents (namely copies of bills of lading, fumigation certificates, a phytosanitary certificate and a certificate of origin) and promised copies of the "missing documents" the next day, Mr Philippas changed his evidence and told me that Mr Coello asked for "copies of documents and whatever you have".
153. Mr Coello gave evidence when he was being cross-examined that at the meeting Mr Philippas specifically told him that the documents relating to the goods were in Geneva and that Huyton had paid for them. I reject that evidence, which was not contained in his witness statement, and it was not put to Mr Philippas that he said this. I consider that if Mr Coello had been told this by Mr Philippas, this would have been mentioned before Mr Coello was cross-examined.
154. I conclude that while it is clear from the contemporary correspondence that some mention was made of commercial documents relating to the seeds during the meeting, Dipasa has not established what was said.
155. After the meeting on 26 May 1998, Huyton sent a fax to Dipasa setting out an outline of an agreement. They faxed with it copies of the three bills of lading, a fumigation certificate, a phytosanitary certificate and a certificate of origin relating to the 1,000 mt shipped with bill of lading no.2. (Shipping documents relating to the other 2,375 mt, shipped under bills of lading nos. 1 and 5, had not yet been received by UEB.) These documents, of course, reflected the original destination of Guatemala. In particular, the phytosanitary certificate was addressed to the Plant Protection Organisation of Guatemala, and certified that the product was "considered to conform to the current phytosanitary regulations of the importing country", namely Guatemala. By way of description of the consignment, the "name of produce and quantity declared" were said to be 1,000 mt gross Ethiopian whitish sesame seeds FAQ crop 1997/98.
156. On 28 May 1998 Mr Coello sent Huyton a fax in which he requested that Huyton provide to Dipasa (among other things) a phytosanitary certificate indicating Dipasa were the importer and relating to the full quantity of cargo which was to be the subject of the JVA.
157. On 2 June 1998 Mr Coello sent Huyton a further fax stating that it was most important that before the vessel's arrival in Mexico various documents were received stating that Dipasa were the consignee. He specified the documents that were needed in the following terms: "Invoice original and 5 copies for the full quantity. Original phytosanitary certificate for the full quantity. Original origin certificate for the full quantity. Full set of bill of lading; or written consent from shipowners that they will release the consignments to Dipasa or whatever valid document stating release to Dipasa". The fax requested that Huyton, "please make sure those documents are well ahead of arrival of vessel, otherwise we cannot proceed with the discharge neither the import formalities".
158. In response, in a fax dated 3 June 1998 Huyton told Dipasa that they would "proceed and arrange for the necessary documents to be couriered to you". The reference to documents being couriered distinctly suggests that original documents were to be sent. If copy documents were urgent, they would have been sent by fax.
159. The JVA was made on 4 June 1998. Before it was concluded there was a telephone conversation between Mr Philippas and Mr Coello. The exact date of the conversation is uncertain and unimportant. I find that it took place after Dipasa's fax of 28 May 1998 was sent and before their fax of 2 June 1998. Mr Coello's evidence was that in that telephone conversation he told Mr Philippas (or reminded him) that Dipasa required original shipping documentation in order to import the goods into Mexico and to have a smooth discharge operation, and that the documents had to be made out to Dipasa; and that Mr Philippas assured him that there should be no problems and that the original documents would be delivered to Dipasa before the arrival of the vessel. That evidence is in line with the contemporaneous exchanges, and I accept it.
160. Mr Philippas' evidence was that he was aware that it would be difficult to obtain documentation naming Dipasa as importer, not least because of the hostilities between Ethiopia and Eritrea. He said that he explained to Mr Coello the difficulties, and suggested that Huyton obtain certificates from origin from the Chamber of Commerce and Industry in Geneva. As for the phytosanitary certificates, his evidence was that he "mentioned" to Mr Coello that Huyton could send samples of the cargo taken by Afro Star to Geneva where they could be analysed and where phytosanitary certificates could be issued by the Administration Cantonale Genevoise Department de l'Action Sociale et de la Sante Controles. He said that the samples were sent to Geneva, but after they had been sent, Dipasa informed Huyton that they required the original phytosanitary certificates from Ethiopia and not certificates from Geneva, and therefore the samples were never analysed.
161. When he was cross-examined about this telephone conversation, Mr Philippas was evasive, and his evidence was particularly unsatisfactory. He repeatedly avoided saying whether or not he had told Mr Coello that Huyton had at that time no original documents relating to the 3,375 mt of cargo. I find that he did not do so. I cannot believe that if he had done so Dipasa would have sent the fax of 2 June 1998 in the terms that they did or that Huyton would have responded to it as they did.
162. This conclusion is confirmed, in my judgment, because on 9 September 1998, Huyton responded to Dipasa's complaint about their failure to supply documentation as follows: "At the time of negotiation [of the JVA] and even when this agreement was drawn up and signed we were never informed that you will require the original documents (in particular the original phytosanitary certificate) to import the goods into Mexico. In fact there is no mention of the requirement in the agreement. Your request for original phytosanitary certificates was only made after the goods had been discharged in Mexico, and in spirit of good co-operation we agreed to obtain this document". If Mr Philippas had explained the difficulty of obtaining documents before the JVA, Huyton would have referred to this in their letter of 9 September 1998.
163. I also reject Mr Philippas' evidence that Huyton sent samples taken by Afro Star to Geneva for analysis. Mr Philippas said that they were sent from London to Huyton Geneva for this purpose, but there is no document that evidences either the samples being sent or Dipasa telling Huyton that certificates from Geneva were insufficient for their purpose. After first saying that he thought Dipasa communicated by fax, Mr Philippas said that he was told this by Mr Coello at about the time that the JVA was concluded. Mr Coello denied it. I prefer Mr Coello's evidence. It is inconceivable, in my view, that if Mr Philippas' evidence were true, the subsequent exchanges would not have reflected it.
164. Huyton argue that in any event Dipasa should have been aware, and that they probably were aware, that replacement documents showing Dipasa as importer and Mexico as the country of import would take Huyton some time to obtain. This is an unattractive argument in view of Huyton's want of candour in their communications with Dipasa about the provision of documents. It is also one that I reject. Dipasa ought to have been able to rely upon Huyton to provide appropriate documents and to advise them of any difficulties about providing them. I am not persuaded that Dipasa turned their mind to the problems that Huyton might have had in arranging new documentation showing Mexico as the destination.

Huyton's instructions for the discharge of the sesame seeds

165. On 26 May 1998 the parties contemplated that the Zarina 1 might proceed to the port of Manzanillo to discharge the cargo which was to be sent to Mexico. On 28 May Mr Coello said in his fax to Huyton that there were no public warehouses available in Manzanillo, and that he was investigating the possibility of discharge at Lazaro Cardenas instead. This was the arrangement reflected in the JVA.
166. By a telex dated 3 June 1998 to the owners of Zarina 1, Huyton confirmed the declaration of Lazaro Cardenas as the first discharge port and Puerto Quetzal as the second discharge port. Agencias Naviera Unidas SA de CV ("Anusa") were appointed as the vessel's agent at Lazaro Cardenas. They were told that the vessel was expected to arrive on 7 June 1998 to discharge 67,500 bags of sesame seeds weighing 3,375 mt gross, and that the cargo was to be released to Huyton without production of bills of lading. Anusa were instructed that the cargo was to be stored in Acosa's warehouses in Huyton's name, and that it was not to be released by them or the warehouse to anyone without Huyton's written authority. They were also told that Dipasa were appointed to deal with "all import formalities" and to arrange stevedoring and storage on Huyton's behalf, but were not authorised to take possession of or to dispose of the cargo without Huyton's written instructions.

The Phytosanitary Certificate

167. On 5 June 1998 Huyton sent by fax their invoices, certificates of origin issued in Geneva and a fumigation certificate issued by SGS on 20 May 1998 in relation to the fumigation in Singapore, together with a copy of the phytosanitary certificate and copies of certain telexes. The fax ended "please note that all above original documents will be sent to you today by special courier." In the context of this communicaition, the term "original" clearly refers to the version of the documents that was being faxed. In the case of the phytosanitary certificate, a copy was being faxed and the letter indicated that a copy was being sent by courier. Huyton's communication did not suggest that they had any difficulty in providing the documents that Dipasa required.
168. On the same day Huyton sent from Geneva to Dipasa in Mexico documents including three invoices relating to the shipments under bills of lading nos 1,2 and 5 and a copy of one phytosanitary certificate dated 22 February 1998 relating to the shipment under bill of lading no 2. The invoices were for the payment of sums on the basis of a price of $700 per mt for sales of the sesame seeds "cash against documents". In that respect they did not represent the terms of the JVA. The certificate was, of course, addressed to the authorities of Guatemala. The entry against "name of produce and quantity declared" had been altered in that after the words "1000 mt gross Ethiopian whitish seseame seeds" there had been added "FAQ crop 1997/1998", and the amendment stamped by Huyton as "correction approved". This was the amendment to which I have referred and which was made after the discrepancy had been noted by UEB when the document was presented under l/c 68.
169. On 9 June 1998 Huyton sent to Dipasa from Geneva "copies of missing phytosanitary certificates". They sent copies of three certificates, two dated 18 March and 4 April 1998 in respect of the shipment under bill of lading no 1 and one dated 9 April 1998 for the bill of lading no 5 cargo. They went on to say that "original will be sent as soon as in hand".
170. The vessel arrived at Lazaro Cardenas on 7 June 1998. In a letter to Anusa, the Master stated that the sesame seeds would be delivered only to Huyton or their nominee.
171. As I have explained, in order to arrange the import of the cargo into Mexico, Dipasa needed to obtain an import permit from Sagar. Mr Baptista had gone about obtaining the requisite permit before the end of May 1998, and on Monday 8 June 1998 he flew to Mexico City to collect it. Sagar's phytosanitary requirements for importation included that an international phytosanitary certificate be presented, that samples be taken and that there be a physical inspection of the goods. The permit also stipulated that the goods were to be placed in quarantine custody, or provisional quarantine, because they had come from Africa. Since Huyton had not provided Dipasa with a certificate, Dipasa gave Sagar a letter dated 9 June 1998 which stated that the phytosanitary certificates and certificates of origin would be delivered to Sagar within five days. This was supported by a bond given by Dipasa in the sum of $1,000,000 to guarantee "the delivery of original documents and the industrial processing of 3,375 tons of natural sesame seeds of Ethiopia in order to eradicate the plague of pennisetum polystachium [or thin mission grass]; otherwise, the obligation to destroy it". This was apparently sufficient to persuade the Sagar representative to issue their phytosanitary certificate of importation on 9 June 1998 (although the expert evidence casts doubt upon whether Sagar should have done so in these circumstances).
172. Sagar's certificate stated that inspection of the sesame seeds indicated that they complied with the sanitary conditions for their importation. It also stated that the destination of the goods was Dipasa's premises at Cortazar.
173. On 24 June 1998, Mr Coello again contacted Huyton. He asked them to "rush" original phytosanitary certificates covering the whole parcel, saying that Dipasa had thus far been able to persuade the Mexican authorities to be patient, but that the position had become one of extreme urgency, because the authorities would otherwise execute upon the guarantee bond given by Dipasa to Sagar in order to be able to discharge and import the goods. In response to that communication, Huyton said that they were "continuously chasing the suppliers for original documents" and confirmed that they would courier the certificate to Dipasa's office in Mexico upon receipt. They said nothing about them not paying under the letters of credit because of discrepancies that they had not waived.
174. On 1 July 1998 Dipasa again impressed upon Huyton the extreme urgency that they should receive the phytosanitary certificates. They did so again on 3 July, 14 July and 16 July. On 27 July 1998 Acosa sent a fax to Huyton, stating that the phytosanitary certificate had not arrived and that it was needed "to extend the storage certificate at your name". In reply Huyton told Acosa, in the fax of 29 July 1998 that they had authorised Dipasa to issue a bank guarantee in respect of the missing phytosanitary certificate. Acosa replied that it was necessary in order to issue a deposit certificate to have all the documentation. Huyton rely upon these communications from Acosa in support of their allegations of mispresentation, and I shall refer to them in more detail later in my judgment.
175. Mr Philippas told me that during June and July 1998 Huyton were under the impression that the phytosanitary certificate had been lost in the post when being sent from Ethiopia to UEB. He said that Huyton were making great efforts to contact Haleka about it, but had difficulties in doing so because of the fighting there. In their letter of 9 September 1998, to which I have already referred, Huyton wrote to Dipasa that : "…as has already been explained the original phytosanitary certificate has been lost when mailed, and although we have exerted utmost pressure with shippers to issue a new one, yet due to the current crises between Ethiopia and Eritrea we have been unable to get in touch with shippers…..Consequently, due to the present situation in Ethiopia/Eritrea which amount to Force Majeure, there is not a lot we can do".
176. However, on 23 September 1998 Huyton wrote to Dipasa that "after considerable efforts on our part, we have succeeded in locating the missing original Phytosanitary certificate (which the bank has now admitted it had all along but apparently had somehow mis-filed)…". Mr Philippas described the discovery of the "missing" certificate as a "major breakthrough" on the basis that previously they had been proceeding under the misapprehension that Haleka or their bank had failed to provide the certificate.
177. No document has been disclosed that reflects either Huyton's mis-directed efforts to obtain the certificate from Haleka or their bank, or UEB's discovery of it in their files. Mr Philippas told me that communications about this with UEB were conducted orally by Ms Gloria Xenofontou of Huyton's Geneva office. Huyton did not complain to UEB about the Bank's mistake for fear of offending them. I cannot accept this. If an error of this kind had been made by a bank and it had caused such major difficulties to a substantial transaction, I cannot accept that no complaint would have been made and that there would be no document reflecting it. I do not accept that the reason that the certificate could not be produced was that it was mis-filed by the bank. I consider the probable reason that Huyton could not produce it was because they were withholding payment under letters of credit. The explanation that they gave Dipasa was untrue.
178. Although Dipasa did not provide the authorities with a proper international phytosanitary certificate as they had promised, Sagar did not call upon the bond. The bond was released on 16 November 1998 after the goods were processed.
179. According to a letter written to Dipasa's former solicitor by Dr Gustavo Frias, Director of Phytosanitary Regulation at Sagar, within the five days specified in the letter Dipasa lodged at Sagar's branch office in Lazaro Cardenas what purported to be a phytosanitary certificate bearing the number 70900 issued by the Ethiopian authorities addressed to the Mexican authorities in respect of the 3,375 mt of sesame seeds. The document was not genuine, and I do not understand that either Huyton or Dipasa submit that it was. In a letter sent to Huyton and dated 22 December 1998 Dr Kabeto of the Ministry of Agriculture in the Federal Republic of Ethiopia said that the document does not originate from the Ministry. Dr Kabeto produces a copy of the real certificate numbered 70900, which was issued on 26 March 1998 and related to an entirely different shipment to Saudi Arabia.
180. It is not clear how the false document came to be among Sagar's papers. In so far as it is suggested that Dipasa were party to producing a false document to Sagar, I do not consider such a conclusion would be justified on the evidence before me.
181. First, the history of Dr Frias' evidence is curious and, in my judgment, it is unreliable. He wrote a letter to Dipasa's former solicitor dated 9 July 2001, stating that he was doing so at the request of Dipasa and explaining documents relating to Sagar's part in the import of the shipment. (There is a second version of what is, for practical purposes, the same letter dated 10 August 2001.) In this he did not refer to Dipasa presenting the false certificate. His evidence about this is in a later letter dated 19 November 2001 sent at the request of Huyton's representatives in order to clarify his earlier letter. He did not indicate the source of his information about the lodging of the certificate, and it is certainly not clear that he had direct knowledge about it.
182. Secondly, and more importantly, the false document bears the date 30 July 1998. I regard this as significant for two reasons: first, if Dipasa were producing false documents, they would surely have produced a document that might on its face have been lodged within the five days period specified in the letter of 9 June 1998. Secondly, it casts grave doubt upon the evidence in Dr Frias' letter that it was lodged within the five days period. It is improbable that Dipasa or anyone else would have had the audacity to present to Sagar a false document bearing what obviously could not be its true date, and it is improbable that Sagar would have accepted it.
183. The evidence of the Mexican law experts was that the Sagar officials who accepted Dipasa's bond were acting outside their powers. It might in these circumstances have been convenient for the records of Sagar to include a certificate and prevent any question arising as to whether the bond should be enforced. But this is speculation. Having decided that there is not evidence upon which I can properly conclude that Dipasa were party to lodging the false document, I cannot, and need not, make any positive findings about its history.

The "manifest" and bills of lading

184. The absence of an international phytosanitary certificate was not the only problem that Dipasa faced when they went about discharging the sesame seeds. On 8 June 1998, Mr Baptista was told by Navemar Internacional SA ("Navemar"), who were agents for the vessel, that because bills of lading were not available, the vessel could not clear customs and the cargo could not be discharged. On 9 June, Anusa informed Huyton by fax that the vessel was berthing that day and expecting to commence discharge at 1500 hours. They continued "We urgently need B/L by fax as per attached strowage plan, otherwise the cargo can not be clear by customs. Also please adv[ise] us freight charges for custom purposes". They attached to their fax a document that was headed "cargo manifest", rather than a stowage plan. It purported to be issued by Erstas at Assab and list cargo for discharge at Lazaro Cardenas. I infer that it was not in fact issued by Erstas, who had had nothing to do with the cargo since long before the decision to send part of it to Mexico.
185. Mr Amaslides, on receiving the fax, telephoned Mr Ayala of Anusa to explain that they did not have the bills of lading. He said that Huyton had no objection to the agents issuing non-negotiable bills for the cargo to be discharged at Mexico reflecting the contents of the cargo manifest, with a view to them being presented to customs. He acknowledged in his evidence that he realised at the time that the agents were asking to issue non-negotiable versions of bills of lading which had never been issued, in that the new versions were to show Lazaro Cardenas as the discharge port. That did not seem objectionable to Mr Amaslides. Huyton confirmed by telex that they had no objection to the issue of a non-negotiable bill of lading "as per faxed cargo manifest for custom purposes".
186. Anusa issued bills of lading accordingly. They were stamped "copy non-negotiable", purporting to be copies of bills of lading nos 1, 2 and 5 and to have been issued by Erstas on 13 April 1998 at Assab (although bill of lading no 2 was in fact dated 28 February 1998). The port of discharge was given as Lazaro Cardenas. The shipper on all three was stated to be Genesis (whereas the named shipper on bill of lading no 2 was Haleka). The consignee on the purported copies was said to be Huyton, whereas consignees on the original bills were stated as "to the order of Commercial Bank of Ethiopea".
187. Huyton do not accept that these bills contained any false statement, pointing out that they showed the true destination of the cargoes to which they referred. This submission misses the point. The documents purported to be copies of bills issued by Erstas in Assab on shipment, and they were not: they were not copies of anything. There is no reason to suppose that Huyton knew in detail how the bills of lading that Anusa were to issue would differ from the original bills except as to the port of discharge, but they did know that the documents which were to be presented as copies would differ from the original bills at least in that respect. However, I conclude from Mr Amaslides' cross-examination on this point that it did not occur to him that there was anything improper in what Anusa were suggesting, and I do not think that he was authorising anything which struck him as dishonest in any way.

Storage Arrangements

188. On his return from Mexico City in June 1998 Mr Baptista was informed by Acosa's local representative, Mr Alonso Zurita, of other problems. Acosa could not accept the cargo into their local warehouse because it was bagged, and Acosa's authorisation to warehouse goods at Lazaro Cardenas related only to bulk goods. One consequence of this was that the vessel could not be berthed at Acosa's berth, and had to go to a general berth. More importantly, the goods could not be stored in Acosa's warehouse at Lazaro Cardenas as planned and new warehousing arrangements had to be made.
189. Mr Baptista discussed the problem with Mr Mosqueda. It was Mr Mosqueda's evidence that there was discussion about the cargo being carried to one or both of the two warehouses which Acosa had closest to Dipasa's premises at Cortazar. These were at Celaya and Irapuato. Mr Mosqueda sent a fax to Huyton, which was dated 8 June 1998 but transmitted early on 9 June 1998, to the effect that they were informed that the cargo "will be allowed to send it to our warehouse located in Celaya, y/o Irapuato" (sc Celaya and/or Irapuato).
190. Mr Mosqueda's evidence was that that fax was sent after discussion with Dipasa, but he could not recall whether he himself spoke to Dipasa or one of his assistants did so. He said that it must reflect an arrangement that the goods were to be stored there. It was clear to me when Mr Mosqueda was cross-examined that he had no clear recollection about the circumstances in which this fax was sent. The wording of the fax does not suggest that a decision had been taken to send the cargo to those warehouses, but only that Acosa would be allowed to store it in their warehouses there, unlike the warehouse at Lazaro Cardenas.
191. Mr Baptista's evidence was that, while he accepts that he had discussions with Acosa about the possibility of storing the goods at these two warehouses and that these discussions took place, or at least might have taken place, on 8 June 1998, he had them with a Mr Cruz, a manager working for Acosa at Lazaro Cardenas. In cross-examination, however, he agreed that these matters were also discussed with Mr Mosqueda on 9 June. He said that no decision was taken to send the cargo to the warehouses at Celaya and Irapuato. This was one possible solution to the problem that was canvassed, and he and Acosa discussed several places where the cargo might be stored.
192. Mr Mosqueda also told me that he believes that a copy of his fax of 8 June was sent to Dipasa. The reason for his belief was that he had given instructions that all faxes be copied to Dipasa. When asked whether those instructions were given before 8 June 1998, he was uncertain, but answered "Probably yes". There is no documentary evidence that a copy of the fax was sent to Dipasa. Since the fax conveys no decision about what is to happen to the cargo, there is no obvious reason that it should have been copied to Dipasa. Mr Baptista told me that he had no recollection of seeing the fax. I accept Mr Baptista's evidence and conclude that the fax was not sent to Huyton on the instructions of Dipasa and was not copied to them.
193. There were also at about this time discussions between Mr Baptista and Mr Mosqueda about "enabling" Dipasa's premises at Cortazar. Mr Mosqueda was not able to say when those discussions took place, except that they must have been before 19 June 1998, when Acosa's surveyor prepared a report on the premises. According to Mr Baptista, he discussed storage at Dipasa's premises under an enabling agreement "on or about" 9 June 1998, when Mr Mosqueda told him that there might not be space for the cargo in Acosa's two nearby warehouses, but he decided to adopt this course only after being informed on 10 June by Mr Soto, Sagar's licensed representative who dealt with quarantine questions, that Sagar had detected the presence of pennisetum polystachion in the discharged cargo, and that the goods would have to be placed in quarantine in his custody until the sample had been analysed.
194. I accept Mr Baptista's evidence that, after it was learned that the goods could not be stored by Acosa at Lazaro Cardenas and before it was decided that the goods should be taken to Dipasa's premises in Cortazar, Dipasa explored with Acosa various options as to where they might store the seeds. On the other hand, I do not accept Mr Baptista's evidence about precisely when the decision was taken. I conclude that by some time on 9 June 1998 it had been decided that the cargo should be taken to Dipasa's plant in Cortazar. This is because on that date Sagar issued their certificate of importation, which stated that the delivery place was Dipasa's premises. Mr Baptista said in evidence that he did not know how that came to be the destination on the certificate, but I conclude that Dipasa had specified it. It therefore seems to me likely that the decision was taken by Dipasa at some time that day. It is impossible to be more precise.
195. Dipasa did have an alternative course open to them. Specifically, they could have stored the cargo in Acosa's own warehouses. Although bagged goods could not be in their warehouse at Lazaro Cardenas, and there was not space for all the seeds in Celaya, I accept Mr Mosqueda's evidence that it would have been possible for the cargo to have been stored partly in Celaya and partly at Irapuato.
196. By the enabling agreement of 30 June 1998, to which I have referred, Dipasa undertook to transfer to Acosa that use of the warehouse(s) at their address in Cortazar and Acosa undertook to receive there goods of Dipasa or third parties and in some circumstances to issue cd's and pledge bonds. The parties to the agreement were not only Dipasa and Acosa but also Mr Baptista and a Mr de la Vega, another employee of Dipasa. The enabling agreement contained the following provisions:

i) By clause 4, that Acosa should not be liable for merchandise deposited in the enabled premises until cd's had been issued for them.

ii) By clause 6, that merchandise received by Acosa on deposit should be delivered up by them only when Acosa had physically received the cd's and any applicable pledge bonds relating to the deposited merchandise, signed by the legal holder of the instruments.

iii) By clause 23, that whenever Acosa received merchandise in deposit, they took possession of it, and therefore had the right at all times to appoint administrative personnel as they deemed necessary and to charge Dipasa for the control and surveyance of the merchandise. If they thought it necessary, they could transfer merchandise deposited in the enabled warehouse to their own premises.

iv) By clause 27, that deposited merchandise should remain in the possession of Acosa, who agreed to appoint Mr Baptista and Mr de la Vega as "enabled warehousemen". Mr Baptista and Mr de la Vega accepted the obligations imposed on them under the enabling agreement. "The enabled warehouseman shall issue of its own responsibility entrance receipt in the name of Acosa at the moment of receiving the merchandise and shall be in charge of all things regarding a better performance of their duties".

v) By clause 28, Mr Baptista undertook specified obligations, including an obligation that merchandise received in the name of Acosa should remain under his direct control, possession and responsibility, and an obligation not to allow the withdrawal of merchandise if the cd covering it had not been recovered.

197. The scheme of the enabling agreement was therefore that Acosa should have use of Dipasa's warehouse, and that they should be responsible for goods deposited there once the enabled warehouseman, Mr Baptista, had issued an "entrance receipt" and a cd had been issued by Acosa. Unless and until a cd was issued, Acosa were not to be responsible for goods in the enabled warehouse.
198. The agreement was subject to the authorisation of the Mexican Banking and Securities Commission. If the Commission were to withhold authorisation, it had to give notice of this within 10 days of receiving details of the premises that were to be the subject of an enabling agreement. The relevant papers for Dipasa's premises were filed with the Commission on 2 July 1998 and, no objection being raised, they were authorised as enabled premises on 12 July 1998.

Importing the seeds and warehousing them

199. On 9 June 1998 Dipasa, or their broker, presented a pedimento for importation of the cargo and it was stamped by the Mexican customs to allow the seeds to be imported. For this purpose, Dipasa presented to the customs, among other documents, the phytosanitary certificate of importation issued by Sagar and the "copy" bills of lading issued by the vessel's agents.
200. The discharge of the cargo started at about 16.30 hours on 9 June 1998. The goods were discharged into wagons. This operation continued until 17 June 1998, and by 19 June 1998 the goods were being delivered to Dipasa's premises. In total 3,434.872 mt gross of sesame seeds were discharged. As I have explained, the enabling agreement was made between Dipasa and Acosa on 30 June 1998. By 14 July Dipasa had received 3,235 mt into their "enabled" premises. The final part of the consignment arrived shortly thereafter. Dipasa recorded the receipt on what have been described as "goods inwards notes".
201. Acosa did not issue cd's for the goods. The reason for this is in dispute. Huyton's case is that Acosa did not do so because Mr Baptista had not issued receipts under clause 27 of the enabling agreement, and cd's were to be issued only after that. Mr Mosqueda's evidence was that he repeatedly asked Dipasa for a written request to issue cd's and never received one, and that by the end of July he had concluded that the enabling agreement "was very unlikely to proceed". He said that he told his staff to take no further action unless instructed by Dipasa to go into the warehouse to inspect the goods and to issue cd's. He denied that Acosa were otherwise inhibited from issuing a cd, and asserted that Acosa would have issued in it the absence of a phytosanitiary certificate.
202. Dipasa's case is that the reason that cd's were not issued was that Huyton, despite their promises, did not send the requisite documentation. Mr Baptista's evidence was that, after the enabling agreement was signed, Acosa did nothing other than telephone to ask about the condition of the cargo and how much had arrived. Inspectors did not come to look at their premises. He did not chase Acosa, since he was content to keep to a minimum the costs under the enabling agreement.
203. I prefer the evidence of Mr Baptista about this, and reject Mr Mosqueda's that he was chasing Mr Baptista to issue receipts. I observe that Mr Mosqueda appeared in his witness statement to be saying that the problem was not that there had been no written request under the enabling agreement but rather that Acosa were not afforded inspection facilities. However, this is not the reason that I reject Mr Mosqueda's oral evidence. I do so because it is inconsistent with more contemporaneous documents.
204. No document lends support to Mr Mosqueda's explanation. A small point is that at about this time he signed a request to Mr Garibay of Acosa's Operations Department to "proceed with the physical verification of the sesame seeds stock" so that Acosa might be in a position to sign cd's. The request was dated 29 July 1998, but has been countersigned by persons apparently in the Operations Department with the date 28 July 1998, which suggests that it might have been misdated. This request seems surprising if, as Mr Mosqueda said, he thought that the enabling agreement was unlikely to proceed.
205. However, there are two more important points. First, as I shall explain, the reason that Acosa gave Huyton on 29 July 1998 for not issuing a cd was that Huyton had not sent the requisite documentation. Huyton pointed out that Dipasa were party to the drafting of this explanation to Huyton, and I accept that they were. However, this does not answer the point. Mr Mosqueda is clearly an intelligent man, and was, as I find, personally involved in dealing with this matter at the end of July. Whatever Dipasa's involvement in Acosa's communications with Huyton, there is no reason that Mr Mosqueda should have sent a letter that he did not believe to be true. He never recorded any unhappiness with Acosa's reply to Huyton about this, or objected that Mr Baptista or Dipasa were causing problems about issuing cd's .
206. Secondly, in his report dated 30 December 1998 Mr Mosqueda made no mention of the absence of receipts as a reason for not issuing cd's. Again he referred to the absence of appropriate commercial documents, saying "in summary, we consider that the documentation does not satisfy the requirements of reliability to grant certificates of deposit". The context in which he wrote this report was that Huyton, through their Mexican lawyers, had presented a claim for damages and filed a complaint before the National Banking and Securities Commission. Had Mr Mosqueda believed that Acosa had an answer to the claim that under the terms of the enabling agreement they could not issue cd's because Mr Baptista had not issued receipts, it seems to me most unlikely that he would not have mentioned it.
207. It is certainly the case that the enabling agreement envisaged that Mr Baptista should issue receipts before Acosa issued any cd, and there is no reason to suppose that Mr Baptista had issued a receipt. Further, Acosa were not to issue cd's until informed of the value of the goods and to whom the cd should be issued. However, it does not follow that this is the reason that no cd was issued. I conclude that if Acosa had had the phytosanitary certificate, and thought that they needed a receipt and the information before they could properly issue a cd, Mr Baptista would have provided them upon Acosa's request. The real reason for cd's not being issued in Huyton's name was, in my judgment, Huyton's failure to provide a certificate. After all, Dipasa had entered into the Enabling Agreement. I accept that when they did so, they intended that the agreement should be implemented by Acosa issuing a cd, and I do not believe that they intended to prevent Acosa from doing so and thereby undertaking responsibility for the goods. Indeed, that was not suggested to Dipasa's witnesses.
208. Against this, Huyton submit that Acosa would have wished to issue a cd if they could do so, because only then could they make charges for the enabled warehouse. It is said that, having set up the enabling arrangement, their commercial interests dictated that they should issue a cd as soon as they could. This is true so far as it goes. It does not persuade me that Acosa's explanation to Huyton for not issuing a cd was untruthful.
209. I add this. Even if, contrary to my conclusions, the real reason that Acosa did not issue a cd was that Mr Baptista did not provide a receipt, Mr Baptista, or Dipasa, would equally have been able to prevent Acosa from issuing a cd in Huyton's favour or a negotiable cd even if the goods had been in Acosa's own warehouse. Acosa regarded Dipasa as their customer and would not have issued a cd without Dipasa's written request. On no view did the fact that the goods were in an enabled warehouse prevent Huyton being issued by Acosa with a cd.

The SGS certificate

210. Dipasa arranged for SGS to inspect the seeds. They visited Cortazar on 30 June 1998 to take samples and to weigh the cargo. On 15 July 1998 SGS issued a certificate that they had weighed and sampled the goods at Lazaro Cardenas and at Dipasa's warehouse. They referred to attending "at the port of Lazaro Cardenas, Mich., Mexico and the warehouse of Dipasa, S.A. de CV, for the sampling and weighing of the … cargo".
211. Huyton received the certificate at about the end of July 1998. Despite clause 10 of the JVA, Huyton did not have the samples analysed. It is Huyton's case that in a telephone conversation Mr Philippas and Mr Coello agreed that analysis was not necessary, but Mr Coello denied this. There is no correspondence referring to any such conversation. In support of his submission that Mr Philippas' evidence is to be preferred on this point, Mr Johnson pointed out that when Dipasa received a copy of the SGS certificate at the end of August 1998, they did not raise the question of analysis of the samples and did not complain that there had been no analysis. I am not convinced by this argument, and conclude that Mr Coello's evidence is more likely to be right about this. There would have been no reason for Dipasa to have agreed to dispense with the analysis (an insignificant expense). Moreover, if there were such an agreement I would have expected it to have been confirmed in a fax.
212. In reaching this conclusion, I do not overlook the evidence of Mr Amaslides. In his first witness statement, despite referring to the question of sampling, he made no mention of any telephone conversation between Mr Philippas and Mr Coello. On the contrary, he said that "there would be no problem about asking for the analyses later on if they were required". In his second witness statement, dated 29 January 2002, he stated that he specifically remembered Mr Philippas telling him of the conversation with Mr Coello "at the time" and instructing him that it was unnecessary to analyse the samples that had been taken during discharge. Under cross-examination, Mr Amaslides had no explanation for the inconsistency between the two statements, and in particular as to why he used the phrase "if they were required", if Mr Philippas had told him that it had been agreed that there should be no analysis. I do not consider that I can rely Mr Amaslides' evidence about Mr Philippas telling him of a conversation with Mr Coello, although I am prepared to accept that Mr Amaslides has convinced himself that he can remember this and is not deliberately giving untruthful evidence.

Quarantine Restrictions

213. I have already said that Sagar required that upon discharge the cargo should be placed under quarantine restrictions. It was to be visually inspected on 10 June 1998 by Mr Alvarez Soto for Sagar, and samples were to be taken. Mr Soto tentatively identified the presence of pennisetum polystachion. On 10 June 1998, Sagar confirmed their requirement of provisional quarantine pending analysis, issuing a Certificate of Quarantine Custody and a Certificate of Facts requiring this. An analysis report dated 15 June 1998 confirmed the presence of pennisetum polystachion, a single seed being found in a 500g sample. By a certificate dated 10 July 1998 the provisional quarantine of the goods was confirmed.

Misrepresentation: the nature of Huyton's case

214. It is Huyton's pleaded case that they made the SA as a result of and in reliance upon representations made by Dipasa or alternatively by Acosa that "the goods were stored at the Acosa warehouse (or an Acosa warehouse), and not at Dipasa's factory". The term "the Acosa warehouse" refers to their warehouse at Celaya. I shall explain the nature of Huyton's case in misrepresentation before identifying the individual communications on which they rely.
215. First, Huyton rely on communications from Dipasa (or Dipasa Europe) which were made before the goods were discharged from the vessel. Huyton's case here is not that these communications contained misrepresentations when they were sent or that they did not properly represent Dipasa's intentions and expectations for the storage of the sesame seeds. Huyton's argument is that in view of what was said in those communications, it was Dipasa's duty to apprise Huyton of the new position when the plans for storage were changed.
216. Secondly, Huyton rely on written communications from Acosa, which, as the case was pleaded and opened by Huyton, Dipasa "caused" Acosa to make. Huyton say that Acosa copied Huyton's messages to Dipasa and that Acosa's responses were sent on the instructions of Dipasa.
217. In the course of his closing submissions Mr Johnson advanced an alternative argument that it sufficed that Dipasa had notice that Acosa had made the representations, even if they did not cause Acosa to make them. Mr Johnson made it clear that Huyton does not advance a case of Dipasa having constructive notice of any misrepresentations made by Acosa, and that Huyton's case was that Dipasa had actual notice.
218. Thirdly, in their pleading, Huyton also refer to statements made by Dipasa after the SA was concluded. It is obvious that they cannot support a claim of an entitlement to rescind for misrepresentation, and Mr Johnson did not press this part of the pleaded case.
219. Huyton's case therefore is that they would not have made the SA if Dipasa had told them of the changed storage arrangements, and that when they made it, they relied upon written representations made by Acosa. They do not assert that there were relevant oral representations, or that any positive representations were made by Dipasa themselves (or by Dipasa Europe) before the SA was made.

Dipasa's involvement with the faxes sent by Acosa

220. According to Mr Mosqueda, Acosa always sent correspondence that they received from Huyton on to Dipasa, and communicated with Huyton only in according with Dipasa's instructions. He said that from the outset, Acosa regarded Dipasa rather than Huyton as their clients. Understandably, Mr Mosqueda did not himself deal with these exchanges, but directed his staff to refer all communications to Dipasa and to act on Dipasa's instructions, and left it to them, and in particular to his two assistants, Ms Evangelina Ramirez and Mr Alonso Zurita, to do so. Neither Ms Ramirez nor Mr Zurita has given a witness statement in these proceedings.
221. Mr Baptista acknowledged that there were conversations on occasions between Dipasa and Acosa in which Dipasa gave Acosa information about the goods, which information was passed on to Huyton, and it is not disputed that Acosa had discussions with Dipasa before replying to some of Huyton's enquiries. However, Mr Baptista denied that communications from Huyton to Acosa were routinely passed on to Dipasa, and he denied that Dipasa routinely gave instructions as to the terms in which Acosa were to reply to Huyton.
222. In support of their contention that I should accept Mr Mosqueda's evidence, Huyton first point to fax cover sheets indicating that letters from Huyton to Acosa were passed on to Dipasa. One of these evidences that a letter of 4 June 1998 to Mr Mosqueda was passed on to Mr Baptista. All the others relate to communications after the SA was made. These documents are not inconsistent with Mr Baptista's evidence, and I do not consider that this assists Huyton to show that the general picture is that painted in Mr Mosqueda's evidence. On the contrary, the fact that only one relevant fax cover sheet has been produced, and that that was sent to Mr Baptista for his information ("para su conocimiento") rather than to obtain instructions as to the response seems to me, if anything, to support what Mr Baptista told me.
223. Secondly, in the case of two specific documents, the documents show that Dipasa sent to Acosa a suggested draft as to how response should be made to Acosa. In both cases, Dipasa's contribution referred to Mexican law. One of them related to Acosa's fax of 29 July 1998. The second, dated 22 September 1998, was sent after the SA was made. I shall refer to these documents specifically in the course of my judgment. It suffices here to say that, for the reasons that I shall explain, I do not think that these provide any basis for a proper inference that Dipasa were making comparable contributions to other communications sent by Acosa.
224. Thirdly, on occasion the terminology of Acosa's letters to Huyton indicates that they are passing on information to Dipasa. No doubt they were doing so, but that falls far short of establishing Huyton's case.
225. I do not doubt that in corresponding with Huyton, Acosa sought and obtained from Dipasa information about the sesame seeds. However, this is very different from Dipasa dictating or directing the precise words of the faxes that Acosa were sending to Huyton or even being aware of them. The documents that have been produced do not show that Dipasa were so intimately involved with the exchanges as Mr Mosqueda told me they were.
226. I consider it inherently improbable that Acosa would have looked to Dipasa for the precise words of their exchanges with Huyton. Generally the parties to these dealings did not conduct their exchanges with such care or attention to detail, and it seems to me improbable that commercial people in the position of these parties would have done so. I cannot tell precisely what instructions were given to Acosa's staff, but in any event it is probable that they simply obtained from Dipasa such information that they needed to respond to Huyton.
227. This seems to me the more likely since Mr Baptista does not understand much English, and the thrust of Huyton's case, as I understand it, was that Mr Baptista was himself involved in "causing" Acosa's faxes to be sent. It would be a time consuming and unnecessary exercise for him to be involved in the details of the exchanges in a language with which he is not familiar.
228. This issue turns largely upon the oral evidence of Mr Mosqueda and Mr Baptista, both of whom were cross-examined through interpreters. The difference between them was in the end less than appeared from their written evidence because in cross-examination Mr Mosqueda acknowledged that, despite the impression given by his affidavit, he could not remember whether or not he personally spoke to Mr Baptista about these communications or whether this was done entirely by his assistants. However, to the extent that there remain differences between the evidence of the two witnesses, I prefer that of Mr Baptista, and, subject to the findings which I shall make about specific documents, I find that Huyton have not shown that Dipasa were aware of the terms of the exchanges that passed between Acosa and Huyton, and still less that they participated in drafting Acosa's letters or determining what was said in them.

The Communications

229. Huyton rely in support of their pleaded case that Dipasa made misrepresentations about the whereabouts of the goods upon six communications sent to them by Dipasa before or at about the time of the arrival of the vessel in Mexico and the discharge of the goods.
230. First, in the course of the negotiating the JVA, when Huyton proposed a term that the goods should be transported to a bonded warehouse in the port and held in the name of Huyton, Mr Coello responded on 1 June 1998 by proposing instead a term that "the goods shall be transported to a bonded warehouse in the port or in any other bonded warehouse in any city near Dipasa's factory, where space is available and held in the name of Huyton". This suggestion was adopted and is reflected in clause 3 of the JVA. Dipasa also proposed a term, reflected in clause 8 of the JVA, that upon receipt of payment, Huyton should immediately release the goods to Dipasa.
231. Secondly, before the JVA was concluded, in response to a request for the full style of the bonded warehouse to enable Huyton to obtain the bank's authorisation for storage there, Mr Coello informed Huyton on 3 June 1998 that the bonded warehouse at which the goods would be stored was to be Acosa's.
232. Next, Huyton rely upon two faxes sent on 4 June. Mr Coello sent a fax from Dipasa Europe in which he said that, since Huyton were arranging insurance, they (Dipasa) were not covering "the insurance from Free Out to the Bonded Warehouses".
233. Further, Mrs V Lima, of Dipasa's traffic department in Mexico, sent a fax in these terms:

"We want to inform you that goods will be discharged to custom warehouse and after customs clearance goods will be storaged at [Acosa] bonded warehouse. For that reason we need original set of documents as soon as possible."

234. The context in which these communications referring to Acosa were sent was this. On 4 June 1998, Mr Baptista wrote to Acosa advising them that Dipasa had made the JVA with Huyton, and that they wanted the sesame seeds to be warehoused in Acosa's warehouses and certificates to be issued to the order of Huyton. He sought confirmation that the goods might be stored in Acosa's warehouses at Lazaro Cardenas and/or Celaya. On the same day, Huyton sent Acosa a fax, referring to Dipasa having arranged with them the storage of their goods and seeking their confirmation that Acosa would act according to their instructions that the cargo should remain in their "bonded warehouse in our name and is not to be released or delivered to anybody without or [sic] written authority or instructions". This was the fax which was copied by Acosa to Dipasa for the information of Mr Baptista.
235. The fifth communication from Dipasa on which Huyton rely is one dated 8 June 1998, in which Mr Coello was again pressing Huyton for documents. He said that they were needed urgently because "otherwise discharging and stevedoring costs will be duplicated plus double warehousing cost, since goods have to go to "customs" (rented) warehouse and from there to Acosa warehouses, also, please note that authorities are very bureaucratic to the extreme that they might create problems. Please "RUSH, RUSH documents as requested"". A copy of this fax was sent by Mr Coello to Mr Baptista in Mexico.
236. The sixth communication from Dipasa on which Huyton rely is another fax from Mr Coello that he sent on 9 June 1998. Before describing it, I should again set out something of the context in which it was sent.
237. On 8 June 1998, Mr Mosqueda sent a message to Mr Amaslides in the following terms: "we are informed that the 67,500 bags, weighing 3,375 mt of sesame seed gross, will be allowed to send it to our warehouse located in Celaya, y/o [that is to say, and/or] Irapuato, Guanajuato Mexico. The merchandise sall be discharged above your stricts instructions [sic]." This is the first of the communications from Acosa to them that, according to Huyton's pleading, contained representations that Dipasa "caused" Acosa to make.
238. Mr Mosqueda said that he prepared the fax of 8 June 1998 himself, but that it would have been sent only with Mr Baptista's approval and authority. However, he was not able to say whether he himself dealt with Dipasa or whether he left it to one of his assistants. I concluded from his cross-examination that he had no real recollection about this fax. It is apparent from the wording of the fax ("We are informed…) that Acosa were using information that they had obtained from Dipasa when writing this fax, but this in itself is neither remarkable nor important. I was not persuaded that Dipasa had any significant involvement with it, or that they knew what Acosa were writing.
239. On 9 June 1998 Mr Amaslides sent Mr Mosqueda a further fax. Apparently he had not yet seen Mr Mosqueda's fax dated 8 June. Mr Amaslides said that Huyton were "still missing the confirmation we requested from you on the 4 June….. that you will keep our consignment…..in your stores under our name and ownership and that you will not release or deliver any quantity without our written instructions and authority". There is no evidence that I accept that Dipasa were sent a copy of this fax by either Huyton or Acosa.
240. Mr Amaslides also sent a fax to Mr Coello on 9 June 1998. He stated that the insurers needed to know the exact location of each warehouse where the cargo would be stored and the quantity to be stored in each. He also said that Huyton were obliged to provide their bank with a direct confirmation from the warehouse company "that the whole cargo is stored in our name"; and that they had requested this information of Acosa, but not received it. He asked for Dipasa's "intervention".
241. That day, Mr Coello sent two faxes to Huyton referring to the plans for storage of the seeds, upon one of which Huyton rely in support of their contention that Dipasa misrepresented the whereabouts of the goods. In it, Mr Coello told Huyton that in order to discharge the goods they had provided the bond that they would "furnish all documents in good order before the vessel leaves port". He again requested Huyton to send the documents "otherwise authorities will collect the bond". Turning to the arrangements for storing the goods, Mr Coello continued: "… part of the cargo will be placed in Acosa warehouses in Lazaro Cardenas and part will be shipped directly to Celaya (Acosa warehouse near Dipasa's factory). Therefore please send a fax or letter to your agent instructing them that cargo will be delivered to Acosa either in Lazaro Cardenas or in Celaya or at any of their warehouses…".
242. In his second fax of 9 June 1998, Mr Coello responded to Mr Amaslides' enquiries. Mr Coello said that he did not have the specific address of each of the warehouses, and that Dipasa Europe were seeking that information from Dipasa in Mexico. He also said that Dipasa's "aim" was to store all of that cargo in Celaya, but that plan depended upon the availability of railroad cars; and that it might be necessary to store some of the cargo temporarily in Lazaro Cardenas. He also pointed out that Acosa would not be able to state that the cargo was presently stored in Huyton's name, but expressed the belief that Acosa could say that the goods would be stored in Huyton's name as soon as they received the goods. He repeated his request that Huyton confirm to their agents that the goods might be stored in any of Acosa's warehouses. This communication ended: "It is obvious that you are missing some necessary confidence in Dipasa, which is understandable but not acceptable; if so we strongly suggest that you go to Mexico and supervise this cargo together with our people there…"
243. Mr Amaslides sent a reassuring response, stating that he had obtained Acosa's confirmation that the cargo would only be released against their direct instructions. Thus, the implication was that Dipasa's "intervention" as requested in the earlier fax was no longer needed. Mr Amaslides said that Huyton saw no reason to be suspicious of Dipasa, and apologised if their repeated demands for information had given the contrary impression. Mr Amaslides said that the "demands were originating from our Bank and Insurance company to whom we are obliged to furnish detailed information and securities for obvious reasons". (It became apparent during Mr Philippas' cross-examination that the insurers had not in fact requested receipts or other securities and that the bank had not made any specific request in respect of this consignment.)
244. Mr Philippas was cross-examined about the last point in Mr Coello's second fax. He told me that he read it when it arrived and discussed it later that day with Mr Coello by telephone. He said that he told Mr Coello that he had entered into the joint venture because he trusted Mr Coello and that there was no need for Huyton to visit Mexico. This telephone conversation is not mentioned in Mr Philippas' (very detailed) witness statement and is inconsistent with Mr Amaslides' response to the fax. I conclude that when Mr Philippas was giving these answers in cross-examination, he was being untruthful, and that no such telephone conversation took place.
245. On the same day, 9 June, Mr Amaslides sent a message to Mr de Baere of Belgibo, Huyton's insurance brokers, that the consignment would be stored at warehouses of Acosa located at "Celaya, y/o Irapuato Guanajuato. There is a possibility that a small quantity may be stored at the same company's warehouse located at Lazaro Cardenas. If the inspection is to be done immediately, we suggest that both warehouses are inspected. If the inspection is to be carried out after three days or so we shall be in a position to let you know whether any quantity will be stored at Lazaro Cardenas warehouse." It is apparent from this fax that Mr Amaslides had not appreciated that the reference to Celaya and Irapuato contemplated the consignment might be split between these two locations. He had not understood the Spanish term "y/o", which means "and/or".
246. Huyton have not shown that any of the six faxes on which they rely was sent after the decision was taken by Mr Baptista that the seeds should be sent to Cortazar. Indeed, in view of the date on Mr Mosqueda's fax (which suggests to me that it might have been dictated on 8 June and sent early the next day) and the time difference between European time and Mexican time, I think it more likely than not that they were sent before any decision was taken. These communications properly set out the developing plans for storing the seeds, and it must have been apparent to Huyton that the arrangements about storage were still fluid. This is reflected in the phraseology of Mr Amaslides' fax to Belgibo.
247. Before I come to the later communications from Acosa upon which Huyton rely in support of their misrepresentation case, I should refer to some faxes sent on 29 June 1998. First, Huyton sent Mr Mosqueda a letter that they understood "all the cargo of 3,700 mtons shall be transported to your bonded warehouses in Celaya. Please confirm by fax whether all the cargo has now arrived at your warehouse." There is no record of a response to this fax. Mr Mosqueda said the fax was sent on to Mr Baptista and that Acosa sent no reply because he did not receive instructions from Dipasa to do so. Mr Baptista denied this. I do not accept that Mr Mosqueda had any specific recollection about this communication, and do not accept his evidence about it.
248. On the same day Huyton sent a fax to Mr Baptista enquiring about a railway accident which had affected some of the cargo and continuing, "finally, can you confirm that all the cargo arrived at Celaya and put into the stores? Has SGS weighed the cargo?". In reply Mr Baptista stated, "cargo is beginning to arrive this week SGS comes tomorrow - will keep you informed, we hope that in about two weeks more cargo will arrive". He did not point out in this response that in fact the cargo would not be coming to Celaya but to Cortazar.
249. I should mention two matters in relation to this exchange. First, there was a question about whether Mr Baptista spoke to Huyton by telephone before replying to the fax. Mr Baptista told me that there was a conversation, but he did not know to whom he spoke, and in any case he only said that Dipasa would send a reply to Huyton's fax. Mr Amaslides denied speaking to Mr Baptista himself. The question is unimportant, but I accept Mr Baptista's evidence about it. Secondly, Huyton do not in their pleaded case rely upon this exchange in relation to their allegation of misrepresentation. In the course of the trial, they sought to amend their pleadings, and I refused them permission to do so.
250. On 13 July 1998 Huyton sent Acosa a fax in which they said that their bank was pressing them hard for a storage certificate, and asked whether "all the consignment has now arrived. If affirmative please let us have your certificate that you are holding the cargo at your stores at Celaya in the name of Huyton S.A. Geneva and that you will not release any quantity without their written authorisation". Acosa replied by sending two faxes. They were both addressed for the attention of Mr Amaslidis and were sent by Mr Mosqueda. The first read as follows: "we are informed that the last 130 metric tons of sesame seeds gross will be arrived next Friday to our warehouse located in Celaya, Guanajunato. When all the consignment have been arrived we can send it to you the storage certificate". The second fax was in different terms: "we already received 3,235 metric tons of sesame seeds gross. We hope receive the last 140 metric tons next Friday. When all the consignment have been arrived in our warehouse located in Cortazar, Guanajunato; We have to count it. Then we shall extend the storage certificate at your name". The first fax was sent out without any signature. The second was signed by Mr Mosqueda. It seems that both Huyton and Acosa regarded the latter fax as superseding the former. I observe that Mr Mosqueda used the term "our warehouse" to refer to the enabled premises.
251. Mr Mosqueda's evidence about the first fax is that he "can only imagine" it was sent by one of his assistants at Mr Baptista's request. As for the second fax, Mr Mosqueda said that it was sent at Mr Baptista's request. He acknowledged that Mr Baptista did not dictate the exact wording, but that Mr Baptista gave him the information set out in it about how much of the consignment had reached the Cortazar warehouse.
252. I do not understand Mr Baptista to dispute Mr Mosqueda's evidence about the second fax. Certainly I would infer that between the two faxes there had been communication between Dipasa and Acosa, because the correction about the amount of seeds yet to arrive at the warehouse is likely to have derived from Dipasa. They, rather than Acosa, would have had such information. However, Mr Baptista said that he did not request either of Mr Mosqueda's assistants to send the first fax, and denied that he had received a copy of the fax from Huyton that was under reply. Huyton have produced no evidence that casts doubt on this evidence of Mr Baptista's and I accept it. The most likely sequence of events seems to me to be that the first fax was sent by someone at Acosa before speaking to Dipasa and was inaccurate, and the second more accurate fax was sent after discussions. However, there is no reason to suppose that Dipasa were aware of the precise wording of the second fax, and I reject any suggestion that they were.
253. I therefore conclude that Dipasa were responsible neither for Huyton being told in the first fax that the goods were at Celaya, nor for the term "our warehouse" being used to descibe the "enabled" premises. There is no evidence that I accept that Dipasa were aware of the contents of the first fax or of the terminology used in the second fax.
254. On 20 July 1998 Huyton asked Acosa, "if the last 140mt arrived last Friday, can we now please have storage certificate". Again, there is a conflict of evidence between Mr Mosqueda and Mr Baptista as to whether it was forwarded to Dipasa, and I prefer the evidence of Mr Baptista that it was not.
255. It appears that Acosa did not reply to this inquiry until 27 July 1998, when Mr Mosqueda sent Mr Amaslides a fax in these terms: "We were informed that the phytosanitary certificate of +- 3,375 Mtons of sesame seeds not arrive yet. We need that document to extend the storage certificate at your name".
256. Mr Mosqueda said of this fax that it was written on Mr Baptista's instructions and that those instructions were not received by him personally but by one of his assistants. His evidence was that this was the first time that Mr Baptista had referred to the absence of a phytosanitary certificate as a reason for not issuing a receipt. He said that previously Mr Baptista had mentioned "quality and documentary problems", but had not suggested that because documents had not been received "he would not wish us to proceed to issue cd's"; and that previously he had "been led to believe by [Mr Baptista] that the documents were not a problem".
257. Mr Baptista disputed this. He said that he spoke to neither of Mr Mosqueda's assistants about this communication. Moreover, he said that Mr Mosqueda had told him that he was unwilling to issue cd's unless and until he was fully satisfied by Huyton that the goods had been lawfully imported into Mexico and that Huyton owned them.
258. The evidence of Mr Mosqueda to which I have referred cannot, in my judgment, be entirely accurate: Mr Baptista could not have been aware of "quality problems" before the end of July. More importantly, when he was cross-examined, Mr Mosqueda accepted that it was a matter for his assistants how the fax was drafted, and I reject the suggestion that Mr Baptista or Dipasa had any significant input into it.
259. On 29 July 1998 Huyton sent a fax to Acosa stating, "this is to confirm that the above cargo is the property of Huyton S.A. and that we have authorised Dipasa to issue a bank guarantee to Mexican customs in respect of the missing phytosanitary certificate. Please therefore send us your warehouse certificate immediately." Mr Zurita wrote a note on the fax addressed to Ms Ramirez that reads in translation, "Evangelina, sent draft in accordance with the one prepared by Dipasa. It does not work for an issuance of the certificate."
260. Dipasa's draft to which Mr Zurita referred was a suggestion as to how Acosa might respond to Huyton, and was in the following terms: "The goods (merchandise) of foreign origin according to the imports Custom Law and the General Law has to prove it legal stay in the Country with the invoice, import permit, phytosanitary and origin certificate. To issue a deposit certificate it is necessary to have the whole documents set at sight, otherwise the certificate cannot be issue. We can issue the deposit certificates only with your firm compromise that you will issue the phytosanitary certificates in maximum 15 calendar days and the authorization of your Company to execute the bond in case of nonfulfilment of this compromise".
261. Acosa replied to Huyton on 29 July 1998: "The goods (merchandise) of foreign origin according to the imports custom law and the general law has to prove its legal stay in the country with the invoice, import permit, phytosanitary and origin certificate. To issue a deposit certificate it is necessary to have the whole documents set at sight, otherwise the certificate cannot be issue. According with your last fax sended on July 29, 1998 please send a letter compromise as follows terms: we can issue the deposit certificate only with your firm compromise that you will issue the phytosantitary certificates in maximum 15 calendar days and the autorization of your company to execute the bond in case of nonfullfilment of this compromise, letter will be sent to [Acosa] y/o [Dipasa]". It will be seen that Acosa's reply adopts the draft suggested by Dipasa, but adds two additional passages, which, as I find, did not come from Dipasa. I also find that Dipasa did not know the full terms of Acosa's reply. It is to be observed no complaint is made by Huyton of the part of the reply that Dipasa drafted.
262. I do not find it surprising that Acosa particularly involved Dipasa in this reply to Huyton. On the contrary, it would have been remarkable if, without consulting Dipasa, Acosa had proposed that Huyton might give a bond of this kind. Nor is it surprising that Dipasa's experience was drawn upon to assist with a response referring to the laws governing the import of foreign agricultural products.
263. I do not consider that Dipasa's involvement in this reply is indicative of the extent of their involvement in, or knowledge of, other communications passing between Huyton and Acosa. What is more significant is that, as is apparent from Mr Zurita's note, Acosa were not simply acting as a "post-box" between Huyton and Dipasa but were applying their mind and making their contribution to the response to Huyton's request.

Dipasa's knowledge and intention when the representations were made

264. Because it is Huyton's case that the representations upon which they rely were made by Dipasa fraudulently, I must consider what those acting for Dipasa knew about the plans for storing the seeds and about how those plans were progressing. In doing so, it is necessary to distinguish the knowledge and state of mind of Mr Coello, who was with Dipasa Europe in Holland, from that of Dipasa's officials in Mexico, specifically Mr Baptista.
265. It is Dipasa's case that, although the decision was taken by them in Mexico to store the goods in Cortazar at or about the time that the vessel started to discharge them, Mr Coello was not informed of it at the time. Mr Baptista was, of course, party to the decision. He was also aware of the goods being in quarantine.
266. However, Huyton have not shown that Mr Baptista had any significant knowledge about the communications from Dipasa upon which Huyton rely in support of their case of misrepresentation. Of the six communications from Dipasa pleaded by Huyton, only the fax of 4 June 1998 sent by Mrs Lima was sent from Mexico. Mr Johnson did not ask Mr Baptista whether he saw it when it was sent, and there is no reason to suppose that he did. The other five communications were sent by Mr Coello from Dipasa Europe. Mr Baptista's evidence was that he did not see the exchanges between Mr Coello and Huyton in June, Mr Coello being in Holland. For the most part, there is no evidence that copies of those exchanges were sent to Mexico. As I have observed, Mr Coello did send him a copy of his fax of 8 June. But Mr Johnson did not ask Mr Baptista whether he saw the document when it was received. Given that Mr Baptista was away from Cortazar for much of this period and given that the allegation made by Huyton is of fraudulent misrepresentation, I am not prepared to assume that Mr Baptista did see it. The very fact that it was stated on this document that it was being copied to Mr Baptista and there was no such annotation on other documents supports my conclusion that generally Mr Baptista did not receive copies of these exchanges.
267. Mr Coello told me that, although he spoke to Mr Baptista by telephone during June about the goods (for example, about a railway accident involving wagons carrying one part of the consignment), they did not discuss where the goods were to be stored or that Dipasa's premises were to be the subject of an enabling agreement with Acosa. He said that in a telephone conversation towards the end of June he learned from Mr Baptista that there were phytosanitary problems with the goods, and Mr Baptista asked that Mr Coello travel to Mexico with Mr Philippas to try to resolve it. Mr Coello asked Mr Philippas to come to Mexico, and he flew there himself at the end of June. He learned only on arriving in Mexico that the sesame seeds were in quarantine and that they were in Dipasa's "enabled" warehouse in Cortazar, rather than in one of Acosa's own warehouses. Mr Baptista's evidence too was that he told Mr Coello that the goods were in quarantine in Dipasa's premises in Cortazar only when Mr Coello came to Mexico from Holland at the end of June.
268. Dipasa maintain, therefore, that Mr Coello was unaware when he sent the five faxes between 1 and 9 June 1998 of any suggestion that the seeds might be not be stored in a warehouse owned or leased by Acosa. I do not understand that Huyton dispute this, and in any event I find it to be the case. Mr Coello was, of course, aware that Huyton wanted to know in what warehouse the goods were stored. However, Dipasa knew that Huyton had had direct contact with Acosa, and on 9 June 1998 Mr Amaslides had told him they, or rather their bank, needed direct confirmation from Acosa that they held the goods. Mr Coello responded properly to the request for "intervention". Mr Amaslides' reply later on 9 June 1998 confirmed that Huyton were in communication with Acosa, and they appeared no longer to be looking to Dipasa for information about how the goods were stored or were to be stored.
269. Mr Coello's evidence was that it was only when he arrived in Mexico at about the beginning of July 1998 that he realised that the goods were stored in Dipasa's enabled warehouse. He was then expecting Mr Philippas to come to Mexico in the near future, and intended to advise him of the position when he arrived. I accept Mr Coello's evidence about this.
270. More specifically Mr Coello suggested to Huyton in his fax of 9 June 1998 that they might come to Mexico. On 3 July 1998 Mr Coello sent a fax to Mr Philippas emphasising again the need for the phytosanitary certificates and saying that he was looking forward to meeting Mr Philippas in Mexico that weekend. On 16 July 1998 Mr Philippas spoke to Mr Coello on the telephone, and Mr Coello again told him that he was needed in Mexico to help resolve problems about the seeds and their importation. Mr Philippas said he would come on 23 July, but later that day Mr Coello realised that he would not be available and sent Mr Philippas a fax seeking to re-arrange the visit for 25 July. Mr Philippas responded that he could not arrive before 10 August. Mr Coello, having been on holiday from 17 July to 10 August 1998, learned on his return that Mr Philippas had still not arranged a visit and that no phytosanitarty certificate had been received. He telephoned Mr Philippas to press him to visit Mexico, but Mr Philippas appeared busy and did not commit himself to a specific date. Mr Coello followed up the telephone call with a fax on 10 August: "So far no Phytosanitary Certificate received, are you coming? Please advise". Mr Philippas did not respond. On 20 August 1998 Mr Coello returned to Holland.
271. Mr Philippas accepted that he was repeatedly invited to go to Mexico, and promised that he would do so, but said that he found that he was unable to make the trip because he needed to attend to other business. However, he said that the visit was not to discuss this shipment or the JVA, but because Mr Coello was interested in Huyton buying part of Dipasa's business in Mexico. Mr Coello denied this.
272. Whatever the purpose of the visit, Mr Coello was pressing Mr Philippas to visit Mexico, and if he had visited, Mr Coello would have told him where the seeds were and under what regime they were held, and it was all but inevitable that Mr Philippas would have found out anyway. I have also no doubt that Mr Philippas would have been pressed to explain why Huyton had not provided Dipasa with the phytosanitary certificate. I prefer the evidence of Mr Coello about the purpose of the visit: there is no documentary support for Mr Philippas' account of a suggested investment by Huyton in Dipasa's business, and in the fax of 10 August 1998 the proposed visit is clearly linked to the missing phytosanitary certificate.
273. It was put to Mr Coello in cross-examination that the repeated requests of Dipasa for a phytosanitary certificate were a "smoke screen" and, at least after a document (albeit a false certificate) had been supplied to Sagar and appeared to satisfy them, Dipasa were not truly concerned to receive it. I do not accept that submission, and would not do so even if I had been satisfied that Dipasa were party to supplying the false certificate to Sagar. After all, Mr Coello had stressed the importance of documents before the JVA was made, and repeatedly called for them. Huyton had never given Dipasa a coherent explanation, still less a true explanation, for not providing the phytosanitary certificate that Dipasa requested. Whatever the position under Mexican law about the enforceability of the bond if no certificate was produced to the authorities (a question that I consider later in my judgment), I conclude that the concerns expressed by Dipasa, and specifically Mr Coello, were genuine throughout this period.
274. Huyton rely upon some of the answers given by Mr Coello in cross-examination in which, they submit, he admitted that he was at fault in not giving Mr Philippas information about the seeds. This part of the evidence was, I thought, somewhat confused. Certainly Mr Coello acknowledged that he should have mentioned to Mr Philippas at about the end of June that the goods were subject to quarantine restrictions. It is also the case that Dipasa never told Huyton that the conditional restrictions on the goods had been confirmed after the traces of pennisetum polystachion had been found; and Mr Coello acknowledged that this was a serious development about which Huyton should have been informed. That, as I understood his evidence, was the extent of Mr Coello's admissions that, in retrospect, Dipasa should have kept Huyton better informed about the shipment that they did. Moreover, Mr Coello pointed out that when he learned of these quarantine restrictions, he was expecting Mr Philippas to visit Mexico and expecting to be able to explain the position to him face to face. I accept that explanation, and I do not consider that Mr Coello made significant admissions in cross-examination that advance Huyton's case.

Huyton's knowledge about the warehousing of the seeds

275. Huyton's case is that at the time that they entered into the SA, they were unaware where the goods were stored, that they were not stored in their name and that they were subject to quarantine restrictions. They plead that they were "not aware until early October 1998 that the goods had been taken to Dipasa's own warehouse and were not in the custody or under the control of Acosa". Mr Philippas, and Huyton generally, had not previously been engaged in importing goods into Mexico. They were not aware of the system of enabling warehouses. It did not occur to them that Acosa's involvement with the storage might be that they had "enabled" premises owned by Dipasa, or that the goods were not in premises owned or leased by Acosa.
276. At one time Dipasa contended that Huyton were aware where the goods were stored because Mr Baptista had told Mr Amaslides on 29 or 30 June 1998 about SGS taking samples and carrying out a weight survey and about the enabling agreement, and also because Mr Coello had told Mr Philippas about the warehousing agreement "on a number of occasions" during July 1998. Huyton denied these allegations, and Dipasa do not persist in them.
277. In late June 1998 Mr Baptista told SGS where the goods were. This in itself does not mean that Huyton are to be taken to have known where the seeds were stored. SGS were not Huyton's agents for this purpose.
278. On 30 July 1998 SGS of Mexico sent to Huyton a certificate of sesame seeds inspection dated 15 July 1998 that reported upon the attendance of SGS "at the port of Lazaro Cardenas, Mich., Mexico and the warehouse of Dipasa, S.A. de CV, for the sampling and weighing of the ... parcel." SGS's letter was addressed to Mr Amaslides. I am satisfied that no-one at Huyton noticed or appreciated the significance of this. Mr Philippas had no reason to study the certificate, and I accept this evidence that he did not do so. Mr Amaslides told me said he did not spot the statement about the location of the goods, and again I accept his evidence. I infer that if anyone else at Huyton had appreciated the significance of the certificate, they would have spoken to Mr Philippas or Mr Amaslides.
279. I have mentioned that the second fax sent to Huyton by Acosa on 13 July 1998 stated that the goods were in Cortazar. However, Acosa also stated in it that the goods were in "our" warehouse. The geographical location of the warehouse was not in itself of any significance, and I am satisfied that no-one at Huyton appreciated the significance of the reference to Cortazar.
280. I find that Huyton were unaware that the sesame seeds were at Dipasa's premises until late September 1998 when, as I shall explain, Acosa told Huyton that they had not been able to store the seeds in any of their warehouses. The terms of the SA that Huyton drafted reflected Huyton's understanding of the position. So too did the invoices under the SA that Huyton sent to Dipasa and to which I shall refer. Mr Coello would not have written the untruthful letters of October 1998 that I shall describe had he thought that Huyton knew where the seeds were stored.
281. It is less clear whether Huyton thought that the goods were, in some sense, stored in their name, as under the terms of the JVA they should have been. The requirement that the goods be held "in Huyton's name" is not, in my judgment, free of ambiguity, but the cross-examination of Mr Amaslides casts light upon Huyton's thinking. He accepted that (provided Huyton could satisfy any requests from their insurers to enable them to inspect the goods) he was not concerned about the geographical location at which the goods were stored, so long as they were at an Acosa warehouse. His concern – and, as I infer, his understanding of Huyton's concern – was that the sesame seeds should be in the control of Acosa. He acknowledged that it was not be a matter of concern how, under Mexican law, Acosa came to have that control. Mr Amaslides said that when Huyton received the assurance from Acosa of 8 June 1998, he was "satisfied" because he was relying on Acosa. It is true that Acosa did not provide Huyton with the certificate that they sought, but there is no reason to think that this undermined Huyton's satisfaction with the assurance. I conclude that Huyton did not turn their mind in August 1998 as to what it meant for the goods to be held in their name, or whether they were so held.
282. I add that Huyton never believed that the goods were held in the name of the owners of the Zarina 1. It remains unexplained why Huyton told UEB in their letter of 19 August 1998 that they were.
283. Huyton allege that Dipasa deliberately concealed from Huyton that the cargo was stored at their premises. First, they point to Mr Coello's untruthful letters of October 1998, letters to which I shall refer and which are on any view remarkable and have not been satisfactorily explained. However, whatever Mr Coello's reason for these lies, the dispute between the parties had developed significantly since the SA, and I have concluded that the letters are not, in themselves, sufficient reason to draw any inference about Dipasa's intentions and state of mind at the time of the SA and earlier.
284. Secondly, Huyton refer to Mr Baptista's response to the fax of 29 June 1998 which refers to the goods arriving at Celaya, submitting that Mr Baptista "studiously avoided spelling out the true position". However, if Mr Baptista and Mr Coello were working together to deceive Huyton at around this time, Mr Coello would not have pressed Mr Philippas to visit Mexico. Moreover, Mr Baptista must have known on 29 June that SGS were about to inspect the cargo in Cortazar with a view to reporting to Huyton, and realised that the report would state where the goods were. I do not accept that Mr Baptista carefully drafted his reply on 29 June 1998 in the hope that Huyton would not discover where the goods were stored. The faxes sent in July 1998 that misinformed Huyton about the storage of the goods were sent by Acosa rather than Dipasa.
285. Thirdly, Huyton can point to the fact that the draft of the SA mis-stated the location of the goods, and that Mr Coello did not draw this to Huyton's attention. The draft twice referred to the seeds being stored at "Almacenadora Centro Occidente SA, Celaya, Mexico". Mr Coello's evidence was that he read the draft, but that he did not pay attention to this point. He said that he "saw it as Acosa and then that was good for me", pointing out that Celaya and Cortazar are "almost the same area": the Cortazar warehouse is only about 15 kilometres from the centre of Celaya. He concentrated on commercial terms such as the quantity of seeds to be supplied and the payment terms.
286. Although in retrospect, now that the parties' attention is focused on the point, it does, at first sight, seem remarkable that Mr Coello did not appreciate the significance of the statement in the draft about where the seeds were, I accept that it did not occur to Mr Coello at the time that it might be of any importance. I accept that the reference to Acosa seemed to him appropriate in view of the enabling agreement, and he did not focus on the reference to Celaya.
287. I recognise that Huyton's submission on this point is the more powerful because in his letters in October 1998 Mr Coello was dishonest about the storage of the goods. In the end, however, I have concluded that I should accept his evidence that when he read the draft SA, he overlooked the significance of the statements about where the seeds were stored.
288. There is also a difference between the parties about whether Mr Coello told Mr Philippas that the goods were subject to quarantine regulations in the telephone conversation on 27 August 1998 in which they agreed, at least in principle, that Dipasa should buy the seeds. Mr Philippas' evidence was that he was not told this at any time before the SA was made. Mr Coello says that in the telephone conversation he told Mr Philippas that the goods were in quarantine and needed to be processed to prevent them from being destroyed by the health authorities. It is not easy to resolve this difference, given that neither account is inherently more probable than the other and that I regard the evidence of both witnesses as unreliable. However, the subsequent correspondence in no way indicates that Mr Philippas was told that the goods were in quarantine, and on this fragile basis, I accept Mr Philippas' evidence on this point.
289. I do not accept Huyton's submission that before, and at around, the time that the SA was concluded, Dipasa were intent on deceiving Huyton about the warehousing of the seeds. It is to be observed that Huyton have not suggested a reason that Dipasa should have entered upon such a deception or what might have led them to do so.

The conclusion of the SA

290. Mr Philippas' evidence about making the SA was this. Towards the end of August 1998 Mr Coello telephoned him, saying that he did not think that the JVA would work and suggesting that it be replaced by an agreement that Huyton should simply sell the seeds to Dipasa if Huyton would agree to "credit terms". Mr Philippas indicated that in principle he would agree to this. This was followed by a further conversation on 27 August 1998, during which, according to Mr Philippas, Mr Coello and he "agreed the main points, such as the fact that it would cover all the goods as is and the price ($695)", and that Dipasa "would be responsible for all costs incurred in relation to the cargo from the time the vessel arrived at the discharge port although Huyton would bear any demurrage claims, insurance costs and the costs for the vessel's call at the discharge port." There was no reference to any requirement that Huyton should provide Dipasa with any documents.
291. In cross-examination Mr Philippas said that by the time of his telephone conversation, he was tired of the problems created by this parcel of seeds, which had been continuing for some six months since February 1998, and when Mr Coello proposed to buy the goods and end the joint venture, he was pleased to end Huyton's involvement with the shipment.
292. Mr Coello's evidence about when the SA was concluded took a curious course. In his witness statement, which was dated 11 July 2001, he said that after he had returned to Holland on 20 August 1998, he telephoned Mr Philippas to express his annoyance that Mr Philippas had not come to Mexico as they had planned. Mr Philippas apologised, explaining that he had been busy and had needed to travel to China. He explained to Mr Philippas that the goods were in quarantine. He also said that in this telephone call and against this background Mr Philippas proposed that Huyton sell the goods to Dipasa, putting forward price of US$695 per mt. He told Mr Philippas that Dipasa could not agree immediate payment for the goods, and he and Mr Philippas "agreed a payment schedule".
293. In his witness statement Mr Coello said that he told Mr Philippas during this conversation that he "would need the approval of Alberto Baptista before [he] could accept his proposal"; and that between 27 August and 1 September 1998 he "discussed the proposed contract with Alberto Baptista and explained what I had in fact agreed with Mr Philippas on 27^th August".
294. This account differed from that of Mr Philippas in three respects. The first difference is whether there was mention of the goods being in quarantine, about which I have already expressed my conclusion that I accept Mr Philippas' evidence that it was not mentioned.
295. Secondly, while Mr Philippas told me that, the suggestion of a sale having been made by Mr Coello, the agreement was reached not in the same conversation but later in a separate telephone call. Again there is no firm basis upon which I can decide which version of events is accurate. Here, if it matter, I hold that Mr Coello's account is more likely to be correct. If there had been two conversations, in the first of which Huyton were inclined to look favourably on a sale to Dipasa, it seems to me likely that this would have been reflected in a fax between the parties.
296. The third point is Mr Coello's statement about the agreement being subject to Mr Baptista's approval, which approval was obtained, but this part of his statement was withdrawn by Mr Coello when he gave oral evidence. In his evidence in chief, Mr Coello said that the reference to seeking approval from Mr Baptista was a mistake, and that he simply told Mr Philippas that he would inform Mr Baptista that the SA was concluded. I conclude on the evidence before me that Mr Coello did not say that any agreement was subject to Mr Baptista's approval.
297. In cross-examination Mr Coello gave further evidence about what was said in the telephone call: that he and Mr Phillippas agreed upon the price to be paid by Dipasa to buy the goods and on the payment terms, although Mr Coello said that they "did not go into any detail"; that they did not discuss such matters as who would bear any demurrage claims or insurance costs; and that they did not discuss whether the goods were to be sold "as is" or whether there were to be warranties as to quality. Mr Coello agreed with Mr Philippas that there was no discussion of what, if any, documentation was to be supplied to Dipasa by Huyton, although he asserted that "it was clear that the documents were going to be provided" because "if we are replacing the first contract [the JVA] with the second contract [the SA], the commitment for the documents is still there".

Huyton's reliance upon the representations

298. Huyton's case is that when he made the SA, Mr Philippas relied upon representations that the seeds were stored at the Acosa warehouse, or an Acosa warehouse, and not at Dipasa's factory. Mr Philippas' evidence in his witness statement was that the terms of the JVA and Huyton's communications with Dipasa and Acosa led him to believe that the goods were in Acosa's custody: "Had I known that, in fact, the goods were in Dipasa's custody, and apparently had been in their custody since being transported from the port, and quite possibly a significant quantity of the goods had already been processed and possibly sold, there is no way in which I would have entered into the sale contract on the terms in which I did. The sale represented what I perceive to be a significant concession by Huyton in order to be rid of what had become a problem: the sale price was below the base price in the JVA on which we had hoped to make a profit. Had I known the truth, the first thing I would have done would have been to protest in the strongest terms at Dipasa's flagrant breach of contract…I would probably have flown to Mexico straightaway to protect our interests and, if possible, to prevent the goods from slipping entirely out of our control….If I was in these circumstances prepared to do a deal with Dipasa at all it would have been on much more stringent terms. In conclusion on this point I believe very firmly that I was induced to enter into this very "soft" deal by the consistent deceptions which Dipasa inflicted on us. In particular, there is no way in which, had I known the truth, I would simply have agreed to cancel the JVA at par without any recourse against Dipasa. Obviously had I known the truth, it would have been clear to me that we would have had a substantial claim for damages against Dipasa".
299. There are a number of observations to be made about this evidence. First, Huyton do not now contend that by the time of the SA Dipasa had started to process or sell the seeds. I find that they had not.
300. Secondly, Mr Philippas acknowledged in cross-examination that in fact Huyton had suffered no loss by reason of the storage of the seeds in Dipasa's premises, and had no claim for substantial damages, although he did say that had he known about the warehousing of the seeds, he would have sought a higher price under the SA and that he thought Huyton's bankers would have been concerned. I view this latter point with great scepticism in view of Huyton's letter of 19 August 1998 to UEB misrepresenting the position about the shipment, and in view of the paucity of information that Huyton have put forward about their relationship with their bank; and I do not accept that this consideration influenced Huyton in the negotiation and conclusion of the SA.
301. Thirdly, Mr Philippas told me in his oral evidence that his concern was that the seeds were under the control of Acosa, and not about the physical location of their storage.
302. Huyton do not suggest that anything was said in the telephone discussions between Mr Philippas and Mr Coello about where the goods were or who had control of them. Nevertheless, they submit that I should accept Mr Philippas' evidence that he relied upon the representations in making the SA.
303. Dipasa forcefully attack Huyton's case that they were influenced by their understanding that the seeds were at Acosa's premises when they made the SA. I hope that it is fair to Mr Young's cross-examination and submissions to say that the attack had three main prongs: first, that in entering into the SA, Huyton were relying upon Acosa rather than upon Dipasa for information about the storage of the seeds. This part of Dipasa's argument provides no answer to the misrepresentation case in so far as it relies upon representations made by Acosa, and it is directed to the case based upon what Dipasa had told Huyton between 1 and 9 June 1998.
304. Mr Young also argued that the seeds were, or included, old crop, not of the 1997/98 harvest, and that Mr Philippas, knowing this and knowing that Huyton had not been able to supply proper documentation, was intent on disposing of them as best he could; and that it is unrealistic to suppose that Huyton would have been concerned about where the seeds were and who had control of them so long as they could conclude a deal for their sale for a reasonable price. This argument is based upon Dipasa's assertions that (i) the shipment included old crop, and (ii) that Mr Philippas knew, or at least suspected, this. As I shall explain, I find that these assertions by Dipasa are justified.
305. Thirdly, Dipasa submit that Mr Philippas' dishonesty undermines Huyton's case. This submission has two aspects. First they say that Mr Philippas is so discredited as a witness that there is before the court no evidence upon which I should rely to support Huyton's case on reliance. Secondly, they say that Mr Philippas' business practices are so lacking in candour and integrity that it is unrealistic to suppose that he would conduct Huyton's affairs on the basis that others were being honest and candid with him.
306. I accept Mr Young's submissions, and in view of these considerations I decline to find that in entering into the SA Huyton relied upon the goods being stored in an Acosa warehouse, rather than at the enabled premises or relied upon them not being at Dipasa's premises. I add that there is further support for this conclusion in the evidence of Mr Amaslides (to which I have already referred) about Huyton being satisfied with Acosa's assurance in their letter of 8 June 1998.
307. In reaching my conclusion that Huyton have not shown that they relied upon the alleged representations in concluding the SA, I have referred to my finding that the cargo included old crop. However, I add that my conclusion about reliance does not ultimately depend upon this. Even if I had found that all the cargo was of the 1997/98 harvest, I nevertheless would have found that Huyton have not proved reliance.

Testing the seeds

308. The most direct evidence upon which Dipasa rely in support of their case about the age and quality of the seeds is a report prepared by the Autonomous University of Chapingo. It is dated 18 September 1998 and signed by a Mr M Alonso, who is described in the translation put before me as an "Engineer" in the "Oleaginous Laboratory".
309. Dr Palafox of the University explained in a statement how he and Mr Alonso obtained the samples that were the subject of the report. They found about 3,375 tonnes of sesame seeds in Dipasa's warehouse in jute bags marked consistently with the shipment from Haleka. They took 50 samples from the bags, and reduced them to a representative sample of the entire lot. The representative sample was found to contain a mixture of "phenotypes" (varieties, or land-races), and Dr Palafox and Mr Alonso separated four sub-samples of different phenotypes and kept a fifth heterogeneous sample.
310. Their report described the smell of the seed as "slightly rancid". There was also found among the seeds the presence, among other things, of pennisetum polystachion and the larvae of ephesia cautella. Upon analysis the levels of fatty acids in the five samples were found to be as follows: 2.3%, 3.9%, 2.8%, 5.0% and 4.8%. The peroxide indices were at the following levels: 3.6, 4.4,3.6, 5.0, and 4.9. The germination percentage also showed variation: 68.4%, 32.7%, 60.5%, 17.2% and 28.3%. The percentage of oil was 45.8%, 47.6%, 44.5%, 40.1% and 44.7%. (In each case, the last of the figures which I have mentioned is from the heterogeneous sample).
311. The report concluded from the fact that different phrenotypes were found, that the shipment comprised productions of different cycles from different regions. The presence of plagues such as ephesia cautella was said to show that the product had been stored for a long period of time, and that it had been badly maintained in storage. From the analysis Mr Alonso concluded that there was "old product, formed by different lots and probably different cycles and, according to the results, from the years from 1994-1997", and that "the representative sample of sesame seed obtained from the lot of 3,375 tons of Ethiopian origin showed that this is a mix of land races from the harvests of 1994, 1995, 1996 and 1997. The preceding is supported with the results obtained in the inspection and ocular selection (plagues, diseases and weeds) and due to the values obtained in the % of germination, % of oil, % of free fatty acids and indexes of peroxide".
312. I should refer to the evidence about the circumstances in which the report was obtained. In his first witness statement dated 12 November 2001, Dr Palafox said that he and Mr Alonso had obtained the samples in August 1998. There was put in evidence during the trial a letter from Dr Palafox correcting this and giving 9 September 2001 as the date of his visit to obtain the samples. He exhibits an extract from his diary verifying this. I accept this evidence. There is no reason to suppose that Dipasa would have been obtaining an independent report about the seeds in August 1998. If they had commissioned one in August, they would not have entered into the SA without finding out what it concluded.
313. Mr Baptista told me that the report was obtained because, when Dipasa started to process the goods at the start of September 1998 after the SA was concluded, they noticed that the seeds had a rancid smell. He discussed this with Dipasa Europe (and I infer probably with Mr Coello), and they decided to obtain the report. This conversation took place on 3,4 or 5 September 1998. Mr Baptista saw the report in September or at the beginning of October, and discussed its contents with Mr Coello. Before seeing the report, Mr Baptista was, he said, unaware of the high ffa content of the seeds. He said that when the seeds arrived they were checked for "purity and sanitary conditions", but there was no sampling or analysis of them.
314. Mr Coello's account of how the report came to be commissioned was rather different. In his witness statement he said that in mid-September 1998 Mr Baptista called him to say that they had found the seeds had a very high ffa content, and he suggested an external analysis. He also said that at about the same time he asked Mr Baptista to check whether Dipasa had analysed the incoming goods; that Mr Baptista replied that he would find out; and that Mr Baptista telephoned back to say that the laboratory at Cortazar had made an internal analysis that showed very poor results. Mr Coello also said that when he learned what the report of the University of Chapingo said, he was shocked.
315. I find Mr Coello's account incredible. In cross-examination, his evidence became unclear as to whether Mr Baptista said that the seeds had a high ffa content or were rancid. More importantly, I do not accept that Mr Baptista mentioned an internal analysis. If he had, Mr Coello and Mr Baptista would both surely have wanted to know the details of the results, but there is no suggestion that either sought them. Mr Coello's evidence is in conflict with what Mr Baptista told me, Mr Baptista's account is inherently more likely, and I accept it.
316. However, the picture is the more curious because of a document disclosed by Dipasa that shows that Dipasa were indeed carrying out some internal analysis of the seeds. It is headed (to translate the Spanish) "Report of acidity of raw material, residual material and oil." It purports to set out in six columns the results of analysis of samples from the sesame seeds. The dates of the analysis are given as being between 20 July 1998 and 10 September 1998. The analysis is said to be of samples from railway wagons. It gives the ffa content as ranging between 4.8% and 6.1%. The peroxide levels are between 10.0% and 15.2%. On the face of it, these results indicate seeds of very poor quality, significantly worse than the results reported by the University of Chapingo.
317. When he was asked about this document in the course of his cross-examination, it was quite apparent that Mr Baptista knew nothing of it, and was unable to explain it. He did, however, say that the results related to this shipment of seeds. After he had given evidence and returned to Mexico, he carried out enquiries about the document and, with the consent of Huyton, his explanation has been put in evidence before me. It was that the document was prepared by Dipasa's quality control department, and that it was sent by them to the buying department some time after 10 September 1998. There it was received by a secretary, who did not consider it to be important and simply filed the document.
318. On any view the document is an enigma. It is not relied upon as evidencing the quality of the sesame seeds either by Huyton or by Dipasa. However, there is no reason to doubt that it was a genuine document in that it was created between July and September 1998 and set out what those compiling it considered to be true results of analysis of the sesame seeds. It is an understatement to say that it casts serious doubt upon Dipasa's quality control procedures that such a report did not come to the attention of authority in Dipasa.
319. I accept Mr Baptista's evidence both that he knew nothing of the document or the analysis that it reflects. It was not referred to in any contemporaneous document that was put before me.

Communications after the sale agreement

320. In a letter dated 7 September 1998, Dipasa again wrote to Huyton asking for the original shipping documents and asserting, although no mention had been made of documents in the telephone discussions between Mr Coello and Mr Philippas, that on 27 August 1998 Dipasa had agreed to "purchase the goods from Huyton against the original shipping documents". The letter said that it was "quite impossible for Dipasa to sell the goods unless they [were] given the original shipping documents, and threatened a claim against Huyton, putting forward a "preliminary estimate" that of one in excess of US$1.2 million.
321. In their fax dated 9 September 1998 (to which I have already referred), Huyton replied that they had "agreed to sell the goods to you basis the same as the first agreement ie without original documents…". They explained their failure to produce the phytosanitary certificate on the basis that it had been lost in the post, an explanation that I have rejected as untrue.
322. Mr Mosqueda told me that in mid-September 1998 there were a number of telephone conversations between Huyton and his office (although not him personally). There was no suggestion that his staff were told by anyone in Acosa or by Dipasa not to speak openly and truthfully to Huyton about where, and under what arrangements, the goods were stored.
323. On 21 September 1998, Huyton requested Acosa that, when Acosa sent them a fax stating what the customs required to allow the cargo to be released without original documents, Acosa confirm "the exact quantity in [their] stores at Celaya". In a reply dated 22 September 1998 Acosa told Huyton that because original documentation had not been presented and therefore the goods were not legally imported into Mexico, Acosa had not been able to take the goods into any of their warehouses.
324. I should explain in some detail how the fax came to be written. There are in the documents before me two drafts of it on Acosa's paper that were never sent to Huyton, the second of which was signed by Mr Mosqueda. Mr Mosqueda told me, and I find it to be the case, that it reflects Mr Mosqueda's true belief about the status of the goods. It reads as follows: "We refer to your last fax to inform you that the goods weren't legally imported to Mexico because no original documents were presented, therefore they couldn't receive any product in our warehouses. According to Mexican Law it's considered a criminal activity, it's forbidden to receive merchandise without proving the lawful importation and the ownership has responsibility too. Please send us original invoice, phytosanitary certificate, and origin certificate".
325. In fact, the reply to Huyton's fax was sent after Dipasa had been consulted about it. Mr Mosqueda's evidence was that there were conversations between him and Mr Baptista, but I conclude that neither of them was directly involved in the exchanges. I prefer the evidence of Mr Baptista about what happened, which is in accordance with the documents and is supported by the evidence of Ms Acosta, who worked in Dipasa's export department. One of Mr Mosqueda's assistants spoke to Ms Acosta, requesting assistance in sending an appropriate reply in English to Huyton's fax of 21 September. She spoke to Mr Baptista, who referred Ms Acosta to one of Dipasa's lawyers, a Mr Roberto Valencia. Mr Valencia provided Ms Acosta with wording for a reply, which was suggested by Dipasa to Acosa and was along these lines: that the goods were not legally imported into Mexico because no original documents were presented, and that therefore Acosa could not receive any product into any of their warehouses. This suggested wording was adopted by Acosa in the reply that they sent to Huyton, although they mis-typed it in that they omitted a line of the text.
326. Dipasa were therefore party to the reply sent to Huyton's inquiry. However, the reply expressed Acosa's, and Mr Mosqueda's, true understanding of the position.
327. As I have explained, on 23 September 1998 Huyton told Dipasa that they had found the "missing" phytosanitary certificate. I have rejected their explanation, that Mr Philippas repeated in his evidence, that it had been mis-filed by UEB.
328. On the same day Huyton sent a request to SGS to let them know the full name and address of the warehouse where the cargo was stored, the name of the owners of the warehouse and under what name the cargo was stored. On 30 September 1998 SGS Mexico told Huyton that the name of the warehouse was Dipasa, and gave the address in Cortazar. They also said that Dipasa refused to advise them of the exact quantity stored in the warehouse.
329. Huyton sent Dipasa invoices dated 23 September 1998 in respect of the price to be paid under the SA. They referred to the seeds being stored at Acosa's warehouse at Celaya. On 2 October 1998, Mr Coello replied on behalf of Dipasa to Huyton's enquiries. Mr Coello accepts that his letter was deliberately untruthful. Referring to the location of the sesame seeds, he observed that the invoices referred to goods at Acosa's warehouse in Celaya and stated, "our enquiries lead us to understand that this is not the position … Before we consider matters further, we require your assurance that the goods have not been impounded or confiscated by the Mexican Health Authorities following your complete failure to produce original shipping documents under the JVA and agreement of 27 August". Mr Coello was lying in order to avoid revealing to Huyton the truth about where the goods were stored. He made no complaint about the age or quality of the seeds.
330. In a reply of 8 October 1998, Huyton referred to information from SGS that the goods were in Dipasa's warehouse, and said that they were "quite shocked at this flagrant breach of the agreement of 4^th June 1998". Huyton referred to their discovery that Dipasa had "all along had the goods in [their] possession", and they expressed a fear that Dipasa had disposed of some of the goods, which were not Dipasa's property, without paying for them. Huyton also said that they "simply expected [Dipasa] to collect and pay for the documents" under the SA; and, referring to a suggestion of Dipasa that the payment schedule might be renegotiated, said that, "Unless and until the agreement of 27^th August is amended by negotiation it stands". The letter ended as follows: "Please let us have your unequivocal agreement to take up and pay for the documents in accordance with the agreed payment schedule by return. Failing such agreement, we reserve our right to hold you in default and to recover the goods and seek damage from you. All our rights are reserved".
331. The next day, on 9 October 1998, Huyton wrote a further fax to Dipasa, the last paragraph of which said this: "This matter must now be sorted out once and for all. Please may we have your constructive proposals for the execution of this sale by close of business London time on 12 October 1998, failing which we shall have no alternative but to conclude that you have no intention of performing the agreement or paying for the goods. We shall then have to make arrangements for the sale of the goods at the best price available and claim damages from you for any losses we have suffered. Needless to say if you have any grievance as to our conduct, that can be aired at the same time in the arbitration. In the meantime, please confirm by return that you are holding the goods to our order…".
332. Dipasa rely upon Huyton's letters of 8 and 9 October 1998, in support of their contention that Huyton affirmed the SA and were not entitled to elect to rescind it at the end of October. Specifically they say that in the communication of 8 October 1998, Huyton assert their entitlement to the price under the SA and in the communication of 9 October, they refer to "the arbitration", a reference to a FOSFA arbitration under the SA.
333. Mr Coello replied to Huyton with another untruthful fax on 12 October 1998. Again he did not complain about the age or quality of the seeds. He said, "There is no way we could have any access to the goods as they have been under your control since discharge in Mexico….. We cannot give information to SGS about goods which are not in our control…. Since the goods are under your control we are not in a position to ascertain from the Mexican Health Authorities whether the goods have been impounded or confiscated. …." He went on to say that the problems about original shipping documents remained after the S.A. had been completed. With regard to the enquiry about disposal of the goods, Mr Coello said, "As we do not own the goods, it follows that we are not in a position to dispose of the same". In fact, Dipasa had already started to process the goods.
334. Mr Coello candidly acknowledged that these two letters of 2 and 12 October 1998 were untruthful, and he had no real explanation for sending them. At one time in his cross-examination he suggested that he was concerned about putting Dipasa in trouble with the Mexican authorities, but I find that explanation difficult to understand. After all, Sagar knew where the goods were. The most likely reason for Mr Coello's lies, I am driven to conclude, is that he thought that if Huyton learned the truth, they might make a claim against Dipasa or a claim to the seeds or both. However, on any view of the reason, the letters were strange ones to write because Mr Coello can hardly have thought that Huyton would accept what was written.

The termination of contractual relations

335. On 13 October 1998 the documents presented by Haleka in respect of the cargo shipped under bills of lading nos 1,2 and 5 were accepted and paid for by Huyton (the proceeds, as I have explained, being paid into the blocked account in Switzerland). On 16 October 1998, Huyton sent a fax to Dipasa refuting Mr Coello's letter of 12 October and calling upon them to accept documents and to pay or accept drafts for them by close of business on 19 October 1998, "failing which we shall hold you in default, withdraw the documents and take all appropriate action to safeguard our interests". In a reply dated 19 October 1998 Dipasa rejected Huyton's claim, accused Huyton of fraud with regard to their assurances about the original shipping documents and said that they held Huyton liable for breach of contract. Huyton responded with a fax dated 29 October 1998 in which they said, "We hereby hold you in default and regard our contractual relationship as at an end, without prejudice to our rights to claim damages from you". Huyton say that the effect of that fax was to rescind the SA and to elect to terminate the JVA on the grounds that Dipasa were in repudiatory breach of it.
336. On 30 October 1998 Dipasa replied, saying this: "As you remain unwilling or unable to present the original shipping documents as required by the agreements dated 4^th June and 27^th August 1998 and as you have unlawfully held us in default we treat your conduct as being a repudiatory breach of the contracts dated 4^th June and/or 27^th August 1998 and we accept your repudiation. In the circumstances we hereby hold you in default and shall claim against you all damages of whatsoever kind and howsoever arising from your breach." Thus, both parties accept that by the end of October 1998 the contractual relationship between them was ended. Huyton issued these proceedings on 18 December 1998.

The processing and sales of the sesame seeds

337. According to Mr Baptista's evidence, which I accept on this point, on about 3 September 1998 Dipasa started processing the seeds (that is to say, peeling, cleaning and drying them for packing), and they continued to process them until about 14 November 1998. Mr Baptista's evidence was that the seeds were processed because this was required by the quarantine order, but he acknowledged that the goods could not have been sold until they had been processed. Dipasa's precise purpose in starting the processing when they did is not, I think, material to the issues that I have to determine, but I conclude that Dipasa had both these reasons in mind. The 3,375 tonnes of seeds produced a parcel of about 2,800 mt when processed.
338. On 16 November 1998 the goods were released from quarantine. In November 1998 (and not before), as they approached the end of the processing, Dipasa went about selling the seeds that had been processed in their factory. Dipasa's case is that their sales manager, Mr E Grenados, arranged a sale of the whole parcel of the hulled seeds (which amounted to 2,800mt) to Agricola Tama SA ("Tama") for US$1,055 per mt. on the basis of Dipasa's "usual quality specification for hulled sesame seeds", which was a specification of maximum ffa of 2%. In a witness statement Mr Grenados said that he was not aware of any problems relating to the quality of the product when he entered into the contract of sale. However, after representatives of Tama had taken samples from the product before it was loaded at Dipasa's premises, and noticed a rancid smell, by a letter dated 25 November 1998 they rejected the whole parcel as bring "totally out of the norms and specifications contracted".
339. According to Dipasa, Tama threatened that, unless Dipasa delivered the contractual quantity, they would make a claim for $529,100 by way of compensation. Mr Baptista told me that Dipasa did not reply to this claim in writing and he simply discussed it by telephone. No claim has been paid by Dipasa, and apart from sending an invoice, Tama have not pursued a claim, having become insolvent.
340. After the sale to Tama fell through, the product was sold to Ajonjoli La Concepcion SA ("Ajonjoli") for US$420 per mt, the specification being for ffa of 8% maximum, which, according to Mr Grenados, reflected the quality of the cargo. There are in evidence before me records of analysis of the seeds conducted by Ajonjoli and dated December 1998 and 1999, which show ffa levels of between 4.8% and 6.1% and peroxide levels between 14% and 19.5%. The evidence is that Ajonjoli paid for the goods between Janaury 1999 and November 2000, because they delayed payment when as a result of the poor quality of the seeds, the sale of the oil was delayed.

Age of the cargo

341. Dipasa allege that the cargo included seeds which had been produced in harvests before 1997/98 and had been, or probably had been, stored in Assab for some time and re-bagged before shipment; and that this led to the crop having levels of ffa above 2%. They also say that Mr Philippas knew, or at least suspected, this when he made the SA. Huyton say that the crop was from the 1997/98 harvest, and Mr Philippas had no reason to think otherwise.
342. The foundation of Dipasa's case about the age of the crop is Mr Baptista's evidence about the rancid smell of the seeds when processing started at the beginning of September and the resultant report prepared by the University of Chapingo. However, Dipasa submit that the conclusions reached in that report are corroborated by the history of how Huyton dealt with this shipment.
343. Three of the arguments that Dipasa advance do not seem to me persuasive, and I mention them first.

i) Dipasa refer to the fax of 21 February in which Haleka are reported as claiming that the cargo had been ready "for months". Dipasa say that cargo from the 1997/98 harvest could not have been ready for months. That is literally true, but it could have been ready for, say, 6-8 weeks and an element of hyperbole in such a communication would not be unnatural. I do not find that point telling.

ii) Secondly, Dipasa refer to the fact that cargo that had been fumigated at Assab was again fumigated in Singapore. They suggest that time and money were expended in this way because of concern that there were insects hatching in the cargo, which was a risk if the seeds were old crop. Mr Philippas explained this on the basis of Huyton's anxiety to ensure that their new business in Guatemala got off to a good start. I am somewhat sceptical about this in view of the abrasive tone of some of Huyton's exchanges with Agropacific. Nevertheless, Dipasa's point here depended essentially upon their contention that larvae and eggs cannot be eliminated by fumigation. As I have stated, the evidence does not in my judgment establish this.

iii) Next, it is said by Dipasa that Huyton directed the vessel to Mexico before Guatemala because, as they invite me to infer, old crop was stowed at the top of the cargo, and they wanted that to be delivered to Dipasa rather than to Pro-Export. I have accepted Mr Philippas' evidence that the vessel was directed to Mexico first because of concerns that Agropacific might take action against the cargo.

344. I find these submissions on behalf of Dipasa more telling.

i) 3,000 mt of the shipment derived from contracts made with Haleka in April and May 1997 for 1996/97 crop. I reject Huyton's contention that Haleka agreed to vary these contracts and to supply seeds from the 1997/98 harvest instead.

ii) There is no evidence that I accept that Huyton passed on to Haleka the concerns of the Guatemalan purchasers.

iii) The Erstas account evidences that part of the cargo had been in storage since 1996. Dipasa suggest that it is likely that this old crop had been kept perhaps since 1994 in the poor storage conditions of Assab, and had been rebagged before being loaded so as to disguise what was being shipped. The evidence of Mr Philippas was that there were not re-bagging facilities at Assab that could have been used for this cargo, but I find this evidence surprising and do not regard it as reliable. The Erstas account does, in my judgment, provide support for Dipasa's argument that old seeds were shipped.

iv) Next, Dipasa point out that the inspectors from Pro-Export and Agropacific reported seeing significant quantities of what they considered to be "old crop" stored in a warehouse in Assab, and that thereafter the inspectors were denied proper access to the crop. It is to be borne in mind that their principals did not complain about that old cargo was being shipped and that Pro-Export increased the amount that they bought. Nevertheless, the contemporaneous documents seem to me to support the submission that the inspectors were denied access to the cargo as it was shipped, and this and their reports about old crop do, in my judgment, lend support to Dipasa's complaint about the age of the cargo. So does the report of the Master that the cargo looked "very old".

v) Dipasa also point to the failure of Huyton to have samples of the cargo analysed by SGS. I have found that they did so without consulting or advising Dipasa of this. I have rejected Mr Philippas' evidence about this, and this conduct on Huyton's part is unexplained. I consider that there is force in Dipasa's submission that this too supports their case about the age of the shipped seeds.

345. None of these considerations, taken in isolation, is decisive. However, taken together, I consider that they do significantly corroborate the findings of the report of the Universtiy of Chapingo.
346. I must weigh these considerations against the arguments advanced by Huyton. First, they refer to the evidence of Mr Garcia about the seeds delivered to Pro-Export. However, I have explained that I consider this evidence unreliable. In any case, there is no suggestion that all the cargo shipped on the Zarina 1 was old crop. Undoubtedly a good deal of cargo from the 1997/98 crop was included.
347. For the same reason it does not assist Huyton to point to evidence that the loading of the vessel was delayed because some of the cargo was being transported to Assab, which, they suggest, indicates that it was new crop.
348. Next, Huyton rely upon the Afrostar certificates issued in respect of the cargo. These certify a ffa content of 1.79%. However, on any view the certificates are curious in that, although issued in respect of cargo purportedly transported to Assab for shipment over a period of some two months, all show precisely identical analysis results. Mr Bollard's evidence was that such similar results are highly unlikely, evidence that I readily accept. I agree with Dipasa that this shows that the certificates are unreliable and undermines their evidential value.
349. Huyton also seek to rely upon the fact that the parcel produced 2,800 mt of processed seeds as evidence that the seeds were of good quality. I do not consider that this question was sufficiently explored in evidence to provide a robust basis for any inference of this kind.
350. The most powerful argument made by Huyton on this point is their submission that Dipasa's conduct in and after October 1998 is inconsistent with their contention that they had discovered that they had been delivered old seeds. First, they continued to process the seeds. Secondly, on their own case, Dipasa entered into the agreement with Tama to sell them seeds with a maximum ffa of 2%. Thirdly, in their letters to Huyton, Dipasa did not complain that the crop was old and did not refer to the report from the University of Chapingo.
351. As for Dipasa continuing to process the seeds, Huyton are able to rely upon evidence of Mr Bollard that it would be more usual to dispose of sesame seeds with a high ffa either by crushing them to extract the oil or by selling them untreated as animal feed. However, Mr Bollard's evidence was not, as I understand it, directed to the disposal of such a large parcel of seeds, and I did not understand him to be saying that this quantity could be so disposed of. In any case, I have held that Dipasa's purpose in processing the goods was not only to sell them, but also to satify the requirements of the Mexican authorities. Although their precise requirements were not explored in evidence, Dipasa might well have foreseen such difficulties if they halted the processing. The evidence was too vague for me to find this point of Huyton compelling.
352. The evidence of Mr Grenados that he went about selling the processed seeds without being aware that they were of poor quality is, on any view, surprising. However, Dipasa were faced with a major problem as to how they might dispose of such a parcel of processed seeds, and it is perhaps less surprising that they risked giving their usual warranty as to quality in an attempt to do so. I cannot tell whether Mr Grenados was truly aware of problems about the quality of the seeds or whether that information was withheld from him as he went about selling it. Nevertheless, I accept that Dipasa's evidence about the sale to Tama does not rest comfortably with their evidence about discovering that they had been supplied with old crop.
353. There is also undoubtedly great force in the point that Dipasa did not raise their complaints about the age of the crop with Huyton. However, Mr Coello's letters are extraordinary whether or not the shipment included old crop. In any case, this consideration does not drive me to reject the evidence of the University. I find that the report of the University is accurate and accept its conclusions that the cargo included old seeds.
354. Having found in general terms that Huyton supplied seeds of an old crop to Dipasa, I should make more specific findings, despite the scant evidence available, because they might be relevant to questions of quantum. As for the amount of old crop, I conclude that on the balance of probabilities the cargo included 3,000mt of seeds, the amount that was to be suppplied under the agreements of April/May 1997, which was old crop, and all of that old crop was discharged in Mexico. (Mr Mazariegos said in his statement that Haleka were able to load "approximately 4,500 mt of old crop product into the vessel or even more", but he does not explain this assessment, and I do not regard it as reliable.)
355. As for the age of the crop, I accept the evidence of the University that the seeds were from various crops from the 1994/95 harvest onwards. However, if it be relevant to any question of quantum, Dipasa have not established how much of the harvest was older than the 1996/97 harvest.
356. I also conclude that when they made the JVA and the SA, Huyton, and in particular Mr Philippas, knew that the shipment was likely to include a substantial quantity of seeds older than the 1997/98 harvest. My reasons are these: first, there had been no agreement to change the contracts made with Haleka in April and May 1997. Secondly, I have found that Huyton did not pass on to Haleka the concerns of the Guatemalan purchasers which they would have done if they had expected all the cargo to be of the 1997/98 crop. Thirdly, this is, in my judgment, the reason that Huyton did not have the samples of the cargo analysed by SGS. I acknowledge that, when at the end of August 1998, after the sale of the cargo to Dipasa had been agreed at least in principle, Dipasa learned that the goods had not been analysed, they did not complain about it. But this does not explain why Huyton decided against analysis.

The quality of the seeds

357. The best evidence of the ffa content of the seeds in September 1998 is the report of the University of Chapingo. The samples contained levels of ffa between 2.3% and 5.0%, the heterogeneous sample having 4.8% ffa. I conclude that when the goods were tested by the University, the ffa level was over 2%, and I infer therefrom that the ffa level was over 2% when the SA was concluded.
358. The evidence is not sufficient, it seems to me, safely to draw any further conclusions about the ffa content of the goods. In particular, since I was told, and accept, that the ffa content of sesame seeds can increase rapidly, I do not draw any inference as to the quality of the seeds at the time of the JVA. Nor can I properly draw any more precise inference about the ffa level at the time of the SA.
359. In their pleaded case Dipasa also complain about the moisture content and the purity of the goods, but they have not established any factual basis for these complaints and I reject them.

Mexican Law

360. Mr Enrique Garza, the expert witness on Mexican law called by Huyton, is, and has since 1996 been, a partner in the firm of Garza Tello & Asociados, which he established. He started work as a law clerk in 1983 and was admitted to practice in 1991. He was instructed by Huyton on 30 October 1998 in respect of these matters, and since that time he has acted for them, assembling evidence for these proceedings, and also being involved in the institution of criminal proceedings against certain officers of Dipasa concerning these events. (The precise nature of those criminal proceedings was not explored before me.) Mr Garza speaks fluent English.
361. Dipasa's expert witness was Dr Ignacio Melo. He started work as a law clerk in 1951, and was admitted to practice with Melo & Melo (a firm founded by his grandfather) in 1956, becoming its senior partner in 1972. He has been a professor of maritime law, the law of the sea and the law of international trade at the Universidad La Salle, Universidad Anahuac, Universidad Panamericana and Universidad Iberoamericana, and also Dean of the Law School at the first two universities. His only involvement with the dispute has been as an expert witness. Dr Melo does not speak good English and he sometimes used an interpreter when giving evidence, but in my judgment he succeeded in conveying his views clearly in his oral evidence.
362. Both experts were certainly qualified to give expert evidence about Mexican law, and both were seeking to assist the court. Generally I found the evidence of Dr Melo more compelling. First, he was more independent of the dispute between the parties. As I have indicated, Mr Garza and his office have been assisting Huyton in relation to these matters for some time. Mr Garza's report shows that he and his firm were deeply involved in making factual investigations on Huyton's behalf, and he did not hesitate to express his views about factual questions and Dipasa's culpability. I am compelled to conclude that at times he was willing to embrace arguments of Mexican law to support Huyton's position that I do not believe a more detached expert would have adopted.
363. Secondly, Dr Melo has a distinguished background as an academic as well as a professional lawyer. He has, for example, taught customs law. Mr Garza had only taken the mandatory courses in customs law, and had no compensating professional experience of the importation of agricultural products.
364. Thirdly, sometimes Mr Garza seemed to me not to have thought through the practical consequences of the propositions of law that he advanced. Perhaps the clearest example of this is his evidence (to which I shall refer) about whether a "pedimento" is required to bring into Mexico agricultural products otherwise than by importing them in the fullest sense. On the other hand, Dr Melo seemed to me to have a proper command of the implications and ramifications of the views which he expressed.
365. Against this, I must balance the criticism made of Dr Melo on behalf of Huyton that he sometimes advanced propositions without citing his source. This was undoubtedly frustrating for his cross-examiner, and it would certainly have been preferable had Dr Melo been able to support some of his propositions more precisely. However, by and large this occurred when Dr Melo was advancing a proposition of apparent common sense, and it did not undermine my confidence in his evidence.
366. I have not found it altogether easy to identify the questions of Mexican law which the parties raise in support of their arguments upon the issues between them and upon which I should therefore make findings. This is in part because Mexican law is not formally pleaded. However, the main questions for my determination are these:

i) Could the sesame seeds lawfully have been discharged from the vessel and held in Mexico without a pedimento?

ii) If the pedimento was obtained through the presentation of forged or fraudulent documents, is it vitiated?

iii) What are the consequences of importing goods under a pedimento that is vitiated?

iv) Did Acosa have control over the warehouse at Cortazar and the goods stored there under the enabling agreement, and were they responsible to Huyton for them?

Before considering these four questions, I should refer to some other points where there was less dispute.

367. First, Dipasa submit that the evidence shows that in Mexican law, and as a matter of usage in relation to warehousing in Mexico, the term "bonded warehouse" connotes simply a public warehouse. This is how Mr Garza himself used the term "bonded warehouse" in his report. For example, he inferred, because Dipasa nominated their warehouse (which was to be enabled) as the place of importation in the certificate, that "regardless of the infestation of goods by pennisetum polystachion, there is no legal impediment for the cargo to have been deposited in a bonded warehouse". Again, he said that "The Fiscal Deposit Scheme [a scheme associated with public warehouses] would have allowed Dipasa to store the cargo in a bonded warehouse"; and that "The difference between a bonded warehouse and a normal warehouse is that the normal warehouse cannot issue cd's".
368. Moreover, Dr Melo pointed out that under articles 14 and 15 of the Customs Act authorised warehousing companies can, among other things, receive merchandise that has not been customs cleared, a concept which he described as very similar to that of bonded warehouses in other countries.
369. Secondly, I refer to the circumstances in which the sesame seeds were permitted to enter Mexico. I have already described the import procedures in general terms. Dipasa plead that in the event that the requisite documents were not "forthcoming, the provisional import permit was to be revoked and the bond forfeited". The experts agree that Mexican law does not allow "provisional" importation or import permits. Mr Garza's report was that the bond which Dipasa provided was solely to support Dipasa's obligations as custodians of a cargo that was under quarantine. Dr Melo does not agree, pointing to the wording of the bond itself, which is said to support the "fulfilment to surrender original documents and…" ("cumplimento de la entrega de documentos originales y…"). It seems to me that Dr Melo is right about the terms of the bond. However, he acknowledged that Sagar were not entitled to require this undertaking from Dipasa or a bond to support it. Mr Garza said that the consequence of this is that a bond in these terms would have been unenforceable. Dr Melo disagreed, stating that the bond might be enforced according to its terms. As I see it, this difference between them does not matter, it being the case that in fact no attempt has been made to enforce the bond and it being unrealistic to think that the bond will now be called upon. If necessary, I would resolve the point by accepting Dr Melo's evidence, because it is prima facie likely that, the bond having been given, Dipasa would be bound by its terms, and because generally I regard Dr Melo as the more reliable witness. However, it does not follow that, if Dipasa failed to fulfil the terms of the bond, the provisional import permit would be revoked, or properly could be revoked. In my judgment, Dipasa have failed to establish this.
370. Thirdly, Mr Garza acknowledged that an enabled warehouse is entitled in its capacity as a warehouse to process goods under quarantine. Dipasa seized upon this to justify them in processing of the goods. However, I did not understand Mr Garza to be saying that Dipasa were therefore entitled to process goods which belonged to Huyton without Huyton's consent. If Dipasa intend to submit otherwise, I reject that submission.

Discharge without a pedimento

371. Huyton submit that a cargo such as sesame seeds could properly have been discharged from the vessel immediately despite the importer not being able to produce original documentation by way of invoices, bills of lading, certificates of origin and phytosanitary certificates. They say that there are two procedures available to the prospective importer in these circumstances: first that, under article 23 of the Customs Law (or Ley Aduanera), an importer is entitled to deposit goods with the customs authorities for the purpose of determining the importation regime under which they are to be brought into Mexico, and that, in the case of goods brought to Mexico by sea, they can remain in a customs warehouse for up to 2 months without being imported.
372. Alternatively, Huyton say that the goods could have been deposited in a public warehouse under a scheme of fiscal deposit under article 90 of the Customs Law. Under this procedure, goods can either be withdrawn from deposit for importation into Mexico or transported from Mexico.
373. Original documentation, including, in the case of foodstuffs such as sesame seeds, a phytosanitary certificate, is needed in order to obtain a "pedimento de importacion". However, according to Mr Garza, goods that are held in a customs warehouse or under a scheme of fiscal deposit are not imported into Mexico in the strict and proper sense of the word, and accordingly the goods do not need a "pedimento".
374. Dipasa's submission, on the other hand, is that without a phytosanitary certificate, the sesame seeds could not lawfully be discharged from the vessel, taken into Mexico, and stored, processed or sold there. Dr Melo's evidence is that the goods could not lawfully be discharged at all without a phytosanitary certificate, whatever the regime under which they were discharged.
375. As far as the fiscal deposit regime is concerned, Dr Melo said that a pedimento, and so a phytosanitary certificate, was required because of Article 119 of the Customs Law (or Ley Aduanera). According to his evidence, this contemplates that there will be a pedimento because, in order for merchandise to be subject to the regime, it will (to quote from the translation of the Article with which I have been supplied):

"be necessary in customs to comply in the Clearance Customs with the regulations and non-customs fees restrictions applicable to this regime, and to attach the pediment with the customs letter"

It also provides,

"The bonded warehouse or the holder of the premises for international exposition which issued the customs letter, shall inform to the Ministry with a term of twenty days following the issuance of the letter, the excess or lack of the merchandises detailed in the importation pediment from the Customs Clearance. In the event, such merchandises are not presented within such term. Such situation must be informed at the latest on the following day after the maturity of the term. If such notice is not rendered, it shall be understood that it properly received the products mentioned in the importation pediment."

376. Mr Garza disagreed with Dr Melo. I did not find his reasoning easy to follow, and he modified his position in the course of cross-examination. His starting point was that Article 19 of the Federal Law of Agricultural Health (the Ley Federal de Sanidad Vegetal) requires that any obligatory phytosanitary measures or requirements with regard to the carriage of agricultural products on to Mexican territory must be stipulated in an official "norm". Initially, at least, his evidence was that there was no relevant "norm" dealing with the measures required in respect of products which were placed in "fiscal deposit", and so no phytosanitary restriction could properly be imposed in respect of goods which were placed in fiscal deposit. This argument called for consideration of the Norm dated 26 February 1996, and specifically article 4.7 of it. Article 4.7 provides that no person or company may introduce ("internar") into the country vegetable products which are subject to phytosanitary regulations without complying with them. Mr Garza told me that "internar" connotes importation into the country and does not apply unless the goods are cleared through customs. In support of this, Mr Garza referred to the introduction to the Norm, which states that it applies where products "se pretendan importar", and where there is no specifically applicable norm.
377. First, Mr Garza expressed the opinion that the term "se pretendan importar" connotes an intention that the goods should be imported. In the end, however, I understood him to accept that in fact the term simply indicates by the conditional sense of the words that, if and when the goods are released, they can be imported if customs grant permission.
378. This concession undermined Mr Garza's contentions about the meaning of the Norm, and so undermined his evidence that there is no applicable norm that justify the authorities in requiring a phytosanitary certificate in cases where goods are being taken into fiscal deposit. At the highest, there is an ambiguity in the language of the Norm: taken in isolation it might or might not be interpreted to cover the position where agricultural products are introduced into Mexico by way of fiscal deposit.
379. There are good reasons to reject as narrow a view of the application of the Norm as Mr Garza propounded. First, there are fiscal deposit warehouses throughout Mexico. There is no reason that a law that is designed to protect Mexican vegetation from infestation from abroad should cover agricultural products introduced into the country under one regime and not products introduced under another regime.
380. Secondly, I was referred to the Regulation for the Federal Law of Agricultural Health, which provides (in translation) that "for the introduction ("introduccion) of [agricultural products] the Ministry shall demand the following requirements: I Certificate of Health or in the case of it being non-existent, Certificate of fumigation, disinfection, refrigeration or other treatment. II Phytosanitary Certificate of Origin duly legalised by the Mexican Consul in the area where the product was harvested. III Agricultural Health Inspection at the port of entry, airport or border customs". When first asked about this regulation, Mr Garza emphatically maintained that it does not apply to goods introduced into Mexico under the fiscal deposit regime. This was based upon his interpretation of the word "introduccion" as meaning importation through customs. Later in his evidence he retracted this, and said that there is a contradiction between article 94 of the Regulation and article 19 of the Agricultural Law with regard to the treatment of the fiscal deposit regime, and that article 19 prevails. While I do not doubt that primary legislation would prevail over secondary legislation, it is more likely that Mexican law is internally consistent.
381. For these reasons, I prefer the simple and straightforward evidence of Dr Melo on this point, and conclude that under Mexican law, in order for goods to be placed in fiscal deposit, a pedimento must be presented.
382. The question of the goods being discharged for deposit with customs was not explored by either party in the same detail as the fiscal deposit regime. It might be that Huyton rightly recognised that the JVA does not contemplate the seeds being deposited in this way. Certainly the evidence was that the charges would have been markedly more than the JVA contemplated, and in my judgment this was never a realistic alternative. In any event, I again accept Dr Melo's evidence that a phytosanitary certificate is required if the goods are to be deposited with customs. The same considerations of policy apply as with the fiscal deposit regime, and it seems to me that it would be a surprising lacuna if the Mexican law did not require a pedimento for agricultural goods to be placed in customs. Dr Melo told me, and I accept, that in interpreting the relevant provisions a Mexican Judge would take account of the statutory purpose of protecting Mexican agriculture from imported disease, and apply the regulations to all agricultural goods brought into Mexican territory under whatever legal regime.

Is a pedimento vitiated if obtained by fraud, or only if it is obtained through forgery?

383. Dipasa argued, relying on Dr Melo's evidence, that, because Huyton did not provide proper documentation for the importation of the sesame seeds into Mexico, the seeds might have been seized by the Mexican authorities. Moreover, they were faced with the prospect of criminal liability. They said that a pedimento is vitiated if it is obtained by producing either fraudulent or forged documents; and so the copy bills of lading that were produced to the Mexican authorities, and more remotely the false manifest which the bills reflected, vitiated the pedimento. Similarly they argued that if the pedimento had been obtained by presenting the false certificate dated 30 July 1998, the pedimento would have been vitiated on that account also.
384. Huyton argued, relying on Mr Garza's evidence, that a pedimento is vitiated only if obtained by a forged document, and not if it is obtained by using a fraudulent document. Mr Garza acknowledged that the bills of lading that were presented in order to obtain the pedimento must have been false in as much as they purported to have been issued by the agents at the port of loading and they were not. He acknowledged also that therefore there would have been a breach of the Mexican customs law punishable by a fine (a matter that he referred to as an "administrative fault"). This does not, according to Mr Garza, affect the validity of the pedimento.
385. Mr Garza was asked about the distinction that he drew between a false document and a forged one, the presentation of which would vitiate a pedimento. He told me that forged documents are documents that are issued without authority, and that documents issued with authority are not regarded as forgeries. This distinction did not stand up to examination: he acknowledged that a person would commit forgery if he backdated a letter of his own, or produced what purported to be a copy of a letter of his own which he had in fact never written.
386. Dr Melo denied that there is a distinction of this kind between a forged and a false document. The use of either will vitiate a pedimento. He referred to Article 104 and 105 of the Federal Fiscal Code. Article 104 provides for criminal sanctions for those involved in smuggling. Article 105 provides as follows:

"The following persons will be penalised with the same penalites applicable to smuggling. Those who with respect to foreign trade operations:…..

XIII Present false documents accompanying the pedimento or the invoice to customs authorities".

387. Dr Melo acknowledged in cross-examination that article 105 came into force only on 1 January 1999, and was not in force when this cargo was imported into Mexico. However, he said that, before article 105 came into force, there was a similar provision of Mexican law, and that in any event the same result would come about by application of general principles of Mexican law.
388. Dr Melo has not produced, or even identified, the provisions that were in force at the relevant time. However, on the face of it, it would be a surprising position, as it seems to me, if before 1999 the law was not as he stated it to be. I accept Dr Melo's evidence about this, and reject Huyton's contention that under Mexican law there is a distinction of this kind between a pedimento obtained through forgery and one obtained through fraud. Moreover, even if some false documents could not be relied upon as vitiating a pedimento, I conclude from the cross-examination of Mr Garza, that the bills of lading could be.

What are the consequences if a pedimento is vitiated?

389. There is a difference between the experts about the consequences in Mexican law if a pedimento is vitiated because of the circumstances in which it was obtained, and the documents presented to the authorities in order to obtain it.
390. Dr Melo says that a pedimento obtained through forgery or fraud does not afford protection against the consequences of the goods being contraband. Goods imported under such a pedimento are liable to be confiscated.
391. Mr Garza's evidence was that the pedimento would still be valid and effective to protect the goods and those interested in them from any criminal or other legal consequences unless and until the Mexican authorities successfully bring proceedings to nullify the pedimento before the Federal Fiscal Court in accordance with article 36 of the Fiscal Code. Goods are regarded as contraband only if the pedimento has been nullified in such proceedings. Until then, the pedimento would stand as evidence of the legal importation of the cargo, and so, even if the pedimento was obtained with forged or fraudulent documents, Dipasa would not be committing an offence by transporting, processing, or otherwise dealing with the goods, and Acosa similarly would not have committed an offence by storing the cargo or issuing cd's for it.
392. Article 36 of the Customs Law on which Mr Garza relied provides that, "The administrative resolutions of an individual character favouring a tax payer can only be modified by the Federal Fiscal Court through a trial initiated by the fiscal authorities"; but that on the other hand in the case of a resolution that does not favour the tax payer, the authorities may, subject to safeguards, modify it themselves. The article does not in terms support Mr Garza's contentions.
393. Mr Garza also referred to two cases decided in the Mexican courts. Only headnotes about the cases were produced. Neither case concerned a pedimento obtained by a false document. I could not discern here any cogent support for Mr Garza's contentions.
394. I do not consider that article 36 provides any sound basis for Mr Garza's contention. I consider that it would be surprising if the authorities were precluded from taking measures against goods imported through the use of forgeries and by fraud without bringing court proceedings. There obviously would be cases where more urgent action is required. I conclude that Dr Melo's opinion on this point is likely to be correct, and if they were imported under a pedimento obtained by fraudulent or forged documents, the seeds were liable to seizure without court proceedings under the Federal Law of Administrative Procedure. There was no evidence about how likely seizure is in practice.

Control of Enabled Warehouses and the Goods in them

395. I turn to the question of how much control Acosa had over Dipasa's warehouse and the goods in it as a result of the enabling agreement. This is relevant to the question whether it was a misrepresentation of the position to say that the goods were in an Acosa warehouse. It also bears upon whether Huyton relied upon any such representation, and the importance of any mistake that Huyton made about where the goods were warehoused.
396. Dipasa's first submission is that under Mexican law storage of goods by a public warehouse company in an enabled warehouse is tantamount to storage of them in their own premises. Thus, Dipasa submitted, the warehouse at Cortazar and the goods stored there were, as a matter of Mexican law, under the control of Acosa at all material times, and the only reason that Acosa were not under an obligation to issue cd's for the sesame seeds in Huyton's name and the reason that they did not do so, is that Huyton had not provided the necessary phytosanitary documentation.
397. In response to this submission, Huyton submitted that an enabled warehouse takes control of, and assumes responsibility for, goods only if and when they issue entry receipts: only then are cd's issued. At least, according to Huyton, this was the effect of the arrangements in this case. They rely not only upon the general law of Mexico, but upon the terms of the enabling agrement made between Dipasa and Acosa.
398. The issue turned out to be narrower than first appeared. Dr Melo said that the enabling agreement gave Acosa control over the enabled premises from the time that the enabling agreement was signed. However, he agreed that until cd's were issued for the goods stored under the enabling agreement or by virtue of it, Acosa were not responsible to the owners of the goods for them.
399. It seemed at one time that I might also have to consider questions of Mexican law about whether, and if at all how, the fact that the goods are under quarantine restrictions might have prevented them from being stored in Huyton's name. There is no longer any need to do so. It has become clear Dipasa had the right to choose where the goods would be kept, and that the quarantine restrictions did not prevent, or legally impede, the seeds being stored with Acosa. Moreover, the fact that the goods were under quarantine restrictions did not prevent Acosa from issuing cd's in respect of them. The only difference between the experts is whether (as Dr Melo states) only non-negotiable cd's might be issued or whether (as Mr Garza told me) negotiable cd's might be issued if appropriately qualified. But neither party suggests that anything turns upon that question.
400. Dipasa had a second argument. They submit that in any event, and even if Acosa would not otherwise have been responsible to Huyton for the sesame seeds because cd's were not issued, nevertheless, a warehouse will become responsible to the owner for goods if he has given undertakings to the owner to that effect. They say that that is the effect of the undertakings given by Acosa on 8 June 1998.
401. Mr Garza denied this. He said that the Code of Commerce lays down the form whereby contractual commitments are to be given in these circumstances, and a purported agreement which does not comply with the formalities will not be of legal effect. The communication of 8 June 1998 could not, he said, give rise to obligations of this kind. In any event, whether or not there was an undertaking would depend upon the terms of the fax.
402. This question can be shortly determined by reference to the terms of the undertaking given by Acosa on 8 June 1998. The communication contemplated that the goods would be sent to Acosa's warehouse(s) at Celaya and/or Irapuato. They were not. Whatever was meant by the words, "The merchandise sall be discharged above your stricts instructions", and whatever comfort Mr Amaslides and Huyton derived from them, the letter cannot, in my judgment, be interpreted as meaning that Acosa were undertaking responsibility for the goods in the events that happened.

The proposed amendments of the pleadings

403. During the trial, I had to decide a number of applications by both sides for permission to amend pleadings. In the case of one application made during the course of the trial, an application made by Huyton for permission to plead that they were entitled to rescind the SA on the grounds of mistake, I deferred my decision on the application for determination in this judgment. Further, after closing submissions had been completed and the trial concluded, both Huyton and Dipasa separately made applications for further amendments. I have ruled on part of Dipasa's application. I rule on the rest of it and on Huyton's application in this judgment. Therefore the pleading questions that I determine here are these:

i) Huyton's application to plead that the SA was concluded on 1 September 1998 and not 27 August 1998, and that, when they concluded it, they relied upon the draft of the agreement sent by them to Dipasa on 27 August 1998 and Dipasa's response to it ("the SA amendment").

ii) Huyton's application to plead that they were entitled to rescind the SA on the grounds of mistake ("the mistake amendment").

iii) Dipasa's application to plead waiver in relation to the case that they were in breach of the JVA in not transporting the goods to a bonded warehouse ("the bonded warehouse waiver amendment").

iv) Dipasa's application to amend their plea of affirmation to allege that by 8 October 1998 Huyton knew of their right to rescind the SA ("the affirmation amendment").

The background to the applications to amend

404. In order to put these applications in context, I should explain something of the background to them. On 21 January 2002, the first day of the trial, Dipasa indicated that they would seek to introduce a plea that Huyton had affirmed the SA and thereby lost any entitlement of rescind it. Huyton did not oppose the appplication, but made it clear that this was because they considered that the proposed pleading was inadequate to sustain a contention of affirmation. I allowed Dipasa to make the amendment.
405. On 6 February, the eleventh day of the trial, after Mr Philippas and Mr Amaslides had given evidence and when Mr Mosqueda was in the course of doing so, Huyton served on Dipasa some proposed amendments to their pleadings. At the start of the trial, Huyton were asserting that they had been entitled to rescind the SA on the grounds of fraudulent misrepresentation. The proposed amendments were to introduce pleas of entitlement to rescind on the grounds of innocent misrepresention and mistake. Mr Young made it clear that the proposed amendments would, for the most part, be opposed by Dipasa. It was also apparent that it would take some time for the parties to prepare for, and to present arguments upon, the applications (since some of the proposed amendments involved considering the impact of the arbitration agreement in the SA and jurisdictional questions, Dipasa having been served with these proceedings out of the jurisdiction pursuant to leave granted on 14 December 1998). In these circumstances, in order to minimise the disruption of the evidence and the arrangements made by witnesses from overseas to attend the hearing, I directed, with the consent of the parties or at least without their opposition, that the defendants' witnesses of fact be cross-examined as if permission for the amendments had been given, without pre-judging whether the application to amend would be granted. However, one amendment which was not opposed by Dipasa was a change to Huyton's pleaded case that made it clear – if it was not already clear - that they alleged that the SA was concluded on 27 August 1998.
406. On 25 February 1998 Huyton served a new draft of their proposed pleading. They sought to add a further allegation of misrepresentation, that had not been foreshadowed, namely that Dipasa misrepresented the position about the storage of the goods in Mr Baptista's fax of 29 June 1998 (as well as in other communications).
407. On 4 March 2002 I heard the application by Huyton to amend their pleadings. I refused certain applications including an application for permission to rely upon the fax of 29 June 1998. I allowed the application to plead an entitlement to rescind the SA on the grounds of innocent misrepresentation. As I have indicated, I deferred determination of their application to rely upon mistake.
408. Closing submissions in the case concluded on 13 March 2002. In the course of his submissions in reply, Mr Johnson indicated that he wished to consider further Huyton's case about when the SA was concluded. On 20 March 2002 Huyton served a draft pleading in which they sought permission to put forward a case that the SA was concluded on 1 September 1998, and not earlier. The draft also included a new plea of a representation made by Dipasa in that Huyton had on 27 August 1998 sent the draft of the SA that referred to the seeds as stored at Acosa, Celaya, and that Dipasa did not respond by correcting this part of the draft. I heard that application on 21 March 2002, and told the parties that I would determine it in this judgment.
409. On 27 March 2002, Dipasa gave notice that they wished to amend their pleadings. Their applications to do so required an oral hearing. Because both the parties told me at a directions hearing on 25 April 2002 that, understandably, they wished the hearing to be arranged to accommodate their counsel and because of my commitments on circuit, it was not possible for the applications to be heard before 22 July 2002. At the hearing on 22 July 2002, I ruled on some of the proposed amendments, refusing permission for them. I said that in the course of this judgment I would rule on the bonded warehouse waiver amendment and the affirmation amendment.

The principles for determining the applications to amend

410. I must decide whether it would promote the overriding objective to deal with the case justly to allow these amendments. In Cobbold v London Borough of Greenwich, (unreported) 9 August 1999, Peter Gibson LJ said this of the application of the overriding objective to the amendment of pleadings: "The overriding objective (of the CPR) is that the court should deal with cases justly. That includes, so far as practicable, ensuring that each case can be dealt with not only expeditiously but also fairly. Amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon provided that any prejudice to the other party or parties caused by the amendment can be compensated for in costs, and the public interest in the efficient administration of justice is not significantly harmed".
411. In applying this principle and guidance to these applications, I do not think it right to refuse them simply on the grounds that they are made late, although they are all undoubtedly made very late and could have been made earlier. Nor do I consider that I should refuse applications on the grounds that the amendments would mean that I would have to entertain further submissions on the new points, although that would further delay my judgment in this matter. However, where I have concluded that I could fairly allow an application only by permitting the parties to re-open the evidence, particularly the oral evidence, I consider this a much more powerful objection to the application. I did not understand either party to suggest that I should allow amendments if this would be the consequence of doing so.

The mistake amendment

412. The pleading that Huyton seek permission to introduce to plead mistake is in the following terms: "Huyton were entitled to, and did, rescind the sale agreement because (1) they entered into the sale agreement under the mistake of fact (which if necessary Huyton will say was a fundamental mistake) that the goods were stored at an Acosa warehouse and not at Dipasa's factory and (2) that mistake was caused or contributed to by Dipasa's conduct, namely [in summary, their pleaded breaches of contract in taking the goods to their own warehouse and storing them there and failing to give proper information to Huyton about this]. In these circumstances, it was and is inequitable for Dipasa to rely on the sale agreement."
413. Huyton having formulated their proposed amendment to plead mistake before Dipasa's witnesses gave evidence and the hearing of their application being deferred simply as a matter of convenience to accommodate the attendance of witnesses from Mexico, the objection to this application depends largely upon whether Dipasa would be unfairly prejudiced because they did not cross-examine Huyton's witnesses of fact about questions relevant to this plea. I have concluded that Dipasa have not suffered significant prejudice of this kind. In order to deal with the case that the SA was avoided for misrepresentation, Mr Philippas was thoroughly cross-examined about his state of mind when he made the SA on Huyton's behalf; about the perceived importance of the circumstances in which the seeds were stored; about whether Dipasa were in breach of contract and at fault with regard to the storage; and about whether Huyton themselves through their own fault, in particular in the way that they dealt with the documents and Dipasa's requests for them, materially contributed to the circumstances about which they were, as they say, mistaken. I allow Huyton to make this amendment.
414. I add that at the time of the hearings before me, the parties proceeded on the basis that there is an equitable jurisdiction to set aside for mistake contracts that are valid at common law. Since I heard argument, the Court of Appeal has decided in Great Peace Shipping Limited v Tsakiris Salvage International Limited, The Times, 17 October 2002, that in cases of common mistake, equity will not intervene in these circumstances. Huyton do not contend that the SA was invalid at common law and they rely upon equity's jurisdiction. I have not heard further argument in light of the Court of Appeal's decision, but it does not affect my conclusion that Huyton should be allowed to argue that they are entitled in equity to rescission on the grounds of their unilateral mistake when they made the SA.

The SA amendment

415. The application for permission to plead that the SA was entered into on 1 September 1998 was made after the parties had completed their closing submissions. At the start of the trial, Huyton's pleading was that it was "made by telephone and in writing on or about 1^st September 1998". The Points of Claim continued as follows:

"The sale agreement was made

(1) in a telephone conversation between Mr Philippas on behalf of Huyton and Mr Coello on behalf of Dipasa on 27^th August 1998.

(2) by Huyton's fax of the same date.

(3) in further telephone conversations between Mr Philippas and Mr Coello between 27^th August and 1^st September 1998, and

(4) by Huyton's fax of 1^st Setember 1998."

416. When Mr Young opened Dipasa's case, he made it clear that he understood the claimants' case to be that the SA was concluded on 27 August 1998 in the telephone conversation between Mr Philippas (for Huyton) and Mr Coello (for Dipasa), although it was subject to consensual variation thereafter. Huyton did not suggest that he was mistaken. As I have explained, on 6 February 2002, Huyton proposed an amendment to their pleading that put their case beyond doubt. After the close of the final submissions, however, Huyton applied for permission again to amend their pleading to argue that the agreement was not concluded until 1 September 1998. More significantly, they sought to introduce a plea that Huyton entered into the sale agreement by reason of a misrepresentation made by Dipasa in that, while raising other objections to the terms set out in Huyton's fax of 27 August 1998, they did not comment upon what it said about where the seeds were. In support of their case that Dipasa's response amounted to a representation that the fax of 27 August 1998 correctly stated where the goods were, Huyton seek to allege that a reasonable man would have expected Dipasa, acting honestly and responsibly, to have done so, and that their obligation under the JVA to act towards Huyton in good faith required this of Dipasa.
417. Mr Johnson characterised the proposed amendment as representing Huyton's wish to revert to their original case. I agree that, in so far as it relates to when the SA was concluded, the amendment would amount to Huyton reverting to a case that was available to them on the original pleadings. However, this is not the real point of the proposed amendment. The representation based on the draft SA would be an entirely new case.
418. I have concluded that it would be wrong to allow Huyton to amend their pleading to rely upon the draft of the SA and Dipasa's response to it. Dipasa would be prejudiced because they did not cross-examine Mr Philippas about whether he relied upon Dipasa's response to the draft. I cannot assume that his answers would have been the same as those that he gave about the earlier representations that Huyton plead, given Mr Philippas' evidence about the extent of the agreement reached by telephone on 27 August 1998. This is so whether or not Mr Philippas believed that a contract of sale had been concluded, and whether or not he would have been correct if he thought that it had been.
419. I also consider that because of the course of Mr Coello's cross-examination I should not allow Huyton to introduce after the evidence of fact a plea that Dipasa acted in breach of an obligation of good faith in not responding to the draft SA about where the goods were. Certainly Mr Coello was cross-examined about whether he observed these words in the draft SA, and the case was put to him that he did not draw Huyton's attention to the error because "if the sale went through, you thought it would not matter, you need not open up that area". But he was not cross-examined on the basis that his failure to draw attention to the location of the goods in response to the draft constituted a breach of contract. Although I confess to suspecting that Mr Coello might well not have added anything to his denial that he noticed the reference to the location in the draft SA, the allegation being one of want of good faith, it would, in my judgment, be wrong to allow it to be pleaded after his evidence without the point being specifically covered in cross-examination.
420. I therefore revert to the question whether I should permit the amendment to plead that the agreement was made on 1 September 1998. From Huyton's point of view, this might well appear an arid question if they cannot rely on the draft SA. Nevertheless, I consider that the evidence about this has been presented and fully tested, and if the proper view of the case is that the SA was concluded on 1 September, there is no reason that I should be compelled by the pleading to take a fictional view of the case. I grant the permission for this amendment. (Indeed, Mr Johnson suggested that, notwithstanding the pleadings indicate that the parties are at one on the point, I am not precluded from drawing the legal inference from the facts that the SA was concluded on 1 September. I need not consider this point in view of my conclusion that I should permit that part of the amendment.)
421. In view of submissions made by Mr Young, I should say something about the implications of the amendment about the date of the SA being allowed. If the SA was concluded on 27 August 1998, undeniably it was thereafter consensually varied by subsequent exchanges. Mr Young was much exercised about the distinction between the terms of the SA being finally agreed in two stages, by an agreement on 27 August and a subsequent variation, and its terms being agreed in one stage on or about 1 September. This was, as I understood Mr Young, because if I conclude that there was a two-stage agreement, this might in some way lead to a conclusion that the consensual variation alone might be rescinded, leaving the parties bound by the unvaried SA. If this is the concern, it is without basis. Huyton did not purport by their letter on 29 October 1998 to rescind a contract of variation and do not purport to do so now.

The bonded warehouse waiver amendment

422. By the bonded warehouse waiver amendment Dipasa seek to introduce a plea that goes to Huyton's case that Dipasa were in breach of contract because the seeds were not transported to or stored in "the Acosa Warehouse or any other bonded warehouse". The new plea would read as follows: "If and to the extent that it was a breach of the JVA not to store the goods "in bond", that breach was waived by the Claimants who knew, not later than the date of the said bill of lading [sc. by the time that there was issued a bill of lading naming Mexico rather than Guatemala as the destination of the goods] that the goods would be "customs cleared" and thus not held "in bond" and yet failed to make any complaint in respect of the same".
423. Dipasa wish to introduce this plea in order to submit that, if it was a breach of the JVA for them to clear the goods through customs and to import the goods into Mexico, then Huyton knew that they were proceeding to do this, and did not complain, and cannot now, consistently with their previous conduct, elect to treat the importation as a ground for determining the JVA.
424. I do not believe that Huyton have suffered any prejudice as a result of the amendment being made so late in the trial. It seems to me just to allow the bonded warehouse waiver amendment, and I do so.

The affirmation amendment

425. The plea of affirmation of the SA that Dipasa introduced at the start of the trial asserted that Huyton had relevant knowledge in the following terms: "Huyton had knowledge of the facts said to evidence the alleged misrepresentations by, at the latest, 8^th October 1998." The relevance of that date was that Huyton then sent their fax in which, according to Dipasa, they affirmed the SA. Huyton submit that this plea is defective in that Huyton are bound by an election of this kind only if they knew of their right to elect between rescission and affirmation, and it is not pleaded that they did. In these circumstances, after the close of final submissions, Dipasa applied for permission to expand the plea of affirmation in order to allege that Huyton had knowledge by 8 October 1998 of "its alleged legal right to rescind and to choose between rescinding and affirming the Sale Agreement".
426. Certainly Mr Johnson made it clear when he did not oppose Dipasa's amendment to introduce the original affirmation plea, that Huyton would argue that, as a matter of pleading, it was defective, although he was less specific in his criticism of the pleading than he was in his closing submissions. Equally Mr Young stated that Dipasa regarded the original plea of affirmation as adequate, and properly asserted the basis upon which the defence would be argued. This application to amend the affirmation plea represents a change of position on Dipasa's part. In terms of this jousting between advocates, Huyton win. But that is not the basis upon which I should decide whether to allow the affirmation amendment.
427. Had the original application to plead affirmation been opposed at the start of the trial, I should neverthless have allowed Dipasa to introduce a properly formulated affirmation plea. If the pleading point now taken had been fully explained by Huyton, no doubt Dipasa would have adjusted the formulation of the plea accordingly. Huyton have, in my judgment, suffered no prejudice as a result of them not opposing the original plea of affirmation.
428. Huyton were aware throughout the trial, in my judgment, of the nature of the affirmation case that Dipasa were asserting. I consider that they would suffer no prejudice as a result of the proposed development of the plea in order to meet the technical objection raised by Huyton. I allow the proposed amendment.
429. I add that, had I not in any case allowed the affirmation amendment, I should have been troubled about allowing Huyton to rely upon their mistake amendment without permitting Dipasa to answer it by any proper defence, including a plea in the form of the affirmation amendment. In view of my decision on the affirmation amendment, this consideration does not affect my decision to allow the mistake amendment.

The Issues

430. I now identify the issues that I have to decide. The question of Dipasa's liability on the claim raises the following questions.

1. Have Huyton rescinded the SA?

1.1 When was the SA made?

1.2 Misrepresentation:

1.2.1 Was it represented to Huyton that "the goods were stored at the Acosa warehouse (or an Acosa warehouse) and not at Dipasa's factory" -

1.2.1.a by Dipasa in that they failed to correct information about where the goods were to be stored that they gave Huyton before the cargo was discharged (the "Dipasa's own representation case")?

1.2.1.b by Dipasa in that they "caused" Acosa to make representations to Huyton (the "caused representation case")?

1.2.1.c by Acosa, and if so did Dipasa know of the representations (the "known representation case")?

1.2.2 In so far as Huyton establish one (or more) of these three cases, was the representation untrue?

1.2.3 If such a misrepresentation was made, did it induce Huyton to enter into the SA?

1.3 Mistake:

1.3.1 Did Huyton enter into the SA under a mistake?

1.3.2 If they did, are they entitled in equity to set aside the SA?

1.4 Affirmation: If Huyton would otherwise have been entitled to rescind the SA because of misrepresentation or mistake, did they lose the right to do so because they elected to affirm the agreement?

2. Have Huyton terminated the JVA on the basis of Dipasa's breach?

2.1. Breach of clause 3 of the JVA: were Dipasa in breach of the JVA in storing the sesame seeds as and where they did?

2.2 Information about storage: were Dipasa in breach of the JVA in that they failed to inform Huyton that it was not possible to store the goods as contemplated by the JVA?

2.3 Good faith: were Dipasa were in breach of an obligation under the JVA that they act in good faith towards Huyton?

2.4 Entitlement to terminate the JVA: if Dipasa were in breach of the JVA, was their breach such that Huyton were therefore entitled to terminate the JVA, and if so were they so entitled on 29 October 1998? In this context it is necessary to consider the point introduced by the bonded warehouse waiver amendment.

431. Dipasa's counterclaim is for damages for breach of the SA, and alternatively of the JVA. As far as liability is concerned, the following issues have to be decided (in addition to those arising upon Huyton's claim):

3. Are Dipasa entitled to damages for Huyton's breach of the SA?

3.1. Were Huyton in breach of the SA in that they failed to provide documentation to Dipasa?

3.2 Were Huyton in breach of the SA in that the goods failed to satisfy the contractual requirements? This in turn raises these questions -

3.2.1 How old were the seeds?

3.2.2 What was the quality of the goods at the time of the SA?

3.2.3 Were the seeds infested?

3.2.4 What were Huyton's contractual obligations under the SA with regard to the description and quality of the goods?

4. Are Dipasa entitled to damages for breach of the JVA?

4.1 Are Dipasa entitled to damages in respect of the quality of the goods?

4.1.1 Did the JVA oblige Huyton to provide goods of the minimum specification of 98% purity, 6% moisture and 2% ffa?

4.1.2 If so, did they do so?

4.2 Are Dipasa entitled to relief in respect of the value of the goods?

4.2.1 Did the JVA oblige Huyton to provide goods of a value of US$700 per tonne?

4.2.2 If so, did they do so?

432. I am not generally to determine questions of quantum of damages either on the claim or on the counterclaim, although, having decided that the goods were not all of the 1997/98 harvest, I have gone on to make findings about how much of the shipment was older crop, and how old it was. I have also, at the request of the parties, made findings about Mexican law where I have thought that they might be relevant to a later assessment of damages. I was asked by the parties to determine certain questions relating to quantum that are essentially questions of interpretation of the JVA, namely: (i) whether it matters that money was payable to Huyton's bank rather than Huyton, and (ii) whether damages should be assessed on the basis of a price of $700 per tonne, without bringing into account the rest of the JVA accounting procedure. I have, however, concluded that it would be undesirable to do so in isolation from the determination of quantum generally.

When was the SA made?

433. Because I have permitted the SA amendment only on a limited basis, this question is not crucial. I do not consider that the SA was concluded in the telephone conversation of 27 August 1998, or at any time before 1 September 1998. Mr Philippas' evidence was the "main points" were agreed in the telephone conversation. Mr Coello's oral evidence was that he and Mr Philippas did not go "into any detail". As I understood the evidence of the witnesses, both considered that further matters remained to be agreed. Huyton's fax dealt with them. I do not infer that the parties intended to conclude the contract on the telephone without further exchanges.

The Dipasa's own representation case

434. Before the seeds were discharged from the Zarina 1, Dipasa sent faxes to Huyton which conveyed that the seeds were to be taken to and stored in an Acosa warehouse, and in particular they did so in the six faxes from Dipasa on which Huyton rely in their pleaded case.
435. It is not suggested that Dipasa were not properly stating their expectations at the time that these communications were sent. Huyton say that once Dipasa had decided that the seeds were to be stored in their own warehouse at Cortazar, they knew that Huyton were acting under a misapprehension about the storage of the seeds. Huyton go on to submit that (i) Dipasa had a contractual obligation under the JVA to correct Huyton's misapprehension, and (ii) in any event a reasonable man acting honestly and responsibly would have done so (see The Henrik Sif, [1982] 1 Ll L R 456 at p.464).
436. I reject this submission. I have found that Dipasa did not know that Huyton were proceeding under a misapprehension about where the goods were stored. From the time of the JVA Dipasa knew, because Acosa sent them a copy of their fax to Huyton of 4 June 1998, that Acosa were directly corresponding with Huyton. As I have held, the implication of Huyton's faxes of 9 June 1998 was that Huyton were looking to Acosa, rather than to Dipasa, for information of this kind. In any case, Mr Amaslides told Mr Coello that the information was not required by Huyton for themselves, but to satisfy their insurers and their bank. As far as Mr Baptista is concerned, his evidence was that he assumed that Acosa would tell Huyton about the enabling agreement because Mr Mosqueda had said that they would do so. I accept that evidence. I reject Mr Mosqueda's evidence to the contrary, which seems to be based upon the fact that, Dipasa being Acosa's customer, Acosa would have no responsibility to communicate with Huyton. There was in fact a significant amount of correspondence between Huyton and Acosa.
437. The early faxes sent by Dipasa had indicated that some of the cargo would or might be stored at Lazaro Cardenas. Huyton were well aware that the storage arrangements had moved on from there, but did not direct inquiries to Dipasa in order to keep themselves up to date. They directed their enquiries to Acosa. It is true that Huyton asked Mr Baptista about the goods in their fax of 29 June 1998, but the primary focus of this communication was the railway accident. I do not consider that this indicates, or would have indicated to Dipasa, that Huyton were looking to Dipasa for information as to where the goods were stored. Mr Baptista told Huyton that it was hoped that all the goods would arrive within about a fortnight, and Huyton directed their consequent enquiries in the middle of July to Acosa. This was natural to suppose that Huyton would be looking to Acosa in respect of these matters in that their main concern was apparently to obtain a cd from them.
438. Huyton submitted that because Dipasa led them to believe that the goods were to be stored with Acosa, they were responsible for ensuring that that information was corrected and, whether or not they reasonably believed that Acosa would give Huyton all proper information about the warehousing of the goods, they were not discharged from their responsibility unless and until Huyton in fact received information correcting the impression that they created. They relied on Torrance v Bolton (1872) LR 8 Ch 118. In that case a property put up for auction was erroneously described in the advertised particulars as an immediate absolute reversion of a freehold estate, without reference to the mortgages with which it was encumbered. The mortgages were referred to in conditions of sale that were read in the auction room before the sale. The claimant had read the advertised particulars, which were characterised as "an improper, insufficient and not very fair description", but, being deaf, had not heard the conditions. James LJ said: "There being…this improper and misleading desciption in the particulars of sale, I am of opinion that the burden of proof is cast entirely on the Defendant to shew that the [claimant] was not in fact misled by what he had read". The claimant "never had his mind sufficiently clear of that misrepresentation which was infused into it by the particulars of sale"; and therefore was entitled to rescind the contract.
439. The position in the present case is, in my judgment, significantly different from that in Torrance v Bolton. In Torrance there had been a misrepresentation of fact and the question was whether in the circumstances the plaintiff was entitled to rescind the contract because of it. Here the communications sent by Dipasa did not contain any misrepresentation when they were sent. The question is whether Dipasa can be said to have misrepresented the storage arrangements by failing subsequently to advise Huyton about how plans were changed. In order to maintain that they did, Huyton need to show that Dipasa undertook a responsibility to keep Huyton informed about storage plans developed. I conclude that they did not. I do not consider that honest and reasonable conduct required them to do so; nor do I consider that there was any implied term in the JVA that they should do so.

The known representation case

440. Next, the known representation case. Huyton rely upon Barclays Bank v O'Brien, [1994] 1 AC 180, in which Lord Browne-Wilkinson (at p.191E) said an equity to set aside a transaction induced by a third party's misrepresentation is available against a party who had actual or constructive notice of it. Lord Browne-Wilkinson was dealing with a case where the representor was himself a party to the contract induced by it, but Mr Young did not suggest that that is a material distinction from this case. Nor does he dispute the principle enunciated by Lord Browne-Wilkinson. The essential question is what representations made by Acosa were known to Dipasa.
441. Huyton rely upon the communications from Acosa to them dated 8 June, 13 July, 27 July and 29 July 1998. As I have explained, I am not satisfied that Dipasa did have actual notice of the first three, and I conclude that they did not do so. They participated in the drafting of the fax of 29 July 1988, and suggested wording that Acosa in fact used. Dipasa must have been aware that in all probability Acosa would write to Huyton in such terms, and are to be taken to have had actual notice when they made the SA that Acosa had so written,
442. I do not, however, interpret the fax from Acosa of 29 July 1998 as representing that the goods were stored at their own warehouse (or warehouses) rather than at Dipasa's premises. Certainly it does not expressly say so. Nor in my judgment does it do so by implication. It was sent in response to a request from Huyton for a cd. The request dealt with the request and explained the difficulty about issuing a cd. Acosa considered that it was true. I decline to find, if it be so alleged, that Dipasa thought otherwise. In any case, the fax did not refer to the location of the goods, and there is no reason that it should have done so.

The caused representation case

443. I am uncertain in what sense Dipasa are said by Huyton to have "caused" Acosa to make the representations in the faxes sent by them. Now that Huyton also advance the known representation case, the caused representation case adds nothing to Huyton's argument unless it be said that Dipasa, whilst unaware of the representations, "caused" them because in some way Acosa were Dipasa's agents in making them or because Dipasa and Acosa are to be regarded as participating in some sort of joint enterprise. I do not understand Mr Johnson to advance any such argument, and there is no basis upon which he could do so. In view of my findings about the extent to which Acosa involved Dipasa in their communications with Huyton, I do not consider that Dipasa can be said to have "caused" Acosa to make any representation other than what was said in the communication of 29 July 1998 in so far as that reproduced their draft.

Was the representation true?

444. Dipasa submit that even if Huyton do establish one of their representation cases, the representations upon which Huyton rely were true. The pleaded representations are that:

i) That the goods were stored at the Acosa warehouse;

ii) That the goods were stored at an Acosa warehouse; and

iii) That the goods were not stored at Dipasa's factory.

445. It would not have been true to represent that the goods were stored at the Acosa warehouse, which could only be a reference to the warehouse at Celaya.
446. Nor would it have been true, in my judgment, to represent that the goods were not stored at Dipasa's factory. It is true that they were in the part of Dipasa's premises that was used for storage and not in the building used for processing, and it is true that by the time of the SA the premises were enabled; but it would have been quite misleading to have stated without qualification that the seeds were not at Dipasa's factory. I do not understand Dipasa to submit otherwise.
447. Mr Young argued, however, that the goods were stored in an Acosa warehouse; and submits that if Huyton succeed in establishing that representation, it was true. Dipasa submit that a warehouse that has been "enabled" under an agreement between Acosa and a customer is no less "an Acosa warehouse" than one which is owned or leased by Acosa. Under Mexican law, it is properly to be regarded as under Acosa's control.
448. If my task were to attribute some meaning to the term "an Acosa warehouse" in the abstract, I would see force in this argument. However, in context it would, in my judgment, be an incomplete and misleading desciption of Dipasa's enabled premises to call them "an Acosa warehouse". The exchanges with Huyton had referred to Acosa's warehouses at Lazaro Cardenas, Celaya and Irapuato. The natural inference of the phrase is that Acosa had a similar interest in the warehouse where the seeds were stored. I would take this view even if Acosa had issued cd's to Huyton, but the absence of cd's reinforces my conclusion.
449. I recognise, of course, that for there to be an actionable misrepresentation, the statement relied upon must be false: ambiguity will not do. Nevertheless, I conclude that the pleaded representation was false.

Did the representations induce Huyton to make the SA?

450. Since Huyton have not persuaded me that they relied upon the goods being stored in an Acosa warehouse rather than at Dipasa's enabled premises, I decline to find that the representations induced the SA.

Fraud

451. Huyton put forward their misrepresentation case as one of fraud. Indeed, at the start of the trial, the only basis upon which they argued their entitlement to rescind the SA was that they were induced to make it by fraud. Having rejected Huyton's allegation that Dipasa deliberately concealed from Huyton that the cargo was stored in their premises, I also reject the allegation of fraud. In fact, it is not strictly necessary to determine the allegation in order to decide the claim. This is because neither party has put forward a relevant argument that the court should exercise its discretion under section 2(2) of the Misrepresentation Act 1967 to declare that the SA subsisting notwithstanding any innocent misrepresentation, and to award damages in lieu of rescission. (Huyton did submit that this question arises if I uphold Dipasa's affirmation contentions, but I have rejected them. In these circumstances, I do not need to consider whether if the right to rescind is no longer available, damages might be awarded under the 1967 Act: see Chitty on Contracts, 28 Ed, Vol 1 at para 6-097 and Thomas Witter Ltd v TBP Industries Ltd., [1996] 2 AER 573 at pp. 590a-591g; cp Govt of Zanzibar v British Aerospace (Lancaster House) Ltd., [2000] 1 WLR 2333).

Mistake

452. Huyton allege that they entered into the SA in the mistaken belief that the goods were stored at an Acosa warehouse and not at Dipasa's factory. By "an Acosa warehouse" they mean a warehouse owned or leased by Acosa, and not one enabled by them. The first question is whether Mr Philippas did believe that when he made the SA on Huyton's behalf. He did not know that the seeds were stored at Dipasa's factory, and I find that it did not occur to him that they might be there. Further, he thought that they were at an Acosa warehouse, and it did not occur to him that they might not be in a warehouse owned or leased by them. To that extent, Mr Philippas and Huyton were under a misapprehension when they made the SA.
453. Huyton do not argue that because of their mistake the SA was void at common law. Such an argument would be contrary to the decision in Bell v Lever Bros., [1932] AC 161, and in particular Lord Atkin's well-known statement that for a contract to be void for mistake, the mistake must be such as to "render the subject matter of the contract essentially and radically different" from what it was believed to be. Mr Johnson does, however, argue that because of Mr Philippas' mistaken belief, and because Dipasa's conduct caused it or contributed to it, it would be inequitable for Dipasa to rely upon the SA, and Huyton were entitled to rescind it.
454. The argument before me proceeded on tha basis that equity will in some circumstances give relief to a contracting party who has made an agreement whilst acting under a mistake which was not fundamental in the strict sense required by the common law. However, there is some uncertainty as to the circumstances in which equity will intervene, indeed such uncertainty that Toulson J has recently suggested that the subject is one which the Law Commission might consider: Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd., (unrep) 9 November 2001 at para 69. I have already mentioned that since I heard argument (indeed since I sent a draft of my judgment to the parties' legal representatives) the decision of the Court of Appeal in that case had been reported, and it has determined that in cases of common mistake, equity will not intervene to set aside contracts that are valid at common law.
455. I have not heard further submissions in light of the Court of Appeal decision. In view of my conclusions of fact, it does not seem to me that I should further delay my judgment in order to do so. It can, I think, be stated with some confidence that on any view the exercise of equity's jurisidiction to set aside on the grounds of unilateral mistake contracts that are valid at common law is limited by and subject to the following considerations:

i) If the contract makes express or implied provision for who is to bear the risk of the mistake that was made, then there is no role for equity to afford relief from the consequences of the mistake: Associated Japanese Bank (International) Ltd v Credit du Nord SA, [1989] 1 WLR 255, 268 per Steyn J.

ii) Even in the absence of such contractual provision, equity will not intervene if the mistake is one with "relatively minor consequences": William Sindall plc v Cambridgeshire CC, [1994] 1 WLR 1016, 1042. It has been said that equity requires that the mistake must be "fundamental", but, given that the mistake need not be such as will make a contract void at common law, it does not seem to me that this clarifies the enquiry. However, the public policy of upholding contracts (see, for example, Bell v Lever Bros. cit sup at p.224 and Associated Japanese Bank cit sup at p. 264) means that equity will not intervene unless the mistake is about a matter of some real importance.

iii) The court, in deciding whether to exercise its equitable jurisidiction, will take into account whether the party seeking rescission was at fault. Accordingly, in the Associated Japanese Bank case equitable relief would have been available (had the contract not been void at common law) because the claimant was "not at fault in any way" (at p.270). (The Associated Japanese Bank case was one of common mistake, and the Court of Appeal's decision in the Great Peace Shipping case might mean that Steyn J's separate consideration of the position in equity was unnecessary: but his reference to fault is indicative of its relevance to cases of unilateral mistake where the equitable jurisidiction is invoked.) On the other hand, in The Lloydiana, [1983] 2 Lloyd's Rep 313 relief was refused since the mistake was entirely due to the fault of the allegedly mistaken party (see p.318).

iv) The court will also take account of the conduct of the party seeking to uphold the contract. It will consider whether it would be unconscionable for him to enforce it in light of any responsibility that he has for bringing about the mistake or for allowing the other party to enter into the contract under a mistake.

v) The equitable jurisdiction will be exercised in circumstances where it would cause hardship to the mistaken party to enforce the contract: see Treitel, The Law of Contract (1999) 10^th Ed at p.295. It is difficult to envisage such hardship unless the mistaken belief has led the party seeking relief to enter into a contract significantly different from that which he would otherwise have made.

456. Dipasa argue that the SA itself indicates that Huyton should bear the risk about where the goods were warehoused, and who had control of them. The argument, as I understand it, runs as follows: the reason that Huyton say that it was important that the goods should have been in an Acosa warehouse is that this would provide have provided them with some sort of security for Dipasa to fulfil their obligations under the SA. However, Huyton required of Dipasa that their obligations should be guaranteed by Dipasa Europe. They therefore indicated, Dipasa argue, that a guarantee would be regarded by them as sufficient security or reassurance for them that Dipasa would perform the SA and pay for the goods, and so impliedly accepted that they should have no further security.
457. I observe that this argument would not have been open to Dipasa if, as they contend, the SA had been concluded on the telephone conversation of 27 August 1998. The guarantee was proposed only in subsequent fax sent by Huyton. However, the argument seems to me in any event to be without merit. The fact that Huyton sought the security of the guarantee does not bear in any real way upon the allocation to Huyton or Dipasa of the risk of a mistake about the location of the goods.
458. Huyton submit that their mistaken belief was of importance because they believed that the seeds were held by Acosa and would be released to Dipasa under the terms of the SA only against payment. They say that therefore this was an important consideration to secure their position pending payment.
459. I have already concluded that Mr Philippas was not induced by his belief that the goods were stored at an Acosa warehouse to make the SA for Huyton. I must also examine the objective importance of his misapprehension.
460. Had Acosa issued cd's in respect of the seeds, Huyton would have been able to hold Acosa responsible if they were released to Dipasa, regardless of whether the seeds were stored in a warehouse owned or leased by Acosa or they were stored in Dipasa's "enabled" premises. On the other hand, Acosa regarded Dipasa as their customer, and they did not, I find, regard themselves as holding the seeds for Huyton or in Huyton's name. This was not because the goods were in an enabled warehouse, rather than in one owned or leased by them. This was because Acosa considered that their obligations were owed to Dipasa and not to Huyton unless and until they issued a cd; and they declined to issue a cd because they had not been provided with the documentation that they considered necessary in order for them to do so.
461. The question whether the goods were in a warehouse owned or leased by Acosa or an "enabled" warehouse was not the important point. Huyton knew that cd's had not been issued and knew the reason that Acosa have given for not issuing one. Their mistaken belief that the goods were in "an Acosa warehouse" did not have the importance that Huyton suggest, and in my judgment was not of itself of such importance to the SA that it would be unconscionable to enforce the SA.
462. Moreover, I have held that the reason that Acosa gave Huyton in their fax of 29 July 1998 for not issuing a cd was their true reason. It was because Huyton, despite their promises, did not provide the necessary documentation. Huyton's submission is that their mistake was that Acosa did not have the control over the goods that they supposed them to have, but if they had provided the promised documentation and a cd had been issued, Huyton could have looked to Acosa to protect their interests. In any case, as I have pointed out, the fact that the goods were in enabled premises rather than in Acosa's own premises was not a reason that no cd was issued to Huyton.
463. Dipasa also argued that Huyton's belief that the goods were at an Acosa warehouse was one for which they had no reasonable grounds and one for which they were themselves responsible in two respects: first, because they failed to pick up the reference to the place of storage in the SGS report; and secondly, because Mr Philippas, having promised to go to Mexico, did not do so and so did not observe for himself where the seeds were stored. I consider that the first of these criticisms has little force, and the latter none at all. It was not the purpose of the SGS report to advise about where the goods were stored. Mr Philippas simply found his plans to go to Mexico overtaken by other business calls on his time. These considerations do not bear upon my decision as to whether the mistake means that it is unconscionable for Dipasa to enforce the SA.
464. I have held that the SA was not induced by any misrepresentation made by Dipasa or of which they were aware. I decline to conclude that Dipasa were aware of, or suspected, Mr Philippas' mistake when they made the SA. As I shall explain, I consider that Dipasa were in breach of the terms of the JVA in arranging to store the seeds as they did, and in that sense it might properly be said that their breach of the JVA contributed to Huyton's mistake. However, I doubt whether this amounts to Dipasa causing Huyton's misapprehension, and am inclined to think that the most that can be said is that they created the opportunity for it: see Galoo v Bright Grahame Murray [1994] 1 WLR 1360. In any case, and more importantly, I do not consider that Dipasa were guilty of any want of good faith before they concluded the SA or in concluding it, and do not consider that they were in breach of any duty under the JVA to act towards Huyton in good faith. They are not guilty, in my judgment, of the sort of unconscionable behaviour that should prevent them from enforcing the SA: Commission for New Towns v Cooper, [1995] Ch 259 at p.280B-D.
465. I do not consider that it would be a hardship on Huyton to enforce the contract despite Mr Philippas' mistake. First, he would, as I have held, have made the SA in any event. Secondly, the mistake disadvantages Huyton only if they are unable to obtain the price of the goods to which they are entitled under the SA. I have been told little about the arbitration proceedings or about the proceedings in Holland, but I have been given no reason to believe that Huyton will not be able to obtain any redress to which they are entitled under the SA.
466. I conclude, in view of the relative insignificance of the mistaken belief and the lack of demonstrable hardship to Huyton in holding them to the SA, that it would be equitable for the court to enforce it.

Affirmation/change of position

467. Dipasa plead that if Huyton would otherwise have been entitled to rescind the SA because of misrepresentation or mistake, they lost the right to do so because by their conduct they affirmed the agreement or because Dipasa changed their position by entering into the sale agreement with Ajonjoli.
468. The affirmation argument relies upon Huyton's letters of 8 and 9 October 1998. Dipasa submit that in those letters Huyton assert their entitlement to the price for the goods under the SA, and to an arbitration for damages before FOSFA. Dipasa acknowledge, as I understand their submissions, that in order to succeed in this argument, they have to establish that when they wrote the letters of 8 and 9 October 1998, Huyton were aware of their right to rescind the SA: Peyman v Lanjani, [1985] Ch 457. In support of their argument on this point, Dipasa point out that by the end of September, as Mr Amaslides told me, Huyton had consulted lawyers, and they submit that I should infer that they had been advised of their rights.
469. If I had upheld Huyton's other arguments about their entitlement to rescind the SA, I would have rejected Dipasa's affirmation argument for three reasons. First, in so far as Huyton's case is based on representations made by Acosa, there is no evidence that Huyton could have known at the end of October the extent of Dipasa's involvement with Acosa or how much they knew of or contributed to what Acosa were telling Huyton. Similarly with regard to the mistake case, they could not have judged how far Dipasa, rather than Acosa, were responsible for their mistaken belief.
470. Secondly, I am not persuaded, despite some involvement of lawyers, that Huyton knew of their entitlement to rescind. It was not put to Mr Philippas when he was cross-examined, that he and Huyton knew this, and I decline to draw that inference.
471. Thirdly, I do not interpret the communications of 8 and 9 October 1998 as an unequivocal election by Huyton not to exercise their right to rescind the SA. On the contrary, in their letter of 8 October 1998, Huyton expressly reserve all their rights, and it is unrealistic to suppose that the letter of 9 October 1998 was not intended to be sent on the same basis.
472. I also reject the argument that rescission is precluded by Dipasa entering into a sale agreement with Ajonjoli. By the time of the agreement, Dipasa regarded their contractual relationship with Huyton as terminated by the exchange of letters at the end of October 1998. They did not make the agreement with Ajonjoli on the basis that the SA was in force.

Have Huyton terminated the JVA on the grounds of Dipasa's breach of it?

473. The reason that Huyton have sought to rescind the SA is to enable them to advance this argument:

i) That, the SA whereby Huyton and Dipasa agreed the JVA being cancelled, the relationship between Huyton and Dipasa is to be viewed as if the SA had never been agreed and so the JVA had not been terminated. They rely upon Johnson v Agnew, [1980] AC 367 at pp.392-3, in which Lord Wilberforce said that in the case of rescission "such as may arise for example in cases of mistake, fraud or lack of consent…the contract is treated in law as never having come into existence".

ii) Dipasa were in breach of the JVA before the SA was made, and, the SA being avoided, they were in continuing breach of the JVA on 29 October 1998.

iii) Because of Dipasa's breach of the JVA, Huyton were on 29 October 1998 entitled to terminate the JVA, and to sue Dipasa for damages for breach of the JVA.

iv) By their letter of 29 October 1998 or alternatively by bringing these proceedings on 18 December 1998, Huyton elected to terminate the JVA.

474. Accordingly, Huyton say that they are entitled to claim against Dipasa damages arising from the termination of the JVA. (Huyton do not contend that Dipasa's breach in itself caused them any damage, or make any claim on that basis.)
475. Since I have concluded that Huyton were not entitled to rescind the SA, it is not necessary to determine whether the starting point of this argument is sound. Huyton have cited no case, and I know of no case, in which the principle stated in Johnson v Agnew has been applied in comparable circumstances to these or to achieve a result such as Huyton seek to achieve here. Dipasa rightly observe that there is something unreal in examining whether they were in breach of the JVA at the end of October 1998, and whether their breach justified Huyton in ending the JVA, when the parties' relationship had for the previous two months been governed by the SA and not by the JVA.
476. Further, Dipasa argue that the proposition put forward by Huyton contemplates that the JVA is reinstated for a scintilla temporis before being terminated by the same letter of 29 October 1998. This again is somewhat contrived. After all, it by no means follows that because Huyton were able to set aside the SA, they were able to end the JVA for breach, but it would be a distortion of their letter of 29 October 1998 to suggest that Huyton envisaged that the JVA might be revived in any real sense or evinced an intention that it should be.
477. I see force in these observations of Dipasa. However, I am prepared to assume that the remedy of rescission is sufficiently flexible to overcome difficulties of this kind if they arose in a particular case, and I decline to express any more concluded views about these points since they do not, in my view, arise on the facts of this case - both because I do not consider that Huyton were entitled to rescind the SA and because, as I shall explain, I do not consider that, on any view about these questions, Huyton were entitled to terminate the JVA on the grounds of Dipasa's breach.
478. Huyton's primary complaint of breach of the JVA is that Dipasa were in breach of clause 3 because the goods were not transported to or stored in Huyton's name in the Acosa warehouse or in any bonded warehouse. Dipasa do not dispute that clause 3 imposed on them obligations relating to the storage of the seeds. They deny that they were in breach of them.
479. Huyton's complaints about this, as they were stated by Mr Johnson in Huyton's closing submissions, are that the goods were not stored in a bonded warehouse, that they were not stored in a warehouse that was Acosa's own but one that was enabled by them, that under the enabling agreement the "enabled warehousemen" were Mr Baptista and Mr de la Vega, that the goods were stored at Dipasa's factory premises, and that cd's were not issued in respect of the goods.
480. Huyton also sought to argue that Dipasa were in breach of clause 3 because their bank had not approved the place of storage, referring to the "vital importance" of ensuring that the goods were stored in a place approved by the bank. However, this complaint was not pleaded, was not advanced by Huyton when the case was opened and was not explored in evidence. The point is not open to Huyton.
481. The complaint that the goods were not stored in a "bonded warehouse" raises a question of interpretation of the term "bonded warehouse" in the context of the JVA. Huyton say that it means that the goods were to be held "in bond", that is to say, that they were not to be imported into Mexico in any formal sense, but were to be held pending payment of import charges. They submit that the goods should have been transported to and stored in a warehouse for which import clearance would not have been required, either in a customs warehouse or under the system of fiscal deposit. They say that Dipasa would not meet their obligations under clause 3 of the JVA by storing the seeds in a public warehouse, such as Acosa's, at least if they were not held under fiscal deposit.
482. Huyton argue that this interpretation of the JVA makes commercial sense. They say that they were aware that they would, or might, not have documentation relating to the cargo and that that might cause difficulties if the cargo was to pass through customs. The structure of the JVA, they argue, was that they should not be expected to deliver the documentation to Dipasa, and accordingly that the goods should not pass through customs, but should remain in bond.
483. Dipasa say that the JVA contemplated that the goods should be held in a public warehouse, having been imported and import charges having been paid. They argue that upon the proper interpretation of the JVA clause 3 cannot have required that the goods be kept in bond. The JVA contemplated that the goods would or might be imported for hulling and cleaning, and then re-exported.
484. Undoubtedly Huyton's submission gives the term "bonded warehouse" its normal meaning. However, I do not consider that read as a whole the JVA contemplated that the goods should be held without passing through import procedures and customs procedures. For example, it would make nonsense of clause 4. It would in my judgment distort the structure of the JVA to give the references to "bonded warehouse" the effect for which Huyton contend. It is of some interest that Mr Garza, whose English is good, interpreted the term as meaning public warehouse.
485. I am comforted in this conclusion by the fact that when Dipasa went about importing the goods into Mexico, Huyton raised no objection to what Dipasa were doing. There can be no doubt that Huyton knew that the goods were being "customs cleared". This is why Acosa required an appropriate bill of lading, as they explained in their fax to Huyton of 9 June 1998. Even if I had concluded that the JVA, properly interpreted, did preclude Dipasa from clearing the goods through customs and importing them as they did, and obliged them to store the seeds in a bonded warehouse in what might be called the usual sense of the term, nevertheless I would have held Huyton elected not to rely upon this point so to determine to JVA for breach.
486. Next, Huyton complain that the seeds were not held "in the name of Huyton". As I have already said, I do not find it easy to give a precise meaning of this phrase in the JVA. My understanding is that Huyton's complaint is that no third party warehouse entered into a commitment to them to deliver the goods up to them or in accordance with their order; that is to say, that they were not issued with any cd in respect of the goods. However, Dipasa have a number of answers to this. First, I do not interpret the JVA as imposing that obligation upon Dipasa. Secondly, I do not consider that it is open to Huyton to complain about this or to rely upon this to terminate the JVA: they had received the assurance from Acosa in the letter of 8 June 1998 and did not complain to Dipasa that it was inadequate.
487. There is a third answer to this complaint. The reason that Acosa did not issue Huyton with a cd was that Huyton did not provide what Acosa regarded as the requisite documentation. I consider that in that respect Huyton were in breach of their own obligations under the JVA. It is true that there was no express obligation upon them to supply the documents necessary to enable the goods lawfully to be brought into Mexico. However, it was necessary that they should do so if the goods were to be dealt with as envisaged in the JVA. It is also true that in fact Dipasa were able to have the goods imported into Mexico despite not having a phytosanitary certificate. But this was, as I have found, in fact the reason that Acosa did not issue a cd, and so did prevent the goods from being held in the name of Huyton in that sense.
488. Dipasa also alleged that Acosa were prevented from issuing a cd for the goods because they were in quarantine. This is not a sound point. I have found that under Mexican law the quarantine restrictions did not prevent Acosa from issuing a non-negotiable cd, whatever might have been the position about a negotiable cd, and this was not Acosa's reason for not issuing a cd.
489. Dipasa therefore are able to answer some aspects of Huyton's complaint about how and where the goods were stored. However, the JVA contemplated that the goods should be stored in the premises of a third party and released to Dipasa only as and when they paid for them: clause 8. Dipasa argue that because of the enabling agreement their premises were, for all relevant purposes, Acosa's premises, and that no proper distinction can be drawn between the goods being stored in premises owned or leased by Acosa and the premises of Dipasa that they had enabled. Under the enabling agreement Huyton had the protection of a warehouseman with the responsibilities for issuing receipts, and, had a cd been issued, Acosa would have been answerable to them.
490. I do not accept this answer to Huyton's complaint of breach. Unless and until cd's were issued, under the enabled warehouse arrangement, Acosa had no real involvement with the goods or responsibility for them. The JVA did envisage that the goods would be stored with a third party. It might be that, because Huyton's conduct prevented the issue of a cd, storage with a third party would in any event have afforded no real protection to Huyton, but this is what was required by the JVA. Admittedly Mr Baptista had personal responsibilities under the enabling agreement, but it is unrealistic to suppose that this amounted to third party involvement such as was contemplated by the JVA.
491. Dipasa put forward a number of reasons which, they submit, excused their manner of performing the JVA. First, they refer to the failure of Huyton to provide the phytosanitary certificate. This explains why no cd was issued, but did not compel Dipasa to store the goods in their own premises. Secondly, Dipasa say that import permission was obtained by false documents, and so the goods were liable to be seized as contraband. I agree that the position under Mexican law was that because of the bills of lading used to effect their importation, the authorities might have treated the goods as contraband. But that is beside the point. There is no evidence that this in fact created any difficulties about where the goods might be stored, or affected Dipasa's decision where to store them. Thirdly, Dipasa say that the warehouses of Acosa were either unlicensed to take bagged goods or were full. The goods could not be stored at Acosa's warehouse at Lazaro Cardenas because they were bagged. It might be that not all could have been stored at the Celaya warehouse. There is no reason to suppose that the seeds could not have been stored at other Acosa warehouses. Finally, Dipasa refer to the fact that the goods contained pennisetum polystachion and were subject to quarantine restrictions, but this did not restrict Dipasa's freedom as to where they stored the goods or affect their decision to use their own warehousing premises.
492. I therefore conclude that Dipasa were in breach of the JVA in arranging to store the seeds as they did. However, this was not a breach that deprived Huyton of the protection of a third party preventing Dipasa taking possession of the goods before paying for them. Had a cd been issued, Huyton would have had the same protection from the goods being stored in an enabled warehouse as the JVA contemplated that they would have: that is to say, they could have held a third party warehouse responsible for the goods. Nor do I consider that Dipasa were deliberately storing the seeds in breach of the JVA. This breach of contract did not, in my judgment, go to the root of the JVA and did not entitle Huyton to terminate it.
493. Huyton also complain that Dipasa were in breach of the JVA in that they failed to inform Dipasa that it was not possible to store the goods as contemplated by the JVA. This complaint does not seem to me justified on the facts as I find them to be. The reason that Dipasa stored the seeds in their own warehouse was not that it was impossible to store them with Acosa. In so far as the complaint is about them not being informed about the goods being in a bonded warehouse in the strict sense of the term, if I am right about the proper interpretation of the JVA, this point does not arise, and in any case I have found that Huyton knew that the goods were being cleared through customs. In so far as the complaint is about Huyton being informed that the goods were not stored in their name in the sense that no cd was issued to them, Huyton were aware of the position and had Acosa's explanation for not issuing a cd; and Dipasa knew what Acosa had told Huyton about this.
494. Dipasa admit in their pleading that under the JVA the parties had a duty to act towards each other in good faith. Since the nature of the arrangement was by way of joint venture, I do not dissent from that, despite English law rejecting any overriding principle that the parties should act in good faith in making and carrying out contracts: Interfoto Library Ltd v Stiletto Ltd, [1989] QB 433 at p. 439F. However, Huyton's case that Dipasa did not fulfil this obligation rests upon their contentions about Dipasa being responsible for misrepresentations about the warehousing of the goods. In view of my conclusions about Huyton's misrepresentation case, I reject this complaint of breach of contract.
495. I therefore conclude that Dipasa's breach of the JVA was not such that it ever entitled Huyton to terminate the JVA. It follows that, even if I had concluded that Huyton were entitled to rescind the SA and even assuming that the effect of them doing so would have been to revive the JVA and any breach of it on the part of Dipasa, nevertheless I would not have held that on 29 October 1998 Huyton were entitled to terminate the JVA for breach.

Counterclaim under the SA

Documentation

496. Were Huyton in breach of the SA in that they failed to provide documents to Dipasa? Dipasa claim that Huyton were in breach of the SA in that they failed to provide the following documentation: the phytosanitary certificate, the certificate of origin, a full set of bills of lading and an invoice, all of these documents indicating that Dipasa was the importer of the seeds into Mexico. They do not allege that there was an express term of the SA that Huyton should provide these documents. Mr Coello acknowledged that nothing was said about the documents being provided in his telephone conversation with Mr Philippas of 27 August 1998. Nor was anything said about their provision in the fax sent by Huyton following the conversation or in any subsequent communication before the SA was concluded, except that Huyton were to present a commercial invoice in order to obtain payment. However, Dipasa contend that it was an implied term of the SA that Huyton would provide these documents because Huyton were to provide comparable documents under the JVA. (Clearly the documents to be presented would not be identical to those to be presented under the JVA; the invoice(s) would reflect the terms of the SA.)
497. I do not accept that submission. The circumstances in which the SA was made were quite different from those in which the JVA was made. When the JVA was made, the goods still needed to be imported into Mexico. In these circumstances it is not difficult to imply a term into the JVA that Huyton should provide the documentation necessary to enable the goods to be imported lawfully into the country. By the time of the SA, the goods had been imported.
498. For similar reasons, a term that Huyton were to provide documents is not, in my judgment, to be implied into the SA on the grounds that goods imported on the basis of forged or fraudulent documents were effectively contraband and could not under Mexican law (as I find it to be) be lawfully traded despite the authorities issuing a pedimento in respect of them. First, there is no evidence that Huyton had any knowledge of Mexican law when they made the SA, and I reject any suggestion that they did have any relevant knowledge of it. Secondly, if the goods were vulnerable to seizure as contraband, there is no evidence that this would have been prevented by the provision of further, genuine, documentation by way of bills of lading. Thirdly, even if there were such evidence, this would not be a sufficient basis for implying a term that Huyton were to provide such documents. Fourthly, as for the phytosanitary certificate, while the failure to supply it might have made Dipasa vulnerable under their bond, it did not mean that the goods were unlawfully imported or vulnerable to seizure.

Description and quality of the sesame seeds

499. Were Huyton in breach of the SA in that the goods failed to satisfy the contractual requirements? I have already held that most of the seeds delivered to Mexico were not of the 1997/98 crop, but were from earlier harvests. As for the quality of the goods when the SA was made, I have held that the ffa exceeded 2%. Further, at the time of the SA, there was pennisetum polystachion in the seeds, and there were also larvae of ephesia cautella.
500. Dipasa allege that Huyton were in breach of the SA in that the goods did not meet the "represented and contractual description and were infested". The SA contained no contractual statement of the ffa content of the seeds, and in any case the SA provided that the quality of the goods was "final in all respects" as stored at Acosa. I do not understand that Dipasa pressed this complaint in their final submissions, and it is not sustainable.
501. I also reject the complaint about the goods being infested. It is not particularised. If it refers to pennisetum polystachion, Dipasa were aware by the time of the SA that its presence had been detected. If it refers to the presence of the larvae of ephesia cautella, this complaint is also excluded by the "final in all respects" provision of the SA.
502. The more difficult question is whether that provision also excludes Dipasa's complaint about the age of the crop. The fax of 29 August 1998 described the commodity being sold as "Ethiopian whitish sesame seeds crop 1997/98". Huyton say that that is part of the description of the goods, and that the "final in all respects" provision applies to it. Mr Young says that the crop year is part of the definition of the goods, not a mere description of them, and that as such it does not fall within the "final in all respects" provision.
503. In support of the last stage of this argument, Mr Young relied upon the decision in NV Bunge v Compania Noga d'Importation and d'Exportation SA (The "Bow Cedar"), [1980] 2 Ll L R 601. That case concerned the sale of Brazilian crude groundnut oil under a contract that provided "weight and quality final at loading as per certificate of independent surveyors nominated by the sellers". The sellers supplied a mixture of groundnut oil and soya bean oil, which was described by the certifying surveyors as groundnut oil. Lloyd J held that "the certificates were to be as to the sort of matters that are covered by the quality clause, for example, the percentage of ffa, moisture and impurities, and not as to the commodity itself".
504. In that case the certificate clause did not cover the description of the goods. In this case, the "final in all respects" provision did, and in my judgment the crop year was part of the description of the commodity that was being sold. I therefore conclude that the terms of the SA preclude a contractual claim in respect of the crop year.
505. I reject the counterclaim for damages under the SA.

Counterclaim under the JVA

506. Dipasa also claim damages on the grounds that Huyton were in breach of the JVA. I understand that Dipasa intend to pursue this claim only if Huyton succeed in showing that they have rescinded the SA. In any case, I consider that, if the SA is not set aside, a claim for breach of the JVA would be precluded by the agreement in the SA to cancel the JVA "without any recourse". I shall therefore express my conclusions about this claim only briefly.
507. First, Dipasa allege that Huyton were in breach of "express or implied warranties contained in or evidenced by clauses 1 and/or 3 of the JVA to the effect that the specification of the goods was purity 98%, moisture 6% and ffa 2%". The reference to clauses 1 and 3 of the JVA must be a mistake. I would suppose that Dipasa are intending to refer to the first paragraph of the recital to the JVA.
508. There seem to me to be two answers to this claim. First, there is no evidence upon which I can properly make findings of fact about the ffa content, the purity or the moisture of the seeds at the time of the JVA; and therefore Dipasa have not discharged that burden of proof upon them. Secondly, Huyton gave no undertaking about the specification of the goods. The recital simply set out the description that had been applied to the goods by others.
509. The second complaint by Dipasa of breach of the JVA is based on an allegation that Huyton gave a warranty that the seeds had a value of US$700 per mt. I do not interpret the JVA as containing any such warranty. The value of US$700 was one that both Huyton and Dipasa agreed to ascribe to the seeds for the purposes of the JVA, and neither Huyton nor Dipasa gave the other any warranty that this represented their true value or their market value.
510. I therefore reject the counterclaim based on breach of the JVA, and would do so even if the SA were set aside.

Conclusion

511. I conclude that the claim and the counterclaim should be dismissed.