Mr Justice Tomlinson :
Introduction
- In this action the First alternatively the Second Claimant claims from the Defendant a sum in excess of US$83 million being the balance due in respect of two cargoes of gas oil delivered by the First Claimant to the Defendant in August and September 2008, the first by the vessel "Grace Victoria" and the second by the vessel "Hellespont Promise". Both cargoes were delivered in two parcels, under separate Bills of Lading. In each case the Defendants paid for one parcel but not the other.
- The Defendant has taken no part in the trial and it disputes the jurisdiction of the Court. However so far as I can discern it denies substantive liability, in whole or in part, on four grounds:
i) The written contract dated 5 March 2008 on which the First Claimant sues is null and void, either because it is not signed on behalf of the Defendant by a person with capacity to sign on its behalf or because the signature it purportedly bears on behalf of the Defendant is a forged signature, of a person who in any event lacked capacity to bind the Defendant and moreover the purported signature is not witnessed and each individual page of the contract is not initialled by the signatory purportedly on behalf of the Defendant;
ii) The true terms of the contractual relationship between the First or perhaps the Second Claimant and the Defendant are to be found in e-mail exchanges culminating in January 2008. The first parcel ex Grace Victoria failed to comply with the contractual specification to be found in that earlier e-mail exchange, although not in the later signed contract, in that the Cetane index of the product supplied fell short of the contractual minimum 52, although it is also alleged to have fallen short of the minimum of 50 which the Claimants allege to have been agreed. The Defendant's alleged loss arising out of this discrepancy is not particularised. The relevant parcel was accepted by the Defendant notwithstanding its contemporary assertion that the ascertained Cetane index thereof was 47.6. The allegation that the seller was in this respect in breach of contract and that this had caused the buyer loss was first made in December 2008. The cargo had been delivered in August 2008.
iii) It is said that two of the invoices sent by the First Claimant to the Defendant on 19 and 20 August 2008 relating to the cargo ex Grace Victoria contain accounting mistakes. The First Claimant in fact raised three invoices bearing this date in respect of this cargo – Invoices Nos. 7314 and 7315 of 19 August and Invoice No. 7322 of 20 August. Invoices Nos. 7314 and 7322 have been paid. It is not explained of what the accounting irregularities consist.
iv) On 10 May 2009 the Defendant asserted for the first time that, over a three year period spanning 2006 to 2008, "Trafigura" had failed to comply with "The Common Customs Law for Arab States of Gulf (GCC States) No. 10/2003" pursuant to which as suppliers of cargoes shipped from outside the Arabian Gulf it was obliged to pay (scilicet to the Defendant as buyer) 5% of the invoice value of the cargoes supplied. An invoice was raised on the Second Claimant claiming US$28,705,671.14 in respect of 19 shipments. These shipments included the two parcels ex the Grace Victoria and the Hellespont Promise in respect of which the Defendant has paid the First Claimant in full, and other shipments delivered under the contract of 5 March 2008 which, the Claimants say, binds the First but not the Second Claimant. The Defendant appears to draw no distinction between the two Trafigura companies. On the invoice of 10 May 2009 it is said that "the amount will be offset against the payable to Trafigura". The Defendant does not recognise the jurisdiction of this Court and it has not invoked it in order to pursue a cross-claim. It might however assert that it enjoys a right of set-off against sums claimed in this action by the First or Second Claimant.
- The Trafigura Group is an international commodities trader with a business presence in many parts of the world. The First Claimant Trafigura Private Limited is incorporated in Singapore. The Second Claimant Trafigura Beheer BV is incorporated in The Netherlands. Trafigura has a Contracts Administration Department with offices in London, Houston, Lucerne and Singapore. Trafigura has a branch office in Dubai. Mr Amjad Habbas is and was at all material times employed there by Trafigura Beheer BV, to whom I shall refer hereafter as "Trafigura BV", as manager of the Trafigura Group's Middle East operations. In that capacity he acts equally for and represents Trafigura Private Limited, to whom I shall refer hereafter as "Trafigura PTE" as well as other companies within the Trafigura Group.
- The registered name of the Defendant is "Emarat" by which it is usually known and as I shall refer to it hereafter. Emarat is incorporated in the United Arab Emirates and is based in Dubai. It is a leading fuel retailer in the UAE. It has been said on its behalf that it is a UAE Federal Government Corporation established by a Federal Decree in the UAE and that it is therefore a UAE Government Entity. I have no reason to believe that this is not so. Its General Manager since 8 July 2008 has been Jamal Al Midfa. He had become Acting General Manager with effect from 1 April 2008.
- The Claim Form herein was issued on 16 March 2009 and on 30 March 2009 Gloster J gave permission to serve out of the jurisdiction. The Defendant was served with the proceedings on 14 May 2009 – Flaux J so found on 26 June 2009. CPR 11 provides a mechanism whereby a defendant who wishes to dispute the court's jurisdiction or to argue that it should not be exercised may apply to the court for an order declaring that it has no such jurisdiction or should not exercise the same. A defendant who wishes to invoke this procedure must ordinarily first file an acknowledgement of service. The rules expressly provide by CPR 11(3) that by so doing he does not submit to the jurisdiction of the court. The Defendant did not invoke this procedure. However on 4 June 2009 it provided to the Court, under cover of a letter in fact dated 5 June 2009, a Defence in respect of the dispute between Emarat and Trafigura PTE.
- On 5 June 2009 a hearing took place before Flaux J. Mr Al Midfa attended the hearing and was permitted by the Court to represent the Defendant. Flaux J directed that there should be a further hearing on 26 June 2009 at which it would be determined whether the court had jurisdiction to entertain the claim. Directions were given concerning the service of further evidence. On 22 June 2009 the Defendant served a response to the evidence served by Trafigura PTE on 15 June 2009, a document which was expressed to be submitted in respect of the jurisdiction issue alone.
- On 26 June 2009 Flaux J heard the Defendant's application challenging the jurisdiction of the court, seeking to set aside the service of proceedings on it in Dubai and, consequentially, the discharge of an anti-suit injunction granted by Cooke J on 23 April 2009 and continued by Flaux J himself on 5 June 2009. Flaux J again permitted Mr Al Midfa to represent the Defendant at the hearing. Mr Al Midfa had full authority so to do. Mr Al Midfa accepted on the Defendant's behalf that it had been properly served with the proceedings although as I have already indicated Flaux J decided independently and for good measure that the proceedings had indeed been properly served.
- Flaux J determined that Trafigura PTE had clearly shown a good arguable case that it was party to a contract with Emarat that contained a clause conferring upon the English Court exclusive jurisdiction in respect of all disputes arising thereunder and providing further that the contract should be governed by and construed in accordance with English law. The Defendant's challenge to the jurisdiction therefore failed. Pursuant to CPR 11(7)(b) Flaux J directed that Emarat have 21 days within which to file an Acknowledgement of Service if so advised. That is the procedure available to a defendant who, having made an unsuccessful challenge to the jurisdiction of the court, wishes thereafter to defend the action on the merits. Defending the action on the merits can include, for example, a defendant against whom it has been determined that there is a good arguable case that it is bound by a contractual exclusive jurisdiction clause demonstrating at trial that in fact no contract was ever concluded between it and the Claimant. Flaux J also gave permission for Trafigura BV to be added to the proceedings as Second Claimant.
- Emarat has not filed an Acknowledgement of Service and has taken no further part in the proceedings. It has however been kept fully informed, both through Mr Al Midfa and directly by airmail, e-mail and fax, of all steps taken in the proceedings.
- On 9 October 2009 David Steel J directed that, notwithstanding the failure of the Defendant either to acknowledge service or to give notice of intention to defend the claim, there should be a full trial of the claim on the merits. That is a procedure recognised by this court in Berliner Bank AG v Karageorgis [1996] 1 Lloyds Reports 426 as appropriate particularly in a case where a judgment obtained simply by mechanical process in default might prove difficult to enforce in a place where the defendant's assets are to be found.
- Emarat was served in good time with all of the evidence upon which Trafigura intended to rely at trial. Emarat was urged to instruct English solicitors, to participate in the proceedings and to defend itself at the trial. Emarat was advised in good time that the trial would take place on Friday 18 December 2009.
- The trial duly took place before me on that day. The Claimants were represented by leading counsel Mr Robert Bright QC and solicitors. Mr Bright developed and sought to prove his case in reliance on the contemporary documents and on the evidence of four witnesses who were called to give live evidence at the trial. Those witnesses were:
i) Amjad Habbas, to whom I have already referred;
ii) Alana Thompson, at all material times Contracts Administration Manager for the Trafigura Group, working out of the London office;
iii) Malcolm Drury, a Consultant Chemist called as an expert witness on the issue concerning the Cetane index of cargo shipped on board the Grace Victoria; and
iv) Richard Briggs, the Executive Partner at Hadef & Partners in Dubai, called as an expert witness in relation to the Customs and Environmental Law of the UAE.
All of these witnesses gave evidence in accordance with written statements and reports copies of which had previously been served on the Defendant. It was uncertain even up to the conclusion of the hearing on the afternoon of 18 December whether the Defendant would attend or participate in any way. In the event the Defendant took no part. In accordance with the usual tradition of the Court and of the Bar, Mr Bright endeavoured to draw to my attention such arguments as it was thought might be relied upon by the Defendant in answer to the claim.
- After the conclusion of the hearing Mr Al Midfa again communicated with the court. He said or reiterated that Emarat has/had no intention to litigate the case in the English courts. However he also asked for proceedings to be delayed for at least four weeks as Emarat "are now in the process of appointing our lawyers to represent and pursue the above matters before [this court]". It is unclear precisely what Mr Al Midfa had in mind since he spoke also of filing papers with the Public Prosecution Department of the Government of Dubai. However that may be, as Mr Al Midfa has been advised, I have simply proceeded to prepare my judgment at the first opportunity in the usual way. As it happens, four weeks have now elapsed since Mr Al Midfa's request for a period of delay.
The claim
- Trafigura PTE sues as seller under Contract No. 154876 dated 5 March 2008 pursuant to which it agreed to sell to Emarat 390,000 tonnes of gasoil, plus or minus 10% in seller's option, to be delivered cif two safe ports/berths UAE in 13 lots during the period 27 January to 31 December 2008. The invoices outstanding relate to part of the sixth and seventh shipments under this contract. Inclusive of those shipments 277,009.4 tonnes of gasoil were supplied by Trafigura PTE to Emarat between March and August 2008. In the light of the breakdown in relations between the parties Trafigura PTE has not tendered further performance. The failure of the buyer to make any payment under the contract is an event of default as defined therein. Upon the occurrence of an event of default the seller is entitled to suspend or to postpone performance of its obligations under the contract until such event of default is cured or until the seller exercises its right of termination.
- As already adumbrated, Trafigura and Emarat have a trading relationship dating back to, at least, 2006. Prior to the contract in question the parties had concluded at least 28 contracts, mostly spot sales of gasoil, although some for fuel oil and one for, in part, gasoline. Most were cif sales and all were concluded with Trafigura BV rather than with any other Trafigura entity. The contracts were in certain respects in broadly similar form – they all provided that payment should be made without any withholding, offset, counterclaim or deduction whatsoever and that interest would be payable on outstanding balances, based on LIBOR; they all specified that claims regarding quality or quantity were to be waived unless submitted in writing, together with supporting documentation, within 30 days from completion of discharge; they all provided that any other claims would be waived unless notified in writing within one year; they were all expressly made subject to English law and they all contained a submission of all disputes arising thereunder to the exclusive jurisdiction of the English court. Such terms are commonplace in oil trading contracts.
- The other more detailed provisions contained within these contracts evolved over time, for example those concerned with the ascertainment of quality and quantity. A contract concluded on 8 May 2007 contained, as did all contracts concluded thereafter, a provision to the effect that the buyer should be liable for and should indemnify the seller in respect of all taxes, duties, tariffs etc levied in the country of discharge. Such a term does no more than spell out what would as a matter of English law be the implied allocation of responsibility under a cif contract in the absence of express stipulation. It would to the eyes of an English commercial lawyer be an unusual contract whereunder a cif seller undertook responsibility for customs duties payable upon import into the country of discharge.
- The process by which these contracts were concluded followed a standard pattern. Emarat would issue an invitation to tender to a number of companies, including Trafigura. Trafigura would revert in writing and confirm an offer to Emarat. Emarat would then advise if the offer had been accepted, following which Trafigura would issue the contractual documentation and send it to Emarat. None of the contracts was signed and no issue was raised in relation thereto.
- On 22 May 2007 Trafigura BV and Emarat agreed a contract which thereafter they referred to as the "semi-term" contract because it covered deliveries over several months during the second half of 2007. Although terms were agreed on 22 May 2007 the contractual documentation was dated 20 July 2007, reflecting the date when it was drawn up and issued by Trafigura. The contract was not signed, but it was performed by Trafigura BV and Emarat without problem and all the deliveries required by Emarat were made and paid for. The significance of this contract is that when Trafigura BV made its intial offer which led in due course to the conclusion of Contract No. 154876 it did so by reference to the terms of "the semi-term contract for 2007".
- In a message of 7 June 2007 addressed to Alana Thompson of Trafigura Susan Neesham, Emarat's Supply and Shipping Co-Ordinator said:
"As Emarat intends to purchase quite a few cargoes from Trafigura within the next few months we would like to establish a standard contract with you as it is not practical from our side to check every single contract. Having a standard format would require only logical amendments to be made for each sale and would allow Emarat to confirm promptly all contracts received from your side.
If it is possible, can you please send me a copy of a recent contract between our two companies in Word format so that I can add our amendments to any clause, if found applicable and this would make it easier for us to come to an agreement with regards to a final contract format.
Please let me have your prompt response."
In fact it was Emarat who on 18 June 2007 selected a contract of 8 May 2007 as the template, sending it to Ms Thompson annotated with suggested amendments. None of the clauses therein which are of particular relevance to the current dispute and which were in due course replicated in Contract No. 154876 were the subject of any comment by Emarat. The process culminated in a final draft sent by Ms Thompson to Emarat on 18 September 2007.
- On 2 or 3 January 2008 Emarat invited "M/S Trafigura" to tender for the term supply of gas oil 0.05% S in 2008. The message dated 2 January was sent by Hassan Arab, Emarat's Finance and Accounts Manager and Chairman of the Tender Committee. The product was to be supplied on either a fob or a cif basis, at buyer's option for each cargo. When tendering Trafigura was asked "to take into account" certain Terms and Conditions which were then set out. These terms included the following:
"Custom taxes and customs dues if applied on the cargo shipped from outside the Arabian Gulf, to be on seller's account."
The terms set out by Emarat were very brief. They did not include the detailed terms and provisions which would habitually be incorporated into a term or any gasoil supply contract. It was probably in recognition of this that the invitation to tender concluded:
"Awaiting your offer along with your full terms and conditions for the supply of gasoil 0.05% S. (Specifications attached)."
As there indicated, there was included with the invitation to tender an "Emarat's Standard", a detailed specification for gasoil 0.05% S. The required Cetane index thereunder was minimum 52.
- The suggested allocation of responsibility for customs duties and taxes levied in respect of cargo shipped from outside the Arabian Gulf into the UAE was inconsistent with that provided by clause 28 of both the semi-term contract and the standard terms tentatively agreed in 2007. It can have come as no surprise to Emarat that Trafigura countered with the terms agreed in earlier transactions. It should also be remarked that the invitation to tender contains no suggestion that any contract resulting therefrom should be governed by the laws of the UAE or that the courts of the UAE should have jurisdiction, let alone exclusive jurisdiction, in respect of disputes arising thereunder.
- Trafigura BV by Mr Amjad Habbas responded to the invitation to tender by e-mail first on 10 January 2008, but then again on 13 January. The only difference I can detect between the two messages is that the premium for two port discharge had been slightly reduced, although not unnaturally the second message had a validity for acceptance which expired later than that of the first. The offer referred to the product as being gasoil 0.05% Sulphur (per attached specs). The specification attached stipulated a Cetane Index of minimum 50. Under Misc (miscellaneous) Trafigura BV countered:
"- Any customs duties and fees for Buyer's account.
- Terms to be as our semi-term contract for 2007."
The response was sent, as requested, to the Chairman of the Emarat Tender Committee.
- It was Susan Neesham of Emarat who responded on 15 and 17 January 2008 seeking confirmation of various points and an extension of the validity of the offer. Her messages, and the replies thereto sent by Amjad Habbas, were copied to the following recipients at Emarat:
- Ibraham Al Tamimi: Manager of Terminals and Logistics;
- Captain Ahmed Zainalddin: Manager of Logistics and Trading, and
The latter is a signatory to the Defence of Emarat to which I referred in paragraph 5 above. He is there described as "Internal Audit". Whereas allegations of misconduct by various employees or former employees of Emarat in relation to this contract have from time to time been made or hinted at by Mr Al Midfa the involvement of Mr Divakaran and of Mr Al Arab has not been similarly impugned.
- On 20 January 2008 Susan Neesham countered with lower prices and asked for confirmation of them. She added:
"Please note that your confirmation of the above prices is based on the following:
Payment to be 60 days from B/L date.
Interest on late payments will be paid @ LIBOR+1%
Pricing based on MOPAG under heading Gas oil. All terms and conditions stipulated in tender document to apply."
- By e-mail of 21 January 2008 Mr Habbas confirmed the prices put forward by Emarat. He added:
"Payment to be 60 days from B/L date. Interest on late payments will be paid @ LIBOR+1%. Pricing based on MOPAG under heading Gas oil."
He stopped short of commenting on the next sentence in Susan Neesham's message under reply "All terms and conditions stipulated in tender document to apply". He says that he did so deliberately, because he did not wish to accept those terms. That may be so, but it is an inadmissible consideration, and irrelevant to the proper construction of the message sent. In respectful disagreement with Flaux J, who thought otherwise, see paragraph 52 of his judgment of 26 June 2009, I consider that by failing to stipulate differently Mr Habbas was impliedly accepting that his confirmation of Emarat's prices was, as requested, "based on" all terms and conditions stipulated in the tender document applying. On this aspect therefore I reject the argument of Mr Bright as set out in paragraphs 86(2) and 87(2) of his skeleton argument prepared for the trial. As will appear hereafter in greater detail, this conclusion is however of little moment. Firstly, there was nothing in the tender document to displace the parties' agreement to English law and jurisdiction. Secondly, matters were in any event overtaken by events. On 22 January 2008 Susan Neesham e-mailed Mr Habbas awarding Trafigura the supply of 13 firm Gas oil cargoes during 2008 "based on your offer dated 13 January and subsequent clarifications". If matters had stopped there it would no doubt be the case that the contract would have to be regarded as containing Emarat's proffered clause on customs duties and to incorporate the Emarat specification where it differed from the Trafigura specification, hence a Cetane Index of minimum 52 rather than minimum 50. However the terms of Trafigura's offer of 13 January 2008, including therefore the provisions of the semi-term contract, would also have to be regarded as agreed save insofar as inconsistent with Emarat's tender document. As I have already recorded, the semi-term contract contained many detailed provisions on matters not addressed in the Emarat tender document, including law, jurisdiction and time bar. The different Cetane Index would ultimately be of no relevance since, as I find hereafter, the Cetane Index of the entire commingled cargo shipped on board the Grace Victoria was in excess of 52. As to customs duties, the cross-claim if there is one in respect of the earlier contracts by reference to the law of the UAE remains unaffected not least because many of the earlier contracts expressly stipulated that any customs duties were for buyer's account. Any claim would also be time barred. Claims in respect of any shipments in 2008 are likewise time barred as I discuss hereafter.
- However matters did not rest with Susan Neesham's e-mail of 22 January 2008. On 29 January 2008 Susan Neesham e-mailed Amjad Habbas:
"Kindly forward your contract for the supply of Gas oil during 2008, please note that there should be only one standard contract for the entire supply of 13 confirmed cargoes, Emarat cannot accept individual contracts to cover each lifting.
This contract should be in accordance with the mutually agreed 2007 standard contract for the supply of Gas oil."
This was of course a reference to the standard form contract which had been under discussion between June and September 2007.
- Trafigura in the shape of Alana Thompson therefore drafted Contract No. 154876 using the standard terms tentatively agreed as at 18 September 2007. A first draft dated 4 February 2008 setting out the terms in full was sent to Susan Neesham on 5 February 2008. The draft identified the seller as Trafigura BV, although in error it described the product as Gasoil 0.25% as opposed to Gasoil 0.05%. This error was spotted internally by Trafigura and a revised draft was sent out on 6 February. On 7 February 2008 Susan Neesham reverted with Emarat's comments on the uncorrected draft sent on 5 February 2008. Emarat asked Trafigura to amend the quality clause to provide "in any case quality to meet Emarat tender specifications for Gas oil 0.05% S", but did not object to any other relevant provisions. On 12 February 2008 Trafigura agreed to replace the erroneous 0.25% with 0.05%, expressly rejected Emarat's proposed amendment with regard to the specification but agreed to insert the full specification as per Trafigura's tender and did so. There was therefore now set out in extenso in the draft contract a specification which included a Cetane Index of minimum 50. On 18 February 2008 Susan Neesham confirmed receipt of the e-mail of 12 February 2008 and countered on the terms of the nomination clause but not on the quality specification. Emarat thereby signified that it was content to contract on Trafigura's specification and not by reference to its own original tender specification. No point was taken on any other relevant terms.
- On 21 February 2008 Trafigura explained to Emarat that the version of the nomination clause in the contract had been agreed during negotiations for the standard form contract and that it had also been used since that template had been agreed. A revised draft of Contract No. 154876 was sent to Emarat later that day. On 24 February 2008 Emarat, this time in the shape of Captain Zainalddin, suggested to Trafigura by e-mail that "as long as we agree now on the contract we should use the same for all future contracts with logical amendments. For the current Gas oil term contract we do not need a contract for every cargo, all that we need is to agree with your operation people on the delivery option and that's it." In the same message Captain Zainalddin referred to the fact that once Ms Neesham returned from holiday she would work on "internal contract approval". There is no evidence to suggest that she did not do just that.
- On or about 3 March 2008 Mr Habbas spoke to Mr Al Tamimi and asked if Emarat was agreeable to changing the contracting party from Trafigura BV to Trafigura PTE. This was more convenient for Trafigura because it intended to source the cargoes in the Far East where Trafigura PTE would be the purchaser and it was preferable for the same company to be both purchaser and seller. Mr Al Tamimi agreed to the change. I have already remarked that Emarat appears to draw no distinction between the two Trafigura companies. Following this agreement a revised draft of Contract No. 154876 dated 5 March 2008 was sent to Emarat by the Contract Administrations Team in Singapore on 6 March 2008. All invoices under the contract were subsequently issued by Trafigura PTE and all payments were duly made to Trafigura PTE with the exception of course of the two invoices in respect of which no payment has been made. Even in respect of the parcels to which those invoices relate however Emarat issued Payment Undertakings direct to Trafigura PTE.
- In early March 2008 there was discussion between Susan Neesham and Amjad Habbas concerning the premium to be paid for optional cargoes. Those premiums were agreed and introduced by e-mail of 19 March 2008 by way of an amendment to the contract of 5 March 2008. Emarat confirmed its agreement on 28 March 2008.
- Performance under the contract began in March 2008. Three shipments were made in March and two in July, pursuant to which 166,500 odd tonnes of Gas oil were delivered and paid for. Furthermore, as I have already explained, a substantial quantity shipped by the Grace Victoria and the Hellespont Promise in July and August 2008 was duly delivered and paid for, leaving payment for only one albeit substantial parcel from each vessel outstanding.
- At the same time as Contract No. 154876 was being performed without incident, Trafigura and Emarat became embroiled in a dispute concerning a joint venture pursuant to which they co-operated in supplying the state oil companies of Qatar, Bangladesh and Angola. The detail of this dispute does not matter save only that it involved an assertion by Emarat that relevant contracts did not bind it because they had not been authorised or signed by the then General Manager. The dispute was in due course resolved but its nature not unnaturally focussed the attention of both parties on the desirability of signed contracts. In consequence, both parties became keen that Contract No. 154876 should be signed.
- The question seems first to have been raised by Trafigura towards the end of May 2008. Emarat was told that Trafigura required a signed copy of the contract for presentation to its bank. Whether that was a pretext I do not know and it does not matter. Emarat for its part asserted that it too required a signed contract as a pre-condition to its issuing payment undertakings as required under clause 10 of the contract. Emarat also insisted on Trafigura signing the contract first. It said that it required two signed and stamped originals, rather than simply copies sent by fax or as pdf e-mail attachments.
- In an e-mail to Amjad Habbas of 16 June 2008 Susan Neesham on behalf of Emarat stated that she had forwarded Contract No. 154876 to management for signature. This was no doubt a reference to Mr Al Midfa, then Acting General Manager. Later on the same day she sent a further e-mail saying that she expected the contract to be signed soon. Both of these e-mails were copied within Emarat to Mr Al Tamimi.
- On 1 July 2008 Mr Habbas e-mailed Mr Al Tamimi directly, forwarding to him the previous exchanges with Susan Neesham. Mr Habbas told Mr Al Tamimi that Trafigura had a new bank which was financing its transaction with Emarat and that the bank had been asking for the signed contract and the list of authorised signatories before finalising the financing. Mr Al Tamimi was asked to provide both soonest. A response came from Susan Neesham, saying that she would follow up. Her message was copied to Mr Al Tamimi and it is of course to be inferred that she sent this message with his approval.
- On 3 July 2008 Susan Neesham e-mailed Alana Thompson stating that Emarat wanted Trafigura to stamp and sign the contract as "we require this on an urgent basis". Her e-mail specifically identified the contract as "Gas oil Contract 154876" although it erroneously referred to the date thereof as being 21 February 2008, which was in fact the date of a superseded draft. Her e-mail was copied internally both to Mr Al Tamimi and to Captain Zainalddin. It is to be inferred that she sent it in consequence of her having followed up the matter with her management.
- On 4 July 2008 Susan Neesham again sent an e-mail asking for a signed and stamped copy of the contract, specifically identified in the "Subject" line of the e-mail as Gas Oil Contract No. 154876, as a pre-condition to Emarat providing payment undertakings. This e-mail was copied internally to Mr Al Tamimi, Mr Al Arab and Mr Rajeev Divakaran.
- Contract No. 154876 was signed by Mr O'Brien on behalf of Trafigura PTE on 4 July 2008 and a copy was e-mailed to Emarat on the following day, addressed to Susan Neesham and copied to Mr Al Tamimi. On 6 July 2008 Susan Neesham sent an e-mail to Michael Bourdier of Trafigura as follows:
"As instructed by our AGM we request you to urgently send two signed and stamped originals of the 2008 Gas Oil contract. Emarat AGM will sign both originals and return one copy to you."
Her reference to the "AGM" is undoubtedly a reference to Mr Al Midfa, then the Acting General Manager. The inference is overwhelming that it was at Mr Al Midfa's own request and with his knowledge and authority that this message was sent. Furthermore, it was copied internally within Emarat to both Mr Al Tamimi and to Captain Zainalddin. On the same day Susan Neesham sent a yet further e-mail to Michael Bourdier in these terms:
"Can you please let us have Trafigura PTE bank account details ASAP as our AGM wishes to include these details in the PU."
- I agree with the submission of Mr Bright that these e-mails, and especially the first e-mail of 6 July 2008, are compelling evidence that, by early July 2008 at the latest, Mr Al Midfa knew of and approved of Contract No. 154876, had authorised Susan Neesham's e-mail exchanges in relation to it and now intended to sign it. This is confirmed by the fact that on 8 July 2008 Hassan Arab sent to Trafigura an e-mail which attached a specimen draft Payment Undertaking letter for Trafigura to review. This e-mail was copied internally not only to Susan Neesham, Ibraham Al Tamimi and Rajeev Divakaran but also to Mr Al Midfa himself. The reference line in the specimen letter attached, as drafted and proffered by Emarat, referred to "Contract 154876 dated 5 March 2008 entered into between Emarat and Trafigura PTE".
- Two originals of the contract, duly signed on behalf of Trafigura PTE, were couriered to Dubai arriving at Trafigura's branch office there on or before 10 July 2008. That very day Captain Zainalddin sent an e-mail to Mr Habbas asking whether there was any news about the contract and payment undertaking or whether Emarat should seek alternative supply – this e-mail again was copied internally not only to Susan Neesham but also to Mr Al Midfa. Mr Habbas responded stating that Trafigura had the contract but was waiting on the payment undertaking wording. Captain Zainalddin replied:
"Is it possible to send with driver now before we close for the weekend."
- The two original contracts were then delivered to Emarat's offices as requested. Mr Habbas cannot recall how precisely they were delivered, although he thinks that this was done on 10 July. The offices of Emarat and Trafigura in Dubai are close and the documents may have been delivered by Trafigura's office driver or even by Mr Habbas in person. It is possible that one of Emarat's drivers called in to collect them. At all events, Emarat clearly received the original contracts, because on 11 July it duly issued a payment undertaking for the next cargo, ex the vessel "Diyyinah", which had been withheld pending receipt of the hard copy of the contract documents signed by Trafigura PTE. This payment undertaking specifically refers to Contract No. 154876 dated 5 March 2008 and is signed by Mr Al Midfa. Neither Emarat nor Mr Al Midfa has suggested that the signature on this or any other payment undertaking is a forgery.
- Mr Habbas then received back two photocopies of the original contracts, appearing to bear the signature and stamp of Jamal Al Midfa by way of counter signature on behalf of Emarat. Mr Habbas does not remember precisely when he received these copies, or how they were delivered. It is however likely that this occurred on or shortly after 14 July.
- The evidence shows therefore that on 6 July 2008 Jamal Al Midfa had every intention of signing the contract and that it was in fact signed a few days later. The signature resembles that of Mr Al Midfa. Emarat asserts that the signature is a forgery, but it has of course produced no evidence to suggest a change of heart on the part of Mr Al Midfa or indeed a plausible motive for the alleged forgery. Furthermore, any forgery must have taken place on Emarat's premises between 10 and 14 July 2008, and it is difficult to see how any such forgery could have been carried out without the knowledge of all those who were copied in on the preceding e-mail exchanges, i.e. Susan Neesham, Ibraham Al Tamimi, Captain Zainalddin, Mr Divakaran and Mr Al Arab. Indeed, given the extent to which he had been copied in on relevant messages, it is difficult to see how Mr Al Midfa himself could have been unaware of the outcome of the request to sign the contract.
- Against this background the suggestion that the signature on the contract, purportedly that of Mr Al Midfa, is in fact a forgery, is to say the least implausible. On the overwhelming balance of probabilities it is, I find, the signature of Mr Al Midfa. Even if it is not, all of the evidence demonstrates overwhelmingly that Emarat by its words and conduct agreed to be bound by the terms set out in Contract No. 154876 as it was reduced into writing on 5 March 2008 and sent to it on the following day. There was subsequent agreement to prices for additional optional spot cargoes. These were agreed by an exchange of e-mails on 19 and 28 March 2008 but this is of no materiality save perhaps to the extent that agreement of an amendment to a contract presupposes the existence of the contract thus amended. For good measure, Emarat continued after 14 July 2008 to perform the contract according to its terms. Deliveries were made later in July ex the "Diyyinah" and the "Blackfin" and paid for by Emarat without incident. As required under clause 10 of the contract, Emarat issued payment undertakings in relation to these deliveries, and also in relation to the deliveries ex "Grace Victoria" and "Hellespont Promise". Like the payment undertaking signed by Mr Al Midfa on 11 July in relation to the "Diyyinah" these payment undertakings expressly refer to Contract No. 154876 dated 5 March 2008 entered into between Emarat and Trafigura PTE; they were both signed by Mr Al Arab, not alleged by Mr Al Midfa to be implicated in the conspiracy.
- The contract thus agreed set out at clause 4 the quality specification to which I have already referred, which provided for a Cetane Index of minimum 50, as ascertained by Test Method ASTM D976/D4737. The contract further contained, inter alia, the following provisions:
"6. DELIVERY
EACH CARGO LOTS SHALL BE DELIVERED IN ONE OR MORE LOTS AS FULL OR PART CARGO CIF TWO SAFE PORTS/BERTHS UAE, ESTIMATED TO ARRIVE AT THE DISCHARGE PORT DURING THE TERM OF THIS CONTRACT AS MUTUALLY SCHEDULED BETWEEN THE PARTIES.
THE BUYER SHALL GIVE FULL WRITTEN DISCHARGE INSTRUCTIONS FOR THE NOMINATED DISCHARGE PORT TO THE SELLER AT LEAST 7 DAYS PRIOR TO THE VESSEL'S ETA AT THE DISCHARGE PORT AND THE SELLER SHALL NOT BE RESPONSIBLE FOR ANY DELAYS THAT ARISE DUE TO THE BUYER'S FAILURE TO DO SO.
IN THE EVENT THAT SELLER'S VESSEL IS NOT SUITABLE FOR A UAE PORT, BUYER MAY DISCHARGE CARGO VIA STS. IN THE EVENT OF AN STS DELIVERY THE PRICE WILL BE DISCOUNTED AS STATED IN CLAUSE 9 PRICE.
COSTS RELATING TO STS OPERATIONS WILL BE SOLELY FOR THE SELLER'S ACCOUNT.
ALL CHARGES AT THE DISCHARGE PORT, OTHER THAN THOSE DEFINED BY WORLDSCALE AS BEING FOR OWNERS' ACCOUNT (INCLUDING THE EXPENSE IF ANY, OF SHIFTING BERTH AT THE DISCHARGE PORT, UNLESS SUCH SHIFT SHALL BE FOR THE VESSEL'S PURPOSES), SHALL BE PAID BY BUYERS.
…
9. PRICE
THE UNIT PRICE IN US$/BBL CIF ONE SAFE PORT/BERTH UAE SHALL BE EQUAL TO THE AVERAGE OF MEAN QUOTATIONS IN THE PLATTS ASIA PACIFIC/ARABIAN GULF MARKETSCAN FOR GAS OIL UNDER THE HEADING 'FOB ARAB GULF PLUS A PREMIUM OF US$6.50/BBL..
FOR ANY CARGO DISCHARGED VIA STS TO BUYER'S VESSEL THE PREMIUM SHALL BE $6.00 PER BARREL
THE APPLICABLE QUOTATIONS SHALL BE THE QUOTATION ON BILL OF LADING DATE, THE TWO QUOTATIONS IMMEDIATELY PRECEDING THE BILL OF LADING DATE AND THE TWO QUOTATIONS IMMEDIATELY FOLLOWING THE BILL OF LADING DATE (2,1,2).
SHOULD THE BILL OF LADING DATE FALL ON A SATURDAY, SUNDAY OR PUBLIC HOLIDAY, THE THREE QUOTATIONS IMMEDIATELY PRECEDING THE BILL OF LADING DATE AND THE TWO QUOTATIONS IMMEDIATELY FOLLOWING THE BILL OF LADING DATE SHALL APPLY...
10. PAYMENT
THE BUYER SHALL PAY THE PRICE BY TT IN US DOLLARS NET CASH, WITHOUT ANY WITHHOLDING, OFFSET, COUNTERCLAIM OR DEDUCTION WHATSOEVER INTO THE SELLER'S NOMINATED BANK ACCOUNT WITH FULL VALUE LATEST 60 CALENDAR DAYS FROM THE BILL OF LADING DATE (B/L DATE = DAY ONE) ('PAYMENT DATE') AGAINST PRESENTATION BY THE SELLER OF:
(A) THE SELLER'S ORIGINAL COMMERCIAL INVOICE TO BE SUBMITTED 14 UAE WORKING DAYS PRIOR TO PAYMENT DUE DATE. SELLER WILL HOWEVER MAKE BEST ENDEAVOURS TO SEND BUYER TRADE CALCULATIONS PROMPTLY UPON COMPLETION OF PRICING WITH INVOICES TO FOLLOW SOON AFTER
(B) CERTIFICATE OF QUALITY AND/OR THE INDEPENDENT INSPECTOR'S QUALITY REPORT AT THE DISCHARGE PORT (TELEX/FAX ACCEPTABLE).
(C) CERTIFICATE OF QUALITY AND/OR THE INDEPENDENT INSPECTOR'S QUANTITY REPORT AT THE LOADPORT (TELEX/FAX ACCEPTABLE).
(D) 3/3 ORIGINAL BILLS OF LADING ISSUED TO OR ENDORSED TO THE ORDER OF THE BUYER PLUS THE ORIGINAL MASTER'S/AGENTS/VESSEL OWNER'S RECEIPT FOR THE MISSING 1/3 OPRIGINAL BILL OF LADING.
(E) ORIGINAL CERTIFICATE OR ORIGIN
(F) ORIGINAL CERTIFICATE OF INSURANCE
IF ANY OR ALL OF THE DOCUMENTS ARE NOT AVAILABLE AT THE PAYMENT DATE, THE SELLER SHALL PRESENT AND THE BUYER SHALL PAY AGAINST:
A. THE SELLER'S ORIGINAL (TELEX/FAX) COMMERCIAL INVOICE
B. THE SELLER'S (TELEX/FAX)LETTER OF INDEMNITY (TELEX OR FAX ACCEPTABLE) IN THE FOLLOWING FORM:…
…
WITHOUT PREJUDICE TO ANY OF THE SELLER'S OTHER REMEDIES, IF THE SELLER DOES NOT RECEIVE IN FULL PAYMENT INTO ITS NOMINATED BANK ACCOUNT ON THE PAYMENT DATE, THE BUYER SHALL PAY INTEREST ON ANY/ALL OUTSTANDING BALANCES (AT THE ONE WEEK LIBOR RATE AS QUOTED BY THE ROYAL BANK OF SCOTLAND ON THE PAYMENT DATE PLUS 1 PERCENT) UNTIL THE DATE PAYMENT IS RECEIVED INTO SELLER'S NOMINATED BANK ACCOUNT. SUCH INTEREST SHALL ACCRUE AND BECOME DUE ON A DAILY BASIS. THE FOREGOING SHALL NOT BE CONSTRUED BY THE BUYER AS AN INDICATED OF THE SELLER'S WILLINGNESS TO PROVIDE EXTENDED CREDIT AS A MATTER OF COURSE.
THE BUYER SHALL PROVIDE TO THE SELLER SECURITY IN RESPECT OF ITS PAYMENT OBLIGATIONS BY MEANS OF A PAYMENT UNDERTAKING IN THE FOLLOWING FORMAT SENT BY THE BUYER TO THE SELLER'S NOMINATED BANK LATEST 7 CALENDAR DAYS PRIOR TO THE FIRST DAY OF THE ESTIMATED ARRIVAL PERIOD AND TIME SHALL BE OF THE ESSENCE IN THIS RESPECT:…
11. INSPECTION
THE SELLER SHALL APPOINT AND INSTRUCT AN INTERNATIONALLY RECOGNISED INDEPENDENT INSPECTOR TO DETERMINE QUANTITY AT THE LOADPORT AND QUALITY AT THE DISCHARGE PORT IN ACCORDANCE WITH THE DETERMINATION OF QUANTITY AND QUALITY CLAUSE (THE 'INDEPENDENT INSPECTOR').
THE INDEPENDENT INSPECTOR SHALL BE ACCEPTABLE TO BOTH PARTIES, SUCH ACCEPTANCE NOT TO BE UNREASONABLY WITHHELD. ALL INSPECTION COSTS SHALL BE SHARED EQUALLY BETWEEN THE SELLER AND THE BUYER.
12. DETERMINATION OF QUANTITY AND QUALITY
THE INDEPENDENT INSPECTOR SHALL DETERMINE:
(A) THE QUALITY OF THE PRODUCT AT THE DISCHARGE PORT USING THE CUSTOMARY METHODS, PRACTICE AND PROCEDURE AT THE DISCHARGE PORT AND BASED UPON FULLY REPRESENTATIVE COMPOSITE SAMPLES DRAWN FROM THE TANKS OF THE PERFORMING VESSEL;
AND
(B) THE QUANTITY OF THE PRODUCT AT THE LOADPORT USING THE CUMSTOMARY METHODS, PRACTICE AND PROCEDURE AT THE LOADPORT.
SUCH DETERMINATIONS SHALL BE REPORTED ON THE CERTIFICATES OF QUALITY AND QUANTITY RESPECTIVELY, WHICH SHALL BE FINAL AND BINDING ON THE PARTIES FOR ALL PURPOSES SAVE FOR FRAUD OR MANIFEST ERROR.
THE BUYER SHALL SUBMIT TO THE SELLER ANY CLAIM AGAINST THE SELLER REGARDING THE QUALITY OR QUANTITY OF ANY PRODUCTS DELIVERED IN WRITING, TOGETHER WITH SUPPORTING DOCUMENTATION AND REASONABLE DETAILS OF THE FACTS ON WHICH THE CLAIM IS BASED, WITHIN 45 DAYS FROM THE DATE OF THE COMPLETION OF DISCHARGE (DISCONNECTION OF HOSES), FAILING WHICH THE BUYER'S CLAIM SHALL BE WAIVED AND ABSOLUTELY BARRED.
…
18. TITLE
TITLE TO THE PRODUCT SHALL PASS FROM THE SELLER TO THE BUYER WHEN THE PRODUCT PASSES THE PERMANENT FLANGE CONNECTION OF THE VESSEL'S INTAKE HOSE AT THE LOAD PORT. …
19. RISK
RISK OF LOSS, CONTAMINATION OR DAMAGE TO THE PRODUCT SHALL PASS FROM THE SELLER TO THE BUYER WHEN THE PRODUCT PASSES THE PERMANENT FLANGE CONNECTION OF THE VESSEL'S INTAKE HOSE AT THE LOAD PORT.
20. LAW AND JURISDICTION
THIS CONTRACT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH ENGLISH LAW, THE PARTIES HEREBY AGREE TO SUBMIT ALL DISPUTES HEREUNDER TO THE EXCLUSIVE JURISDICTION OF THE ENGLISH HIGH COURTS IN LONDON.
IF ANY DISPUTE ARISES UNDER OR IN CONNECTION WITH THIS CONTRACT, WHICH BOTH PARTIES FAIL TO SETTLE BY NEGOTIATION, THE PARTY SEEKING TO MAKE THE CLAIM SHALL COMMENCE LEGAL PROCEEDINGS WITHIN ONE YEAR FROM THE DATE OF THE COMPLETION OF FINAL DISCHARGE, FAILING WHICH THE CLAIM SHALL BE DEEMED WAIVED AND ABSOLUTELY BARRED WITHOUT RECOURSE TO LITIGATION OR ARBITRATION.
21. CLAIMS
IF ANY CLAIMS ARISE UNDER OR IN CONNECTION WITH THIS CONTRACT (OTHER THAN QUALITY AND QUANTITY CLAIMS COVERED IN CLAUSE 11), THE CLAIMING PARTY SHALL NOTIFY THE OTHER PARTY OF ITS CLAIM IN WRITING WITHIN 6 MONTHS FROM THE DATE OF THE COMPLETION FO FINAL DISCHARGE, FAILING WHICH THE CLAIM SHALL BE DEEMED WAIVED AND ABSOLUTELY BARRED.
…
28. TAXES AND LICENCES
THE BUYER SHALL BE LIABLE FOR AND SHALL INDEMNIFY THE SELLER ON AN AFTER TAX BASIS IN RESPECT OF THE FULL AMOUNT OF ALL TAXES, DUTIES, TARIFFS, IMPOSTS AND CHARGES ARISING AFTER DELIVERY OF THE PRODUCT OR LEVIED IN THE COUNTRY OF DISCHARGE ON OR BY REFERENCE TO OR PAYABLE IN RESPECT OF THE PRODUCT, ITS SALE, DELIVERY, IMPORT OR TRANSPORTATION OF IN RESPECT OF THE VESSEL, WHETHER RETROSPECTIVE OR NOT.
THE BUYER OR THE BUYER'S CUSTOMER SHALL BE THE IMPORTER OF RECORD AND SHALL BE RESPONSIBLE FOR COMPLYING WITH CUMSTOMS AND EXCISE ENTRY PROCEDURES AT THE DISCHARGE PORT AND SHALL BE LIABLE TO THE CUSTOMS AND EXCISE AUTHORITIES FOR ALL DUTIES AND TAXES THAT ARISE IN RESPECT OF SUCH CUSTOMS AND EXCISE ENTRY.
IF, PURSUANT TO THIS CLAUSE, THE BUYER IS LIABLE TO PAY AN AMOUNT OF TAX IN A CURRENCY OTHER THAN THE INVOICING CURRENCY FOR THE PRODUCT, THE SELLER MAY, AT ITS OPTION, PRESENT A TAX INVOICE IN EITHER THE LOCAL CURRENCY OF THE COUNTRY IN WHICH THE VAT, EXCISE DUTY OR OTHER TAX IS PAYABLE, OR IN THE INVOICING CURRENCY FOR THE PRODUCT, CONVERTED AT THE APPROPRIATE EXCHANGE RATE PREVAILING AT THE DATE OF THE TAX POINT UNDER THE RELEVANT TAX RULES.
THE BUYER SHALL INDEMNIFY THE SELLER IN RESPECT OF ANY COSTS, PENALTIES AND INTEREST INCURRED BY THE SELLER AS A DIRECT OR INDIRECT RESULT OF THE BUYER'S FAILURE TO PAY, OR DELAY IN PAYING, ANY VAT, EXCISE DUTY OR OTHER TAX IN ACCORDANCE WITH THIS CONTRACT.
THE BUYER SHALL OBTAIN AND MAINTAIN ALL LICENCES, CONSENTS, PERMITS, APPROVALS AND AUTHORISATIONS NECESSARY FOR THE IMPORT OF THE PRODUCT AND TO ENABLE IT TO PERFORM ITS OBLIGATIONS UNDER THE CONTRACT. ANY FAILURE TO COMPLY WITH THIS PROVISION SHALL NOT CONSTITUTE FRUSTRATION OR BE SUFFICIENT GROUNDS FOR A DECLARATION OF FORCE MAJEURE."
- Events after the signature of the contract can be shortly described. In addition to the deliveries made ex the "Diyyinah" and the "Blackfin" to which I have referred above the cargo ex the "Grace Victoria" was delivered at the end of August 2008 and the cargo ex the "Hellespont Promise" was delivered in early September 2008. In each case Emarat duly made payment for one parcel of the cargo being in each case approximately one third of the total. On 24 September 2008 Mr Habbas sent an e-mail to Emarat attaching a letter dated 23 September 2008 marked for the attention of Mr Al Midfa. The letter was headed "Contract No. 154876 between Trafigura PTE Ltd ('Trafigura') and Emirates General Petroleum Company ('Emarat') dated 5 March 2008 for sale of Gasoline" and referred to the invoice sums then outstanding. At that time the sums outstanding included the amount now claimed in relation to the "Grace Victoria" as well as that due in relation to the "Diyyinah" and the "Blackfin". Mr Al Midfa responded noting Trafigura's concern and asking Mr Habbas to contact Mr Al Arab, Finance and Accounts Manager. Mr Al Midfa did not suggest that the contract was invalid or non-binding, nor did he complain about the quality of the material delivered ex "Grace Victoria".
- On 13 October 2008 Mr Habbas sent an e-mail attaching a further letter dated 9 October 2008, headed in the same way as the last, dealing with the sums then outstanding, which now included the amount due in respect of the entire cargo on the "Hellespont Promise" as well as a further amount due in respect of the first parcel shipped on the "Grace Victoria". Payment had however by now been made for the cargo delivered ex "Blackfin". The letter was again marked for the attention of Mr Al Midfa and the covering e-mail was sent to Mr Al Midfa and copied to Mr Al Arab. No response was received.
- On about 2 November 2008 Mr Habbas met with Mr Al Midfa to discuss the outstanding invoices and other matters. At that meeting Mr Al Midfa showed to Mr Habbas a letter from Emarat to the UAE Federal Government requesting approximately Dirhams 980 million, then the equivalent of about US$266 million, in funding for products including the gasoil supplied by Trafigura under the contract and for which Trafigura's invoices were outstanding. From this Mr Habbas understood that Emarat did not take issue with any of Trafigura's invoices, that the reason for non-payment of the invoices was essentially cash-flow difficulties and that Emarat intended to settle them as soon as Emarat was in funds.
- By 24 November 2008 Emarat had indeed paid all of the outstanding invoices except for the two which still remain unpaid and which are the subject of this action. Those invoices are:
Invoice No. 7315 dated 19 August 2008 in the sum of US$41,948,306.91 in respect of cargo shipped on the "Grace Victoria" under Bill of Lading dated 25 July 2008;
Invoice No. 7403 dated 3 September 2008 in the sum of US$40,273,414.85 in respect of cargo shipped onboard the "Hellespont Promise" under Bill of Lading dated 29 July 2008.
- On 1 December 2008 Ashton D'Souza, Financial Accountant of Emarat e-mailed Mr Habbas as follows:
"We apologise for the delay in settlement of Trafigura Invoices which were due in September 08. The funds from the Ministry of Finance are expected to be received by us shortly. We assure you that as soon as the funds are received by us, your invoices will be settled. Please bear with us in the meanwhile."
- On 10 December 2008 Mr Habbas again pressed for payment, by fax to Mr Al Midfa copied to Mr Al Arab.
- It was on 19 December 2008 that Emarat for the first time suggested that Trafigura had acted in breach of contract. Even now liability to pay for the gasoil supplied was not denied. The e-mail from Mr Al Midfa to Mr Habbas of that date read:
"Subject: Gas Oil supply arrangement for 2008
We refer to the Emarat/Trafigura Gas Oil supply arrangement for 2008. We wish to put on record that Trafigura has breached agreed supply arrangement as we have detected deviation from Emarat product specification, which constitutes a serious breach. This has resulted in considerable financial losses in the manner in which the product has been invoiced. Therefore we wish to emphasise that Emarat reserves all our rights to claim consequential damages resulting from Trafigura's breach. We hold you fully responsible for any damages on account of the above breach pending our full internal investigation of all issues relating to the above arrangements."
- On 23 December 2008 Trafigura received from Emarat a copy of its "Judicial Notice" dated 22 December 2008. This suggested that the product to which two invoices dated 19 and 20 August 2008 referred did not comply with "the standard specification of the product" and further suggested that "heavy losses" had in consequence been sustained. No details were given of either the alleged non-conformity or the alleged losses. There were as I have already pointed out three invoices dated either 19 or 20 August, being two bearing the earlier date and one the later.
- On 6 January 2009 Mr Habbas attended a further meeting with Omar Al Shamsi and others. At the meeting Emarat explained that the complaint related to the Cetane Index of part of the parcel ex "Grace Victoria" for which payment had in fact already been made. Trafigura pointed out that no claim had hitherto been made. In fact the position concerning the "Grace Victoria", to which I return in more detail below, is that Emarat asserted when it accepted discharge from that vessel that the Cetane Index of one parcel of the cargo had been ascertained to be 47.4. It accepted discharge nonetheless. Captain Zainalddin then copied to Trafigura an e-mail which had on the same day, 17 August 2008, been sent to him by the responsible Emarat personnel which read as follows:
"Subject: MT Grace Victoria Cetane Index
According to Certificate of Quality the Test result of this Parcel Cetane Index is 47.4 which is below Emarat Min Requirement (50). Hence as per your instruction to accept and proceed with discharging, we have actioned accordingly."
This e-mail had been sent to Captain Zainalddin by Mr Khalfan, who is the supervisor of the Emarat terminal at Fujairah. It is perhaps just worth noting additionally that the Emarat minimum requirement is said by Mr Khalfan in that e-mail to have been 50, and not 52. Finally, at the meeting on 6 January 2009 Emarat raised a further point in relation to the basis upon which the invoice amount for the "Grace Victoria" had been calculated, without explaining precisely why it was said that the amount invoiced was incorrect.
- At the meeting on 6 January 2009, the gist of which was recorded by Trafigura in a fax message sent to Emarat three days later on 9 January, Emarat did not assert that Contract No. 154876 was not valid and binding. On the contrary, it asserted a breach thereof by Trafigura. It was only after Emarat had been served with these proceedings and in the light of developments therein that Emarat raised its point in relation to customs duty and for the first time challenged the validity of the contract. Thus after Cooke J had on 23 April 2009 granted an anti-suit injunction restraining Emarat from proceeding in the UAE and shortly before the return date of 5 June Emarat issued the invoice of 10 May 2009 to which I refer at paragraph 2(iv) above which for the first time raised the Customs Duty point. The allegation that Mr Al Midfa's signature had been forged, and that the contract was invalid, was first made on 4 June 2009 as again I have recorded above.
- The upshot is that Emarat has in my view no conceivable defence to the claim brought by Trafigura PTE in respect of the two unpaid invoices which relate to gasoil of which Emarat has taken delivery.
- As I have already adumbrated above, the argument as to whether the contract was definitively agreed in January 2008 or progressively developed into a more detailed written agreement thereafter is I think something of a red herring. If developments after 22 January 2008 are to be ignored the only consequence would be, as I have already pointed out, that the contractual terms as to Customs Duty and specification would be different. All the other relevant terms were in any event included in the semi-term contract by reference to which Trafigura tendered. Additionally, it might be that it is Trafigura BV which is entitled to recover from Emarat rather than Trafigura PTE, although I am not sure that Emarat goes so far as to suggest that the novation of the contract can be ignored. I cannot however begin to understand how or why it is or can be suggested that anyone, whether at Emarat or Trafigura, would have had a motive to forge Mr Al Midfa's signature so as to bring about so limited a variation of the terms otherwise agreed as at 22 January 2008. Particularly is this so since the relevant terms were both the subject of extensive open correspondence between January and July 2008.
- There is a suggestion by Emarat in its letter to the court dated 5 June 2009 that Emarat, as a UAE Government Entity, lacks capacity to enter into a contract which violates its domestic law. Reference in that regard has been made:
i) in the invoice of 10 May 2009, although not I think in the letter of 5 June and Defence of 4 June 2009, to the Common Customs Law for Arab States of Gulf (GCC States) No. 10/2003, and
ii) in the Defence, to the Environmental Law as stated by Emirates Authority for Standardisation and Metrology (ESMA) which is said to state that the Cetane Index is minimum 52 for gas oil supplied to the UAE.
I deal with these points separately.
Customs duty
- Mr Briggs has placed before the court a copy of the Common Customs Law for Arab States of Gulf (GCC States) No. 10/2003. It indeed provides that goods imported into the country are subject to duties as specified in the applicable tariff. However under this cif contract, in whatever agreed form alleged to be relevant, delivery to Emarat was effected and title to the cargo passed upon shipment outside the UAE. The importer was Emarat. There is nothing in the Common Customs Law which could render Trafigura responsible for payment of the relevant duty. Indeed, as Mr Briggs points out at paragraph 6.17 of his report placed before the Court, UAE Federal Law No. 18 of 1993 on Commercial Transactions (the "CTL") (Annex 5) states in Article 147 that "the buyer shall pay the import fees and the charges and expenses to clear the items sold at the port of discharge". Accordingly, unless the contract states otherwise, in accordance with Article 147 of the CTL, it is the buyer and not the seller which bears import fees, charges and expenses to clear any item. Even if Emarat has incurred Customs duties in respect of the two parcels for which it has not yet paid, as to which it has produced no evidence, it would still be obliged to pay Trafigura without any withholding even if the terms of the contract are to be regarded as frozen as at 22 January 2008. Any claim to recover such duty from Trafigura became time-barred six months after final discharge as provided by clause 21 of the semi-term contract. Final discharge occurred in August and September 2008. The claim in respect of Customs duties was not intimated until 10 May 2009.
- As it is, the contract in fact made between Trafigura PTE and Emarat provides clearly that Customs duties levied in the country of discharge are for buyer's account, entirely in line with Article 147 of the CTL.
Cetane Index
- The contention of Emarat appears to be, in so far as I can understand it, that UAE Environmental Laws as stated by the Emirates Authority for Standardisation and Metrology ("ESMA") "clearly state[s] that the Cetane Index is minimum 52 for gas oil supplied to the UAE", and Emarat asserts that for this reason Trafigura has produced a fabricated document, the allegedly signed contract, to use it as a cover to avoid prosecution under UAE law. Mr Briggs addresses this issue at paragraphs 6.2 to 6.13 of his report placed before the Court. ESMA is a federal UAE authority established to issue standards and technical regulations, which may be either optional or mandatory. Emarat has identified no particular ESMA standard specification upon which it relies. Mr Briggs' colleagues have contacted ESMA in order to identify what if any standard specification might require a minimum Cetane Index of 52 for gas oil, but they have been unable to identify an ESMA standard specification for gas oil, possibly because gas oil is not retailed as such. There are three ESMA standard specifications which refer to Cetane Index – GSO 477/1994 for diesel oil, and GSO 145/1991 and GSO 1041/2000, both of which relate to methods of testing for pollutants emitted by motor vehicles. None of these standard specifications is directly applicable to gas oil sold as such to a commercial entity such as Emarat, which could of course have blended it and/or sold it for a variety of different purposes. Cetane Index is a measure of the ignition performance of a diesel fuel oil in a standard engine by comparison with other reference fuels. The ESMA standard specification which might arguably therefore be relevant is GSO 477/1994. The Cetane Index in that standard specification is minimum 50. That may of course account for Mr Khalfan describing the Emarat minimum requirement as 50, as set out in his e-mail of 17 August 2008 passed on by Captain Zainalddin to Mr Holmes and Mr Habbas.
- It is therefore difficult to understand what is Emarat's point in relation to breach of Environmental law, particularly since the obligation to comply with any relevant law must inevitably have rested upon Emarat as importer and distributor within the UAE.
- However this may be, Emarat's allegation concerning off-specification cargo is in any event factually and technically unsound. Under the contract, in whatever version, quality was final as ascertained by the independent inspector at the discharge port based upon fully representative composite samples drawn from the tanks of the performing vessel. For the "Grace Victoria" two quality certificates were issued by Geochem Middle East, the independent inspector at discharge. One certificate covered only tanks "2W and 5W" and showed a Cetane Index of 48.6. The second certificate related to tanks "1W, 3W, 4W, 6W and SLW" and showed a Cetane Index of 57.3. Mr Drury has demonstrated that a volumetric composite of the two parcels thus tested, which parcels are of very unequal volume, would show a Cetane Index of 54.4 by Method ASTM Method D976 and 55.3 by ASTM Method D4737. This is unsurprising, as the ship's volumetric composite sample at the loadport showed a Cetane Index of 55.5 ascertained by ASTM Method D4737. Incidentally it seems likely that the Cetane Index of 47.4 which Mr Khalfan reported to Captain Zainalddin on 17 August 2008 for one parcel was derived from the Intertek Caleb Brett-Kimsco Certificate of Quality for Shore Tank No. TK-85341 from which the "Grace Victoria" loaded at Onsan Korea. However the vessel also loaded cargo from Shore Tanks Nos. TK-9003 and TK-9002 for which the relevant Certificate of Quality showed a Cetane Index of 56.8. The same organisation reported the Cetane Index of the ship's volumetric composite sample as 55.5, as noted above.
- The seller's obligation as to quality relates to the whole cargo, not to individual parcels thereof. Clause 12 of the contract talks of the quality of "the product" at the discharge port. The suggestion that Trafigura was in this respect in breach of contract is utterly specious, as is the suggestion that Emarat has in consequence suffered loss, which loss has of course never been quantified. This is no doubt why Emarat accepted the smaller parcel in full knowledge that its Cetane Index was or might have been or was asserted to be below 50.
- For good measure, I might add that pursuant to clause 12 of the contract any claim in respect of quality discrepancy had to be submitted within 45 days of completion of discharge, failing which it is waived and absolutely barred.
- I should deal finally with two distinct points raised by Emarat as to the validity of Mr Al Midfa's signature. Firstly, it is as it seems to me of no relevance that Mr Al Midfa was not General Manager of Emarat when the agreement for supply in 2008 was first reached in January. Mr Al Midfa had full authority to sign the contract when he did so as General Manager on 14 July 2008. No internal limitation upon his powers has been drawn to my attention. For the same reason I cannot understand why Emarat allege it to be relevant that Mr Al Midfa's signature is not witnessed and that he has not initialled every page. In any event however these arguments are of no relevance to the validity of a contract governed by English law. English law does not in general require a signature to render a contract efficacious. What is required is the objective demonstration by both parties of their intention to be bound by the terms evidenced in writing. That is here amply demonstrated by the parties' contemporary communications and by their performance in accordance with the terms agreed. By way of relevant example of the latter I would specifically refer to Emarat's issue of Payment Undertakings in accordance with its obligations spelled out in the detailed written terms of the contract.
- Invoices Nos. 7315 and 7403 in respect of which the claim is brought both set out the manner in which the amount due has been calculated by reference to the pricing clause. As Mr Habbas has explained in evidence, the calculations have been carried out in accordance with the contractual requirements and in precisely the same manner as all Trafigura's earlier invoices and in two cases subsequent invoices, all of which have been paid by Emarat without demur. Under Invoice No. 7315 dated 19 August 2008 US$41,948,306.91 fell due for payment on 22 September 2008. Under Invoice No. 7403 dated 3 September 2008 US$40,273,414.85 fell due for payment on 26 September 2008, the payment dates being in each case 60 calendar days after the date of the relevant Bill of Lading.
- Pursuant to clause 10 of the contract interest is due on outstanding balances at the one week LIBOR rate as quoted by the Royal Bank of Scotland on the payment date plus one percent until payment. Trafigura has provided evidence that the one week LIBOR rate as quoted by the Royal Bank of Scotland on the due date was 3.4% and 3.59% respectively. LIBOR plus one percent is not only the contractual rate but is also a rate of interest which the court regards as broadly reflective of the rate which a company such as Trafigura would be charged for borrowing.
- The First Claimant, Trafigura PTE Ltd is entitled to judgment against the Defendant Emarat for the principal amounts claimed together with interest at the contractual rates.
- Both Claimants also seek declaratory relief in relation to their non-liability to pay the Customs Duty claimed by the Defendant in the invoice dated 10 May 2009 to which I referred at paragraph 2(iv) and 55 above. The declaration sought is a declaration that they are not liable for the Customs Duty claimed by way of the invoice dated 10 May 2009 or at all in relation to the shipments referred to therein. Mr Habbas accepted in his evidence that Trafigura has not been able to identify and locate all of the contracts under which the deliveries referred to by Emarat were made and indeed there are five alleged deliveries which Trafigura is presently unable to confirm were made to Emarat. For this and other reasons the declaratory relief sought is in my judgment too wide in scope and it is inappropriate to grant it. It is sufficient to note, as I have already pointed out, that the First Claimant is entitled to the amount due without any withholding, offset, counterclaim or deduction.
