Westbrook Resources Ltd v Globe Metallurgical Inc

By a contract finally agreed on 20 January 2005 after protracted negotiation the Claimant, to which I shall refer hereafter as “Westbrook”, agreed to sell and the Defendant, to which I shall refer hereafter as “Globe”, agreed to buy approximately 30,000 metric tonnes of manganese ore. Westbrook is a metals trader. Globe is a manufacturer and supplier of metals. The contract was not performed and was, on Westbrook’s case, terminated by them on either 6 or 9 May 2005 on account of Globe’s repudiatory breach which Westbrook accepted. Westbrook claim damages for non-performance. Globe assert that they were not in breach of contract, rather that it was Westbrook which was in repudiatory breach and that in any event in the circumstances which occurred they, Globe, were not obliged to accept the contractual performance offered by Westbrook. Globe accordingly both deny liability and in turn counterclaim damages alleged to flow from Westbrook’s repudiatory breach of contract.

The terms of the contract set out in Westbrook’s Confirmation Document which although dated 4 January 2005 was actually agreed on 20 January 2005 were as follows:

“We herewith confirm that we have sold to you:

Material: Manganese Ore

Quantity: (A) Approx 8,000 metric tonnes ex Large, PA (B) Approx 22,000 metric tonnes ex Large, PA.

Quality: As per samples taken by your representative

Price: (A) Usd 3.42 DMTMNU (Dry metric Tonne Manganese Unit) (B) Usd 3.50 DMTMNU (Dry metric Tonne Manganese Unit)

Packing: Bulk

Delivered: CIF Barge bottom Belfre (sic: an error for Belpre) Ohio, by latest 30^th April 2005

Shipment: First barge to load before 28^th January 2005 with barges to follow no sooner than every 7 days and no more than one month between barges until contract is complete.

Size: Screened over plus ½ screen at DLA.

Payment: Against fax copy barge B/L and size confirmation performed at point of loading by mutually agreed survey company with provisional price to be based on 43.5% and credit/debit to be given after draft survey and moisture determination to be applied against following barge.

Documentation: Commercial Invoice Fax copy barge bill of lading Independent draft certification, size distribution and moisture determination.

Weight/Analysis: Barge weight to be determined by draft survey and moisture to be determined by independent assayer costs for sellers account. 3 sets of sealed samples will be prepared one each for buyer sellers and one to be held in reserve. The cost for independent testing company to determine the analysis is to be borne by the buyer.

Limitation Neither party shall be liable to the other for on Damages: special, punitive or consequential damages (including loss of profits and loss of production) resulting from a breach of warranty, delay or performance or other default hereunder.

General: Westbrook terms and conditions over leaf to apply.”

Relevant terms and conditions from Westbrook’s terms and conditions were:

“2 CONDITIONS APPLICABLE

2.2

The Contract will be subject to the Conditions which shall apply to all contracts for the sale of Goods by the Company to the Buyer to the exclusion of all other terms and conditions including any other terms and conditions which the buyer may purport to apply under any purchase order, confirmation of order, or similar document. All orders for Goods shall be deemed to be an offer by the Buyer to purchase Goods pursuant to these conditions.

2.3

Any variation to these Conditions (including any special terms and conditions agreed between the parties) shall be inapplicable unless agreed in writing by a director of the Company and in particular (but without limitation):-

2.3.1

where the Buyer requires the Goods for a particular purpose the Company shall be deemed to have no notice of such purpose unless the purpose is agreed by the Buyer and Company in writing and signed on their behalf as above;

2.3.2

the Company and the Buyer acknowledges that there is no usage or course of trading in existence which could affect the terms of the Contract in any way.

3

LIMITATION OF LIABILITY

3.3

Where this Contract is for the sale of Goods by the Company to the Buyer examination of the Goods will be made by or on behalf of the Buyer prior to the Contract being made and no description or representation on the part of the Company is given or implied by the Contract nor on sale of Goods or provision of Services is any warranty, condition, description or representation on the part of the Company is given or implied by the Contract nor on sale of Goods or provision of Services is any warranty, condition, description or representation on the part of the Company given or implied from anything said or written in the negotiations between the parties or their representatives prior to this agreement. The description of the Goods given on the Order or elsewhere is by way of identification only and such description shall not constitute a sale by description.

3.4

Notwithstanding that on a sale of Goods a sample of the Goods may have been exhibited to an inspected by the Buyer it is hereby declared that such a sample was so exhibited and inspected solely to enable the Buyer to judge the quality of the bulk and not so as to constitute a sale by sample under the Contract. The Buyer shall take the Goods at its own risks as to their corresponding with the said sample or as to their quality, condition or sufficiency for any purpose.

3.5

No forbearance or indulgence by the Company shown or granted to a Buyer, whether in respect of the Conditions or otherwise shall in any way affect or prejudice the rights of the Company against the Buyer or be taken as a waiver of the Conditions.

6

PAYMENT

6.1

Except where there is in existence at the date of the Order a written arrangement by both parties signed on their behalf in the case of the Company by a director of the Company confirming credit terms or otherwise varying terms as to payment upon the Buyer payment of the price of the Goods shall be made in cash within 30 days of delivery of the Goods or within 30 days of the date on which the Company has notified the Buyer that the Goods are ready for delivery and the time mentioned within which the Buyer is to pay the Price shall be of the essence of this Contract.

7

DELIVERY

7.6

No delay in deliver shall entitle the Buyer to repudiate or cancel the contract or any deliveries thereunder.

JURISDICTION AND ARBITRATION

12.

The contract shall be governed and construed in accordance with the laws of England and any different or dispute arising between the Company and the Buyer shall be subject to the sole and exclusive jurisdiction of the English Courts.”

Westbrook knew before concluding the contract that Globe were likely to use the manganese ore in the production of silico manganese in their furnaces at Beverley Ohio. At the relevant time no one at Globe had been involved in either the purchase of manganese ore or the production of silico manganese for at least 20 years. In more recent times Globe had been producers at their plants in Alabama and Ohio of ferroalloys such as ferromanganese and ferrosilicon and of silicon metal. In part because Globe allege that they were induced to enter into the contract in reliance on material misrepresentations by Westbrook I heard a good deal of evidence as to the discussions and negotiations which preceded the making of the contract. Some of the background is in any event admissible as being part of the context in and against which the terms of the contract are to be construed.

The central question in this dispute is what is meant by the contractual term “size: screened over plus ½ screen at DLA.”

At paragraph 9 of their re-re-Amended Defence and Counterclaim Globe plead:

“Further, prior to the making of the contract:

a)

Arden Sims of the Defendant specifically informed Shaun Walton of the Claimants during a meeting held at the Defendant’s premises in Beverly Ohio on December 13 2004 that the manganese ore which it was seeking to purchase was to be used for the purpose of producing silicon manganese and that the Defendant was unable to use or accept “fines” in its processes.

b)

The Claimant represented to the Defendant at the said meeting and in the course of the e-mailed correspondence that preceded the making of the contract (and in particular in an e-mail timed 12:36pm on 12 January 2005) that the stock of manganese ore which it held at Large PA contained “lumpy” manganese ore in excess of ½ in size and could successfully be screened to supply “lumpy” manganese ore of that size.”

In order to put into context the question of construction and the allegations of misrepresentation I must first set out a brief résumé of the background.

Manganese ore is relatively low value material. Standard ore is unlikely to contain in excess of 50% manganese. Manganese is the most widely used alloying agent in steel production. It is added to most grades of steel for its properties of desulphurisation and deoxidation. Manganese is added to steel in the form of ferro or silico manganese. These in turn are produced by smelting manganese ore in blast furnaces or electric arc furnaces. At its Beverley Ohio plant Globe operates electric arc furnaces. Silico manganese can in fact only be produced in electric arc furnaces. For arc furnace production lumpy ores are generally favoured. Most large manganese ore suppliers have integrated mining and smelting facilities. Most independent processors of manganese ore specify the size of the ore purchased for use in their furnaces. Some specify a maximum of 10% passing a ¼ inch or 6.35 mm screen although this is not universal. In a paper delivered to the Electric Furnace Conference in 1961 Mr John Oxaal, evidently a noted authority in the field, indicated that “furnace operators at the various Union Carbide Metals Company plants have somewhat divergent views on the definition of fines with respect to silico manganese operations. The consensus of opinion, however, established 20-30% below ½ inch as the maximum allowable range of fines for good operation.” See page 322 of the Proceedings of Electric Furnace Conference, 1961. There is no international standard size specification either for manganese ore or for its screening although there are of course standards relevant to the manner in which samples should be taken from a bulk pile and as to the manner in which a sample should itself be tested and analysed. There are broadly two types of manganese ore. Pyrolusite or pyrolusitic ore is ore in which the manganese is principally present in the form of manganese dioxide, MnO2. Carbonate ore, rhodochrosite, is manganese carbonate, or MnCO3. MnO2 dissociates at a temperature of 500 or 600˚C into Mn2O3 and oxygen. That is an exothermic, heat releasing, reaction. The oxygen thereby produced becomes available in the furnace charge to react with carbon monoxide which has been released from metal production lower down in the furnace. Carbon dioxide is thereby produced. The production of carbon dioxide in this manner is a yet further exothermic reaction. At the 1992 Electric Furnace Conference a paper was delivered by Messrs Bruno and Festoy of the Tinfos group of companies, producers of ferroalloys in submerged arc furnaces in Norway. At page 4 of their paper (page 70 of the Proceedings for that year) they remarked:

“Economical consideration: the blend has to ensure a smooth operation on the furnace. Though maybe equally priced some ores perform better on the furnace than others. This has to do with the manganese oxidation stage and kind of mineralisation and the interaction in the furnace between certain ores. Presence of MnO2 promotes indirect reduction and formation of CO2. Therefore our blends normally have 30–60% of pyrolusitic ores.”

According to Mr O’Shaughnessy, an impressive witness who gave expert evidence before me with great authority based on his extensive experience and knowledge of the industry, companies such as Union Carbide had a recommendation going back to the late 1970s and 1980s not to use high levels of pyrolusite ore in the furnace in silico manganese production. He was able to tell me that Tinfos themselves had discontinued even their blends with 30-60% pyrolusitic ores. Furnace operators will of course use what they have to use and may compensate for the excessive heat creation in other ways such as by reducing the power throughput and by the artificial introduction of moisture. In an ideal world however high levels of pyrolusite ore would not be used for this application. Carbonate ores are preferable and pyrolusitic ores are too highly oxidised to be used on their own without blending.

In the years after the Second World War the US Government created strategic stockpiles of raw materials that might be required for military or defence purposes. One such material was manganese ore. The Defence Logistic Agency, hereinafter “DLA”, an agency of the US Government, assembled huge quantities of manganese ore in stockpiles throughout the United States. One such stockpile was at Anniston Alabama and another at Large Pennsylvania. These stockpiles were left out in the open. Vegetation grew on them. Working of the piles led to the creation of lakes or ponds. At the sites the stockpile of ore might extend many feet below the apparent ground level and in some cases many feet below the surface of a lake or pond. Over time the DLA determined that it no longer required its manganese ore stockpiles, or at any rate not all of them, and they were offered for sale through a tender process. One such tender process occurred in 2003 and included Pile 1 at Anniston described as 14,977.21 SDT (short dry tonnes) of “lumpy” origin Chile; Pile 1 at Large, described as 170,709.81 SDT of “Fines” origin Cuba; Pile 7 at Large, described as 6,286.46 SDT “lumpy” origin Mexico and Pile 14 at Large, described as 9,338.79 SDT “nodules” of domestic origin”. The manganese was present in the Anniston ore principally as MnO2, i.e. pyrolusite. Information about material available for sale by the DLA was freely available on its website. The names of those who had successfully bid for the parcels were also known. Access to the stockpile sites for the purpose of inspecting the material could also be relatively easily arranged. At some sites security considerations precluded inspection by non-US citizens. There were no such considerations at Large although there were at Anniston. On 30 December 2003 Westbrook successfully tendered for the Anniston and Large ore.

In May 2004 Globe came out of the Chapter 11 protection afforded by the US Bankruptcy Court which it had enjoyed for the past 13 months. Its traditional product portfolio had led it into loss. In the summer of 2004 it was therefore looking to restructure that portfolio, in particular by going back into production of silico manganese which was at that time attractively highly priced. Although Globe’s Chief Executive Officer Mr Arden Sims denied its applicability to his company, the trade paper Ryan’s Notes remarked contemporaneously that the 2004 prices had attracted new entrants because silico manganese can be produced with low quality feed and the cost of entry is low. Globe accordingly began to make enquiries of various manganese ore suppliers including Westbrook whom it knew to have been successful in the DLA tender.

Globe was, as I have already remarked, without recent experience of manganese ore purchase or silico manganese production. On 2 September 2003 Mr Sims asked his manganese ore group, by particular reference to the DLA ore, “have we selected the ores blends that will work for us.” In a considered response Mr Curtis Goins advised:

“WE CAN USE 100% PYROLUSITIC ORE SUCH AS THAT OFFERED AS “CHEMICAL GRADE” BY THE DLA IF THE SIZE IS > 90% + ¼ INCH AND < 3 INCH. (MAY BE RESIZED IF NECESSARY). This would result, in my judgment, in the best furnace operation, greatest production rate, and least amount of slag. If the cost/Lb Mn contained is not a great deal more than that of metallurgical grade ores, and the trace chemistry and size are satisfactory, then “chemical grade manganese ore” is the ore to buy.”

Mr Goins had earlier in his paper noted that “pyrolusitic manganese ores are preferred and normally are used for 30-60% of the ore blend” giving as his authority the Bruno and Festoy paper, which certainly included the 30-60% figure. The advice as to the use of 100% pyrolusitic ore was not borne out by reference to that paper in that use of pyrolusitic ore alone would not, according to those authors, result in the best furnace operation. However that may be Globe apparently located no viable supplier of manganese ore other than Westbrook. One problem no doubt was that their fragile financial condition (and perhaps the novelty of the silico manganese venture) militated against importation of the sort of quantities of ore required to make supply from, for example, Australia, an economically viable option.

On 9 September 2004 Mr Sims made contact with Mr Walton, Managing Director of Westbrook. The contemporary documents demonstrate that Mr Walton was not keen to do business with Globe. He offered the Anniston ore at a price which included a significant premium to the market. To his surprise Globe agreed to buy 13,000 tonnes at just such a price on effectively an “as is where is” basis.

In September 2004 Mr Skip Davis of Globe visited the Anniston site. He carried out a visual inspection and he took away a sample of a small pile to verify the chemistry. He viewed the pile after rain and saw a mined face. He did not know what quantity of fines had been washed away in the rain. He approved the purchase of the material albeit on terms which included the following description: “Size: Lumpy – Typically 5x100mm with max 10% below 5mm.” The contract was made on 14 October 2004. Once the material began to arrive at Beverly the view was expressed at Globe that it contained too high a proportion of fines.

On the same day Mr Sims told Mr Walton that Globe was looking for additional manganese ore for 2005 and beyond, as much as 70,000 tonnes annually and, depending on how things developed, perhaps as much as 100,000 tonnes annually. Mr Walton responded that he had more material which was quite small and which he doubted Globe could use on its own, although he pointed out that Westbrook could import into the US some Lumpy ore to blend with it. Mr Walton concluded “would it be a good idea to get one of your guys to go and look at the material in Large (this is the material Highlanders used and want now) then you can say what you want to do.”

On 21 October 2004 Mr Walton told Mr Sims that there was also some as yet unsold Lumpy material at Large – from memory about 10,000 tonnes. On the next day 22 October Mr Walton gave Mr Sims details of some carbonate ore “that should make a decent blend with say smaller material ex Large.”

On 28 or 29 October 2004 Mr Schott and Mr Goins of Globe visited the Large site to inspect and sample the ore. Globe caused the samples to be analysed for chemical composition and moisture content by Andrew S. McCreath and Son. Globe carried out an internal sizing analysis. There were two samples from Pile No. 1 at Large. The “South” sample analysed at 57.36% less than ¼ inch and 71.61% less than ½ inch. The “North” sample analysed at 60.28% less than ¼ inch and 87.45% less than ½ inch. The sampling process did not conform to any standard designed to ensure that the samples were representative. So far as concerns the two bigger piles at Large Mr Schott said in evidence that he did not consider them to contain good material. Asked by Mr Hantusch “you saw two other piles which were overgrown – did you see anything in those piles that would have been suitable for your furnace?” He replied “I wouldn’t have put it in.” Mr Schott thought that Mr Goins agreed with him that the material was not suitable for the purpose for which Globe required it. He did not know whether Mr Sims appreciated that although he ventured that it was “perhaps why we was putting so much attention on this screening.”

Having obtained and considered the McCreath and the internal analyses on 17 November 2004 Globe reverted to Westbrook. Mr Sims e-mailed Mr Walton “Shaun, Large, PA chemistry looks okay. Can it be screened to plus ¼ inch and if so how much would be available?” A meeting was arranged for 13 December 2004. The principal purpose of the meeting appears to have been to discuss the nature of the imported Lumpy material with which Globe might blend the smaller ore. Mr Walton said that he would be accompanied at the meeting by “the guy from Ghana Manganese, he is technical so prepare yourself to be delighted by the technical benefits of using Ghana ore.” Ghana ore is carbonate ore and the “guy from Ghana Manganese” was Mr O’Shaughnessy.

Meanwhile on 6 December 2004 Globe entered into a contract with Glencore which on the face of it involved Glencore purchasing 100% of Globe’s silico manganese production at Beverly in 2005. However the actual contractual commitment was more modest. Production for the first quarter, estimated to be approximately 1,440 tonnes per month starting on 15 January 2005, was sold at US$0.419 per pound of material. There was no commitment with regard to production for the balance of the year, estimated to be approximately 4,320 tonnes per month. Pricing “for balance of 2005 [was] to be mutually agreed to [sic] with negotiations to take place no later than month prior to quarter commencement.” The price for the first quarter reflects the collapse in the market since the previous summer when prices in “the lower US$0.70s” were achievable. Globe’s untested budgeted cost of production was US$0.28 per pound. Globe took the risk that it could produce silico manganese profitably within the Glencore price. Mr Sims accepted that in entering into this contract Globe took “a big financial risk.” That being the case, I am inclined to think that Ryan’s Notes for 13 December 2004 were again accurate when they reported:

“…while Globe is still proceeding with plans to open at least one furnace in the first quarter to produce silico manganese, it is examining the decision on a day-by-day basis. “obviously, it isn’t as lucrative as before”, one insider said.”

The risk was however potentially mitigated by a force majeure clause to which Globe secured Glencore’s agreement which included “sellers shall not be liable for delay or failure of performance for economic reasons such as if it is no longer profitable for seller to produce the material.”

On 13 December 2004 the planned meeting took place at Globe’s offices at Beverly, Ohio. The meeting was attending by Shaun Walton of Westbrook, Nick Shilatz of USB Metals, Paul O’Shaughnessy of Ghana Manganese Company Ltd. and by Arden Sims, Skip Davis, Curtis Goins, Duane Huck, Robert Becker and Marlon Perkins on behalf of Globe. Mr Shilatz or more accurately his company was responsible for moving the material at Anniston and Large on Westbrook’s behalf. It was put to Mr Walton in cross-examination that as he was shown around the plant at Beverly in the course of or after this meeting he was told that it was very important to Globe that they did not have material that was below ¼ inch in size because such material would cause eruptions or blows in the furnace. It was later accepted, first by Mr Sims when he went into the witness box, that contrary to what had initially been said in the witness statements of Mr Sims and others, Mr Walton had not been shown around the plant. It was I am afraid increasingly obvious as the trial progressed that the witness statements of the Globe witnesses had not been prepared with sufficient regard to the need to ensure accuracy. Rather they put forward a case which in important respects bore no necessary relationship to the truth and could simply not be maintained. Some of the more egregious examples of this were removed by what were euphemistically described as “corrections” at the outset of the oral evidence in chief of the relevant witnesses. At least one witness, Mr Schott, had the realism to acknowledge that he had probably not read his witness statement very carefully before signing it.

In any event I unreservedly accept Mr Walton’s evidence to the effect that he was not told at this meeting either that it was very important to Globe that they did not receive material below ¼ inch or that such material would cause eruptions or blows in the furnace. Mr Walton was an impressive and careful witness whose evidence conformed both to the inherent probabilities and to what could be gleaned from the contemporary documents. The greater part of the meeting was taken up with the presentation by Mr O’Shaughnessy about the possibility of Globe using carbonate ore from Ghana. There was a brief and general discussion about the level of fines found in the first one or two barges of Anniston ore which had by now been delivered. Globe did express concern that the first one or two barges contained of the order of 21 or 22% material below 5mm, as recorded by Mr O’Shaughnessy in a note of the meeting. It should be noted that 5mms is less than ¼ of an inch. ¼ of an inch equates to 6.35mm. Mr Shilatz explained that the material was not screened but simply delivered as is and Mr Walton pointed out that the contract was to supply 13,000 tonnes and that Westbrook could give no indication on a barge by barge basis of what the fines content would be. It was no doubt inherent in what Globe said at the meeting that they regarded the material tendered as not conforming with the contractual requirement but the parties did not discuss this point at any length – they did not for example enter into any discussion of the meaning of the contractual term as to size bearing in mind that it was qualified by the word “typically” in circumstances where the buyers had themselves inspected and sampled the ore before purchase and where the contract imposed no requirement that the material be screened. In particular I reject the suggestion that Mr Walton was invited but declined to inspect the pile of Anniston material which had been delivered to Globe. Mr Walton thought that the point about the fines content had been raised as a precursor to Globe seeking a price reduction on the ore which they had received. As a result of this discussion Westbrook agreed that the independent assayer would in future carry out a sieve analysis and provide a size distribution.

There was discussion at the meeting about the possibility of Globe purchasing from Westbrook further ore, in particular from the stocks at Large and also from other sources for the purpose of blending with the Large ore. Mr Sims had already enquired on 17 November 2004 whether the Large ore could be screened to plus ¼ inch and I think it likely that it was on his initiative that the topic of screening the Large material was raised at this meeting. I think it likely that he asked whether the material could be screened over a ¼ inch screen, or whether material under a ¼ inch could be screened out, or words to that effect. Mr Shilatz explained that this wet material which had been in the open for decades could not be screened over a ¼ inch screen because the screen would simply “blind”, i.e. clog up. Mr Shilatz said that if the material was to be screened it would be better to use a ½ inch screen in an effort to try to remove the smaller material. It is quite plain that whilst Mr Shilatz did say that a ¼ inch screen would simply not work and that a ½ inch screen would produce a decent result, or words to that effect, neither he nor Mr Walton gave any guarantee whatsoever as to the outcome of such screening other than that it would result in significant amounts of under ¼ inch material being screened out. It is also to be noted that the emphasis of the discussion was on the removal of fines below ¼ inch, that of course being consistent with the advice given by Mr Goins that the Large material could be used if not more than 10% was below ¼ inch. It follows that I reject the suggestion that either Mr Walton or Mr Shilatz (although the latter was not in any event representing or speaking for and on behalf of Westbrook) said that the stock of manganese ore which Westbrook held at Large contained “Lumpy” manganese ore in excess of ½ inch in size and could successfully be screened to supply “lumpy” manganese ore of that size. If there was any discussion of “lumpy” ore at Large, which I doubt, that can only have been by reference to the small Pile No. 7 which had been seen by Mr Schott and Mr Goins and was indeed described by the DLA as “lumpy” in its publicly available material.

I also reject the suggestion that Mr Walton made the like representation to Globe in an e-mail timed at 12:36 pm on 12 January 2005. What that message actually said was, in the context of a reiteration of the discussion on 13 December 2004 concerning the inefficacy of a ¼ inch screen and the possible use of a ½ inch screen, “I have no problem we will screen at ½ inch.” This message contained no implied representation as to the likely efficacy of such screening. Such a representation would have been inconsistent with everything that had gone before.

Following further e-mail exchanges on 24 December 2004 Mr Sims e-mailed Mr Walton “Globe can take 22K MT of the Large ore + ¼ inch @ 3.50/DMTU.” Thereafter during January 2005 the parties exchanged draft contracts until agreement was reached on 20 January in the terms which I have already set out. In the course of this exchange Globe twice attempted to introduce a term to the following effect: “Size: Screened to 3 inch by ½ inch with maximum 10% below ½ inch.” Another attempt by Globe was: “Size: Plus ½ inch portion of material screened over properly maintained ½ inch screen. No minus ½ inch material will be included.” That none of these terms was accepted or, therefore, ultimately agreed is corroborative of the point that Westbrook had made no such representations as have been alleged as to the quantity of material in the Large piles in excess of ½ an inch or as to the likely efficacy of screening. Indeed one of Mr Walton’s responses to these various attempts to impose upon Westbrook an obligation to which they could not agree was “you need to make yourself happy that the material when screened is fit for your purposes. I cannot agree to your clauses on quality. If needs be please send your people to Large to do a thorough testing job.”

Inconclusive discussion about the size of the material delivered from Anniston and the nature and extent of Westbrook’s obligations in that regard continued during this period. Matters came to a head with presentation of the 5^th barge. On 14 January 2005 Westbrook and Globe resolved their difference in a pragmatic fashion. It was agreed that the Anniston contract should be cancelled with no further deliveries thereunder and no further recourse on either side. Globe were to accept the first 4 barges tendered including what they regarded as the excessive fines content. It was agreed that the “new” contract for screened material from Large, thitherto under discussion on the basis of 22,000 tonnes at US$3.50 per DMTU should be expanded so as to include a further 8,000 tonnes at the original (i.e. Anniston) contract price, viz, US$3.42 per DMTU. Hence the Large contract became that which I have set out at paragraph 2 above rather than simply a contract for 22,000 tonnes at US$3.50. Furthermore, Westbrook agreed to give to Globe a credit of US$20 per tonne on the entire tonnage delivered under the Anniston contract in the first 4 barges, an amount therefore of approximately US$120,000. This credit was to “be applied to the next 4 barges loaded on the new contract,” a formula which has given rise to a further dispute since in the event only one barge has been delivered and paid for under the “new” i.e. Large contract.

The Large contract called for the first barge to load before 28 January 2005. This did not occur and Globe at the time made no complaint about Westbrook’s failure and/or inability to begin loading within this timescale. The weather in Large PA in winter can apparently be expected to be bad but it was I find during January and February 2005 particularly bad. Mr Becker, Globe’s Purchasing Manager, visited the Large site on 26 January 2005 to meet Mr Shilatz and to discuss screening. He was accompanied by two retired former employees of Globe Mr Richard Clark and Mr Wayne Brooks. According to the latter two gentlemen the weather on their visit was cold and damp and there had recently been a large snowfall. Mr Becker himself in his witness statement described the weather at this time as “terrible.” Mr Shilatz, another impressive witness whose manner and evidence I found straightforward and convincing, said that this was a very cold period with snow and ice and freezing conditions generally. It was not conducive to the effective screening of already wet ore. It is true that the first, and ineffective, attempts at screening were made with a piece of machinery which was not up to the job. It was too small and, as I understand it, it had a vibrating reclined screen dependent upon gravity rather than mechanical agitation. If the agitation was in any way mechanically induced it was insufficient. However it seems to me that even had the superior “Cedar Rapids” machine which was later used been available at this early stage it would have been impossible for an effective screening operation then to have been conducted in the prevailing conditions. A diary entry made by Mr Shilatz on 27 January records the following:-

“LARGE PA

Meeting Wayne Brooks/Dick Clark

MAT [material] WET/FROZEN

Screening ineffective at this time

Decided to wait for Better Weather.”

On 27 January Mr Becker e-mailed Mr Andy Sharp, a trader at Westbrook, enquiring “what is the status of Large, PA Manganese Ore Barge.” Mr Sharp sent a temporising response on 28 January: “Robert, as you know from when you were there earlier this week the weather is causing all kinds of problems, they made some progress yesterday and I will get an update for you early next week.” On 1 February Mr Becker e-mailed Mr Sharp: “Nick [Shilatz] called me today and told me that he would not be able to screen the material. What are Westbrook’s intentions on completing the contract? Please advise.” Mr Sharp replied at 11:00 British Time on 2 February to the following effect:

“Robert, Unfortunately we cannot control the weather nor the temperature and as I am sure your representatives have advised the screening is impossible in present conditions. For the time being we will simply have to wait until the weather becomes more temperate and contusive (sic) to what we are trying to achieve.”

This message reached Globe early in the morning of 2 February. It is clear from a study of the messages being passed internally at Globe around this time that Globe were not operationally inconvenienced by the inability of Westbrook to commence effective screening operations and to load the first barge by 28 January and were content to allow matters to ride while they considered their options. They had sufficient alternative supplies of manganese ore for their immediate and medium term requirements. At a meeting at Globe’s offices on 2 February attended by at least Mr Becker, Mr Davis, Mr Huck, Mr Goins and Mr Clark it was agreed that everything concerning the Large contract would be “put on hold.” Mr Davis was asked to investigate further sources of supply. This was, as it seems to me, all part of Globe’s strategy of reviewing all their options. The crucial point is that Globe, by their lack of response to Mr Sharp’s e-mail of 2 February, indicated their acquiescence in the strategy of waiting for the weather to improve. Furthermore, whilst it may be of no relevance to the proper analysis of the position as between the two parties to the contract, it is clear that Globe fully appreciated that by so doing they were releasing Westbrook from any obligation either to load the first barge by 28 January or to deliver further quantities within any particular timescale thereafter. Thus on 2 February Mr Barenholtz, President and Director of Marco International Inc., the parent of Globe, enquired of his colleagues at Globe “does this mean that they [Westbrook] no longer have any time constraints? Will they wait until June for drier weather?” He went on to suggest ways in which Globe might attempt to require of Westbrook delivery of a limited tonnage between then and the end of April. Significantly Globe made no such attempt, content for their own purposes to acquiesce in the wait for better weather. Equally significantly however Globe now embarked on a deliberate policy of not communicating with Westbrook and in particular of not responding to Westbrook’s repeated queries as to their, Globe’s, intentions and requirements so far as concerned performance of the Large contract.

The backdrop to this commercially unorthodox behaviour, which in an era of instantaneous multi-medium communication by Blackberry and other means drew forth from Westbrook enquiries such as “is Arden Sims still alive,” is that it was in the same period that Globe came to the realisation that they could not produce silico manganese within the budgetary targets which they had set themselves. I do not need to make findings as to why this is so but on the basis of the evidence, which on this topic was far from complete since this was not a primary issue in the case, the basic and admitted reason was the inability to achieve the projected and budgeted level of electrical throughput in the furnace. Globe ascribe this inability to the use of poor quality Anniston ore with a high level of fines. They make the point that the average daily power level achieved in the furnace was better when a mixture of Uniontown and Anniston ore was used than during either the start-up period during which only Anniston ore was used or the periods 22-28 February and 1-23 March during which first Anniston ore combined with agglomerated Anniston fines and then again pure Anniston ore was used. This is quite true but, as it seems to me, not conclusive of the point. The furnace never achieved the budgeted average power input of 10,269 kW – indeed it never did much better than a shortfall from that figure of about 12%. The Anniston ore was indeed unsuitable in that a pyrolusitic ore is too highly oxidised to be used in this application without blending with other ores, and it may be significant that the results were better when a blend was used, although I am not sure that the evidence revealed of what type was the Uniontown ore. However I found convincing Mr O’Shaughnessy’s evidence on this topic, informed as it was by his extensive relevant experience. As early as 21 December 2004, in a follow up to the 13 December meeting, he had recommended a 25% power reduction for Furnace No. 1, predicated on the use of carbonate ores. For a highly oxidised ore, the power reduction required for optimum operation should have been even greater. This advice was not followed. Furthermore Globe used excessive quantities of coal and coke, thereby increasing the conductivity of the furnace charge causing the electrodes to rise away from the hearth of the furnace. When this occurs, the surface of the furnace overheats and the hearth cools. The net effect will be a lowering of the average operating power level in kW and a resulting loss of efficiency and of daily production. Globe also dried the Anniston ore before use which increased its exothermic qualities and thereby increased the risk of eruptions which Mr Goins had in any event identified for Globe as a risk attending the production of silico manganese.

At all events, whatever the cause, Globe found itself unable profitably to produce silico manganese, so much so that it ended up buying in two relatively small parcels, about 450 tonnes in all, in order to fulfil its obligations to Glencore. At the beginning of March there were discussions between Globe and Glencore concerning the possibility of agreeing a price basis for the second and subsequent quarters of 2005. On 4 March Mr Sims e-mailed Mr Young of Glencore:

“…the large tonnage was to come after this quarter depending on a pricing agreement between us. As we discussed Globe’s pricing needs and the price you need for the market are just too far apart to get together on.”

Mr Sims described this in evidence, admittedly in answer to a leading question, as “cancelling” the Glencore contract. It was not of course cancellation in the strict sense but it signalled the end of any prospect that Globe would supply Glencore with silico manganese beyond the first quarter. Globe in fact ceased production of silico manganese on 23 March and, as I have already indicated, on 31 March and 1 April 2005 bought in two small parcels in order to fulfil the contract. The price at which they bought in on the market appears to have been marginally cheaper than their own production and freight cost.

From this point forward Globe had no use for the manganese ore which they had contracted to buy from Westbrook. I found unconvincing the assertion that Globe harboured an intention to re-start production once satisfactory supplies were received from Large. Their conduct which I must shortly describe is consistent only with an intention to extricate themselves from the Large contract by whatever means possible. Furthermore on 17 March 2005 Mr Schott, Globe’s Environmental Manager, contacted the South Eastern District Office of the Ohio Environmental Protection Agency by e-mail with a view to bringing forward a test procedure scheduled for 20 April 2005. The relevant test was a “visual opacity” test. It was brought forward to 23 March because Globe “has decide [d] to halt production of SiMn near the end of March 2005.” It is true that a letter sent, I presume, subsequently, speaks of a decision temporarily to halt production of SiMn and uncertainty “when we will resume SiMn production.” There was no opportunity to question Mr Schott about these documents since they were only disclosed after all the Globe factual witnesses had given their evidence and returned to the USA. The formulation in the letter may have been more cautious than that in the e-mail – it does not persuade me that there was any intention to resume production using the Large ore. Indeed both the e-mail and the letter include the following passage:

“We initially started out with 13,000 tonnes of ore and were in the process of purchasing more but the quality of ore needed is not available at this time.”

Mr Hantusch submitted that the EPA tests would have been wholly unnecessary if production had been about to cease forever but there is no evidence that this is so. Indeed what is stated in these communications and the somewhat equivocal evidence on the point which I heard from Mr Huck, Operations Manager at the Beverley Plant is, as it seems to me, at the least as consistent if not more consistent with the test being required to be carried out in order to ensure that the production of silico manganese since 14 January 2005 complied with the regulatory requirements. Globe had agreed to allow the EPA to carry out an inspection and to conduct a test and could hardly tell them that it was no longer possible to conduct that test. Belated production of these documents also completely undermined Globe’s assertion that it had been a serious eruption which occurred on 23 March which led to the cessation of production of silico manganese on safety grounds. Globe’s evidence on this point was not improved by the fact that to a man their witnesses who spoke to it, including their independent expert Mr Craig, had initially asserted that this serious event occurred on 24 March. It was only after Westbrook’s expert Mr O’Shaughnessy pointed out by reference to the furnace records that by this day silico manganese production had in any event already ceased that the Globe witnesses all professed to have made the same mistake. Mr Craig had apparently studied the furnace records himself before writing his report. I find this episode puzzling, and my confusion is deepened by the diary note made by Mr Huck of an 08:30 staff meeting on 23 March which makes no mention of a serious and apparently alarming eruption which apparently he had himself witnessed only 30 minutes previously. It will be apparent from what I have said already that the furnace records themselves are not conclusive on this point either, the record for 23 March being, as it seems to me, when compared with other entries, rather more consistent with a planned shutdown at 08:00 precisely than with the occurrence of a serious incident at about that time. Since however I am satisfied that, whatever occurred on 23 March, the decision to cease silico manganese production for the foreseeable future had by then already been taken, with the consequence that Globe had no use for the Large ore, I need come to no final conclusion as to what actually happened on 23 March.

Between 4 and 23 February 2005 Westbrook sent numerous e-mails to Globe and made repeated telephone calls. The purpose of these messages and attempts to communicate was to ascertain what were Globe’s intentions with regard to the contract. Thus on 4 February Mr Sharp e-mailed Mr Sims to indicate that the weather was looking up at Large so that hopefully screening of manganese ore could begin if there was sustained improvement. Instead of responding to this message and to a further query in the same message on an unrelated matter Mr Sims merely passed the e-mail to Mr Becker and asked him what he had heard about screening at Large. On 15 February Mr Walton e-mailed Mr Sims as follows:

“As you know we are awaiting drier weather in order to screen the manganese ore as screening it now will not give you the result you require. Do you have any ideas of what to do in the interim?”

The e-mail contained two further unrelated queries. Mr Sims simply did not reply. On 18 February Mr Walton enquired “Arden, please advise what is happening do you still require the Ore? Please let us know.” Again there was no reply. On 21 February Mr Walton e-mailed Mr Sims:

“Arden, we are planning to move a separate screen down to Large to screen the Manganese Ore for you, before we do this please can you clarify what is happening. I have sent numerous e-mails concerning the contract with you and have as yet received no response whatsoever. Please advise.”

Instead of responding to this Mr Sims enquired of Mr Becker “when does the contract with Westbrook call for the ore to be delivered? By the end of March?” On 22 February 2005 Mr Walton sent a fax message to Mr Sims in these terms:

“Re: our sales contract 920643 for 30,000 tonnes MN ore

URGENT

Arden we have been trying to contact you by telephone and e-mail for the last few days to discuss the above contract. We are ready to install new screening equipment to produce the sized MN ore as per the contract and would like some feedback from your side before we proceed.

We know you are keen to have input and possibly have a presence on sight (sic) during the processing so your response is vital in order that we can proceed without any further delay.

Please revert by telephone or e-mail our contact details are as follows:

…”

Not only did Mr Sims not respond to any of Westbrook’s communications during this period, he instructed his employees not to speak to Westbrook or to Mr Shilatz or to anyone associated with Westbrook about the contract or the Large ore. This instruction placed Globe’s employees in some difficulty. When responding to Mr Sims’ question about the period over which the Westbrook contract required delivery Mr Becker added:

“Nick Shilatz has made multiple phone calls to Skip [Davis] and I. He called yesterday afternoon and I didn’t know it was him. We spoke about the Baltimore Ore and then he wanted to know the status of the Large, PA material. I avoided the question. He is calling again today to talk more about the Baltimore Ore. He will ask again about the Large, PA material. Please advise.”

What that meant, as Mr Becker somewhat reluctantly I thought conceded, was that Mr Shilatz had made telephone calls both to Mr Davis and to himself which they had not answered but that Mr Shilatz had finally got through to Mr Becker on an occasion when Mr Becker did not realise that it was Mr Shilatz calling and had only accepted the call inadvertently.

Mr Shilatz having finally established contact with him, Mr Becker on 23 February spoke with him again. He told Mr Shilatz that Globe was trying to decide what they wanted to do about the Large ore. Mr Becker denied having said this but it was recorded in Mr Sharp’s diary note for 24 February, he having obtained that information from Mr Shilatz, and it was indeed the case that Globe was trying to decide what to do. In reality they were hoping to manufacture an opportunity to escape from the contract. This I think is the explanation for Globe’s extraordinary conduct not just in refusing to speak to Westbrook but also in relation to certain invoices which had recently been generated by Globe supplying some parcels of silicon metal to Westbrook.

The first written communication from Globe to Westbrook since, I think, 1 February 2005 was on 23 February, concerned the supply of silicon metal by Globe to Westbrook and read as follows:

“Subject: Past due invoices

Hello Gentlemen. Globe shows the following five invoices as past due. We have a shipment pending Westbrook for tomorrow. Please remit payment on these past due invoices.

29213 US$34,104.75

29214 33,006.00

29239 34,807.50

29250 33,048.75

29258 34,830.75.”

These invoices were in fact dated, respectively, 15 February, 15 February, 16 February, 17 February and again 17 February. The terms of this contract were effectively cash against delivery, but it is I think inconceivable that if Globe had had any real concern that Westbrook was likely to fail to pay these invoices that they would not have been sending e-mails or faxes demanding payment rather earlier than 23 February. Mr Sims said in evidence that efforts were made to contact Westbrook by telephone during this period. If such attempts were indeed made, and if they were unavailing, and if Globe were genuinely concerned about non-payment, they would surely have recorded their concern in permanent form. Both Mr Walton and Mr Sharp responded to the query concerning past due invoices saying that Westbrook did not have these invoices, although, in the case of Mr Sharp, he had been waiting for them, and they both asked for them to be resent for prompt settlement. As it happened, the invoices had indeed been delivered by courier, but Westbrook had just moved offices within a large building and the invoices had not progressed beyond the receptionist. Neither Mr Walton nor Mr Sharp had seen them. Globe were not to know that, but I find it astonishing that their immediate response, by Mr Sims, was:

“I have instructed our attorneys to immediately take legal action to collect the invoices you have refused to pay.”

This was Mr Sims’ first communication with Westbrook for three weeks. Westbrook in fact made payment by wire transfer on 25 February, on which day Mr Sims spoke also to Mr Sharp telling him, in effect, that Globe still wished to take the Large ore on which they had never changed their mind and that they had enough ore to last until 28 March. Mr Sharp’s contemporary note of the conversation ends: “Schedule of 3 weeks works for them” which must, I think, indicate that a possible schedule of deliveries was discussed and that Mr Sims expressed himself content with it.

Mr Sims said in evidence that he had instructed his people not to discuss anything with Westbrook or with their associates until the issue was resolved with the silicon metal. He was he said concerned that Westbrook were having problems delivering the ore per the contract and that they had run up over about US$169 or 170,000 worth of unpaid invoices with Globe and that “they would hold those invoices and put pressure on us with regards to the Large contract.” He was he said concerned “that they [Westbrook] were going to try to tie the two together: the Large contract and the lack of payments for the silicon metal.” … “I had the concern that they were not going to be able to perform on the Large contract and that we would go into negotiation with them withholding money owed to us from the silicon metal contract.” I am afraid that this explanation makes no sense. For a start, the period of non-communication with Westbrook began long before Globe can conceivably have thought that Westbrook were deliberately running up unpaid invoices. No such invoice was rendered between 18 January and 15 February – the 18 January invoice was paid on 19 January. Secondly, Mr Sims had no concerns whatsoever arising out of Westbrook’s difficulties in performing the Large ore contract. He must by now have been well aware that Globe was unlikely to wish to agree terms on which they would supply Glencore with silico manganese beyond the end of the first quarter. Globe had sufficient ore to meet their commitments. Thirdly, if Westbrook were to encounter difficulties in performing, it makes little sense to think that they would be looking to Globe for compensation in respect thereof. The reality, as it seems to me, is that Mr Sims knew that he would shortly be seeking to extricate Globe from the Large contract. He did not want there to be outstanding from Westbrook to Globe any sums of money in respect of which Westbrook, faced with Globe’s unwillingness or refusal to perform, might seek to exercise a set-off. Not only is this view consistent with all that had so far happened, so too it is borne out by what happened subsequently, including for example Mr Sims’ request on 4 April that Mr Walton should provide a signed notarised affidavit confirming that there was enough material at Large to fulfil the contract. What motivated this bizarre request was, I have no doubt, a hope that Globe might be able to rely upon an alleged deficiency in the material at Large as entitling them to terminate the contract, an entitlement which they did indeed assert at trial before me.

Screening of the manganese ore at Large commenced on 21 March 2005 using the Cedar Rapids equipment to which I have already referred. The operation was actually carried out by Mr Dennis Porta, a self-employed man who frequently worked with and for Mr Shilatz. He was the only person actually present throughout the screening operation. He too gave evidence before me. He was in every respect an admirable witness. Mr Clark and Mr Brooks attended regularly at Large between 22 March and 4 April in order to witness the screening and to take samples. They were not familiar with the terms of the contract. They did not even know the quantity which had been purchased. So far as Mr Clark was concerned, Globe had simply “bought the pile” of manganese ore, although he did not know whether they had bought the whole pile or simply a portion of the pile. At no time on site did Mr Clark and Mr Brooks ever suggest that the screening process was anything other than satisfactory. Indeed, they were complimentary about it. As Mr Clark put it in his evidence, he came back from Large to Beverley and reported that the product of the screening process looked pretty good. He thought that Mr Porta and his team were working hard and doing a good job. A screen test conducted at Globe on samples which Mr Clark and Mr Brooks brought back on 22 March showed that 29.8% of the sample passed a half inch screen. On 5 April 2005 there was produced at Beverley a two page “Report” which purported to set out the observations of Mr Clark and Mr Brooks on the screening process at Large. Mr Clark said in evidence that this report was “pretty much” in his own words in that he dictated it to Mr Becker from his notes, Mr Becker typing it simultaneously onto his computer. I am afraid that I must reject this account. Mr Clark would not in my judgment have had the ability to produce a document of this detail in that way merely from such of his notes as I have seen. The “report” also attributes to Mr Shilatz statements that he had not made. I doubt if Mr Clark would have been the initial author of this misattribution. The report is no more reliable as an accurate statement of the personal observations of Mr Clark and Mr Brooks than were their witness statements. I need not dwell on that but the cross-examination of Mr Clark revealed one or two particularly egregious and lamentable examples of words having been put into his mouth which passages, as he explained, he “must have overlooked” when he signed the statement.

On 1 April 2005 Mr Sharp advised Mr Sims by e-mail that Westbrook planned to load a barge at the beginning of the following week. He also attached a provisional invoice saying that payment by return would be appreciated. This was a mistake, no doubt prompted by the fact that under the Anniston contract payment was due prior to barge loading. There was no such similar provision in the Large contract – I have already set out the relevant payment terms. The invoice tendered also made no provision for the credit due pursuant to the compromise reached of the dispute concerning the Anniston contract.

On 4 April Mr Sims asked for the invoice to be reissued with the appropriate credit. Mr Sharp responded immediately by e-mailing a credit note for US$31,000. Mr Sims also said that he would forward the name of the company that would be responsible for issuing the contractually required sizing and analysis certification. Globe never in fact put forward any proposal in this regard.

Later on the same day Mr Sims e-mailed Mr Sharp “our person on site questions if there is enough material remaining to fulfil contract. Please comment.” This was on any showing a strange message. Neither Mr Clark nor Mr Brooks knew anything about the details of the contract. At the most this enquiry could only have been prompted by an observation by one of them to the effect that material from “the pile” appeared to have been removed and not supplied to Globe. In circumstances where Westbrook were only now tendering delivery of the first barge, and where Globe had no use for that material let alone the balance due, it can hardly have been a matter of concern to Globe that Westbrook might in due course prove unable to deliver every last tonne due under the agreement. Indeed, Globe would have been delighted had there been an overall short delivery. Furthermore the ore at Large had no properties which rendered it any more attractive or valuable to Globe than any other ore. Globe could have required Westbrook to perform the contract in full or to pay damages for the amount short-delivered and it would have been of no consequence whatever to Globe had Westbrook been obliged to buy in ore from an alternative source in order to fulfil their entire obligation. As I have already indicated, I have no doubt whatever that this represented the beginning of a ploy pursuant to which Globe hoped to be able to rely upon an alleged deficiency in the material at Large as entitling them to terminate the contract.

There followed what, with some justification, Mr McParland for Westbrook characterised as a charade. It has to be said that Westbrook were seeking payment before loading and therefore before provision of the various shipping documents upon which payment was in fact contractually contingent. Globe were entitled to resist that suggestion. However that of itself was not an explanation for the totality of their extraordinary conduct – and indeed the prematurity of the request for payment was not something upon which they commented until 6 April by which time the exchange of messages concerning the amount of material available to fulfil the contract was quite well-advanced.

Thus Mr Sharp responded to the first enquiry “we have reserved more than sufficient material to produce the tonnage required!” although this retort would have been better had it stopped there, rather than going on to ask for confirmation of payment by return “prior to loading the barge as per contract.” Mr Sims’ response was “suggest you recheck the amount of material available. The representation made by the people doing the screening is there is significantly less material remaining than is need [sic] to fulfil the contract.” Neither Mr Porta nor Mr Shilatz had said any such thing – it is inherently incredible that they would have volunteered such information and neither Mr Clark nor Mr Brooks would have made an enquiry to which this would have been an appropriate response. Mr Sharp replied:

“Arden would you please have the decency to answer my question about payment rather than ignoring me! We have a barge booked and material ready to load we just need you to fulfil your side of the agreement.”

This was of course for the reason I have already explained wide of the mark although that hardly explains the tone of Mr Sims’ response which was:

“Andy the question is simple. Do you have enough material to fulfil the Large PA contract. Yes or No. If you do not response within 1 hour (5pm New York time) then I will take it that the answer is no.”

Mr Sharp’s reply, still on 4 April, was:

“Arden I repeat that we have reserved enough material to fulfil the contract, if we came up short of material in the pile which I do not anticipate we have material in barges loaded from the same pile that could still be screened to make up any shortfall! When will you make the payment? I have given you everything requested now I would appreciate you giving me the same attention to my request and respond within the next 1 hour. It is late here I want to have this finished tonight.”

It was to this message that Mr Sims sent the response which I have already described as bizarre. Still on the same day, 4 April, he replied:

“If you are saying that you are absolutely positive you have enough + ½ inch material to fulfil the contract then Shaun should have no problem sending a signed notarised affidavit confirming that there is enough material to fulfil the contract. The observations of the person we have on site and your representatives on site based on what they have us do not believe that there is enough material to fulfil the contract.”

Mr Sharp in turn replied:

“Arden are you going to take this material or not? The material is ready the contract calls for your payment not a signed affidavit Shaun is travelling until Wednesday and he will be able to revert but right now we have performed and we are expecting you to do likewise.”

Mr Sharp followed up this message on 5 April with the following:

“Arden we are still waiting for your confirmation that payment will be made as per contract. The barge is ordered and will be ready to load on…

We have screened and prepared the material as agreed under the supervision of your representatives now we expect you to perform and pay the invoice on loading as per contract.

If you fail to honour the contract then we will be forced to sell the material against you, should we be forced to take that course of action we will hold you wholly responsible for any and all losses and charges we incur as a result.

If you do not confirm today that payment will be made and we have no payment at the time the barge begins to load we will take it that you are reneging on the contract and ship the material to New Orleans for sale against you.”

Later on 6 April Mr Sharp e-mailed Mr Sims in these terms:

“Arden, still waiting for your response. If we are to load on Friday 8^th April we have to confirm the barge to the line today by 17:00 hours London time (GMT). Therefore if I do not receive your confirmation by then that you will pay the invoice provided I will assume that you have no intention of taking delivery against this contract. We will then stop the screening and make plans to sell the whole contract quantity elsewhere, and hold you responsible for all losses and incurred as a result.”

The response of Mr Sims was, I think, if I have the messages in sequence:

“Thanks for your reply. So there are no misunderstandings and no additional unnecessary costs, we will not be paying for material that our representative viewed on Monday since it does not comply for the reasons I stated today. We look forward to your advice as to when you will screen and prepare a new batch so that we can send our representative there again to view it during screening to make sure you are able to provide compliant material.”

Another message sent by Mr Sharp on this day, I think in sequence a response to the message I have just set out, read as follows:

“We have had no such negative feedback from your representatives during all the time they have been present during the screening process. Further we went to the expense of installing different equipment than originally proposed in order to produce a better sized material. The equipment used was trialled with your representatives present to their satisfaction and their feedback to our representative (USB) during the course of the screening has been positive.

Now we have booked the barge to load on Friday “barge weight to be determined by draft survey and moisture to be determined by independent assayer cost for (our) accounts” we will also instruct them to perform the size distribution. We will appoint Alternative Testing Laboratories at Lemount Furnace PA 15456 as independent assayer to take and prepare samples.

Then we will present as soon as possible after loading the contracted documents “Commercial Invoice, Fax copy bill of lading, Independent draft certificate, size distribution and moisture determination” for payment.”

Globe made no response to the nomination of Alternative Testing Laboratories, to which I shall refer hereafter as “ATL”, as the independent assayer.

The next message in this sequence is a substantial one sent by Mr Sims on 6 April. Because of its importance I must set it out in full. It read:

“Dear Andy,

Contrary to your representations that you have tendered proper delivery as required by our agreement, you HAVE NOT.

1 – Our agreement calls for payment against various documents including, without limitation, a survey report, a copy of a barge bill of lading as well as a commercial invoice. You have only provided a copy of a commercial invoice. Therefore, in any case, no payment is due to you at this point. Surely you can understand that based on prior experience in receiving Mn Ore from you which was non-compliant (for which there still remains a significant amount due to us from our claim that you have accepted and acknowledged) it is quite unreasonable for you to expect payment without, at the minimum, providing the compliant documents.

2 – You state “We have screened and prepared the material as agreed under the supervision of your representatives”. While you have “prepared the material under the supervision” of our representative, what you fail to mention, and what we are aware you fully know, the material was prepared NOT in accordance to our agreement and is out of spec. The material is to be screened to screen out the below ½″ material so that it can be used to produce Si Mn. In fact no less than 30% of the material that was “prepared” is below the ½″ size. Furthermore, we have been informed that you have, screened the material while wet in order to artificially increase the amount of “prepared” material over ½″ (and by doing so, hide the true content of fines), so that it is likely that even greater than 30% if the material is actually … (below the ½″).

Your threat of selling the material and holding us responsible for losses is very telling. As is well known, the price for Mn ore has continued to increase since the time of our formation of the agreement and so the only conceivable explanation for your expecting any loss, can only be because you are aware that the material does not comply with our agreement and that it in fact contains significant level of fines which render the ore commercially unusable for its intended purpose, which is known to you – the production of silico-manganese.

To be clear, Globe will comply with the agreement (just as Globe expects you to comply with the agreement) when you can demonstrate that:

a – you will supply the fully agreed to amount.

b – you will supply material compliant with our agreement which includes proper size, chemistry and suitability for the purpose for which it was bought.

c – you have provided compliant documents.”

The suggestion that Westbrook had artificially increased the amount of prepared material over ½-inch in size is particularly reprehensible. It is a reference to the fact that Mr Porta adopted the sensible expedient of clearing the screen with a high pressure hose when it blinded, a practice applauded by Mr Clark and Mr Brooks.

Mr Sharp’s response to this long message was concise:

“Arden, we have every intention of complying with the contract, that is and has been our intention all along. I will book the barge to load on Friday with the material screened under your representatives supervision and approval and present all documents required by our contract for payment. We will expect the settlement against documents promptly by return, all we have wanted all along was your commitment to abide by our contract. Barge details will follow as soon as available.”

The sequence of these e-mails is not always easy to reconstruct. Another message sent by Mr Sims on 6 April, evidently not responsive to Mr Sharp’s message which I have just set out but to a longer message was the following:

“Andy we will not continue this running debate. You know our position which has been explained and documented. The material is non-compliant and we are not accepting nor paying for the material our consultants have viewed. If you wish to load a barge with the non-compliant material, do it at your own risk and pleasure. If you wish to load a barge with different material, and you wish us to view it to see if it is compliant beforehand, please let us know and we will arrange to be there. Without your notice to such effect, we will assume you are loading the non-compliant material and we will not be accepting it.

By the way, your opening paragraph is inconsistent with fact….”

On 7 April Mr Walton, who had been away, became involved in these exchanges. He e-mailed Mr Sims as follows:

“Arden I have been away and uncontactable which I hope you believe this time and I am only now catching up on your e-mails. Arden as you know in January there was a large amount of snow and so yes the material was too wet to screen and that is why screening took a little longer and why we employed a different screen which did a much better job which was approved by your people. If it wasn’t why have they waited until the job on the first barge has been finished which has taken probably a couple of weeks in which time I believe they have been present nearly if not all the time.

I see from Ryan’s Notes and hear in the market that you are not producing silico manganese and so have no requirement for manganese ore so Arden why don’t you drop this silly charade and we can resolve the problem.

Alternatively the manganese ore we will load for you is exactly as per contract and has been screened over a ½″ screen as supervised by your people. We will provide documents as per contract and expect payment as per contract. The contract will not be amended to include extra terms and documents as you entered into it by your own freewill and we expect a company such as Globe to either honour the contract or stand by their commitments and find a honourable solution.

We await your confirmation which route you wish to take.”

The final message in this sequence is Mr Sims’ response to Mr Walton’s message, again sent on 7 April:

“Shaun, you can deduce what you want, but the reason for the presence of the consultants was to prevent your tendering to us non-conforming material like you acknowledge you did on the first contract. Bottom line is that the consultants have reported to us that the material you have prepared is non-conforming and that the process you are using is flawed and will not remove the minus ½ inch Mn ore.

I have no comment to make about what Ryan’s notes reports nor do I know where they get their information, but to the extent that Globe is forced to delay its production of SIMN, it will directly be the result of your delay in supplying the ore required to produce SIMN as well as your apparent inability to supply Mn ore that will comply with the agreement and that is suitable for making SIMN.

Our position is unchanged from yesterday, namely we are not going to accept non-conforming material you have prepared and if you proceed to load it on a barge, that is your responsibility since we are telling you up front we are not [going? See Bundle 5.1(C) p514] to receive or pay for it. Secondly, we reiterate our offer to send the consultants back again to the sight [sic] to see if you are able to prepare conforming material.

We have already put up with considerable delays and do not intend to put up with it any longer, so we suggest you stop the “charade” of trying to put forth material that everyone knows does not comply with the agreement since it is the wrong size and is not capable to commercial produce SIMN, and proceed to fulfil your responsibility to supply as per the agreement and not as you did the last time which as you have acknowledged has caused us significant damage.”

I should at this stage deal with the contention that material below ½″ in size was non-conforming. It was the contention of Mr Hantusch that it was implicit in the requirement for screening that it be done properly and effectively. Had it been done properly and effectively, he submitted, the result would have been that no more than 10% of the material not passing the screen and hence tendered for delivery would have been below ½″ in size. There are a number of difficulties with this approach, not least that the figure of 10% is completely arbitrary and not of course spelled out in the contract. Furthermore, it was until shortly before the trial Globe’s pleaded case that the contractual term provided and required that the screening be carried out properly and effectively and in accordance with good industry practice and that all material under ½″ in size (which material was described as “fines”) was to be screened out. Although it was not pleaded on either side that the contractual term had any recognised meaning in the trade, Globe’s expert witness, Mr Craig, said in his first report that he entirely agreed with the relevant paragraph in Globe’s pleaded case which at that stage was to the effect that the contractual term required the removal of all sub ½″ fines. Since I doubt whether any of the expert witnesses had any relevant or admissible evidence to give on the topic of what the contractual words mean, as opposed to some background as to what is and is not feasible in practice, I do not need to dwell on Mr Craig’s explanation of how what was he said an error came about. Mr Craig did however make some telling and relevant points in his first report as follows:

“There are really no significant variations of opinion as to what the process of screening involves although there exist several different techniques and a wide range of equipment. However, there are widely varying opinions on the results of what the screening process can or should produce. This is why it is imperative to formulate contracts for screening processes with clearly defined expectations and requirements (detailed sizing specifications for the products of the screening operation).

The effectiveness of any process involving the screening of manganese ore is heavily dependent on several factors including, but not limited to, the quantity of ore to be screened, the allowable time to perform the screening, the physical properties of the ore to be screened, weather and other environmental factors, the condition of screening equipment, the experience of the operators, adherence to proper procedures and the sizing specifications of the final, intended product (s).

The contractual term ‘Size: screened over +½″ screen’ is very open-ended (especially for manganese ore) and is one of the fundamental problems regarding the contractual dispute between the parties. Stipulated alone without any additional specifications for the intended product (over-size) promotes subjective interpretation of the effectiveness of the screening process in removing the under-size particles (smaller than ½″).

In general, my personal experience with screening operations within the industry (manganese alloys) yield expectations of a final, intended product containing no more than ten percent fines (by weight). In fact, the maximum 10% figure is referenced routinely as a typical specification for alloy sizing by ASTM (American Society for Testing of Materials) standards. However, screening of manganese ore yields results (undersize) which vary widely on a case by case basis primarily due to the physical characteristics of the ore being screened. …

… I note that despite the fact that attempts were made to screen the ore properly and in accordance with acceptable industry practice, the screening process was not effective as demonstrated by granulometry tests of samples extracted from +½″ material which contained significant levels of fines. The process was not effective due to several contributing factors including, but not limited to, inclement weather (sub-freezing temperatures and precipitation) and the inherently deleterious physical properties of the manganese ore stored at the Large, PA DLA depot (high moisture content, mud-like, sticky and containing a large proportion of fines).”

Put bluntly, pieces of manganese ore naturally stick together and to the screen as a result of their rough edges and moisture content. Most ore contains moisture, both naturally because it is mined from rock that is porous and as a consequence of storage in the open. The length of time over which and the conditions in which storage took place at Large simply but greatly exacerbated the obvious problem. It is precisely because Mr Shilatz, with his relevant hands-on experience, appreciated the problems that he (a) counselled against the use of a ¼″ screen and (b) carefully gave no guarantee whatever as to the outcome of the exercise using a ½″ screen. Leaving aside the suggestion of drying the ore, which would obviously have cost more, was not reasonably practicable at the DLA Large facility and which no-one expected to be carried out, I do not believe that the evidence came close to justifying the conclusion that the screening was not properly carried out. Indeed, Mr Craig’s shorthand was to an award an ‘A’ for effort but a ‘D’ or ‘F’ for results. The proper conclusion is I think that the contractually agreed method of screening was carried out entirely properly and diligently. Mr Craig pointed out that there were repeated instances where USB actually screened the material not once but twice and even thrice. However despite their very best endeavours the exercise could in all the prevailing circumstances be no more effective than it was. In that regard I would note that while the screen analysis of the material shipped on the first barge in the event showed 25.1% as passing a ½″ screen, it cannot be assumed that that would prove typical of the entirety of the material which would in due course have been shipped. It seems to me perfectly possible that as weather conditions improved, the more dry environment and higher ambient temperatures would be likely to militate in favour of the exercise being more successful in screening out the smaller material. Although it is not relevant to the question of construction which I have to decide, it is also worth recording at this point that the emphasis of the pre-contractual discussion was on the removal of fines below ¼″, not fines below ½″. Even the first barge had, according to the ATL analysis, only 11.3% below ¼″.

I reject the analysis of Mr Hantusch that the contractual term required the screening to be done properly and effectively, not least because those adverbs are too imprecise to be given contractual content. I would prefer the formulation that the term calls for something which can properly be described as screening. I am not sure that Mr Hantusch ultimately pressed the suggestion that the contractual term required the screening to be in accordance with good industry practice. If that was required, Globe came nowhere near demonstrating that the measures adopted by Westbrook did not, in the prevailing circumstances, represent good industry practice. Indeed, as I read Mr Craig’s evidence, it is to the effect that despite the adoption of acceptable industry practice the screening process could not in the prevailing circumstances be more effective than it was. What is however on any view clear is that the contractual term did not import any criterion relating to the success or efficacy of the screening operation. It is for that reason that the foregoing discussion is to my mind in part academic. On the facts here, the only complaint that can be made about the screening operation is that it did not bring about a particular result – the result for which Globe ultimately contended being removal of all but 10% of the material under ½″ in size. However, in my judgment the contractual term used is not one that calls for the achievement of that result.

Mr Hantusch asked rhetorically what is the purpose of the contractual provision for size confirmation by mutually agreed survey company and independent size distribution if the only obligation is to pass the material over a ½″ screen. He argued that the size confirmation and size distribution had to have reference to result, the result for which he contended being 10% and no more as ½″ fines. I have already rejected the suggested result – it is not what the contract says and there was no evidence of any custom or contractual usage out of which it could be spelled. The adoption and adaptation of standard form wording often brings about inelegances or loose ends when, as is usually inevitable, not every ramification of every change is fully thought through. The purpose of a size distribution is clear – it is information which is useful to a buyer if he is using the material himself and which may be essential if he wishes to resell. In my judgment in the context of this contract the provision for size confirmation here adds nothing to that for size distribution, which is no doubt why neither contemporaneously nor in the exhaustive pleadings did Globe ever complain that Westbrook had failed to tender an appropriate size confirmation. Before dealing with the final complaint which was made about the size distribution determination, that it lacked the necessary independence, I will just complete the story as it unfolded between 7 April and 6 or 9 May when the contract was finally terminated.

The first barge was loaded on 12 April. The invoice and shipping documents were sent by Westbrook to Globe on 21 April. As I have already noted the ATL analysis showed 25.1% passing a ½″ screen.

On 22 April Mr Sims e-mailed Mr Sharp as follows:

“Is this the same material that Globe’s consultant observed? I don’t see the credit for the non-spec Anniston, AL ore. The screen test in the documents you e-mailed showed 25% -½″. Is this undersized material in the quantity invoiced?”

Mr Sharp replied on the same day:

“We issued a credit note for US$31,000.00 at the beginning of April this credit Wrl 907535/2 can be applied against the recently presented invoice. The material loaded to barge which the documents refer to has been ‘screened over +½″ screen’ as per contract and the results are as per documents present. Can you confirm when payment will be made to our account?”

On 25 April Mr Sharp chased for payment:

“Can you please revert on the status of the payment against documents sent last week, the barge is loaded and ready for dispatch. Look forward to you [sic] prompt response.”

In response Mr Sims re-sent his previous e-mail omitting the reference to the credit, a credit note in respect of which he had had since his request of 4 April was met on the same day. Thus his message of 14.30 on 25 April read:

“Is this the same material that Globe’s consultant observed? The screen test in the documents you e-mailed showed 25% -½″. Is this undersized material in the quantity invoiced?”

Mr Sharp replied on the same day:

“This is the material that your representatives observed being screened over ½″ as per contract. The size distribution represents the dry screen tests as performed by Alternative Testing Laboratories of the material loaded into the barge.”

The precise sequence of messages is again unclear to me but on 26 April Mr Sims sent a further message which read:

“We do want the +½″ ore but not the -½″ reported in your screen test. Please advice [sic] when the +½″ material will be available.”

On the same day there took place the following exchange. First, Mr Sharp e-mailed Mr Sims as follows:

“Under our agreement of 4 January 2005 (Document No. 920643/01) (Agreement) Westbrook is obliged to screen the Ore over a +½″ screen at DLA, this has been done, under the Agreement Globe is obliged to make a payment of US$182,611.48 (Invoice WRL 907535/2 for US$213,611.48 less Credit WRL 907535/2 for US$31,000.00) to Westbrook for the manganese ore contained in the first barge (First Shipment) on receipt of the barge B/L and size confirmation. The barge B/L and size confirmation were sent to you on Thursday 21 April 2005 and, to date, no payment has been made.

If a payment of US$182,611.48 is not made by Globe to Westbrook by 17.00hrs New York time on Tuesday 26 April 2005 (22.00hrs GMT) Westbrook will therefore assume that, in breach of the Agreement, Globe does not intend to make a payment for the First Shipment.

In the event of any such breach by Globe, Westbrook will claim against Globe through the courts to the full extent permissible under the contract and the law for its losses, costs and interest.”

To this Mr Sims replied:

“We have received you [sic] rather confrontational e-mail. Perhaps we can get to the heart of the matter by your replying to the following question: Is it Westbrook’s position that the interpretation of your obligations under the Agreement is that you are to screen the material through a ½″ screen and deliver to us both the material that passes through the screen as well as what stays on top of the screen?

Your report indicates that it includes both and therefore we require clarification to this question prior to being in position to comply with your request for payment.”

This last message contains another particularly reprehensible suggestion, just like Mr Sims’ earlier suggestion that the use of a high pressure hose had been adopted with a view artificially to increase the amount of “prepared” material over ½″ and to conceal the true fines content. Mr Sims had no material on the basis of which he could have believed that Westbrook had acted in the commercially disreputable manner which he suggested, i.e. passing the material over a ½″ screen and then shipping to Globe both the material which passed through the screen and that which remained on top. Mr Sims had his representatives on site, and he knew that the material was placed after screening into segregated piles. Whilst it is true to say that the Globe representatives were not present during loading, Mr Sims had no basis whatever for the suggestion that Westbrook had acted in this manner. I do not think that he believed that they had. In my judgment this message was simply a delaying tactic.

Mr Sharp replied as follows:

“We have screened at ½″ to remove and separate all of the material that passed through the screen. We have screened the material wet at ½″ and removed a large percentage of fines, the 25% below ½″ remaining is wet fines that sticks to the lumps this is only apparent when the lab dries the sample and performs the lab screen test. Our obligation was to screen at ½″ which we have done and this removed as high a percentage of fines as possible. You initially insisted on the ¼″ x down being removed but we agreed to screen at ½″ to give better results. We have therefore performed as per contract and again simply ask you to do the same and make payment still today.”

This provoked Mr Sims into a long message which I must set out in full. Sent on 26 April it read:

“I have read your e-mail and am frankly amazed at your conclusion where you state, in contradiction to all facts and your own statements that you “have therefore performed as per contract”.

Let’s list the facts:

1.

You were supposed to deliver to us starting in January 2005. You did not.

2.

You attempted to screen the material as required, in February, but was forced to stop because the material was too wet. (See e-mail you sent us that we re-forwarded to you two weeks ago).

3.

We were forced to stop production of simn at the end of March due your late delivery and we were forced to buy simn on the open market to perform our sales obligations. Since that time we have been unable to resume production due to your failure to deliver.

4.

You began screening operations again last month in the present of our consultants who reported to us in a report, that the process was failed, as it did not screen out the fines.

5.

Then, you went ahead and screened the material while wet, which you knew well was unacceptable since it is the very reason you suspended screening in Feb. (One can only wonder why in Feb you stopped screening due to the wetness but screened while wet in April).

6.

All during April when we told you the process was failed, you steadfastly insisted to us that we were wrong and that the process of screening was successful.

7.

You sent us documents, which confirmed what we had believed all along, namely that the process failed to remove the fines. In fact the fines are excessive, in excess of 25%.

8.

You are well aware that our use for the material is for making simn and that fines are not useable by us for that application.

Now, Mr Sharp, exactly how and in what respect have you ‘performed the contract’.

•

You screened material while wet, which as you admitted in Feb, doesn’t work.

•

The screening that you performed was not successful as proven by the results of your own lab (25% - while a properly performed screening should have resulted in near 0% fines).

•

You attempted to hide these results by first presenting us with an invoice and demanded payment without initially disclosing to us that you were shipping us 25% fines.

•

You are 4 months late.

Aside from your failure to deliver in accordance with our agreement.

Your e-mails and behavior is commercially reprehensible by claiming that you have fulfilled the agreement by delivering junk that is unusable for its known purpose and that by your own words and actions was produced using wet material and a failed method. Is that “customer service” as defined by you?

This is to inform you that we are depending on delivery of the material including, without limitation, the full quantity … at the agreed price, to enable us to resume production of simn. Should you fail to make delivery as provided by the agreement prior to the end of May, with deliveries to commence within the next several days, we shall hold you responsible for all our losses.

To avoid this we suggest the following:

1.

You present us with delivery of conforming material produced with proper screening. We reiterate our desire/offer to work with you in the screening process so that the results succeed and not fail as they have been doing to date.

2.

As to the current barge, we are willing to receive this material at our designated facility and arrange proper effective screening that will screen out the ½″ material and take and pay for the material that complies with the agreement once the quantity is established. You are welcome to be present at this screening. All costs and expenses related to removal of the ½″ material will be for your account.

Let us know which you way [sic] you want to proceed.”

I would merely note (a) that this is the first time that Globe had raised any issue of delay in delivery, (b) that the allegation that Globe was forced to stop production of SiMn due to Westbrook’s late delivery was untrue, (c) that Mr Sims was putting forward the now abandoned notion that Globe was entitled to receive material with near 0% fines and (d) that again Mr Sims had no basis for his assertion that Westbrook had in tendering a provisional invoice and requesting payment been engaged in deliberate concealment.

On 27 April Mr Sharp e-mailed Mr Sims to the effect that Westbrook had no choice but to assume that Globe did not intend to pay for the first delivery. It was I think at Globe’s suggestion that a meeting was agreed to take place in London where Mr Sims planned in any event shortly to be. A meeting or meetings took place but the discussions were inconclusive, although a draft Supplementary Agreement was sent by Mr Sharp to Mr Sims at his London hotel on 3 May 2005. It was not agreed. On 4 May 2005, whilst the proposed Supplementary Agreement remained on the table for discussion, Globe began proceedings against Westbrook in the US District Court for the Western District of Pennsylvania. A Complaint was issued that day, with jury trial demanded. No reference was made therein to the exclusive jurisdiction clause, this being a particularly blatant exercise in forum-shopping. The Complaint asserted that pursuant to the contract Globe was not obliged to accept any material under ½″ in size. Although the Complaint recited that Globe stood ready to pay for the material which was larger in size than ½″, it also sought a declaration that Globe was not in breach of contract, that Westbrook was in breach of contract, and that Globe had no further obligations under the agreement. Damages were claimed in the sum of US$120,000, being the credit allowable against the first four barges.

Although issued on 4 May 2005 a copy of the Complaint was not received by Westbrook until 12 May 2005, when it arrived by registered mail. Westbrook was aware by the evening of 5 May 2005 of the bringing of proceedings against them but all that they knew, I think, was that Globe had started proceedings to recover the credit of US$120,000.

However before even this limited knowledge came to Westbrook’s attention there had taken place a further exchange of e-mails in the course of which Globe, “as a measure of good faith,” offered to take delivery of the first barge but on condition that Westbrook acknowledged that Globe did so in full reservation of their rights and “without waiving any defenses or claims [they] may have with respect to the original agreement.” It transpired that what Globe meant by this was that they did not even accept that the parties’ obligations were to be found spelled out in the Confirmation Document dated 4 January 2005 to which both parties had agreed on 20 January 2005. It seems likely that Globe’s insistence at this stage on its unjustified assertion that “there are many terms that are apparently part of your version of the contract to which Globe did not agree and which materially alter the agreed to terms” had an eye to its hope to establish jurisdiction in Pennsylvania, contrary to the agreed exclusive jurisdiction clause.

However that may be, matters finally came to a head on 6 May after Westbrook had discovered the existence of the action in Pennsylvania. On that day Mr Walton offered to Mr Kestenbaum two options. The first option was to pay the invoice for the first barge in which event the material would be delivered. The second option was to confirm that Globe would not pay, in which case Westbrook would mitigate its losses. If option 2 was chosen, Globe was put on notice that Westbrook might treat the non-payment as repudiatory of the entire agreement. The same day Mr Kestenbaum for Globe chose option 2, expressly confirming that Globe would neither pay the first invoice nor make any further payment under the original contract. Globe for its part reiterated its contention that it was Westbrook that was in breach of contract.

Thereafter both parties treated the contract as at an end. Westbrook had already given notice that adoption of option 2 might be treated as repudiatory. Mr Kestenbaum clarified, in effect, that that was indeed how Globe’s stance should be interpreted, and Westbrook acted accordingly. As is now known, Globe had of course by now already started proceedings in the United States in a form inconsistent with their having any further obligation under the agreement. On any view this went far beyond a mere attempt to determine the rights of the parties and so was itself repudiatory of Globe’s obligations – cf Woodar Investment Developments Limited v Wimpey Construction UK Limited [1980] 1 WLR 277. Globe pleaded that, by service of its Defence it accepted Westbrook’s repudiation and at trial it suggested that service of the Complaint amounted to an acceptance of Westbrook’s repudiation. On reflection it seems to me that the better view is that both parties should be regarded as having, on 6 or at the latest 9 May, purported to accept the conduct of the other as repudiatory of the contract. The reality is that it was accepted on both sides that the contract was at an end, each side regarding that as consequent upon the repudiatory breach of the other. The significance of the 9 May date is that it is on that day that the parties agreed that Globe would purchase the contents of the first barge under a new contract at a lump sum price of US$153,307.69, the original contract price amounting to US$213,611.48. Each side regarded this as amounting to a mitigation of its own alleged loss.

Globe received the first barge, unloaded the ore and transported it to its own site. Mr Becker arranged for it to be analysed by Conti Testing Laboratories Inc. He asked Conti to inspect a pile of what was said to be some 1,600 tonnes which he described as “mostly 3″ or less in size.” He said that he thought that the pile contained approximately 20% -½″ material but he wanted it tested. On arrival the technicians found one large pile with a few very large pieces of ore ten to twelve inches in size to the side. Mr Becker directed the technicians not to include these large pieces in the sampling. Mr Becker said in evidence that the large pieces to which his attention was drawn by the technicians were not manganese ore. It was furnace waste or something of that nature. I did not believe him. In their report the laboratory recited that the large pieces off to the side were pieces of ore, by which plainly they meant manganese ore, not scrapings from ladles, cleanouts, dirt balls or clods as Mr Becker would have me believe. Furthermore Conti found that 36.7% of the pile sampled passed a ½″ screen. They also found that 100% of the material passed a 3″ screen. By contrast, ATL had found that 39.8% of the barge sample was greater than 4″ in size. It seems to me tolerably clear that the reason why the proportion of the pile sampled found to be less than ½″ in size was so high a percentage of the whole is because a significant number of the larger pieces had been excluded from the pile, thereby skewing the distribution. Indeed, if both the ATL and the Conti sampling and testing are to be regarded as having been competently and accurately carried out, 39.8% or thereabouts of the contents of the barge must have been removed from the pile sampled by Conti, otherwise surely they would have found at any rate some small percentage as being in excess of three inches in size. Yet they found none. This is a curious episode.

Since taking the first Westbrook barge Globe has purchased manganese ore from no other source, nor have they made any sales of SiMn since March 2005.

During April 2005 Westbrook was actively exploring the possibility of selling the material at Large to a Far Eastern company, OM Materials (S) Pte Limited in the event that, as obviously looked increasingly likely, the contract with Globe fell through. On 12 May 2005 Westbrook contracted to sell 40,000 tonnes of manganese ore to OM Materials on terms FOB New Orleans, delivery to be in May/June 2005. This was a sale of unscreened material. The price was US$83 per tonne, to be adjusted pro rata if the manganese content was less than 43%. Although a sale to a Singapore company, the contract called for final manganese determination in China and the parties at trial called this the Chinese contract. It is Westbrook’s pleaded case that the Chinese contract was entered into in mitigation of its loss.

The Chinese contract was not in the event performed. Its terms were on three occasions varied. First, on 20 June 2005 the terms were amended to “CFR Chinese Main Port” which I assume means cost and freight. It is certainly common ground that Westbrook undertook to ship the material to China. Mr Walton said that he agreed with this variation because OM, with whom Westbrook had a close working relationship, found that they were unable to organise the shipping. The shipment was now to be June/July 2005, the price was now expressed to be US$2.90 per DMTMNU CFR Main Chinese Port.

On 6 July 2005 there was a further variation. The quantity was halved to 20,000 tonnes. The price was reduced to US$2.80, on the same basis as before, save that the shipment period was again pushed back, now to July/August 2005. It was the evidence of Mr Walton that Westbrook had no option but to make these variations, by which he meant I think the variations of 6 July. He said that the Mississippi had flooded, navigation thereon was difficult, exacerbated by an accident at one of the locks which had blocked that lock for sometime. Thus Westbrook could not so it was said get the material down to the sea port. There was no evidence as to when precisely the Mississippi flooded or what precise effect this had on navigation on the river.

In late August hurricane Katrina hit New Orleans causing chaos in the port. In consequence freight rates went up to very high levels. On 21 September 2005 the contract was varied once more. Although the documentation is incomplete it appears that the contract was now split, with 10,000 tonnes for shipment by latest 15 October and 15,000 tonnes for shipment by latest 30 October. The price was further reduced (albeit the quantity had been increased) to US$2.68 CFRFO Qinzhou/Zhanjiang, I think for both parcels.

Eventually in October 2005 Mr Walton negotiated a cancellation of the contract. Westbrook agreed to pay OM US$100,000 in consideration of OM agreeing to cancel the contract. Mr Walton said that freight rates had risen to such levels that Westbrook would have made a substantial loss had they performed the contract by shipping the material to China. The contract when first made of course cast the risk of the cost of shipping increasing upon the buyer OM. It also called for delivery FOB New Orleans in May/June 2005, probably as I infer before the problems with navigation on the Mississippi, whatever they in fact were.

Thereafter the remaining material at Large was disposed of through arrangements of some complexity. Westbrook claims damages by reference to these further arrangements. Westbrook say that it is by reference to these further disposals that there should be calculated the loss “directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract” – Sale of Goods Act 1979 section 50(2). Unsurprisingly Globe say that, in accordance with section 50(3), the price initially agreed with the Chinese interests on 12 May should be regarded as providing the prima facie measure which there is no reason to displace. The vicissitudes by which performance of the contact were affected were in no sense consequences flowing directly and naturally from the buyer’s breach of contract, still less the variation agreed on 20 June.

Before addressing this point I should first deal with various other points relied upon by Globe in support of their case either that they were not in repudiatory breach of contract or that, by contrast, it is Westbrook which should be regarded as having repudiated the contract. I have already concluded that Westbrook complied with their contractual obligation so far as concerns screening. Subject to these further points it is in my judgment clear that Globe repudiated the contract by its clear indication that it would refuse to accept material tendered which was less than ½″ in size. Given the discussions between the parties as to size in the context of which the contract was made, given the nature of the exchanges which I have set out, and given that, as I find, Globe were not acting in good faith but in an attempt to escape their commitment to accept material for which they had no further use, this is not a case where the court should be “unwilling to hold that an expression of an intention by one party to carry out the contract only in accordance with his own erroneous interpretation of it amounts to a repudiation” – see Chitty on Contracts vol. 1, paragraph 24-019. The case in my judgment falls plainly on the other side of the line. In the event that he was wrong on construction, and on the other points to which I next turn, I did not understand Mr Hantusch to contend to the contrary.

The first of these allegations of conduct of Westbrook repudiatory of the contract is that it failed to load and deliver on time – in particular that it sought payment for material that was loaded late. I need only say that it is apparent from the contemporary exchanges that Globe waived any right to reject a first barge which had not been loaded by 28 January 2005 and that the parties plainly did not conduct themselves on the basis that delivery of the entire quantity by 30 April 2005 was of the essence of the contract. Indeed had the contractual interval between barges of not less than seven days been observed, delivery of the entire quantity would not in any event have been completed before 17 June, even assuming that it had begun on 28 January. Late delivery by Westbrook in consequence of the known difficulties at Large, witnessed by the Globe representatives and not complained about at the time, was plainly not repudiatory of Westbrook’s obligations under the contract.

The next point pleaded is that Westbrook repudiated the contract by seeking payment for material based upon a report of size distribution and moisture determination that it well knew was not independent. The background to this point is that Mr Shilatz at all material times owned and controlled USB Metals which was undertaking at Large for Westbrook’s account the extraction and screening process and indeed organising the onward transportation. Globe contends that the ATL Report on size distribution and moisture content to which I have already referred cannot properly be described as an independent report because 25% of the shares in ATL were at all material times owned and controlled by Mr Shilatz. Indeed somewhat extravagantly Globe pleads that “all the Reports ever produced for the Claimant by ATL were not independent.” It is said that Westbrook “well knew” that the report was not independent and that to have sought payment for the first barge in reliance on such a report was therefore repudiatory of the contract.

This was a late amendment by Globe and the point has little to do with the merits of the case. On 4 April 2005 Mr Sims had said he would forward the name of the company that would issue the contractually required sizing and analysis certification but Globe never did so. It was already plain that Globe did not intend to accept the material before on 6 April Mr Sharp informed them that Westbrook would appoint ATL as independent assayer. Globe did not of course receive the ATL report until 21 April.

There was before the court unchallenged evidence from Mr Scott Grey, now President of ATL who was in 2005 its General Manager. USB is one company out of some 250 to 300 companies of which ATL’s customer base is comprised. ATL is dependent for the maintenance of its business upon its reputation for honesty and independence. In the year prior to the date of Mr Grey’s witness statement, which was dated 15 June 2007, USB represented 0.23% of ATL’s total billings. Neither Mr Grey, who owned 25% of ATL, nor Mr Paul Baker, who with his wife owned 50% thereof, would have allowed any involvement in the business by anyone who might or might be seen as compromising their independence. Mr Shilatz had no involvement whatever in the running of ATL or in its work. The shareholding of Mr Shilatz was an investment, nothing more nor less. There is no need for me to recite other parts of Mr Grey’s evidence which demonstrate, as one would expect, that the outcome of this sampling and analysis exercise was in no way influenced or indeed affected in any way by the circumstance that it was commissioned by USB Metals.

For all these reasons I conclude that the ATL report of size distribution and moisture determination was indeed independent of both the seller and the buyer. However the matter does not stop there for it is an essential element in Globe’s allegation that Westbrook’s conduct was in this regard repudiatory that Westbrook knew that the ATL report was not independent. Since the ATL report was independent, Westbrook could not have known that it was not. Mr Walton was aware that Mr Shilatz had a small financial interest in ATL but no involvement in the company as such. He did not consider that this would affect the independence of ATL. It is not clear that Mr Sharp knew in 2005 of the interest of Mr Shilatz in ATL. When he did learn of his interest it never occurred to him that it compromised the independence of ATL. In my judgment it is not demonstrated that Westbrook’s conduct in presentation of and reliance upon the ATL report was repudiatory of their obligations under the entire agreement or indeed at all.

I deal next with the pleaded case that Westbrook’s “attempts to re-sell the manganese ore at Large which it had intended to use to perform the contract [with Globe]” were repudiatory of the contract. In essence what is alleged is that by reason of sales to third parties which were concluded prior to the termination of the Globe contract Westbrook put it out of its power to perform the contract. Both in its pleaded case and in documents submitted at trial Globe submitted calculations of ever increasing complexity designed to show that, by reason of having sold quantities of the ore to third parties, Westbrook had left itself insufficient ore to fulfil the contract with Globe. The calculations were complex not least because of the various different hypotheses as to the amount of unscreened ore required to produce the required quantity of “oversize” material or even as to the amount of ore which, by virtue of screening, would fall through the screen and thus be unavailable for delivery to Globe.

Again, this allegation has little connection with the merits of the case. The contract was indeed for the sale of manganese ore “ex-Large PA” and it was a term of the contract that the ore be screened over a ½″ screen at Large. However as Mr Sims accepted it was in fact of no consequence whatever to Globe from where the manganese ore came so long as it conformed to what he believed to be the contractual size and quality. Had there through miscalculation, inadvertence or for whatever reason been some shortfall in the quantity available at Large it would of course have been Westbrook’s contractual obligation if so required by Globe to source other material which conformed with the contractual description in every respect other than its place of storage or to pay damages in lieu. Sourcing material elsewhere would I find have occasioned Westbrook no difficulty whatever. Admittedly, manganese ore not stored at Large would not in one small particular have satisfied the contractual description and Globe could perhaps have rejected it as non-contractual – I do not need to decide this hypothetical point. A contractual ability to reject some part of bulk goods which fail in some immaterial respect to correspond with words of description in the contract does not lead inexorably to the conclusion that the seller thereof is in repudiatory breach of his obligations. If Globe had wanted the ore, at this price, they would have accepted it under the contract wherever it had been stored. Even leaving this point on one side the suggestion that an inability to supply the entire contract quantity from Large would, whatever the extent of the shortfall, have been repudiatory of Westbrook’s obligations, seems to me again extravagant. In order to be repudiatory Westbrook’s inability to supply material from Large would have had to deprive Globe of substantially the whole benefit for which it had contracted.

A sub-issue arose as to the status of some 9,600 odd metric tonnes of ore which had been shipped out of Large by Westbrook on barges but which remained unsold and could if necessary have been appropriated to the Globe contract. Globe pointed out that this was unscreened material. Westbrook for its part said that it could if necessary have been returned to Large so that it could have been passed over a ½″ screen at that location thereby satisfying the term of the contract to that effect. Globe produced unconvincing evidence in the shape of written statements from officials from the Defense National Stockpile Center without first-hand knowledge who gave it as their opinion that it is unlikely that the DNSC would have permitted Westbrook to return to the Large site for screening material that had been already removed from the site. Mr Shilatz doubted if there would have been any difficulty and he was the only witness giving oral evidence, apart from Mr Porta, who had any knowledge at all as to the real practicalities involved on the site at the time. However that may be, and even assuming that permission to return the material to the site would have been regarded as necessary, would have been sought, and would have been withheld, all this as it seems to me again misses the point. On the assumption that Globe wished to receive material from Westbrook, they would hardly have insisted that available ore be returned to Large for screening. It could more easily have been screened elsewhere. Various possible sites were mentioned in the evidence. To suggest that an inability to screen at Large amounts of ore otherwise available to make up a shortfall is itself repudiatory of Westbrook’s obligations is in my view misconceived. It is misconceived whether the ore available had originally been stored at Large or was sourced from elsewhere. It again confuses Globe’s possible right to reject ore which did not, in some ultimately immaterial respect, conform with some words of description in the contract with the question whether Westbrook was in repudiatory breach of its obligation to supply manganese ore.

For all these reasons it is in my judgment unnecessary to grapple with the detailed and complex calculations concerning the amount of ore actually removed from the Large site and the amount remaining there. On the evidence I could not come to any conclusion more reliable than that approximately 60,000 tonnes of ore would have been required to produce 30,000 tonnes of material which had been screened over a ½″ screen and remained on the screen. In saying this I do not overlook that an ATL analysis report of 7 December 2004 relating to a sample taken from one of the piles at Large, I know not which, shows that in the laboratory whereas 54.2% remained on a ¼″ sieve only 34.9% remained on a ½″ sieve. This was, I emphasise, an exercise carried out in the laboratory. The sample would first have been dried. The sample was tiny in proportion to the bulk. The bulk was far from homogeneous, as Mr Shilatz repeatedly emphasised. Furthermore, as Mr Shilatz also explained, when the screening process was being carried out at Large for the purpose of preparing material for Globe he and Mr Porta selected the largest possible material for the very purpose of generating as much as possible “oversize” material for Globe. Mr Shilatz said that they “ran tests all the time where 70% of what we screened was +½″ material.” This was done with a wheel loader with a 4½ unit bucket on it. In my judgment the evidence does not justify any departure from Mr Shilatz’ working assumption that he would get an approximate 50/50 cut on oversize versus undersize.

A further sub-issue which arose at trial was the question whether any manganese ore capable of extraction remains at the Large site. In his oral evidence at trial Mr Shilatz explained why he believed that there remains at the Large site some 10,000 tonnes or so of ore capable of being extracted. For the most part this was, he thought, below the surface of the lake which had formed at the site. He knew this because of the work he and his men had done daily at the site over a long period including using track hoes and digger buckets to extract material from under the water. It had not as yet been economically worthwhile to extract this remaining material. The evidence certainly demonstrated that the DLA (or DNSC) consider that their contract with Westbrook for extraction from the site is now closed. They have not completed a reconciliation between their own records and the records of the amount extracted, but the amount shipped out of Large is within the variance provided by their contract with Westbrook. Globe provided two statements from DNSC officials, one of which said that the maker thereof had been assured by a Mr Mayle that all recoverable manganese ore at Large had been recovered, the other, tellingly, saying that “it is the position of DNSC that all recoverable manganese ore from Large has been removed.” This evidence does not satisfy me that anyone at the DLA or DNSC has carried out any on-site investigation of the sort which would be necessary in order to ascertain whether any recoverable material remains underwater. In the market conditions which have prevailed since Westbrook vacated the site it would not have been worthwhile to conduct such investigations. Hearsay evidence introduced by Mr Kestenbaum tended to suggest that although the DLA is still formally lessee of the site it has and takes no further interest in it. Tellingly, as I think, the response to Mr Kestenbaum’s query to the current owners of the site, a railroad company, as to what would be the procedure if a company wished to take out any remaining “mine tailings” was not that there are no such remaining mine tailings but that the company would be prepared to allow this although it would require a new lease to be executed which could only be done after the DLA finally vacate the site. After Mr Shilatz had completed his evidence and returned to the United States Globe introduced further evidence including a photographic record of a visit made to the site before trial by Mr Sims, Mr Becker and others. Unsatisfactory though it was that the matter should be dealt with in this way, the evidence of a purely visual inspection, unsurprisingly, took the matter little further forward in relation to the question whether there remains any material underwater. Finally Globe introduced a report of an inspection carried out on 22 June 2007 by a Mr Robert A. Drew, Managing Partner of Maritime Commodity Services Inc. This appears to be a cargo and marine surveying and commodity inspection and testing company, which no doubt explains Mr Drew prefacing his report with the words “As per your instructions, we inspected and sampled the above-mentioned cargo.” So far as concerns the lake, twelve points were sampled in an unspecified manner from about six feet into the water from the shoreline closest to the hillside. Again, this untested evidence does not persuade me to reject the opinion formed by Mr Shilatz as a result of actually deploying the buckets of his heavy machinery in and under the water.

On the assumption (1) that material remains now on site buried under the lake in the sort of quantities posited by Mr Shilatz and broadly consistent with the quantities originally thought by the DLA and Westbrook to be on the site and (2) that the 9,600 tonnes shipped on barges should be brought into account, Globe as I understood it accepted that at least 55,584.91 metric tonnes of ore was potentially available to be screened at Large to provide ore for supply to them. Even this figure makes an assumption as to the moisture content of the bulk. In my judgment any such assumption is fraught with uncertainty. There was no evidence upon which I could make a reliable finding as to the average moisture content of the unscreened bulk material, as opposed to the moisture content of material which had in fact been screened. Much would depend on the location of any relevant ore. I have already explained why in my view no likely shortfall would be capable of supporting the conclusion that Westbrook was in repudiatory breach of contract. What this exercise does at least demonstrate however is that, even assuming that such an argument is available to Globe, any likely shortfall would not be of such proportions that Globe would be able plausibly to assert that it had been deprived of substantially the whole benefit for which it had contracted.

This brings me finally to the quantification of Westbrook’s recoverable loss. In this regard Mr McParland strove to persuade me that Westbrook’s damages should not be computed by reference to the price achieved on resale to OM on 12 May 2005. In particular he relied upon the decision of the Court of Appeal in Bem Dis A Turk Ticaret v. International Agri Trade [1999] 1 All ER (Comm) 619. I do not consider that the observations of the Court of Appeal in that case assist Mr McParland. That was a case in which goods were sold c+f Turkey. The sellers had made the necessary shipping arrangements, which involved chartering a ship. The buyers defaulted in consequence of a subsequent prohibition on import of the commodity into Turkey, with the consequence that the sellers cancelled the charterparty. The arbitrators found that the cancellation costs were costs naturally flowing from the buyer’s breach of contract. There was however at the date of breach no difference between the contract price and the market price. The buyers argued that section 50(3) of the Sale of Goods Act had the effect that in such circumstances the sellers could not recover the cancellation costs. Unsurprisingly the arbitrators, the Commercial Court Judge, Clarke J as he then was, and the Court of Appeal rejected this argument which, as Hirst LJ observed, put the cart before the horse. Sub-section (2) of section 50 lays down the general rule. Sub-section (3) only provides the prima facie measure, and in particular does not exclude where appropriate the recovery of additional costs occasioned by the buyer’s breach over and above the difference between contract price and market price.

In my judgment the position in the present case is extremely straightforward. There was on termination of the contract an available market for the sale of manganese ore and Westbrook successfully concluded a sale in it. The sale price to OM on 12 May 2005 is the best possible evidence of the prevailing market price. It is trite law that subsequent action or inaction by the seller in relation to that transaction is irrelevant because it was not caused by the original buyer’s breach of contract. It is sufficient to say that Westbrook’s subsequent decision to change the basis of the sale to OM from FOB to C&F terms, thereby assuming the shipping risk, is a matter wholly independent of Globe’s breach of contract and is irrelevant to the quantification of Westbrook’s damages. The loss directly and naturally resulting, in the ordinary course of events, from Globe’s breach of contract is the difference between the price payable by Globe and that payable by OM. Westbrook’s subsequent decisions and the manner of their ultimate disposal of the goods were not matters which resulted directly and naturally from Globe’s breach of contract.

I believe that it remains for me to determine three matters in order to enable the parties to calculate the damages recoverable.

I hope that in the light of these findings the parties will be able to agree the damages to which Westbrook are entitled. There are two matters upon which I did not receive argument or in respect of which I will if necessary hear further argument. The first is whether in order to compare like with like Westbrook should give credit for screening costs which would, I assume, have been saved had the material been delivered to OM under the substitute contract rather than to Westbrook. The second is whether Globe is entitled to the US$120,000 credit which would have been allowed against the first four barges had the contract been performed. I hope that I have otherwise identified the necessary ingredients in the calculation of damages which in my view should be performed. If not, and/or if the parties are unable to agree the damages to which Westbrook is entitled in the light of my findings, I shall have to give further directions as to how they are to be assessed.

Finally, Westbrook’s claim for damages for breach of the exclusive jurisdiction clause was ultimately pursued only in respect of the US attorneys’ fees in the sum of US$30,025.50. Globe does not deny liability. Although Globe questioned the reasonableness of the sum in the light of arguments as to duplication of effort etc there can in my view be no sensible challenge to this figure, which is I find recoverable.

There will be judgment for Westbrook for damages to be assessed, if not agreed. Globe’s counterclaim fails and is dismissed.