ED&F Man Sugar Ltd v T&L Sugars Ltd & Ors

This is an application by the defendants to strike out claims pleaded in the particulars of claim, alternatively for summary judgment dismissing those claims.

The case concerns a shipment of 30,000 metric tonnes of raw sugar, which was made under a Sale Contract between the claimant as seller and a company which has been referred to as “SRB”, as buyer, on 7 February 2012. Under the Sale Contract the claimant agreed to sell to SRB on cif terms a total quantity of between 100,000 and 120,000 metric tonnes of raw sugar in the claimant's option. The destination specified in the contract was the Port of Brindisi in Italy.

The relevant shipment was made on board the vessel “Antonia” at Maputo in Mozambique. Loading was completed and the vessel sailed from Maputo on 10 February 2014. On 21 February 2014, the vessel was diverted from Brindisi to a refinery at Silvertown in London belonging to the first defendant (“T&L”). The vessel berthed at Silvertown on 20 March 2014 and by 24 March had completed the discharge of the sugar. T&L took possession of the sugar and processed it for onward sale. No payment was made by SRB and the claimant has subsequently brought arbitration proceedings under the sale contract against SRB to seek to recover the sale price.

In this action the claimant is suing T&L and two of its directors, Mr. Bacon and Mr. Widmer, who are also directors of SRB. Three separate causes of action are pleaded. The first is a claim that all three defendants conspired with SRB to injure the claimant by unlawful means. A further party to the alleged conspiracy is said to have been a company referred to as “SFIR”, which is a 50 per cent shareholder of SRB. This conspiracy claim is said in the particulars of claim to be the claimant's primary case. A secondary case is made against T&L alone, that it is liable for inducing a breach by SRB of the sale contract. The third claim, which is also made against T&L alone, is a claim for conversion of the sugar.

The defendants’ application has four separate limbs. In the order in which the points were argued for them by Mr. Howe QC, the defendants seek an order to strike out or summarily dismiss:

Starting then with the conversion claim, the Sale Contract included a retention of title clause, which provided that title to the sugar was not to pass until the claimant had received payment for it. As I have mentioned, SRB did not pay the contract price. It is the claimant's case that in these circumstances title to the sugar did not pass to T&L. T&L accordingly converted the sugar when it processed the cargo at its refinery and co-mingled it with other stock for onward sale.

The defendants do not on this application suggest that the claimant has failed to allege facts which disclose a valid cause of action in law for conversion; nor is it argued that the claimant has no real prospect of proving the relevant facts. T&L has pleaded a number of defences to the claim, but it is not suggested that any of those defences is capable of delivering a knock-out blow such that the claim should be summarily dismissed. The argument that the conversion claim should be struck out or summarily dismissed is based, and based solely, on the position which the claimant has taken in the arbitration proceedings against SRB in which it has sought to recover the contract price. The defendants say that in order to maintain a claim for the price the claimant has to allege – and has indeed alleged in its submissions in the arbitration – that title to the sugar passed to SRB under the Sale Contract. It was necessary in law, the defendants say, for the claimant to make that allegation because under s.49 of the Sale of Goods Act a seller may only maintain an action for the price once property in the goods has passed to the buyer, subject to an exception in s.49(2) which the defendants say is not applicable. At all events, the defendants contend that it is clear from the claimant's submissions in the arbitration that the claimant has alleged that title passed to SRB. Furthermore, it appears that an award has been made in the claimant's favour, although the award is said to be subject to a request for clarification and no attempt has yet been made to enforce it. Mr. Howe submits that in these circumstances the claimant cannot assert in these proceedings that title did not pass to SRB under the Sale Contract. It follows that the claimant cannot maintain a claim in conversion.

The submission that the claimant cannot say, or cannot be heard to say, in these proceedings that title did not pass to SRB prompts the question, “Why not?” On what principle of law is it argued that the claimant cannot say, or cannot be heard to say, this? The defendants’ skeleton argument provided no answer to that question. Nor does the defence, which does not refer to the arbitration claim and takes no point based upon it in answer to the claim for conversion. Although I invited Mr. Howe in oral argument to identify a principle of law on which he relies, he did not identify any applicable legal principle.

Two principles were mentioned on which Mr. Howe confirmed that he does not rely. One is the principle or doctrine of election of remedy that appeared to be relied on in the witness statement of Mr. Mukhi, which set out the grounds for the defendants’ summary judgment application. Mr. Young pointed out in one of the more useful parts of his skeleton argument, by reference to the advice of the Privy Council in Tang Man Sit v Capacious Investments Ltd [1996] AC 514, why that principle does not assist the defendants. Mr. Howe did not seek to argue the contrary.

Another legal principle on which the defendants do not rely is that of issue estoppel. That principle also does not assist them, because it is well-established that a finding in arbitration or court proceedings between A and B is not binding on A in arbitration or court proceedings between A and C: see e.g. Lincoln National Life Insurance Co v Sun Life Assurance Co of Canada [2005] 1 Lloyd's Rep 606. That being so, it seems to me that a fortiori A can not be bound in proceedings against C by assertions of fact or law which A has made in arbitration proceedings against B. Thus, the claimant is not bound in the present court proceedings against T&L by assertions made in the arbitration proceedings against SRB. That conclusion is reinforced by the consideration that arbitration is a private and confidential process – which militates against the notion that assertions made in arbitration proceedings may be taken to have a wider public significance.

The closest that Mr. Howe came to putting forward anything in the way of legal reasoning in support of this limb of the application was to point out that the particulars of claim, as with any statement of case, are supported by a statement of truth attesting to the claimant's belief that the facts stated in them are true. Mr. Howe argued that such a statement of truth could not honestly have been made in circumstances where the claimant was asserting in the arbitration against SRB that title to the sugar had passed to SRB.

Mr. Howe did not spell out what the legal consequence would be if the statement of truth was in fact false. I shall assume in his favour, although no attempt was made to demonstrate this, that it could have the consequence of rendering the statement of case, or a relevant part of it, liable to be struck out. Even on that assumption, however, I cannot see how reference to the statement of truth advances the defendants’ case. That is so for at least two reasons. First, a statement of truth is confined to the party’s belief in the truth of facts stated in the pleading. An assertion that title to the cargo of sugar did not pass to SRB is not a statement of fact. It is a conclusion of law arrived at by applying rules of law to the facts alleged. The defendants have not identified any underlying fact averred in the particulars of claim, which is denied in the claimant's arbitration submissions (or vice-versa).

Second, even if the assertion that title to the sugar did not pass to SRB were to be regarded as a statement of fact, it cannot be inferred from the fact that an inconsistent assertion has been made in the arbitration proceedings that the claimant did not, or does not, believe the statement made in these proceedings to be true. Inconsistency – assuming, as I do, for this purpose that there is an inconsistency – can always operate in either of two directions. It could perfectly well be that the statement of truth accurately reflects the claimant's belief and that what was stated in the arbitration proceedings did not. That would be a matter for SRB to complain about.

After Mr. Howe had completed his submissions, when the court adjourned overnight during Mr. Young's submissions in response, Mr. Howe and Ms. Powell produced a further written note citing four further authorities in a belated attempt to come up with some legal basis for this limb of the defendant's application. It was said in this note that:

"The defendants rely upon the simple proposition that a claimant should not be permitted to pursue a case which is based on mutually inconsistent allegations of fact.”

The authorities relied on in support of this proposition are all examples of a party attempting simultaneously to advance two inconsistent cases in the same legal proceedings. None of them is an example of a claimant being prevented from pursuing mutually inconsistent cases against different parties in different proceedings. The authorities are therefore dealing with a different situation and are nothing to the point in this case.

I understood Mr. Howe in his reply submissions to attempt to suggest that the claimant is making mutually inconsistent allegations in the particulars of claim because of a reference made to the arbitration in paragraph 8. It is said there that the present proceedings are being pursued in parallel with the arbitration and that, to the extent that the claimant succeeds in recovering any money from SRB, it will give credit for that sum in reduction of its claim for damages in these proceedings. It cannot sensibly be suggested, however, that paragraph 8 of the particulars of claim somehow incorporates into the particulars of claim all the assertions made in the claimant's submissions in its arbitration with SRB. It plainly does nothing of the sort. That paragraph is, in any event, an expendable part of the pleading which could be removed without having any effect on the claim. I cannot but regard these last submissions made by counsel for the defendants as a final scraping of the barrel.

I conclude that the defendants’ objection to the conversion claim is itself lacking in any reasonable foundation. It is wholly incapable of demonstrating that the claim has no real prospect of success.

I turn next to the second limb of the application, which seeks to strike out or dismiss the whole of the conspiracy claim. Before I consider the specific arguments advanced I will give what I hope is a fair summary, in very broad terms, of the case which the claimant is seeking to make under this head.

Money was owed by SFIR to a supplier of sugar which is referred to in the particulars of claim as "Supplier A". In the event of SFIR failing to pay Supplier A, the claimant was liable to do so. The claimant was entitled to be indemnified against this liability by T&L, which in turn was entitled to be indemnified by SRB. It appears – although it is not expressly stated in the particulars of claim – that Supplier A was paid on or about 17 March 2014 by SFIR, which in turn was funded by T&L. SRB was therefore liable to indemnify T&L. However, SRB was in financial difficulties and did not have the cash to do so.

In order to obtain reimbursement from SRB, T&L arranged to buy from SRB the shipment of sugar which SRB had agreed to purchase from the claimant. The price payable by T&L under this sub-sale agreement was then set off against the money which SRB owed to T&L, which was in a roughly similar amount. However, a difficulty arose because SRB did not have the cash to pay the claimant for the sugar. All parties knew that there was a retention of title clause in the Sale Contract. If SRB did not pay the claimant, then it would not be able to pass title to the sugar to T&L, which therefore would not receive the value of the sugar.

According to the claimant, a number of arrangements were made to attempt to overcome this difficulty. First, it was arranged for the sugar and the shipping documents to be delivered directly to T&L and the claimant's agreement to this was obtained. Second, an attempt was made to get the claimant to consent to the sub-sale, so that in accordance with s.21 of the Sale of Goods Act title would pass to T&L irrespective of whether payment was made by SRB. There is an issue as to whether or not that attempt was successful. Further, the sub-sale agreement was drafted in a way which sought to protect T&L, so far as possible, against any recourse from the claimant. None of those steps was unlawful. However, the claimant alleges that SRB and T&L went further and, in order to induce the claimant to provide the cargo of sugar to T&L by diverting the vessel from Brindisi to T&L's refinery in London, they engaged in deception. This allegation is made in paragraph 89 of the particulars of claim, which states:

“The Conspiracy involved the deliberate deception of [the claimant] by inducing [the claimant] to believe that SRB intended to and would pay the Sale Contract Price in the normal contractual way and thus to part with control of the cargo. It was not just a case of deception by silence. Mr. Massaro's email of 19 February 2014, which stated that the claimant should send all documents, except the invoice, to Silvertown and the invoice should be sent to SRB's address in Cesena, Italy, contained a clear implied representation that, as at 19 February 2014, SRB intended to pay the claimant for the Antonia shipment.”

It is then alleged that in fact SRB had decided that it was not going to pay the claimant and that the defendants were aware of this.

The defendants have argued that this conspiracy case must fail for two main reasons. The first argument is focused on the allegation of deception, which is relied on as constituting unlawful means. The second is a broader causation argument.

It is submitted, first, that the claimant cannot credibly assert that it was induced by the email of 19 February to believe that SRB would pay the sale contract price in the normal contractual way. Mr. Howe points out that the claimant itself alleges in para.88 of the particulars of claim that SRB did not have the means to pay for the sugar cargo. Furthermore, earlier in the particulars of claim in paragraphs 42 and 68, reference is made to discussions which had taken place in January 2014 between the claimant, T&L and SRB, in which the claimant had been informed of SRB's serious cash flow difficulties. Mr. Howe argues that in those circumstances it is fanciful to suggest that simply by receiving an email inviting it to send the invoice for the shipment to SRB – which, as the buyer, was of course liable to pay for the shipment, T&L could have been induced to believe that SRB was going to pay the sale contract price in the normal contractual way.

Contrary to what I think may have been suggested by Mr. Young, this argument was squarely raised in Mr. Mukhi's witness statement, which sets out the grounds of the defendant's application, at paragraph 22(ii) A point was added in the defendants’ skeleton argument, and pursued in oral argument, that it is equally fanciful to suggest that the defendants intended to deceive the claimant about SRB's intention and ability to pay when T&L had, on the claimant's own case, previously taken the initiative of informing the claimant about SRB's serious cash flow difficulties.

The second main argument advanced by the defendants is a broader argument that there is no reasonable basis for alleging that the claimant suffered any financial loss as a result of delivering the cargo to T&L in London, instead of to Brindisi. The point is made that there is no reason to think that SRB would have paid for the shipment if the vessel had gone to Brindisi, particularly when on the claimant's own case SRB did not have the means to pay and its shareholders were not prepared to fund it.

These arguments seem to me to be cogent arguments and the claimant's conspiracy case, as I see it, hangs by a very slender thread. However, I am not persuaded that it is possible at this stage to conclude that the claim is bound to fail for the reasons advanced by the defendants. I agree that it is absurd to suggest that the email sent on 19 February led the claimant to believe that SRB was going to pay the contract price in the normal way. I think it is reasonably arguable, however, that the email did, as the claimant alleges, contain an implied representation that SRB intended to pay for the shipment, at least if it could, and that the email was misleading if in truth the position was that SRB had already formed a settled intention that it was not going to pay for the shipment.

I find it difficult to envisage that this email induced the claimant to divert the vessel to London, particularly when the claimant has pleaded in paragraph 49 of the particulars of claim that on 10 February the cargo was shipped "with the intention that it would be discharged … at Silvertown", and when it had already been agreed, as pleaded in paragraph 50, that the discharge port named in the bill of lading would be London. However, under the charterparty the final decision as to the destination of the vessel did not have to be made until 21 February 2014. At this stage of the proceedings, before the claimant has even served its witness statements, I cannot rule out the possibility that the email of 19 February was instrumental in the claimant's final decision to order the vessel to divert.

As for what would have happened if the vessel had proceeded to Brindisi, it seems inherently unlikely that the claimant would, in that event, have paid the contract price and much more likely that it would have sought to evade payment in just the way that has in fact happened. But I cannot conclude at this stage of the proceedings that the claimant will be unable to show that it has suffered some loss as a result of agreeing to deliver the cargo to T&L in London. The claimant might, for example, have succeeded in retaining title to the cargo if the vessel had sailed to Brindisi and have obtained some value from the cargo. That cannot be determined without evidence. I therefore reject this limb also of the defendants’ application.

The third limb is directed to the allegation of inducing a breach of contract which is pleaded in paragraph 95 of the particulars of claim. Paragraph 95 states:

“By reason of T&L's involvement in the altered arrangements for delivery of the Antonia Shipment to Silvertown, and by entering into the 18/19 March Agreement with SRB, T&L knowingly colluded in and/or facilitated and/or induced SRB's breach of the Sale Contract which is pleaded above.”

The “18/19 March Agreement” is a description used to refer to the sub-sale agreement made between SRB and T&L. The breach of the Sale Contract “pleaded above” is evidently the breach pleaded at paragraph 91(iii) of the particulars of claim, which refers to:

“SRB's planned and intentional breach of the Sale Contract by entering into the 18/19 March Agreement with T&L at a time when SRB had already decided not to pay [the claimant] the Sale Contract Price, or any sum, in respect of the Antonia Shipment;”

The fact that this is the breach of the Sale Contract which T&L is said to have induced is confirmed by subparagraph (vi) of paragraph 91, which cross-refers both to subparagraph (iii) and to paragraph 95. What is therefore alleged is (1) that, by entering into a sub-sale agreement on 18 or 19 March 2014 with T&L, SRB committed a breach of the Sale Contract, and (2) that T&L induced or procured that breach by helping to arrange for delivery of the shipment to Silvertown and by entering into the sub-sale agreement with SRB.

The first of those propositions is, in my view, untenable, as there was nothing in the Sale Contract which prohibited SRB from entering into a sub-sale agreement with any party on any terms. Nowhere in the particulars of claim is any term of the Sale Contract identified of which SRB is said to have been in breach by entering into the 18/19 March sub-sale agreement. SRB's liberty to do so is moreover acknowledged at paragraph 56 of the particulars of claim, where reference is made to an email which informed the claimant that a contract of sale was being entered into between SRB and T&L. The point is there made that the claimant was not being offered a right to object to such a sale and indeed was "not in a position to object".

In these circumstances it seems to me that the claimant's case of inducing a breach of contract, in the way that it has been pleaded, rests on a flawed premise and cannot be maintained. This claim must therefore be struck out.

The fourth and final limb of the defendants’ application asks the court to strike out the claim against the two individual defendants, Mr. Bacon and Mr. Widmer. As mentioned, the claim pleaded against those defendants is that they were parties to the alleged conspiracy to injure the claimant by unlawful means. Mr. Howe submitted that an allegation of conspiracy is tantamount to an allegation of fraud, for which proper particulars are necessary. That is all the more so where the conspiracy claim includes an allegation that the defendants were parties to a deception. He submitted that none of the matters pleaded in support of the allegation that Mr. Bacon and Mr. Widmer were participants in the alleged conspiracy provides a proper or reasonable basis for that allegation.

I think it is going too far to equate a case of unlawful means conspiracy with an allegation of fraud as a general matter. Dishonesty is not a necessary element of the tort. However, some reasonable basis needs to be pleaded to support an allegation that an individual was involved in such a conspiracy; and where, as here, the conspiracy is said to have involved deception, all the strictures that apply to pleading fraud are directly engaged.

Starting with the allegation of involvement in deception in paragraph 89 of the particulars of claim, that allegation is, in my view, inadequately pleaded as against all the defendants. It is axiomatic that, where fraud or dishonesty is alleged, specific details must be pleaded of the facts and circumstances from which it is said that dishonesty is to be inferred. In order to establish that any of the defendants was a party to the deception alleged in paragraph 89 of the particulars of claim, the claimant would need to show:

The facts that SRB had decided that it was not going to pay the claimant and the defendants were aware of this are said to be inferred from facts pleaded earlier in the particulars of claim. No specific facts are identified in paragraph 89, however, and I am unable to see how that inference can properly be drawn from anything which has previously been pleaded. Still less can I find any facts alleged in the particulars of claim from which it could reasonably be inferred that Mr. Bacon or Mr. Widmer knew that this email was being sent, that it was being sent for a dishonest purpose and connived in the sending of it. So far as can I see, the sole basis for this serious allegation amounts to nothing more than the fact that Mr. Bacon and Mr. Widmer were directors of both T&L and SRB, and had been involved in some discussions with the claimant about other matters. That is a wholly inadequate basis on which to plead an allegation of involvement in a conspiracy to defraud.

On one view of the particulars of claim, if the allegation of involvement in this alleged deception fails, then the whole conspiracy claim collapses. That is because in paragraph 88 it is said that the conspiracy was designed to injure the claimant by inducing the claimant to provide the Antonia shipment to T&L at a time when each of the defendants knew certain matters. Apart from the alleged deception, the only unlawful means by which the claimant is said to have been induced to provide the Antonia shipment to T&L is something described in paragraph 90 as a "collusive silence". However, silence cannot be characterised as unlawful unless there is a duty to speak, and none is alleged.

Paragraph 91 goes on, however, to allege other unlawful means including, at subparagraph (iv), what is said to have been:

"SRB's planned and intentional breach of the Sale Contract by commencing and prosecuting the Italian Proceedings in breach of the arbitration clause;"

The “Italian proceedings” are proceedings in which SRB is alleging that the Sale Contract is invalid. The claimant's case is that those proceedings are an illegitimate tactical device brought in bad faith in order to try to frustrate the claimant's attempts to recover the contract price.

On one view of the particulars of claim subparagraphs (iii) to (vi) of paragraph 91 are simply wheels that turn without forming part of the mechanism. But although I think the particulars of claim should be amended to make the claimant's case clearer, it is reasonable to assume that those allegations are intended to form part of the alleged conspiracy. The only one which seems to me to have any substance is subparagraph (iv), which I have quoted.

At paragraph 6 of the particulars of claim it is alleged that the decision to commence the Italian proceedings:

"must have been reached at a very senior level within SRB, involving the directors and the joint venture partners, that is to say including the Defendants herein."

Then at paragraph 85 it is pleaded that the claimant:

“relies on both the unlawful nature of the Italian Proceedings (commenced as they were in breach of an arbitration clause) and on the wholly unfounded nature of the allegations made by SRB therein (which are mirrored by similarly unfounded allegations by SFIR in the Italian Arbitration) as evidence of SRB and SFIR's absence of good faith in relation to the Sale Contract and the Antonia Shipment. That absence of good faith infected also the minds of the Defendants and each of them. Based on the similarities between the Italian Arbitration and the Italian Proceedings, the very close relationship between SFIR and SRB and the facts and matters pleaded above, it is to be inferred that:

(i)

SRB had decided to issue the Italian Proceedings (or similar proceedings) by 17 March 2014 at the very latest;

(ii)

The Defendants were aware of this;

(iii)

Mr Bacon and Mr Widmer as directors of SRB … were party to the decision to commence the Italian Proceedings.”

Whatever view may be taken of the strength or weakness of that allegation, I do not think it can be said that this part of the case against Mr. Bacon and Mr. Widmer is defective for want of particularity. My conclusion on this final limb of the defendants’ application is, therefore, that the claims against the second and third defendants should be struck out, except insofar as they relate to the bringing of the Italian proceedings.