"English law shall be applicable to the Contract the subject of their dispute and to any remedy urged by either party, save that the conflict of law rules applicable under English law shall not apply."
1) The FOB sale and payment terms of the JVA were amended by consent of the parties, such that Indagro paid the purchase price and inland transportation costs of the Cargo.
2) As a result of these changes to the JVA, Indagro owned the Cargo when Viva sold it.
3) Viva had no contractual right to sell the Cargo, and Indagro did not consent to its sale, either beforehand or after the event.
4) Viva used false documents to obtain Indagro’s payment for the Cargo.
5) Viva cannot mount a successful defence of set-off against Indagro’s claim because:
a) the defence is not legally available to Viva in the circumstances, and;
b) even if the defence was legally available, Viva has failed to prove the expenditure/liabilities it seeks to set off and/or has failed to give adequate credit for payments made by Indagro.
(i) the absence of any prior reference in the documents to the sales to Titan or Fedcominvest;
(ii) the misdating as 7 June 2005 of a fax sent by Viva to lndagro on 21 June 2005 (HB 191); and
(iii) the production of false documents to obtain payment for the 30,000 MT.
lndagro submits that these factors discredit the evidence from Viva's Witnesses of Fact to the effect that lndagro knew and approved of the sales.
(i) breach of contract: the sales of the Cargo are characterised as both a fundamental and repudiatory breach of the contract giving rise to its termination and/or frustration;
(ii) failure of consideration;
(iii) breach of a bailment obligation;
(iv) breach of fiduciary duty;
(i) because Indagro's claims include non-contractual claims (including claims of a proprietary nature);
(ii) because the dishonest conduct alleged against Viva would make it unjust to allow Viva to avail itself of a set-off in all the circumstances.
(i) whether Indagro was able to sell the Cargo, and whether it, in fact, did so;
(ii) if Indagro could not/did not sell the Cargo, why not?
(iii) whether Viva was entitled to sell the Cargo to mitigate losses accruing to the parties under the JVA;
(iv) whether Indagro approved or knew about the sales of the Cargo to Fedcominvest and Titan;
(v) whether, having sold the Cargo, Viva is entitled to set the proceeds of sale against losses accrued and/or accruing to the joint venture;
(vi) whether Indagro is entitled to recover from Viva the proceeds of the sale of the Cargo or part of them and/or damages.
(i) breach of a term of the JVA that Indagro would sell the sulphur at the highest possible price;
(ii) breach of a representation inducing the JVA that Indagro would be able to sell the sulphur internationally at a profit;
(iii) failure to pay $80,903.44 as its agreed share of losses on the resale of the initial 50,000 MT sulphur, which losses are said to have arisen from Indagro’s negligent handling of its sale;
(iv) failure to repay $70,000 advanced by Viva to Gazexport; and
(v) failure to arrange suitably phased liftings from Kerch to maintain a profitable cycle of rail deliveries from the refinery to the port, leading to a critical problem of stockpiles of sulphur at the port requiring costly storage and leading to the port authorities threatening to seize the Cargo.
(i) The sales of the Cargo were known to Indagro and there was no protest in relation to them;
(ii) there were no thefts of the Cargo or anything approaching that;
(iii) Viva has never concealed details of the sales or retained their proceeds for its own benefit;
(iv) Indagro did not believe it had any cause for complaint as regards the sales and that is the real reason for the lack of protest, not the desire to embark on a damage limitation exercise; and that
(v) the real reason for Indagro’s change of position was that Indagro had to present a convincing picture to the bank that would explain what had happened to the bank's collateral and Viva would not collude in that without a release.
(i) The contract was not repudiated by Viva. Indagro did not purport to bring it to an end but affirmed it.
(ii) Indagro cannot have a restitutionary claim for the monies expended by it as expended under a failed contract as the JVA was valid.
(iii) Indagro’s claim for restitution of the sums expended on the basis that there was a failure of consideration is at odds with its assertion that it acquired title to the Cargo; possession should not be confused with title.
(iv) Viva was not bailee and in any event did not carry out any act that would be a breach of any alleged obligation as bailee.
(v) There was no conversion and theft is not a civil cause of action. The connection between the claim and defence is so close that set-off is plainly available as a defence.
(vi) Any obligations of Viva as FOB seller did not affect Indagro’s obligation to sell the Cargo and its failure to do so necessitated the sale by Viva.
(i) To the extent that this alleged breach could give rise to a claim for damages, the question could then arise whether that claim could be available as a set-off defence to Viva.
(ii) Viva relies on the alleged breach as one justification for their selling the Cargo to mitigate the damage that they say was caused by Indagro’s breach of contract.
....The responsibility of the Purchase partner [i.e. Indagro] commence [sic] from the FOB [Kerch] port till [sic] CFRFO positioning of the product.
Charter party conditions
Charter party conditions will be considered the ones that Purchase partner to the best of their ability will obtain and secure from the owners of each performing vessel according to the loading and shipping terms of [Kerch] loadport.
Any risks, consequents [sic] as well as direct or indirect cost arising due to the agreed loading port conditions and or other charter party terms that are to be established between the relevant parties, will be equally shared between sales partner [i.e. Viva] and purchase partner.
All product costs as well as operational/transactional/logistic costs will [sic] arise directly or indirectly within the frame of this j. venture agreement will be equally shared between the Sates partner and Purchase partner.
All profits and all losses that will arise within the frame of this j. venture agreement will be equally shared between Sates partner and Purchase partner."
"The position is, therefore, that since the Judicature Acts, there may be
(i) a set-off of mutual debts
(ii) in certain cases a setting up of matters of complaint which if established reduce or even extinguish the claim and
(iii) reliance on equitable set-off and reliance as a matter of defence on matters of equity which formerly might have called for injunction or prohibition."
"Transaction set-off (abatement, equitable set-off and United States recoupment)
Transaction set-off arises where the reciprocal claims flow out of the same transaction or closely connected transactions, in circumstances, generally, where the creditor claiming his primary claim has defaulted in performance of the very obligation for which he is seeking payment. Unlike independent set-off, the remedy is self-help and neither claim need be liquidated. The seller who claims the price of goods can be required to bring into account damages for defective goods...."p9
"The availability of transaction set-off is not unlimited; a debtor may not set off his cross-claim against the creditor's primary claim merely because both claims flow out of the same transaction. There is much subtlety as to which cross-claims qualify for transaction set-off and which do not." p10
(i) which of the causes of action alleged by indagro can be sustained;
(ii) what remedies are prima facie available to satisfy those causes of action;
(iii) whether transaction set-off is available as a defence; and
(iv) if so, the amount Viva can set off against Indagro’s claim.
(i) The fact that the actual payment terms were varied from 50% against Viva’s invoice and warehouse receipts at [Kavkaz/Kerch] 40% on vessel nomination and the balance on the Bill of Lading weight, to 100% against Viva's invoice when the goods were still at the refinery. This raises a presumption of the passing of property on payment (or at least at the FCA point, following payment).
(ii) The fact that Viva signed Addendum 14 on Indagro's request as late as 9 March 2005 repeating the FOB terms, notwithstanding that both parties knew that the payment had been accelerated beforehand. This tends to negate any variation by conduct of the FOB terms and, in particular, the fairly inflexible presumption that in an FOB contract property does not pass before the goods go over the ship’s rail.
(iii) The fact that Viva’s invoice (HB 77) was issued and directed payment to Gazexport as its creditor. This strongly indicates that there was no question of Indagro having bought direct from Gazexport, so that Viva appeared to have acquired title at a minimum for a scintilla temporis at the FCA point when the goods became ascertained and appropriated to the contract.
(iv) The fact that the Cargo was insured by Indagro from the FCA point. This raises the presumption of property and risk passing together and the need for Indagro to have an insurable interest.
(v) The fact that Gazexport's dispatch declaration references both the sales contracts under which it was selling sulphur, in one case to Viva and in the other to Indagro. It also references addendum no 2 to those contracts, which was not in evidence. This serves further to obscure the situation.
(vi) The fact that Indagro's bankers took a security interest was in evidence, but its precise terms were not in evidence. This would, nonetheless, tend to imply that the bank needed Indagro to acquire title in order to perfect their security.
(vii) The fact that Indagro e-mailed Viva on 7 February 2005, indicating that its bank (unspecified, and Société Générale were not their only bank) would not accept Indagro to pay on FOB basis. This appears to be another counter-indicator of FOB terms being truly intended.
(viii) The fact that Novochimtrans declaration to Société Générale of 2 March 2005 is headed "Cargo Owner: Indagro SA, Geneva/Viva Chemical Corp., New Jersey" (HB 80). This tends to support Viva's joint ownership case.
"Insulated property claims
A claim may also be insulated from set-off because it is a proprietary claim for the claimant's property held by another. The holder cannot retain the property as security for the cross-claim owing by the claimant unless the holder has a lien or other security interest over the property. A claim may also be treated as proprietary where it is a claim for moneys misappropriated by a fiduciary, such as a trustee or a director, or for the return of a mistaken payment or for the return of money paid for a special purpose which has failed..." p678
Set-off is generally only available where both claims are money claims, not where one or both is a property claim.
A "money claim" in this chapter refers to a debtor-creditor relationship while a "property claim" refers to a proprietary right for the delivery of money or other property..."
(a) Viva pay Indagro the sum of US$678,900.91 as damages, plus interest at 1% above the US Dollar overnight LIBOR (London Interbank Offered Rate), as displayed on the British Bankers Association's webpage in respect of the British Bankers’ interest settlement rate for US dollars, from 1 July 2005 until payment; and
(b) as to costs:
(i) Viva pay Indagro its legal expenses in the amounts of US$191,610.48, £4,791.84 and €5,440.00 within the meaning of Article 31 of the ICC Rules;
(ii) Viva shall pay Indagro US$ 55,000, such that Respondent shall bear the costs of arbitration, fixed by the Court at US$ 55,000; and
(c) all other claims are dismissed.
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