Saipol S.A. v Inerco Trade S.A.

Judgment

MR JUSTICE FIELD: This is an appeal with leave under section 69 of the Arbitration Act, 1996 (“the Act”) brought by Saipol SA (“Saipol”). There is a parallel application under section 68(2) of the Act but at the hearing the sole issue before the court was the questions of law for which leave had been given to argue.

The questions of law are: (1) Whether the Sale of Goods Act, 1979 , limited the recoverable damages to the difference in value between sound and defective goods. (2) Whether the comingling of the respondent’s 3,000 MT with the other sellers’ parcels had the effect that the respondent was not liable for third party liabilities or for expenses.

The background to the appeal is this. There was a contract between Saipol as buyer and Inerco Trade SA (“Inerco”) as seller for the sale and purchase of 3,000 MT of Ukrainian crude sunflower seed oil in bulk at US$1,275 per MT delivery FOB Ilyichevsk between 15 March and 15 April 2008. The contract incorporated the terms of FOSFA Contract 53, Clause 29 of which provides for arbitration in accordance with FOSFA’s rules of arbitration and appeal.

Inerco shipped 3,000 MT of product as part of a total cargo of about 16,600 MT of Ukrainian crude sunflower seed oil which was loaded on board the vessel MT Selandra Swan on about 16 March 2008. The 13,600 MT balance of the cargo was shipped by four other sellers, Rizoil, AWB, Cargill AT and Cargill International.

As the FOFSA tribunal that determined liability found in paragraph 5.6 of their award, before loading the entire cargo had been comingled with other oil including that shipped by the other sellers in seven shore tanks and it was loaded, comingled into Selandra Swan’s tanks. Paragraph 5.6 reads:

It was common ground that the whole shipment of about 16,600 metric tons was comingled in several storage tanks prior to loading and it was common ground that goods were loaded comingled into the ships’ tanks. The storage tanks were identified as tanks numbers 5, 6, 9, 12, 13, 17 and 18 from the Rizoil terminal, although tanks 17 and 18 were apparently the source exclusively for a different shipper. Loading commenced at 21.40 on 13 March and completed on 00.15 on 16 March 2008.

The cargo was discharged at Dunkirk on 31 March 2008 and Saipol began drawing upon it to make delivery to sub-purchasers who were food stuffs manufacturers. On 8 April 2008 a sub-purchaser complained of mineral oil contamination. In the following weeks it became clear there wa