FOB sale – payment obligation on buyers to pay into account nominated by sellers – buyers’ email account hacked resulting in payment to incorrect account – buyers liable for loss suffered by sellers
5000 metric tonnes of Romanian sunflower meal was sold FOB Galati, Romania.
Payment was to be in cash within 2 days of presentation of a commercial invoice.
Clause 18 provided that notice to brokers was deemed to be notice to the parties.
Sellers effected delivery and emailed the commercial invoice with payment details identifying an account at the New York branch of Citibank NA to the brokers who forwarded the email to the buyers.
As result of the hacking of one or both the brokers’ and the buyers ‘email accounts, the sellers’ email was never received by the buyers. Instead they received a fraudulent invoice with details of a different account at the London branch of Citibank NA.
Buyers made full payment into the incorrect account.
In due course the error was detected and the money transferred to the correct account.
The deviation resulted in a shortfall of $161 000 which sellers claimed from buyers.
A GAFTA Board of Appeal held that the sellers’ notice to the brokers was good and that the buyers failed in their obligation to pay the full price.
Popplewell J agreed and refused leave to appeal on a question of law under section 69 of the Arbitration Act 1996.
Buyers also relied on section 68 on the basis that the Board had not given them an opportunity to argue the clause 18 point which the Board took meru motu.
Popplewell J agreed that this was a serious irregularity and remitted the question to the Board.
The outcome seems to be correct.
There are useful discussions in the judgment relating to the respective tests under sections 68 and 69, and the nature of the obligation to pay in cash when bank transfers are involved.
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