England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		Date: 8.8.2008 Date of these reasons for judgment: 19.9.2008

Mr Justice Walker :

Introduction

1. The claimants (whom I shall refer to together as "Man") issued these proceedings on 20 March 2008. Their complaint against the defendants (whom I shall refer to together as "Fluxo") concerned sugar trading. Man's operations include acting as a clearing house recognised by commodity exchanges. One such is IntercontinentalExchange, Inc. of New York ("ICE"). ICE's facilities include electronic trading of derivative and physical commodities. In broad terms the position is that on 16 January 2008 ICE made requirements in relation to positions in sugar futures that Fluxo had taken through Man and 9 other market members who acted as clearing houses or commission houses. For convenience I shall refer to Man and the other 9 market members as "the brokers". During the period from 0724 London time on 18 January 2008 Man liquidated Fluxo's positions. Man's particulars of claim recited provisions in the relevant customer agreement entitling them to close out positions when margin calls had not been met. It was said that margin calls had been made and not met, and that after liquidation of the positions both the margin payments and other sums were due. The total amount owing under the customer agreement as at 20 March 2008 was said to exceed US$22m.
2. On 29 April 2008 Man obtained a world-wide freezing order ("the WWFO"). This was replaced on 6 May 2008 by a revised order ("the Variation Order").
3. Fluxo on 16 May 2008 issued an application ("the WWFO set-aside application") complaining about Man's application for the WWFO. They said it should never have been sought because there was no or no sufficient evidence of a risk of dissipation of assets, and that when it was sought Man were guilty of both non-disclosure and delay.
4. On 18 June 2008 Man issued an application ("the summary judgment application") seeking summary judgment on 6 broadly defined issues, and a money judgment for a specific sum. In addition, or in the alternative, they sought an interim payment.
5. Man told the court that because of proceedings in the United States of America ("US") the summary judgment application needed to be resolved urgently. This was to guard against the possibility that the US court would make an order requiring Man to pay money to Fluxo. Man wished to be in a position where any sum ordered to be paid by this court could be set off against any amount which the US court required Man to pay.
6. In these circumstances this court directed that both the summary judgment application and the WWFO set-aside application be listed for determination at a 3 day hearing from 6 to 8 August 2008 inclusive. Accordingly both these matters came before me as Commercial Court vacation judge on Wednesday 6 August 2008. As I shall explain, it became apparent that it would not be possible in the time available to deal with the WWFO set-aside application, nor would it be possible to deal with all the issues that Man sought to raise in the summary judgment application. Late on Friday 8 August I made rulings on those issues which it had been possible to deal with. My outline reasons for those rulings were in part set out in a written document and in part given orally. I now give my full reasons for my rulings.

The case in a nutshell

7. I can describe the case in a nutshell by quoting from paragraphs 2 to 7 of the skeleton argument prepared on behalf of Man by Mr Paul Downes and Mr Stewart Chirnside:

2. The First Claimant ("MCA") is a sugar broker. The claim arises from trades carried out for the First Defendant ("FCO") up to 15^th January 2008 which left MCA with losses of $22m. MCA says that FCO's debts are guaranteed by the Second Defendant ("Fluxo Commercio"); this is denied. The Second Claimant ("MSI") owes FCO around $6m. In order to mitigate its position MCA has assigned (FCO would say purported to assign) $6m of the $22m debt to MSI. ...

3. MCA's claim arises on the Particulars by way of a simple claim in debt for unpaid margin calls. MCA says that the first demand was sent by email on 17^th January 2008 at 1:17am (although the Defendant disputes that this was a "demand" for the purposes of the agreement) for $7.5m. This was followed up by a subsequent demand timed at 10:23am that morning. Part of the dispute surrounds when those demands were "effective" hence the importance of the precise timings. MCA started to liquidate FCO's positions on 18^th January (at 7:24am London time). MCA say this was justified on the terms of the contract: FCO say that it was premature and has caused them losses which exceed the claim. These are the subject of a Counterclaim.

4. FCO also say that MCA's decision to liquidate when it did was a breach of an oral agreement made between the parties the previous day at a meeting in New York with FCO and other brokers who were also exposed at this time and also had not been paid margin for the previous day. Thus FCO say that MCA "jumped the gun" in two respects:

a. Firstly FCO was not in default of its obligation to pay margin as at 7:24am London time on 18^th January 2008.

b. Secondly and in any event there was an agreement the previous day that MCA would not start to liquidate the positions and its actions on 18^th January were therefore in breach of this agreement.

5. In addition, and without prejudice to its contention that MCA jumped the gun when it started to liquidate, FCO says that MCA mismanaged the closing out process in breach of duties of care, either contractually, or by reason of the FSA Handbook, or by reason of common law.

6. The claim raises other issues with regard to a guarantee from the Second Defendant and the assignment of part of the debt claimed by MCA to the Second Claimant. These issues are not the subject of this hearing.

7. A freezing injunction was obtained on 29^th April 2008 from Mr Justice Andrew Smith. This was the subject of two further hearings: one on 1^st May 2008 (the Claimants initiated this to draw the Judge's attention to a material omission from the evidence); the second on 6^th May 2008 discharging the freezing injunctions on undertakings given by the Defendants coupled with a disclosure order as to the Defendants' asset position.

8. The Defendants have issued an application for a declaration that the Freezing Injunction ought never to have been granted and to be released from the undertakings they have offered.

8. I shall adopt the abbreviations identified in those paragraphs. It is convenient to note at this point that FCO is a company established under the laws of the British Virgin Islands. Fluxo Commercio is a company based in Brazil.

The list of issues for the present hearing

9. At directions hearings in July it was stressed by Aikens J that the parties must identify issues which were suitable for the present hearing. For reasons which I need not examine, the matter had to be left on the basis that the parties would identify a list of such issues in advance of the hearing. Aikens J made it clear that the judge at the hearing would not be bound by the parties' list. Directions were also given for Man to lodge their skeleton argument by 9.30 a.m. on Monday 4 August, for Fluxo to lodge their skeleton argument by 9.30 a.m. on Tuesday 5 August, and for the court to have 1 day pre-reading.
10. No agreement was reached as to the list of issues prior to Monday 4 August. Instead, on Monday morning Man produced a 61 page skeleton argument which worked by reference to a "draft revised" list of 12 issues. However issues 1 and 7 themselves comprised 6 and 5 further issues respectively, some of them with sub-issues, giving a total of 21 issues. On Tuesday morning Fluxo produced a 79 page skeleton argument seeking to answer Man's points on the proposed issues. They observed that the list of issues had not been agreed and said that they thought it best to work by reference to Man's list so long as they were "not held to precise wordings."
11. Man's "draft revised" list of issues for the present hearing was as follows:

Summary Judgment

1. Applying the test set out in CPR 24.2 is the First Claimant entitled to summary judgment in its favour on the following issues at (a) to (f) below:

a. On the true construction of the Customer Agreement between the First Claimant ("MCA") and the First Defendant ("FCO") (and leaving aside for this purpose issue (b) below):

(i) When were the margin calls made on 17^th and 18^th January 2008 demanded under the terms of the Customer Agreement?

(ii) What was the latest time at which FCO was required to pay the margin thus demanded?

b. Did the parties make any and if so what agreement at the meeting on 17 January 2008?

c. If so, was that agreement sufficiently certain to be enforceable and did MCA break that agreement?

d. Was MCA entitled to close out FCO's position pursuant to clause 17 of the Customer Agreement:

(i) At 7.24 London time (2.24 NY time) on 18^th January 2008?

(ii) At some later (and if so, what) time?

e. If the answer to (d) is Yes:

(i) Did MCA owe FCO a "Best Interests Obligation" (as defined by paragraphs 3(4) and 4 of the Defence and Counterclaim) in exercising its rights under clause 17 of the Customer Contract?

(ii) Did MCA owe FCO a "Best Execution Obligation" in exercising its rights under clause 17 of the Customer Contract?

(iii) Did MCA owe FCO a lesser duty and if so what was it?

f. If the answer to (e) is Yes:

(i) is it a sufficient answer to any complaint that MCA failed to comply with such obligation that the transaction in question was entered into at whatever was the market price for such a transaction at the time it was concluded; or

(ii) may other considerations (such as whether it was reasonable to enter into such a transaction at the time when or in the manner in which it was concluded) also be relevant?

(iii) what aspects of the trades carried out under clause 17 of the contract are arguably subject to the duty thus recognised (ie the decision to carry out the trade and/or the decision to carry out the trade at a particular time and/or the mechanics of carrying out the trade)?

2. Do the facts stated in Appendix 1 of the Defence and Counterclaim raise an arguable case in breach of contract against the First Claimant in the way it exercised its rights under clause 17 of the Customer Contract?

3. Is the First Claimant entitled to summary judgment for a monetary sum in relation to the findings on Issues 1 and 2 above, and, if so in what sum?

4. If the answer to 3 is Yes: and if the Counterclaim discloses an arguable claim: should the First Defendant be granted a stay of execution in relation to the judgment on the Claimants' Claim?

5. If the answer to 3 is No: is the First Claimant entitled to an interim payment in relation to the findings on Issues 1 and 2 above and if so in what sum?

The Freezing Order

6. At the hearing on 29^th April 2008 was there no or no sufficient evidence of a risk of dissipation such as to entitle the Defendants to a declaration that the Freezing Order made on 29^th April 2008 should never have been granted and an order setting aside the Variation Order made on 6^th May 2008?

7. At the hearing on 29^th April 2008 was there material non-disclosure on the part of the Claimants of the following matters:

a. Non-disclosure of Middleton Potts' letter dated 7 February 2008?

b. Non-disclosure of the financial information and accounts provided to the Claimants by the Defendants?

c. Non-disclosure of the new contract concluded between the First Defendant and the Second Claimant on 11 February 2008?

d. Non-disclosure regarding assurances of payment for the cargo shipped on the "Tina Litrico"?

e. The claim that "Mr Garcia has a history of restructuring the Group of which the Respondent companies are part, and might take steps to do so were he given notice of this application"?

8. Insofar as there was material non-disclosure of any of the items at 7(a) to (e) above was it deliberate or inadvertent?

9. Insofar as there was material non-disclosure of any of the items at 7(a) to (e) above was it such as to affect the outcome of the application?

10. Was there material delay in bringing the application?

11. Notwithstanding a declaration in the Defendants' favour on issue 6, is there, at the date of this hearing, evidence of a risk of dissipation with regard to the Defendants, and, if so, which ones?

12. In the light of the findings on issues 7 to 11 should the Court (i) declare that the Freezing Order granted on 29^th April 2008 should never have been granted; and/or (ii) set aside the Variation Order; and/or (iii) release the Defendants from their undertakings; and/or (iv) grant a fresh freezing injunction?

12. It was completely unreal to think that within an allotted time of 3 days the court could hear argument, let alone give judgment, on all these issues. As emerged during the hearing, it was also completely unreal to think that the legal teams could properly prepare argument in the time available prior to the hearing. By working what I am sure were absurd hours the parties' lawyers managed to produce skeleton arguments which covered the ground on the various issues in varying degrees of depth.

Pre-reading and the first day of the hearing

13. An agreed reading list accompanied Man's skeleton argument. It comprised 24 items including lengthy transcripts of telephone conversations and meetings which took place on 16, 17 and 18 January 2008. The 24 items comprised in total more than 800 pages. There was a note saying that the parties acknowledged that the list was extensive but had agreed that priority should be given to items marked with an asterisk. The asterisked items were roughly half of this total. No attempt was made to confine the reading list to particular issues, or even to explain which items went to particular issues.
14. Confronted with this unsatisfactory position, I decided that I should skim read as much of the material as I could. When doing so, I noted that paragraph 4 of Man's skeleton argument (quoted at paragraph 7 above) referred to a defence based on what was said and done by representatives of the parties on 17 January 2008. In New York on that day Mr Manoel Garcia of FCO met Mr John Taylor of Man and representatives of some of the other brokers. Representatives of the remainder of the ten brokers participated in the meeting by telephone conference call arrangements. Also participating by conference call arrangements were other representatives of brokers who had a representative physically at the meeting. Among those other representatives was Mr Igor Placet of Man. These conference call arrangements were in place, and were recorded by at least one of the brokers, throughout the relevant period. What paragraph 4b of Man's skeleton argument identified was a defence which arose "in any event" that on 17 January 2008:

… there was an agreement … that MCA would not start to liquidate the positions and its actions on 18 January were therefore in breach of this agreement.

15. For convenience I shall this "the 17 January Agreement defence". At paragraph 14 of the skeleton argument Man gave 3 separate reasons why they said the 17 January Agreement defence was unsustainable:

14. In summary MCA says that this case is unsustainable and that summary judgment ought to be given on this part of the case in MCA's favour. There are essentially three reasons why FCO's case has no reasonable prospect of success:

a. It is clear from the transcript that no agreement was reached at this meeting.

b. Even if the discussions on 17^th January as to the possibility of a coordinated approach could be characterised as an "agreement": it was a thing so vague and uncertain as to be unenforceable.

c. In any event, on the basis of Mr Garcia's own evidence served for the summary judgment hearing the agreement was breached by other brokers (ie not MCA) on 17^th January while the meeting was continuing such that implementation of the agreement was rendered "futile" and Mr Garcia took no steps following the meeting to fulfil his side of the bargain.

16. I did not observe any suggestion in Man's skeleton argument that even if there had been an enforceable agreement on 17 January nevertheless Man might, depending on the outcome of other summary judgment issues, be entitled to a money judgment or interim payment. In those circumstances unless Man rebutted the 17 January Agreement defence there would be no urgent need to decide the other issues raised on the summary judgment application. Further, paragraph 12 of the skeleton argument of Mr Stephen Males QC and Mr Sean Snook for Fluxo stated in relation to the 17 January Agreement:

… if there is a real prospect of establishing the agreement relied upon – that will be sufficient to defeat the summary judgment application regardless of the other issues. That is because, on the facts, it is beyond dispute that if there was such an agreement, MCA broke it by beginning the liquidation of Fluxo-Cane's position at 2.24 NY time on 18 January. It may be, therefore, that the Court would find it convenient to consider that issue first.

17. It seemed to me that if Man were to obtain any form of summary judgment from the court, they would have to show that for at least one of the reasons given in paragraph 14 of their skeleton argument the 17 January Agreement defence was unsustainable. Accordingly at the start of the hearing I made an initial inquiry of Mr Downes as to whether Man agreed with that proposition. He replied that they did. I then asked each side to take instructions on a case management proposal that (1) I should begin by hearing Mr Downes's oral submissions on the question whether for at least one of those reasons the 17 January Agreement defence was unsustainable, and (2) when I had heard his submissions on that question I would then give further case management directions. Both sides agreed to this course.
18. The utter impracticality of the "draft revised" list of issues for a 3 day hearing became increasingly obvious as Mr Downes's oral submissions progressed. The entire morning was devoted to identifying the passages in the transcripts of 16, 17, and 18 January 2008 that Mr Downes relied upon, and taking me through those passages only. It was recognised that Mr Males would wish to take me to other passages but that it would use up even more time if Mr Downes were to try to take me through them.
19. At 2 p.m. on Wednesday 6 August Mr Downes at my request took me through passages in the transcript of 17 January which referred to discussions with ICE. He then proceeded to make legal submissions on each of Man's three reasons why the 17 January Agreement defence was unsustainable. These submissions were completed, subject to a reservation that I shall explain below, at 4 p.m.
20. In the course of oral submissions on the third reason, it seemed to me that Mr Downes was putting forward a proposition which had not been asserted in paragraph 14c of his skeleton argument and which I did not understand. The proposition seemed to be that a decision taken in the evening of 17 January by FCO, and not communicated to any of the brokers, was an acceptance of a repudiatory breach by one or more of the brokers, which thereupon brought the 17 January Agreement to an end prior to the time when MCA made the initial liquidating trades. I queried whether there could be acceptance of a repudiatory breach without communicating it to the other side. Mr Downes replied that it did not matter that MCA did not know of FCO's decision.
21. Mr Downes then sought to make a submission that even if MCA's trades on 18 January prior to the meeting that day were in breach of the 17 January Agreement, that breach only lasted until acceptance of the repudiation was communicated by Mr Garcia at the meeting on 18 January and thus only disentitled MCA from claiming part of the debts alleged in the particulars of claim.
22. This proposed submission was a new point, and a surprising one. It did not appear in paragraph 14 – or indeed anywhere else – in Man's skeleton argument. Moreover, it involved a suggestion, which I had not understood to have been made previously, that even if there had been an enforceable agreement on 17 January nevertheless Man might, depending on the outcome of other summary judgment issues, be entitled to a money judgment or interim payment. Accordingly I reminded Mr Downes of what he had said in response to my initial inquiry. It then became apparent that Mr Downes had misunderstood my initial inquiry. He submitted that there were other issues on the summary judgment application that could usefully be determined even if I concluded that the 17 January Agreement defence was or might be sustainable.
23. I indicated that I would decide overnight whether I would need to call on Mr Males in relation to the 17 January Agreement defence, and I canvassed what directions might be given if I concluded that I did not need to call on him. Mr Males indicated that Fluxo would wish to have the WWFO set-aside application dealt with, but his oral submissions for that purpose would require the best part of a day. The hearing was adjourned on the basis that if Mr Downes wished to refer me to further legal material he would be able to do so at the start of Thursday 7 August.

A procedural foul-up and a moral to be drawn

24. Thursday 7 August was the second day of the hearing. At 9.04 a.m. Mr Downes emailed a note on matters arising from the previous day. This reached me shortly before 10 a.m., and at around 10 a.m. I received a bundle of authorities and text book extracts referred to in the note. The note began with a short point about the making of multi-party contracts. The remainder of the note elaborated on various aspects of the legal submissions referred to in paragraph 20 above.
25. The hearing began at 10.30 a.m., when Mr Downes told me that he did not propose to make any oral submissions supplementing the note he had sent by email.
26. If I had not needed to call on Mr Males on the 17 January Agreement defence then I would have been sympathetic to Fluxo's request that I should deal with the WWFO set-aside application. Overnight, however, I concluded that I needed to hear submissions from Fluxo on the 17 January Agreement defence.
27. The morning of 7 August was taken up with initial legal submissions by Mr Males and the identification by him of relevant background to events on 17 January. During the afternoon Mr Males took me through passages in the transcripts of 17 and 18 January that he relied on, and advanced legal submission on the first and second reasons why MCA said the 17 January Agreement defence was unsustainable. Then at a late stage in the afternoon Mr Males produced a written note concerning the third reason. This began by saying that the argument advanced by Man on the third reason was:

not pleaded or referred to anywhere in (even the latest draft of) the List of Issues and has not been addressed in the Defendants' evidence. In view of the way the argument has developed and evolved it ought to be clearly pleaded if it is to be run at all – let alone to be the basis for a summary judgment application. The Claimants' note of this morning only emphasises the need for a clear pleading.

28. On this basis the note made an initial submission that the Court should rule that the point was not open on this application. Paragraphs 4 to 7 of the note recorded how Man's case on the third reason had evolved, and paragraph 8 made initial comments on the proposed new submission described in paragraph 21 above. The remainder of the note contained legal argument in response to the arguments described in paragraphs 20 and 21 above and also in response to the note emailed by Mr Downes that morning – but under protest that (among other things) the arguments in that note were completely new.
29. By this time it was clear to me that if I were to produce a judgment the following day it would be impossible to deal with anything other than the first two reasons why Man said that the 17 January Agreement defence was unsustainable. If I were to go beyond those two reasons, even if I were to sit late, the complexity of Man's new arguments on matters other than reasons one and two was such that Mr Males's submissions would not be complete until mid-morning on 8 August 2008. It seemed to me that this would be so even without allowing for the time needed to resolve Fluxo's protests. That day (8 August) was the last of the three days set aside for the hearing, and the day when judgment had to be given. If one then factored in oral submissions in reply by Mr Downes there would be no time left for preparation of my judgment.
30. Accordingly I stopped Mr Males from proceeding further and I heard oral submissions from Mr Downes in reply on reasons one and two. Those submissions were completed shortly before 5 p.m. on 7 August, and I reserved judgment until the afternoon of Friday 8 August.
31. So whereas at the start of the hearing I was invited to deal with 21 issues the result was that I was able to give a ruling on only two of them. The moral of this procedural foul-up is that the parties must make sure that they do not overload hearings. This is vital at all times in the interests both of justice and efficiency. The interests of justice require that applications be properly prepared so that within the time allowed for pre-reading the judge can get a clear picture of what the real issues are, what factual and legal points arise, and what arguments the parties put forward on those points. The rush to try to deal with numerous issues in the present case did not leave enough time for the parties to prepare properly in this way. I am sure that lawyers worked absurd hours in a vain attempt to try to do it, but that can hardly have increased the quality of their work.
32. It is inefficient – indeed it is a gross waste of lawyers' and clients' time and of the court's time – to try to cram numerous issues into an application. In this case frenetic activity was generated by what appears to have been a failure to see the wood for the trees. A few minutes' thought, standing back from this frenetic activity, would have sufficed to realise that the suggested list of issues was utterly impractical. I am not singling out any individual for criticism at this stage. It is also right to recognise that the legal team for Fluxo were put in a difficult position when they received a massive skeleton argument based on issues that were not agreed. I am also concerned that the hours worked in this case must have involved serious risks to the health and safety of those involved on both sides. I observe – without saying that this is necessarily the case here – that commercial lawyers sometimes seem to have a macho culture in which they think that clients will be impressed by aggressive conduct. Responsible clients – and I include all parties to the present case in that category – will not be impressed by conduct which is likely to raise the temperature unnecessarily and to result in wasteful inefficiency, and will wish to be satisfied that those involved are not working absurd hours posing risks to their health and safety.
33. My observations about efficient use of court time apply with added force in relation to applications in the vacation. In the first half of August, and for parts of the remainder of August and September, there is only one vacation Commercial Court judge. Parties who have been given an urgent oral hearing in the vacation must recognise that the vacation Commercial Court judge has to deal with other urgent oral hearings at short notice and with urgent and often complex paperwork. It can never be assumed that a judge has the period before and after court available in which to prepare judgment. Any such assumption is even more likely to be unsound in the vacation.

Principles governing summary judgment applications

34. In the ordinary course I would not expect to deal summarily with the question whether an agreement had been made during the course of a meeting and conference call. Man, however, points out that there is a transcript of what was said on 17 January which in all material respects is not challenged. They submit that I am in as good a position as a trial judge to determine whether anything was agreed with sufficient certainty, and that I should do so.
35. It is common ground that an application for summary judgment is not appropriate to resolve a complex question of law or fact, the determination of which necessitates a trial of the issue having regard to all of the evidence. Fluxo say that in consequence all they need do is show a triable issue. They suggest that judicial assessment of the position might be affected by material which emerged on disclosure, by listening to recordings of relevant conference calls, and by hearing evidence. If, however, I conclude on the basis of the transcript that a binding agreement was reached then they have no objection to my determining this summarily.
36. For reasons which will become apparent I do not need to decide whether Fluxo's objections to a summary determination are sound.

Principles governing whether agreement is reached

37. The following principles were summarised in paragraphs 33 and 34 of Fluxo's skeleton argument:

33. In considering whether any agreement was made the relevant principles are as follows:

(a) The Court's task is to review what the parties said and did and from that material to infer whether the parties' objective intentions, as expressed to each other, were to enter into a mutually binding contract.

(b) The Court is not concerned with what the parties may subjectively have intended.

(c) Where the parties have not reached agreement on terms which they regard as essential to a binding agreement, it follows that there can be no binding agreement until they do so. Conversely the parties may by their words and conduct make it clear that they do intend to be bound, even though there are other terms yet to be agreed, even terms which may often or usually be agreed before a binding contract is made. Thus the parties are to be regarded as the masters of their contractual fate.

(d) The Court must bear constantly in mind the subject matter with which it is dealing. While the principles of contract law are universally applicable, the proper inference to be drawn may vary widely. Thus a protracted negotiation conducted in writing between lawyers would be treated differently to one concerning a series of quick-fire exchanges between professionals, practitioners of the same trade with many previous dealings and a wide measure of common experience, knowledge, language and experience; See Pagnan v. Feed Products [1987] 2 Lloyd's Rep. 601, 610-11.

(e) In undertaking this task the Court must take into account surrounding circumstances which reasonable persons in the position of the parties would have had in mind.

(f) It is trite law that an agreement may be complete and certain even though it is not worked out in meticulous detail. Further, an agreement is not incomplete or uncertain merely because it calls for some further agreement between the parties.

(g) Thus an agreement is perfectly sound even though it requires further agreement for the purpose of its implementation.

(h) It is rare that a contract should be struck down on the ground of uncertainty since for that to occur it has to be legally or practically impossible to give the parties' agreement any sensible content: see Scammell v. Dicker [2005] EWCA Civ 405.

(i) Holding a contract uncertain is a last resort for the Court. It has been said that the uncertainty argument is a "counsel of despair": see Nea Agrex S.A. v. Baltic Shipping Co. Ltd. [1976] 1 Q.B. 933.

34. Further, and although not said to be a "principle" of law, the Defendants refer to the comments of Lord Justice Steyn in First Energy (UK) Ltd. v. Hungarian International Bank Ltd. [1993] 2 Lloyd's Rep. 194, at 196, where he said:

"A theme that runs through our law of contract is that the reasonable expectations of honest men must be protected. It is not a rule or a principle of law. It is the objective which has been and still is the principal moulding force of our law of contract. It affords no licence to a Judge to depart from binding precedent. On the other hand, if the prima facie solution to a problem runs counter to the reasonable expectations of honest men, this criterion sometimes requires a rigorous re-examination of the problem to ascertain whether the law does indeed compel demonstrable unfairness."

38. Mr Downes said that he did not quarrel with this summary.

Fluxo's case on agreement

39. Man's arguments on reasons 1 and 2 necessarily responded to Fluxo's case on agreement. This was reduced to writing in two places. The first was in a draft amended defence and counterclaim. Paragraphs 14 to 22 of this document read:

14. In early January 2008 the ICE Futures U.S., Inc. ("ICE") was concerned that FCO held a short position for the March 2008 No 11 sugar contract in excess of the limits established for it. As a result the ICE instructed FCO to reduce its short March position, which FCO was taking steps to do. However, on 14 January 2008 the ICE instructed clearing houses acting for FCO, of which MF Global, MCA's clearing house, was one, to increase the margins to be demanded from FCO by 20%.

15. Further, on 16 January 2008 the ICE notified its members that all orders for the account of FCO and its affiliates might only be accepted directly from a clearing member of the ICE and from no other person. As a result FCO no longer had direct access to the market via the TT trading platforms which it had previously been able to use in order to place trades.

16. On the same day the ICE informed clearings houses holding FCO's positions by letter that it was required to reduce its short March position to a specified level by close of business on 23 January 2008, so that by that time FCO would be in compliance with the position limits which the ICE had set.

17. Accordingly Mr Manoel Garcia, the President of FCO, who was at that time in Brazil, set up a conference telephone call with the commission and clearing houses acting for FCO (including MCA) in which he explained that it was necessary to meet the ICE's requirements and wished to arrange a meeting for the following day in New York in order to organise with them an orderly and coordinated approach to the partial reduction of FCO's March 2008 position, thereby treating all the clearing houses fairly and avoiding disruption in the market and losses to everyone. The clearing houses including MCA agreed to such a meeting.

18. By close of business on 16 January 2008 FCO had paid all margin demanded by MCA (and by the other commission and clearing houses) including the margin demanded that day with respect to the position as at close of business on 15 January.

19. At 1023 London time on 17 January 2008 MCA made a margin call by email of USD 9,468,847.79. This was the margin call referred to in paragraph 23 of the Claim. Accordingly that call was deemed to have been made at 2223 hours and was therefore effectively made on 18 January. Therefore payment was due by close of business on the following business day, 21 January (18 January being a Friday), although payment could not, in practice, have been made before 22 January because 21 January was a national holiday in the USA with the result that no wire transfers could be made as these could only be effected through correspondent banks in the USA. Alternatively by close of business on 18 January.

20. The meeting arranged by Mr Garcia took place in New York on 17 January 2008 and was attended by representatives of the clearing and commission houses including Mr John Taylor of MCA. In addition Mr Igor Placet and Mr Christian Bouet of MCA were attending by telephone. FCO's representatives arrived at about 1230 local time. Mr Garcia explained that his purpose in calling the meeting was to find a way of reducing FCO's short March 2008 position in an orderly manner so as to minimise as much as possible the effect on the market price (which otherwise would inevitably increase dramatically causing significant losses). Mr Jeff Bauml of BNP agreed with the suggestion of an orderly reduction and proposed that one of the clearing houses should carry it out so as to reduce FCO's short position as required by the ICE, giving up the contracts thereby concluded to the other houses in proportion to the positions which they were carrying. Others present also agreed to this proposal. Nobody (including the MCA representatives) expressed any disagreement. Mr Bauml also suggested that the least expensive and damaging way to achieve this would be through the use of spreads (ie rolling forward the position into other months where FCO was long, and thereby smoothing out any potential volatility in the market, decreasing its overall position). Mr Louis Caiafa of BNP then spoke on the telephone with Mr Thomas Farley the President of the ICE in order to ensure that this proposal was acceptable to the ICE and reported to the meeting that it was.

21. For their part the clearing houses wanted to know whether FCO was in a position to and would continue to meet margin calls including the calls which had been made that day. Mr Garcia said that FCO was in a position to make a payment of margin, but would need to speak to FCO's banks before giving any ongoing commitment, and that he would do so but needed in return to have a commitment from the clearing houses that if FCO were able to continue to meet margin calls, the clearing houses would work together with FCO in the manner described in paragraph 20 above. The clearing houses (including MCA) agreed to this and it was further agreed (a) that 1,000 lots which one of the houses, Natixis, had already bought on FCO's instructions would be allocated among all the clearing houses as a demonstration of the agreement to work together, and (b) that FCO would give further instructions to the clearing houses collectively for the purchase of three or four thousand lots to be made in the morning of 18 January to show the commitment on the part of the clearing houses that they would not start buying for themselves individually. Accordingly it was agreed by those present at the meeting including MCA that so long as FCO could give a commitment the next morning to continue paying margins and could back this up by demonstrating that payment was being made, FCO's short March 2008 position would be reduced in a coordinated manner with one commission/clearing house carrying out the necessary transactions on the exchange, including the use of spreads, and giving up the contracts thereby concluded to the other houses in proportion to the positions which they were carrying.

22. As pleaded above the commission and clearing houses asked Mr Garcia about payment of margins (although at that stage no margin payments were due) and it was agreed to meet again the following day so that Mr Garcia could report on his discussions with his banks and to formalise the agreement which had been reached and to finalise payment instructions for margin payments as necessary. It was an express term of this agreement, alternatively it was necessarily implicit therein, that the clearing houses (including MCA) would not start liquidating FCO's position before the meeting set for 18 January.

40. Second, Fluxo's skeleton argument included the following at paragraphs 40 to 54:

40. The meeting with Mr. Garcia was in two stages, with a short break in between. It began with a statement by Mr. Garcia. The Claimants suggest (and make much of the point) that he admitted that Fluxo-Cane had been outside its ICE limits on 11 days in a single month (see Claimants' Skeleton, para 21(a)). In fact, however, he immediately went on to say that looking at the overall position Fluxo-Cane was within its limit ("Altogether we had their limit …") [3/19/195]. There was and is no such admission.

41. Mr. Garcia continued by describing the proposal made to the ICE and complained about the ICE's failure to respond. He said that he needed "to protect my company until I have idea what will be the next move for everyone" [3/19/197]. In response the clearers wanted to know if margin calls made that day would be paid [3/19/197]. The answer was that they would not be until Mr. Garcia knew what everyone was going to do, and that at that stage he did not even know the amount demanded [3/19/198]. Without an agreement on co-ordination margin would not be paid [3/19/198-9].

42. The clearing houses' reaction to this was that without payment of margin there would be no prospect of a co-ordinated approach, but that if a commitment to pay margins was given this approach could be discussed, with one company reducing the position in stages on behalf of all [3/19/199-200]. Mr. Garcia was asked what assurances he could give that ongoing margin would be paid [3/19/200, 203-4, 206]. His response was that he would need to talk to his banks [3/19/209]. At that stage the meeting took a break.

43. In Mr. Garcia's absence, there was discussion of a plan to have a programmed reduction of Fluxo-Cane's position, with a commitment by Fluxo-Cane to pay margins, which the ICE could be asked to approve [3/19/217]. MCA in particular insisted that margins had to be paid, either that day or (recognising that it was too late by then) first thing in the morning; without that it would be everyone for themselves [3/19/218-9]. In other words, MCA expressly recognised that what was under discussion meant that each individual clearing house would refrain from liquidating unilaterally. There was no suggestion that such an arrangement would be too vague to be binding. Everybody understood what was being talked about. If it had not been understood that any agreement would be binding on all, there would have been nothing to talk about.

44. When Mr. Garcia returned, he said that Fluxo-Cane could make a payment but he would need to talk to two of his banks before giving any further ongoing commitment; he said that he would try to arrange this the next day and in the meantime needed to have "the guarantee that we will work together, if I will come with money for that" (ie margin payments); the clearers should talk to the ICE about this [3/19/221]. The use of the word "guarantee" is significant. Plainly Mr. Garcia was – and was understood to be - looking for a binding commitment. Precisely how this reduction of position might be achieved was then further discussed over the following pages, including the use of spreads [3/19/222-4].

45. Mr. Garcia was asked to give an instruction for a reduction of the position that day, just before the exchange closed, as an act of good faith, but did not do so [3/19/225-6]. However, it was agreed instead that the 1,000 lots which Natixis had bought earlier in the day would be allocated among all the clearers [3/19/227].

46. The question of margin was raised again, with Mr. Garcia saying he would talk to his banks and MCA insisting that if there was a commitment by the clearers to help Fluxo-Cane, there had to be a commitment by Fluxo-Cane to pay margin [3/19/228-9]. Again, the word "commitment" – used by MCA – is significant. It was agreed that there would be another meeting on the following day, after Mr. Garcia had had an opportunity to speak to his banks [3/19/230, 233].

47. It was then reported that Tom Farley, the President of the ICE, agreed in principle with the proposal [3/19/231].

48. The meeting ended with a request, to which Mr. Garcia agreed, that he should give collective instructions for a purchase of 3,000 or 4,000 lots to be made first thing in the morning in order to "show the commitment that we are not going to start  buying for ourselves" [3/19/234], and with a comment that an agreement had been reached "in principle" provided that a commitment on margin could be given [3/19/236].

49. The result of all this is that there was an agreement that provided Fluxo-Cane could give a commitment the next morning to continue paying margins, and could back this up by demonstrating that a payment was being made, there would be a managed reduction of its position to the level required by the ICE, to be carried out by one of the houses on behalf of all, and including the use of spreads. This was expressly described by the clearing houses as a "commitment that we are not going to start buying for ourselves." It was therefore explicitly agreed, or at the very least was implicit, that in the meanwhile the clearers would not liquidate Fluxo-Cane's position unilaterally. If that was going to happen, there was no point in arranging to meet again.

18th January, 1st meeting (without Fluxo-Cane)

50. However, by the morning all the houses had taken unilateral steps to reduce their position to some extent. It was recognised that there had been a lot of trading overnight [3/19/241, 243] and there appears to have been some recognition that this was contrary to what had been agreed. There was talk of having to "fess up" as to who had been doing what [3/19/244].

18th January, 2nd meeting (with Fluxo)

51. When Mr. Garcia arrived, he was obviously (and not surprisingly) frustrated and annoyed. The meeting was very short. He said that the purchases made since (and even during) the previous day's meeting while he was trying to solve the problem together had caused his financial situation to deteriorate, with all his credit lines blocked, so that there was nothing to talk about and a huge loss [3/19/265]. Although the language is not clear, in the emotion of the moment he appears to have used the words "nearby bankrupt" [3/19/265] but this was sarcastic rather than serious After he left, there was further discussion among the clearing houses in which they debated whether he had actually said that he was bankrupt or just near to bankrupt [3/19/269].

Conclusion on issue 1(b)

52. There is at least a real prospect of successfully establishing (and in fact it is quite clear) that the parties did indeed reach an agreement at the meeting on 17 January as pleaded by the Defendants.

53. The transcripts confirm that the Defendants (and Mr. Garcia) have run an honest and credible case on this point from the outset and there is no reason to doubt Mr. Garcia's evidence. The credibility of the Defendants' evidence is to be contrasted with that of the Claimants which in material respects is manifestly untrue (see para 32 above).

54. The Claimants suggest, in the alternative, that the Defendants' pleaded agreement would as a matter of law be void for uncertainty. That allegation is without substance:

(a) All the essential terms of the agreement, including the mechanics for its implementation, had been agreed:

(1) Fluxo-Cane would provide a commitment to pay future margins;

(2) The clearing houses would commit to an orderly reduction of Fluxo-Cane's positions to the level required by the ICE through the use of spreads;

(3) The reduction would be coordinated through one house;

(4) Specifically, no unilateral liquidation of Fluxo-Cane's position would take place before the meeting on 18 January 2008.

(b) The only detail that required further agreement was which of the houses would conduct the liquidation. The fact that this minor detail had been left over for agreement cannot render the agreement void or too uncertain.

(c) Indeed, it is clear from the transcript that all parties agreed that this detail could be left over; it did not detract from the conclusion at the end of the meeting on the 17^th that the parties had reached agreement "in principle" and given a "commitment" (see above).

(d) Finally, there is nothing in these terms that could fairly be susceptible to the criticism of uncertainty. These participants were the "brain trust of the sugar industry" and they must be taken to have understood what they had agreed and in particular what an orderly liquidation meant. As was said at the time, "if we can't put it together and get it done in an efficient manner, then nobody's going to get it done" [3/19/191].

(e) It would be contrary to principle and authority to hold that an agreement which the parties plainly intended to be a binding commitment was not capable of being so as a matter of law.

Man's arguments on reasons 1 and 2

41. Mr Downes advanced Man's first submission by reference to passages that he relied upon in the transcript of 17 January. Those passages, he submitted, showed that the language used throughout the discussions was consistent with a potential agreement but not a concluded agreement with perhaps one or two isolated exceptions from isolated individuals. The court had to look at the conversation as a whole. It was not appropriate to take out a couple of little nuggets. The language overwhelmingly was of negotiation and not of concluded agreement.
42. Man's second submission concerned passages in the transcript where one person said words along the lines of, "I agree with that." This, submitted Mr Downes, was not enough. Fluxo's case was that there was an 11 way agreement – representatives of 10 brokers on the one side and Mr Garcia of FCO on the other. It was therefore necessary to show a meeting of minds of 11 participants. There was no prospect of that on the unchallenged transcript.
43. Man's third submission was that absence of crucial details was a further powerful reason for the non-existence of a concluded agreement at that point. Man had sought further information from Fluxo about relevant details. Fluxo's reply said expressly: "These details were to be agreed the next day." Mr Downes posed some rhetorical questions and offered some comments. Which clearing house would do all these trades – a reasonable clearing house, one to be appointed by a judge? What commitment to pay margin was needed – "I commit to pay margin in 10 years' time" – would that be sufficient? And nobody knew what the margin would be the next day, all they knew was that he could not raise the money from the banks. No-one knew what other brokers' positions were. As to what quantities would be dealt with each day, that needed a single person's discretion. Whose? How would it be exercised? Earlier on 17 January 2008 Natixis had bought 1,000 lots, and the parties discussed allocating them among the 10 brokers – but they could not even agree whether it should be allocated pro rata, or simply split 10 ways.
44. Man's fourth submission was that ICE had identified a question as to whether there was a serious emergency. The markets were moving on a minute by minute basis. The brokers had not been paid margin, which was a critical element in protecting their exposure. It was inherently improbable that all 10 would agree to such a bargain. What would happen if the market opened and things went through the roof? No broker, submitted Mr Downes, would enter into such without their margin. Mr Garcia had his lawyer present, but the lawyer never said, "We have a concluded agreement here." It was commercially inherently implausible.
45. Mr Downes relied on all four of these submissions as making good the first reason given in paragraph 14 of Man's skeleton for saying that the 17 January Agreement defence was unsustainable: it was clear from the transcript that no agreement was reached on 17 January. In addition, the third submission was relied upon, without any further elaboration, as making good the second reason given in paragraph 14 of Man's skeleton for saying that the 17 January Agreement defence was unsustainable: any agreement was so vague and uncertain as to be unenforceable.
46. The note emailed by Mr Downes on the morning of 7 August made an additional point concerning multi-party agreements. Mr Downes developed this in his reply (see below).

Fluxo's arguments on reasons 1 and 2

47. Mr Males began by clarifying Fluxo's case. All concerned recognised that an orderly reduction of Fluxo's positions was essential. Without that "all hell would break loose." That would be a disaster not only for Fluxo but also for the brokers. It had been sensible of Mr Garcia on 16 January 2008 to suggest a meeting where an orderly reduction could be agreed. The brokers recognised that an orderly reduction was a prize worth having. That is why they agreed to meet on 17 January. During the meeting on 17 January Mr Gooch ("AG") of Natixis reported that uncertainty as to what ICE would regard as acceptable had been resolved. Mr Farley of ICE had said that it would agree to the use of spreads (ie purchases of March contracts against sales of May contracts) to reduce Fluxo's exposure, and that it would agree to one clearing house operating an orderly reduction on behalf of all. Mr Garcia then withdrew for a period. When he returned it was clear that margin calls that day could not be met before the morning. If, however, Mr Garcia could give a margin commitment in the morning then the prize of an orderly reduction was within the brokers' grasp. Plainly they could only achieve this if no-one acted unilaterally overnight, and they expressly or implicitly agreed to that effect. Express agreements, which were unconditional, were made concerning the 1,000 and 3,000 to 4,000 lots as set out in Fluxo's skeleton argument at paragraphs 45 and 48 (see paragraph 40 above). These agreements, submitted Mr Males, were symbolic. They were made to demonstrate the commitments that the parties were giving to each other as set out in paragraph 49 of the skeleton argument, and to show to ICE that the brokers were acting consistently with its instructions.
48. Thus a crucial part, submitted Mr Males, of events at the end of the meeting of 17 January was an interim agreement made by the 10 brokers with each other and with Fluxo that unilateral action would not be taken overnight. Fluxo's case was that this was a vital element in a further conditional agreement as to what would be the ultimate position the following day. But the conditional agreement was not essential to the 17 January Agreement defence. It was enough that the interim agreement was made, even if (contrary to Fluxo's case) that had been only with a view to arriving at an agreed plan on 18 January acceptable to ICE rather than arriving at a contractually binding and effective agreement that day.
49. Turning to Man's four submissions, Mr Males submitted that the first failed to distinguish between the interim agreement on 17 January 2008 not to deal unilaterally overnight and the ultimate agreement to be made on 18 January 2008. The latter was agreed in principle but was subject to a condition that on 18 January 2008 FCO must give a margin commitment. This fact did not prevent the language being that of agreement. But in any event the commitment not to deal unilaterally overnight was not conditional, the language was clear.
50. Man's second point was that there had to be an 11 way agreement. Fluxo said in relation to both agreements there was agreement by all concerned, especially by Man who were in effect saying, "We want to see a commitment here." When the question of holding off overnight came up, no-one said, "Don't include me in that." There was agreement on behalf of all concerned.
51. Man's third point was that details were yet to be agreed. Fluxo said that again there was a need to distinguish between the ultimate agreement and the interim agreement. If there was indeed an interim agreement then as to that there were no details that needed to be agreed. All the points Mr Downes had taken went to the ultimate agreement. If they were good points they did not hit the right target. In fact they were bad points, the law is that it is for the parties to determine what is essential – see para 33(c) of Fluxo's skeleton, the authority for which was Pagnan v. Feed Products[1987] 2 Lloyd's Rep. 601. All thought it insignificant which house would act on behalf of the group.
52. Man's fourth point was that the market was moving, and it was inherently improbable that they would all agree because it would be commercially absurd to do so. Mr Males acknowledged that this point concerned the interim agreement. Fluxo said that the transcript showed that all present did agree not to act unilaterally overnight. This was not commercially absurd: those involved realised that it was in their best interests to reach the ultimate agreement if they could, and the only way they could win that prize was by holding off from overnight liquidation. They realised that if anyone jumped the gun all bets would be off. It was not in anybody's interest if Fluxo were put in jeopardy of going under. A lot of busy people spent a lot of time discussing this, and it was worth their while to make a relatively small concession.
53. As to certainty, Mr Males repeated what he had said earlier about Pagnan. But the interim agreement did not depend at all on there being a sufficiently certain conditional agreement. It was enough that there was a prize to be gained the next day, whether that was a certain contract, or merely something in practical terms that people would be happy with.
54. Fluxo also submitted that what was said after 17 January 2008 could assist the court in determining whether an agreement had been reached that day. I shall say more about this submission below in the section of this judgment where I set out my legal analysis.

Man's reply on reasons 1 and 2

55. Oral submissions in reply by Mr Downes included a number of new points. I shall deal with those submissions, along with the response by Mr Males to the new points, in my analysis of legal argument below.

Analysis of the transcript of 17 January 2008

56. This section of my judgment seeks to identify the background to, and key passages in, the transcript of 17 January 2008. It also summarises submissions by counsel on those passages, and makes provisional conclusions. I shall review those provisional conclusions, where necessary, later in this judgment.
57. The background to the meeting of 17 January 2008 starts with action by ICE. On Monday 14 January 2008 ICE directed the brokers to collect an additional 20% 'super margin' on all positions held by them on FCO's account, effective from the close of business that day. FCO did not accept that this super margin was due but nevertheless paid all super margin then claimed for value 16 January.
58. On Wednesday 16 January ICE sent a letter to Mr Garcia of FCO. This letter included the following:

I am writing to advise you that a special meeting of the Board of Directors of ICE Futures US Inc ("the "Exchange") was held on January 15, 2008, at which the following actions were taken pursuant to Exchange Rule 21.29:

(1) the Board of Directors determined that there is a substantial question as to whether a "Financial Emergency", as such term is defined in Chapter 21 of the Exchange Rules, exists with respect to Fluxo-Cane Overseas Ltd and you; and

(2) the Board of Directors determined that all orders for the account of Fluxo-Cane Overseas Limited and its affiliates (including you) ("Fluxo") in the Sugar No 11 Futures Contract and any options on such Contract may only be placed or executed by or through a clearing member and not by or through any other person.

The decision of the Board of Directors with respect to the placement of orders, as specified above, becomes effective on Wednesday, January 16 2008 upon the posting of a Release to Members on the Exchange's website, and will remain in effect until further notice. The decision of the Board of Directors was based upon the facts, including but not limited to, that: Fluxo has significantly exceeded the position accountability levels established for it by the Exchange with respect to the futures equivalent position permitted to be held by Fluxo in the March 08 Sugar No.11 delivery month and in all delivery months of the Sugar No.11 contract, combined; Fluxo has refused to bring its positions into compliance with the levels established by the Exchange, notwithstanding repeated requests to do so by the Exchange; and Fluxo has increased its short futures equivalent position when instructed to reduce such position in the March 08 delivery month.

Due to the gravity of the situation, it was not practicable for the Exchange to afford you a hearing before taking action. Accordingly, you and Fluxo may request a hearing before the Board regarding the actions described above. Any such request should be made in writing to the undersigned within five business days of the date hereof, and should specify when you would be available for such a hearing and whether you will appear in person or through counsel or other representatives.

On a separate but related matter, in addition to the actions described above, please be further advised that, pursuant to Rule 6.13, the Exchange has instructed each firm carrying positions for Fluxo in the Sugar No 11 futures contract and/or options thereon to:

(a) reduce Fluxo's short futures equivalent position in the March 08 Sugar No 11 delivery month to not more than a specified level…such that by the close of business on January 23, 2008 Fluxo is in compliance with the position limits established for it by the Exchange…

(b) not accept any orders, electronic or otherwise, that would result in an increase of Fluxo's short futures equivalent position…

(c) not approve the transfer of any Sugar No 11 futures or options contracts carried for Fluxo to an account at another clearing member, without first notifying the Exchange of the intended transfer.

59. The final part of the letter described three requirements which ICE had imposed on the brokers. The first of these was the reduction identified in paragraph (a) of the letter. This was to be achieved by the following Wednesday, a week after the date of the letter.
60. On 16 January Mr Garcia was in Brazil. He took steps to get in touch with the brokers. A conference call was held in which they agreed that they would participate in a meeting which Mr Garcia arranged to take place in New York the following day. The purpose of the meeting was to discuss a co-ordinated response to ICE's letter of 16 January. It is clear from the transcript of the 16 January conference call that any agreement reached the following day would have to be subject to approval by ICE.
61. On 17 January 2008 prior to the meeting margin calls were made on FCO by various brokers, among them Man. At this stage Mr Garcia was travelling to New York. When inquiry was made by Man as to when the margin calls would be paid, the response from FCO was that Mr Garcia was not authorising any payments until after the meeting.
62. With that background I turn to the transcript of 17 January 2008. There were four stages to the record of discussions on 17 January:

i) A first conference call transcript that day begins with a discussion among brokers who were waiting – either in person or via the telephone link - for Mr Garcia and other FCO representatives to arrive, and ends at around 12.30 p.m. when it became clear that they would not arrive until 1 p.m. ("the inter-broker pre-meeting)."

ii) The second conference call transcript ("the initial FCO/broker discussions") began after Mr Garcia and other FCO representatives had arrived. It records a lengthy discussion between Mr Garcia and the brokers, and it ends when the FCO team withdraw to a separate room to enable each side to have private discussions.

iii) The third conference call transcript begins with further discussions among the brokers in the absence of the FCO team ("the mid-meeting inter-broker discussions").

iv) The third conference call transcript continues with the remainder of the discussions after the FCO team returned ("the concluding FCO/broker discussions").

63. Mr Downes submitted that the language used throughout the discussions was consistent with a potential agreement but not a concluded agreement and that "the language overwhelmingly was of negotiation and not of concluded agreement with perhaps one or two isolated exceptions from isolated individuals." Up to the stage of the concluding FCO/broker discussions I agree with Mr Downes that the language was overwhelmingly of negotiation and not of concluded agreement.
64. What is also apparent, however, from the transcript is that during the inter-broker pre-meeting, as Fluxo said in paragraphs 37 to 39 of their skeleton argument:

i) There was concern about whether margins would be paid.

ii) However there was also a willingness in principle to agree to an orderly and co-ordinated reduction of FCO's position – indeed the alternative of each broker acting on its own was described as "a bloodbath".

iii) Such a reduction might possibly be achieved by one party managing this on behalf of the others with "give-ups" [i.e. an arrangement made among the brokers under which one of them will enter into contracts and then allocate those contracts among itself and the others].

iv) It was recognised that spreads [see paragraph 20 of Fluxo's draft amended defence and counterclaim, quoted above] would be a sensible technique to use when seeking to achieve the reduction.

v) There was uncertainty about what ICE would accept.

vi) Some participants commented on the fact that in the past there had been no problems with payment of margin, and that Mr. Garcia was a man of integrity who had always done what he said he was going to do.

vii) A report of a conversation with Susan Gallant at ICE was to the effect that Fluxo had been difficult to deal with. However, others had heard of Fluxo's proposal to reduce its position over time. There was a feeling that ICE may not have handled the situation very well.

65. During the initial FCO/broker discussions Mr Garcia said the problem was not whether he had the resources to pay existing margin calls, although he did not know the total amount of those calls. He was pressed on whether he could ascertain the total amount and then give an assurance that FCO would meet existing margin calls. His response, and the resulting position, was accurately summarised by Mr Males in this way:

"Before I meet the margin calls I want to know what you are going to do, is there to be a co-ordinated reduction, or is it to be out of control?" … Mr Garcia is wanting some indication that there will be a co-ordinated response before he will give a commitment to pay margin, whereas the brokers are in principle willing to agree to a co-ordinated response but not willing to commit to that without having received the margin commitment. The question was who would move first, but there was scope for them to come together.

66. What was under discussion was described by one of the participants:

Unknown: And I'm just saying that's one scenario which would minimize exposure of people blowing out, and liquidating positions. But if we say, we as a group, and I can't really speak individually, but if we agreed not to liquidate a position, as long as we're kept in the margins that we're due, we'll agree to liquidate x lots per day as a unit, and whoever does it, one company, company X does it, then allocates the trades out to everybody who needs to get their share. I will vote for you.

67. Just as that unidentified broker referred to "we as a group", a little later on another broker described as "Pascal" is recorded as saying:

we were talking about commitment in terms of margin calls and money and that's an issue more related to credit.- There is also the commitment to the Exchange, ok? If we were to agree all that, we can try and work collectively, yea? And the Exchange say ok, its great that you work collectively, however, you still have to reduce the position overall the same way, ya? We will need some agreements from you that you are ok also to liquidate the position in an orderly manner otherwise from tomorrow we will be in a position where we have a problem with credit with Fluxo but that's part of the problem, but also a big problem with the Exchange in terms of regulatory. So I mean if we were to agree to something collectively, would you be prepared to say, ok, we can try to find out how we kept the position, but we are going to do it in the next couple of days.

68. This is soon followed by a further contribution from an unidentified broker:

Can I say something? Why …should any of us sit here and not cover your positions?

69. I shall refer to this broker as the "post-Pascal sceptic." It seems to me that this remark shows that the post-Pascal sceptic was working on the basis that he, and other brokers participating in the meeting, had not as yet taken steps to liquidate FCO's positions. In addition, there was an assumption implicit in his question, namely that anyone whose approach was to participate in the discussions [ to "sit here"] would during such participation not liquidate ["not cover"] FCO's positions. What the post-Pascal sceptic wanted to know from Mr Garcia was what FCO could offer in order to persuade the brokers to continue "to sit here and not cover FCO's positions." The answer came from other brokers:

Unknown: May I attempt to answer your question? … it seems to me as the outcome becomes more understandable, and more manageable, the incentive for Fluxo to strain to do whatever it has to do to meet that and survive, is tremendous, but if the outcome is so uncertain that the answer is that Fluxo must die, there's not a lot of incentive. I appreciate the fact that you've got a contract and you expect to be paid, but we're at the place we are now, and I think that our best bet is to spend that time talking, and to see if we can come together in the middle, and certainly its better than either of the other alternatives.
…
Unknown: If you were dealing with one trader of your choice, who puts those orders in to execute those, and give them up to each house, so everybody gets a piece of it everyday, and you must I guess in turn, agree to pay us our outstanding margin calls. Now with that as the basis of the plan, I think it's a starting point.

…
Unknown: Maybe I'm wrong, you guys tell me. I also think its important for all of us sitting here talking in good faith, that we understand whose maintained their positions, and who liquidated positions. If you don't want to tell us, then Fluxo's -got to know who did liquidate their position, because that's going to factor into the equation as well. Not to sit here like a monkey and say I'll agree to do something whilst somebody's trading behind my back.

70. Thus there was an appreciation that, in Mr Males's words, "There was a prize to be grasped, an orderly reduction with commitment to margins avoiding a bloodbath." There was equally an undoubted appreciation that the prize could be grasped only if the brokers acted collectively – it was obvious that no broker would want to be left looking foolish because, while it held off from a campaign of liquidation with a view to a group advantage, one or more competitors had stolen a march for short term gain. Furthermore, the post-Pascal sceptic had asked to be given a reason for continuing to participate in discussions and not liquidate, had been given a reason, and had not indicated any wish to cease to continue.
71. At this point Mr Fabrice Chouissi of Natixis suggested that the brokers should have an opportunity for discussion in the absence of the Fluxo team. The initial FCO/broker discussions ended with Mr Garcia saying that FCO had been in a good position, with huge lines from good banks. He needed to use those lines to pay the brokers. While he was in New York today he did not, however, know the position elsewhere. Overnight FCO had received important communications from two banks. Mr Garcia thus left the meeting on the basis that he would investigate what he could do and return to the meeting shortly.
72. I turn to the mid-meeting inter-broker discussions. As Mr Downes rightly points out, there is no agreement at this stage. However there is a reiteration of what an ultimate agreement would involve, and there is a recognition that in practical terms it was now too late in the day for margin to be paid on 17 January.
73. The reiteration of what an ultimate agreement would involve was by Mr Gooch of Natixis:

… I think the only chance generally that we are going to have on this, is for us to come together with some form of plan, certainly a plan from him in terms of liquidation in compliance, so that we're in compliance with some sort of programme. to get those positions down to what they need to be by the middle of next week of whatever the date is. Um there is another issue, then we are going to need for him to commit that he will resume payments of margins, he's got to make that commitment, um and then with the plan that we have, we then going to have to go to the exchange and get them to sign up to the plan. … I think the only way that we are going to resolve anything is for us as a group to come up with a plan that he agrees to, and we go and sell it to the exchange, because without that, increasingly, one or more of us are going to go into a forced liquidation position.

74. The realisation that margin could not in practical terms be paid that day appears from what is said both by Mr Gooch and by a representative of MCA:

AG: One thing we not going to get is cash today, so whatever margin call you got today I, you know, I'll take a bet that he's not going to pay it.

MCA: He has to ensure he can pay margins. This is a condition from MCA ? it's too late for tonight, tomorrow morning he has pay. cash, it has to be first thing.

AG?: Yes, absolutely, he's going to have to, I mean, you know if he doesn't pay margin calls tomorrow, then we all pretty much know where we're going to stand and then there's going to be ah, you know, its not going to be an orderly liquidation of the market then, because everyone is going to be for themselves.

75. As Mr Males observes, the corollary to this last remark is that, so long as the parties are in discussions aimed at achieving an ultimate agreement, then that must be on the basis that it is not to be "everyone … for themselves". The suggestion that there be mid-meeting inter-broker discussions had come immediately after the point had been made that no broker would want to continue participating "whilst somebody's trading behind my back." No broker during the mid-meeting inter-broker discussions said that it was trading, or reserved a right to trade while the meeting continued, or said that it no longer wished to participate in the meeting.
76. Thus the position at the start of the concluding FCO/broker discussions provisionally appears to me to have been this. Both in the initial FCO/broker discussions and in the mid-meeting inter-broker discussions it had been made clear that participation in the negotiations with FCO had to be on a collective basis which precluded each broker from taking unilateral action. Any broker that wanted to be free to act unilaterally had to say, "I'm no longer prepared to participate on the basis that I can't act unilaterally." There was ample opportunity at the start of the concluding FCO/broker discussions to say this, or words to similar effect, but no broker did so. Accordingly I reach provisional conclusion (1): by continuing on the basis that it was willing to be party to an ultimate agreement, each broker was assuring Fluxo and the other participants that it had not taken, and while seeking to achieve ultimate agreement would not take, action unilaterally to liquidate FCO's positions.
77. The concluding FCO/broker discussions begin with Mr Garcia's return. He is recorded as saying this:

OK then for the first payment of yesterday we think-that we are ok to pay. For the second that we have no yet numbers and also I don't know how many companies bought, and what they bought, and so on. I have a first idea only. And for that I need talk with two of my banks for the second day and the next day. Then our idea is the following: if we here work together, in my opinion we will be out of this problem, and we will be part of a story. If not, I don't know the result because I don't know if tomorrow one more will buy 10 thousand lots, and destroy the market tomorrow morning. I don't know. And how much we will cost tomorrow.

Then my idea is to propose that I will try up to tomorrow to have conditions to put you in relatively comfort about the old margins, and some expectations of new ones and not for fourteen dollars and fourteen cents. In the meantime for that I need to have the guarantee that we will. work together, if I will come with the money for that, and second that you group will have a talk with the exchange to have another solution to comply with them, and put down the mark, the spread, put down the position, -without making a show the movements in the price. In principle, that's it.

78. Mr Garcia was proposing a bargain under which FCO was to have a "guarantee" from the brokers. On the face of it the proposed bargain was rather one-sided, for all that Mr Garcia offered in exchange was that he would "try" by the next day to give "[relative] comfort" about margins under which he would "come with the money", and he explained neither what this comfort would involve nor what "the money" would be. Moreover FCO was not going to give any sort of commitment until the next day, whereas the brokers' "guarantee" was something that Mr Garcia wanted "in the meantime" – ie on 17 January 2008. As will be seen, there was much discussion about particular elements of the proposed bargain. One point, however, that was not questioned was FCO's need to have a commitment from the brokers that day rather than the following day.
79. Mr Downes accepted this much at least of what paragraph 44 of the Fluxo skeleton (quoted at paragraph 40 above) said about the position at this stage:

Plainly Mr. Garcia was – and was understood to be - looking for a binding commitment. Precisely how this reduction of position might be achieved was then further discussed over the following pages, including the use of spreads.

80. However Mr Downes submitted that at this point, and at another stage later in the transcript, Mr Garcia was holding a gun to the head of the brokers. That seems to me to be an exaggeration. There is no reason to think Mr Garcia was doing anything other than what he said he was doing, namely putting forward a proposal that he would try "up to [i.e. by] tomorrow" to be in a position to put the brokers in relative comfort, and commenting that "in the meantime" he needed two things. The first was a guarantee "that we will work together if I will come with the money". The second was that the brokers and ICE needed to work out a solution so that the position could be reduced "without making a show".
81. I agree with Mr Downes that no agreement was reached at this stage. What had happened was that Mr Garcia had identified in general terms the bargain which he envisaged. It was a bargain as to what would happen if, on the one hand, FCO was in a position to give "comfort" and "come with the money." This was not a precise identification of what FCO would have to do if the proposed bargain were to work. Precision would have to come later. On the other hand, if FCO were to meet the condition, Mr Garcia needed to know on 17 January that the brokers were prepared to work together with FCO to identify and put into effect an achievable method of complying with ICE's requirements. Here, too, at this stage there was no precise identification of what the brokers would have to do on their side of the proposed bargain. In practical terms, if the market were not to go haywire, FCO's positions had to be reduced "without making a show". My provisional conclusion (2) is that Mr Garcia was asking the brokers, can you say now that if FCO can perform its side of the bargain, then you will work together with FCO to identify and put into effect an achievable method of complying with ICE's requirements?
82. The brokers' initial response to this question is seen when an unidentified broker makes what Mr Downes rightly described as a proposal:

Unknown: For example, roughly speaking, we're talking about thirty thousand lot short position in the march that they want you to eliminate, more or less. Not the exact numbers. And if you gave instructions to the group, subject to everybody agreeing, that over the next three market days you want to eliminate thirty thousand March may spreads, March July, pick whatever it is, and then that's done. Everyday somebody's going to buy ten thousand spreads, boom, boom, boom. And then by Monday, the date the exchange have given us, you've reached their position limit that they had imposed upon you. So therefore, you're complying through whatever vehicle it is, you're complying with that request. And would you agree, that's the question, is we're all saying `what if', would you agree to doing that if we get our money like you've suggested, then you would agree to doing that, we've spoken to the exchange, and we can move forward on that basis. …

83. The unidentified broker who made this proposal – which, echoing the last few lines quoted above, I shall refer to as the "what if" proposal - referred to ICE deadline as being the following Monday. There was further discussion as to whether it was then or the following Wednesday. The "what if" proposal, however, put forward - "subject to everybody agreeing" - a clear idea of a way forward in which the brokers could achieve what Mr Garcia was asking:

i) FCO would have to be prepared to work in a way in which it "gave instructions to the group" for the requisite number of spreads;

ii) Each market day "somebody" – ie one of the brokers - would buy the appropriate number of spreads to ensure that FCO reached the position limit that ICE had imposed so that "through whatever vehicle it is" ICE's deadline would be met.

84. It is not surprising that this unidentified broker felt able to advance a clear idea of a way forward. If there had been no identifiable way forward none of the brokers would have wasted their time participating in the meeting. The main features of the "what if" proposal had been developing since Mr Garcia's telephone conference call the previous day and they had been honed further during the course of the discussions on 17 January. There were aspects which needed to be discussed further – the "what if" proposal was "subject to everybody agreeing" – and subsequent discussion would no doubt show whether or not everybody did agree. Nevertheless this unidentified broker was sufficiently confident to be able to identify something that the brokers were "all saying" – if they can get their money in the [as yet imprecise] way Mr Garcia had suggested, they wanted to know whether FCO would commit to complying with ICE's deadline for reduction of FCO's positions in the way that he had described "through whatever vehicle it is". In other words, would Mr Garcia regard this way of working as acceptable?
85. There is then a discussion about the deadlines given to brokers by ICE, whether the use of "give-ups" would be acceptable to ICE, and the logistics of possible spreads.
86. That discussion is interrupted by an urgent intervention from Mr Fabrice Chouissi of Natixis:

Fabrice: Guys guys sorry to interrupt, we just spoke to the exchange, obviously what they are saying is that we need to see something from today, from now on and personally speaking we think that for each member and I think that whatever happens I think we should sell I mean we've got five minutes, we could sell two thousand lots collectively, its not a lot, but its showing to the exchange that we are in the game and I'm sure they will be looking at it very very positively. First we have to receive now an order from Manoel, to whoever it was. …

87. Mr Chouissi repeated the suggestion, but the immediate response from Mr Garcia was non-committal:

MG: It is one idea Fabrice

88. Mr Downes submits that at this point everyone became distracted and there could no longer be an agreement. He draws attention to the words "try and come to an agreement", italicised below, in Mr Gooch's next comments:

Andy: Mike we need to buy some time with the exchange, with ? moving with any of the members, they told me I have to cover something today. We borrow some March May, we've reduced the March.

Unknown: Yup

AG: We can put it off and we can discuss and try and come to an agreement with Manoel to get things going forward. If we don't we are all going to be in a position where we have to do something-

89. At this stage, however, it is common ground that, as stated in paragraph 45 of Fluxo's skeleton argument:

Mr. Garcia was asked to give an instruction for a reduction of the position that day, just before the exchange closed, as an act of good faith, but did not do so. However, it was agreed instead that the 1,000 lots which Natixis had bought earlier in the day would be allocated among all the clearers.

90. The discussion about the 1,000 lots is preceded by a further exchange in which Mr Placet of MCA recognizes that any payment of margin will have to wait until the following morning:

IP: Hello? Um I think one of the key issues today is the margin. Hello?

AG: The problem is Igor, the problem is that ok the exchange is going to come around to everyone who didn't liquidate today and say why didn't you liquidate, you had an instruction?

IP: I understand that and its not too late. I do understand and I know someone else ? and I think one essential point is that in order for us to pursue any discussions I feel we need to take comfort and obtain sort of payment.

AG: Igor, Igor -I accept what you're saying and I'll play devil's advocate, I think its going to be very difficult for Fluxo to make any payments today, so you know today's over. You know the market is closed, payment's not going to be made today-

IP: Tomorrow morning?

AG: Yea tomorrow morning, but we still got a problem with the exchange now.

IP: Ok but that has nothing to go.

91. This comment by Mr Placet about there being "nothing to go" leads to a proposal by Mr Chouissi that the brokers go to ICE with a collective agreement that they will wait for payment. Mr Placet suggests that rather than having "nothing to go" to ICE the brokers could go to ICE with an agreement that they would split positions which Natixis had taken on Fluxo's instructions that day, namely purchases of 1,000 lots for March and sales of the same quantity for May:

Fabrice: No we can tell the exchange now that we agreed with him that we wait for the payment before we start acting and we acting collectively.

AC: That is absolutely fine, the conversation I've had with the exchange they made it vitally clear to me that if I didn't do something I'm in trouble with them.

IP: Somebody, who bought a thousand lots? I heard somebody buy a thousand lots? Unknown: Natexis.

IP: Ok so I think give us some, just split. it, there we go.

AG: I'm fine I bought my thousand lots I got my order from Fluxo to buy a thousand lots of March May. I'm quite happy that we bought it, and I'm quite happy that we allocate some elsewhere, I don't have a problem.

Unknown: Ok

92. My provisional conclusion (3) is that, far from being a distraction, the "guys guys" intervention by Mr Chouissi has led the parties to identify a way in which the "what if" proposal can remain under discussion. ICE wanted "to see something from today", and what Man suggested was that they see a "give-up" arrangement among the brokers in relation to Natixis's 1,000 lots. That suggestion was plainly on the basis that any payment of margin would have to wait until the following morning – without a margin payment that day there would have been "nothing to go" to ICE, but in its absence Mr Placet suggested an alternative. Here too Mr Males observes, in my view rightly, that the brokers are discussing how they can show that they are acting collectively, something which is the converse of acting unilaterally.
93. The dangers of acting unilaterally are then explicitly raised:

AG: The problem we're all going to have is we're all working for companies. As we go forward, if we get pressure from the exchange, where we going to get to is the possibility of no negotiated settlement with Fluxo, because each one will start having to act independently. And therefore, it puts Fluxo in a difficult position because everyone will be liquidated. Its not about complying with the limit. Complying with the limit is the least of the problems if everyone starts going into forced liquidation.

Pascal: Ok, is Manoel still there? Unknown: Yes

Pascal: Ok I detected to hear Manoel now just to hear what the situation is, what he feels he wants to do now, what we can do to progress.

MG: Again, I will try to have the answer about money not for one day for few days, for morning with the expectation that we will be together with me to manage this situation. And also they you talk one of you, or all of you, will talk with the exchange in order to mitigate-the upside of March price providing some another ways to comply.

94. In this last passage Mr Garcia returns to the bargain he had proposed. He is no more precise about what FCO will be able to do. As to the brokers' side of the proposed bargain, his comment is that "one of you, or all of you, will talk with the exchange … providing some another ways to comply." This is a broad reference to the "what if" proposal and the subsequent discussion, saying that someone needs to talk to ICE about it.
95. The brokers want to see something further from FCO. This is expressly described by Mr Placet of Man as arising in the context of commitment on behalf of MCA:

Bear Stearns: Ok this is Bear Sterns here and we're all together, so if we could just listen to Manoel and his proposal. What I know you said, initially we on our side here are very happy to speak with the exchange, we're happy to do anything in our power to help you, but what id. like to see, and what we'd like to see here, is some gesture on your behalf so at least the margin payments from yesterday is 'something that will be needed. But everything else we will help with it and do anything we can on our side, but we do need to see something. As I said yesterday's is ok for us.

Unknown: (Unintelligible) today's call would, you now, its more than half-

IP: Yesterday's margin call, I mean today's another day but I would like to see that there is something moving. I mean there is commitment. We are committing over here, I talk on behalf of MCA here, we are committing to helping you and working with you, but we need for you to help us as well. And I can't go any further if we don't have anything in hand.

MG: Ok Igor, I told I will fix .with the person that intends to be here tomorrow again to provide my possibilities for the next days.

96. Mr Males laid stress on the words used by Mr Placet, first "commitment", and twice "we are committing." Mr Downes said that this was seizing one word out of a paragraph. However he then acknowledged that it was a paragraph in which commercial men were working out a deal. It seems to me that the references to "commit" and "committing" make this absolutely plain. The crucial question is what, if any, deal would be reached.
97. As to the brokers' side of the deal, what was it that Mr Placet and the other brokers were saying that they were prepared to commit to? My provisional conclusion (4) is that by this stage the brokers had identified what they thought would – subject to ICE's agreement - be an achievable method of complying with ICE's requirements. The "what if" proposal had been worked through in discussion. The brokers want to know if Mr Garcia would agree to it, and his reaction is that there was a need to talk to ICE.
98. What did the brokers want from FCO in return? It seems to me that they all wanted a commitment from FCO to pay margin in accordance with its contracts. Some, at least, of the brokers wanted to have that commitment made by Mr Garcia there and then. In that regard the brokers put pressure on Mr Garcia:

Unknown: Ok at the risk of sounding repetitive, I asked if I could go back to my managers and tell them not that you're going to tell us whether you can pay, but whether you are going to pay two days the daily margin call? That's what I thought we were talking about in the earlier meeting?

Unknown: I know we were talking about-

Unknown: I think we have to walk out of this room and go back to our managements with something concrete, and not just a commitment to meet tomorrow.

MG: I told that I will work today with my [banks] it makes no sense to pay margin calls today and have no support for tomorrow-

Unknown: -yesterday or today

MG: and then I need cover you in full amount and then for that I will work now and after this meeting I will work out to cover more lines in order to commit my responsibilities.

99. Thus by insisting on knowing about the position for the daily margin call the brokers pinned down Mr Garcia. In response he told the brokers that what he was going to do with his banks was to seek more lines of credit so as to "cover you in full amount … in order to commit my responsibilities."
100. This was, in terms of the chronology of the meeting, the second occasion on which Mr Downes said that Mr Garcia held a gun to the brokers' heads. Here too I think this is an exaggeration. It is true that Mr Garcia made it clear that he wouldn't commit on 17 January to paying that day's margin calls. However he also made clear that this was for a reason which was commercial common sense: if his proposed bargain was to succeed he needed sufficient support from his banks to commit to pay not just the 17 January margin calls but also further margin calls over the coming days. Accordingly my provisional conclusion (5) is that at this stage Mr Garcia significantly advanced matters by making plain that he would seek to be in a position the following morning where FCO could give the brokers what they wanted: a commitment to pay margin in accordance with its contracts.
101. Mr Downes stresses that at this stage Mr Garcia is still talking in terms of a "proposal". That is true. There were further things that needed to happen before Mr Garcia's proposal could become an agreement. Even so, the parties were making good progress. They had reached an agreement that Natixis's 1,000 lots would be allocated among the brokers so that ICE could have proof that the parties were acting collectively. Mr Garcia had been pinned down and had made plain that he would seek to be in a position the following morning where FCO could give the brokers a commitment to pay margin in accordance with its contracts. Having pinned down Mr Garcia, none of the brokers walked away – no-one said that if all he could offer was the prospect of commitment by FCO the next day then further discussion was pointless. My provisional conclusion (6) is that the brokers perceived a real prospect, sufficient to warrant keeping the "what if" proposal on the table, that Mr Garcia would on 18 January 2008 have secured enough financial support from FCO's bankers to enable both the timely payment of margin and the orderly reduction in its positions envisaged by the "what if" proposal.
102. Another way of making progress was identified by one of the brokers:

JH: This is John Hopkins. The one thing that he can do himself right now without going to anybody else is give orders to cover March selling May, and switch out of March into positions which are long. You will immediately reduce your position substantially, and that takes the pressure off of us in terms of the exchange, and you can do that without anybody's agreement. You can give those orders, we would have to get the exchange's agreement to take give ups from whoever executed those orders, but I'm sure we could get that.

103. Mr Hopkins's suggestion that FCO give immediate orders to reduce its position substantially was not taken further at this stage. It was interrupted by news which significantly enhanced the parties' ability to make further progress:

Unknown: And I just, the phone call I just took outside was from Tom Foley, the president of ICE in New York, and I explained-to him what in principle what we were talking about as far as rolling the position, and he said that they would be agreeable, that that would satisfy the requirement, and they would be agreeable to have one person do it and give it up.

104. Thus the earlier uncertainty as to whether ICE would agree to the use of spreads ("rolling the position") and "give-ups" had been resolved in a positive way. It was now clear that the brokers' proposed method for achieving an orderly reduction of FCO's positions was a method acceptable to ICE. Mr Downes does not suggest otherwise.
105. Further discussion follows as to how to allocate Natixis's 1,000 lots. A proposal for pro rata allocation was objected to. Mr Downes caustically commented that "they can't even agree about this at this point." What then follows, however, is actual agreement that the allocation will be a straight division by ten:

MO: I mean it also shows if we do get an equal amount, admittedly there are bigger positions than with others, but at least its showing that we're a unified group.

Natexis - Fabrice?: I agree with you Michael.

MO: trying to find an action together, it makes it a lot simpler, and frankly, you know, to pro rata a thousand lots on such a huge position anyway, it's probably going to be more administrative. If you said tonight Manoel-

Unknown: They're ten, divide by ten people here, just divide by ten.

MO: If everybody gets a hundred lots, then that's it. You know then we can all go away tonight and Natixis can distribute it very simply, and you don't even have to worry about moving positions tomorrow morning.

Natixis - Fabrice? : It just shows to the extent that we have done something collectively and I think that's what's important.

Unknown: Agreed.

106. It is common ground that this was a binding agreement between FCO and the ten brokers taking effect on 17 January 2008: the 1,000 lots that Natixis had bought would be allocated among Natixis and the other brokers in equal shares. My provisional conclusion (7) is that it follows that the parties were working on the basis that no formality was necessary to reach agreement. It was not even necessary to have some sort of notional "going around the table" in which each party participating in the meeting expressed individual assent. It sufficed that the discussion proceeded on the basis that agreement had been reached.
107. The making of this agreement was accompanied by comments from the brokers that this showed that they were acting as "a unified group" and "collectively". My provisional conclusion (8) is that these exchanges affirm provisional conclusion (1): each broker was assuring Fluxo and the other participants that it had not taken, and while seeking to achieve ultimate agreement would not take, action unilaterally to liquidate FCO's positions.
108. Was there also at this stage a conditional agreement that if the following day FCO gave a commitment to pay margin in accordance with its contracts the brokers would put in hand steps to achieve an orderly reduction of FCO's positions? My provisional conclusion (9) is that the discussion was now proceeding on the basis that there was such an agreement:

i) At the outset of the concluding FCO/broker discussions Mr Garcia proposed a bargain which in the course of discussion had been fleshed out. Mr Garcia had now made it plain that he would seek to be in a position the following morning where FCO could give the brokers what they wanted: see provisional conclusion (5).

ii) Mr Garcia had said that in the meantime he needed a "guarantee" from the brokers that they would work with FCO on an achievable method by which FCO could meet ICE's requirements. The brokers had proposed a method for achieving an orderly reduction of FCO's positions, and it was now clear that this method was acceptable to ICE. The parties had made a firm and binding agreement to meet the most pressing of ICE's requirements, that something be done by each broker that day, by allocating Natixis's 1,000 lots.

iii) The parties were now moving towards making arrangements for the meeting the following day following discussions which had referred to "commitment" on each side. The key reason for meeting the following day was to see whether FCO could give the commitment for which Mr Garcia had said he needed "in the meantime" to have a guarantee from the brokers. No-one had dissented from that working basis for discussion.

iv) The parties were working on the footing that no formality was necessary to reach agreement, it being sufficient that the discussion proceeded on the basis that agreement had been reached: see provisional conclusion (7).

109. However Mr Hopkins had made a suggestion (see paragraph 102 above) that there was something further which FCO could do immediately, namely give immediate orders to reduce its position substantially. It remained to be seen whether this suggestion would stand in the way of agreement. What happened next was a discussion about when to meet the next day. It was noted that Mr Garcia needed enough time to talk to FCO's bankers in Brazil. For present purposes I do not need to go any further into the detail of that discussion.
110. After the parties had agreed on timing and location of the next meeting a broker, whom the transcript tentatively identifies as Mr Chouissi, raised two further points. The first was whether there should be a brokers' pre-meeting beforehand. It was agreed that there should. The second point involved a reduction of FCO's positions of the kind suggested by Mr Hopkins, although not necessarily reducing its overall position "substantially" in the way he had proposed. It is recorded in this way:

Fabrice?: Ok great, and second, should we get, in order to show again activity and understanding from Manoel, should we get collectively another order whether you want for another, I don't know, another thousand march may at the opening so that we start something, we show something to the exchange to show that we are as a unity? And also it show the commitment that we are not going to start buying for ourselves.

MG: I want to provide to someone in order to be ? at the end of the day a March May, March July ? over for tomorrow.

Fabrice?: So you will send that as an overnight order, correct?

Unknown: How many?

MG: Three, four thousand.

…
Unknown: And if anybody from Nybot [ICE] asks, they were executed as part of a group arrangement.

111. Mr Downes accepted that the first part of paragraph 48 of Fluxo's skeleton argument accurately summarised the position at this stage:

The meeting ended with a request, to which Mr. Garcia agreed, that he should give collective instructions for a purchase of 3,000 or 4,000 lots to be made first thing in the morning in order to "show the commitment that we are not going to start buying for ourselves" …

112. In his opening submissions Mr Downes, when commenting on paragraph 48 of Fluxo's skeleton argument, stressed that both in relation to the 1,000 lots that were to be allocated by Natixis, and in relation to the agreement that there would be collective instructions by FCO to the brokers first thing in the morning for 3,000 or 4,000 lots, there was "clear agreement." That, he submitted, was to be distinguished from "the vague way in which the balance is left."
113. The stance by Man in opening when commenting on paragraph 48 of Fluxo's skeleton argument was the subject of later qualifications by Mr Downes, including as to the "3,000 or 4,000 lots". My provisional conclusion (10) is that Mr Downes was right to say in opening that there was clear agreement that there would be collective instructions by FCO to the brokers first thing in the morning for 3,000 or 4,000 lots. Mr Chouissi (if the tentative attribution is correct) made the proposal. Mr Garcia agreed with it and stipulated a quantity of "three, four thousand lots." This gave him the option when placing his order as to what the precise quantity would be, but it had to be a minimum of 3,000 lots. An unidentified broker commented that this was "part of a group arrangement." No-one dissented. Here, as when agreeing on the 1,000 lots to be allocated by Natixis (see provisional conclusion (7) at paragraph 106 above), the parties were working on the footing that no formality was necessary to reach agreement, it being sufficient that the discussion proceeded on the basis that agreement had been reached.
114. As to Mr Downes describing the way in which the balance was left as "vague", I question whether there is anything vague about Mr Chouissi saying that it showed a "commitment that we are not going to start buying for ourselves." When probed on this Mr Downes put forward a first qualification, a submission that the "commitment" was simply what was envisaged if the parties were able to reach a concluded agreement the following day. This submission to my mind makes no sense. To start with, what was proposed and agreed was something to occur before the meeting the following day. Moreover, success the following day hinged on there being a commitment not to act unilaterally overnight. This would have been obvious to ICE. It would have been obvious to everyone participating in the meeting not only that this was essential but that both ICE and FCO needed to have that commitment. The commitment not to act unilaterally was certainly important enough to make it sensible to spell it out. Whether that was done for fear of ending up "looking like a monkey", or for some other reason, does not seem to me to matter. What appears on the transcript is that two brokers were repeating and emphasising points made earlier in the day: that so long as they continued to work towards an ultimate agreement all concerned were proceeding on the express basis that they would not unilaterally liquidate FCO's positions, and that what they had actually agreed that day was "part of a group arrangement." No-one dissents. My provisional conclusion (11) is that the remark attributed to Mr Chouissi referred to a commitment that all brokers were giving until the following day and expressly stated something which, now that the parties were adjourning until the following day, naturally followed from provisional conclusions (1) and (8), namely that all participants would proceed on the basis that no broker would take action unilaterally overnight to liquidate the First Defendant's positions prior to the time fixed for the meeting the following morning.
115. Mr Downes then advanced a second qualification: he submitted that one could not attach importance to the words of one broker. I shall return to this submission in the next section of this judgment.
116. The remainder of paragraph 48 of Fluxo's skeleton – the part which Mr Downes did not include when identifying what he accepted – was that there had also been a comment that an agreement had been reached "in principle" provided that a commitment on margin could be given. The passage in question occurs after discussion of the circulation of information about arrangements for the meeting the following day. The transcript continues, with an agreed interpolation in italics and other interpolations of my own for identification purposes:

JC:. This is John Coffin, may I suggest one thing, if we could be .a bit more specific in this so that somebody can talk to the exchange and if we can get this concrete enough so that we can say to the exchange, we have a potential agreement to take the pressure off so that the exchange can tell the world that the pressure is off, and it will save a lot of problems. But we have to have something fairly specific to talk about.

[First] Unknown: An agreement Well we could say in all honesty that an agreement has been reached in principle, [but] if we don't get paid-

[Second] Unknown: In principle's not what-

[Third] Unknown: I think the big thing, the hold up on a lot of it is_, seen as a commitment of the cash and a commitment of it actually arriving, and I think that's ah going to be the key. to us moving forward. I think its fair to say that if the money doesn't come in there's going to be ah-

[Fourth] Unknown:? One side of the deal's been made.

[Fifth] Unknown: Right OK.

[Sixth] Unknown: So we'll circulate the information …

117. Mr Downes submitted that Mr Coffin was not saying there was agreement, that the first "Unknown" and the second "Unknown" were saying things which contradicted any agreement, and that no-one could say there was any meeting of minds. On this latter point he repeated the submission that one could not attach importance to the words of one broker, a submission which I shall return to in the next section of this judgment.
118. My provisional conclusion (12) is that Mr Coffin was making a suggestion which the others swiftly rejected. The suggestion was that if things could then and there be made more concrete then ICE could publicly say, "the pressure on Fluxo is off." If my provisional conclusions so far are correct, then there were two obvious objections to this suggestion. The first obvious objection was that the brokers did not think that anything needed to be made more concrete on their side. They had agreed that if the following day FCO gave a commitment to pay margin in accordance with its contracts the brokers would put in hand steps to achieve an orderly reduction of FCO's positions: see my provisional conclusion (9). This point was made by the first and fourth unknowns, and affirmed by the fifth unknown. The second obvious objection is that the agreement was conditional on Fluxo's side, and there could be no question of saying "the pressure on Fluxo is off" before fulfilment of that condition. This point was made by the first and third unknowns. The second unknown appears to have been starting to make a similar point. The sixth unknown proceeded with the discussion on the basis that Mr Coffin's proposal had been dismissed. It was now simply a question of circulating information and completing any other administrative arrangements needed for the 18 January meeting. This analysis leads me to my provisional conclusion (13): although each of Mr Hopkins and Mr Coffin made suggestions which might have stood in the way of a conditional agreement, those suggestions were not maintained and by the conclusion of the 17 January meeting all parties proceeded on the footing that a conditional agreement was in place.

Analysis: the legal arguments

119. I take the last three of Man's four submissions in reverse order. Man's fourth point asserted that in the context of a serious emergency, with markets moving on a minute by minute basis, and in the absence of any protection in the form of paid margin, the alleged interim agreement would have been commercially absurd. I readily accept that there was inevitably a risk in agreeing not to act unilaterally overnight. Was it commercially absurd to run that risk? Mr Placet of Man did not want to do so, but in the mid-meeting inter-broker discussions MCA had recognised that margin could not in practical terms be paid that day: see paragraph 74 above. Accordingly in the concluding FCO/broker discussions Mr Placet reluctantly accepted the reality that payment would only take place the following morning: see paragraph 90 above. My provisional conclusion (5) identified what then happened: Mr Garcia was pinned down. He made plain that he would seek to be in a position the following morning where FCO could give the brokers what they wanted: a commitment to pay margin in accordance with its contracts. No-one rejected this as a basis for proceeding with negotiations. As stated in my provisional conclusion (6), it seems to me that the brokers perceived a real prospect, sufficient to warrant keeping the "what if" proposal on the table, that Mr Garcia would on 18 January 2008 have secured enough financial support from FCO's bankers to enable both the timely payment of margin and the orderly reduction in its positions envisaged by the "what if" proposal. The upshot of the meeting was that the "what if" proposal had been given ICE's blessing and the brokers were ready to put it into effect if FCO could give a commitment the following day to pay margin in accordance with its contracts. I accept Mr Males's submission that the brokers were willing to do this because the risk was warranted by the value of the prize that the parties thought they could achieve the following day. As regards the interim agreement there was no need for anyone, lawyer or otherwise, to say "We have reached a concluded agreement here" – that had already been made plain.
120. Man's third point asserted that details were yet to be agreed. As Mr Males observed, however, this does not affect the interim agreement. No details had to be agreed in that regard. As to the conditional agreement, I take first what FCO had to do. Mr Downes observed that it involved a commitment to pay margin and - asking rhetorically whether payment in 10 years' time would suffice – asserted that nobody knew what the margin would be the next day, that all they knew was that Mr Garcia could not raise the money from the banks, and that no-one knew what other brokers' positions were. When analysing the transcript of 17 January 2008, however, my provisional conclusions (5) and (6) were that the margin payments in question were payments to be made in accordance with the relevant contracts, and that the brokers perceived a real prospect that Mr Garcia would on 18 January 2008 have secured enough financial support from FCO's bankers to enable an orderly reduction in its positions so as to meet requirements imposed by ICE. That would include ICE's requirements as to margin. If my provisional conclusions are correct, then the first test of that support would be whether margin due on 17 January 2008 was in fact paid on the morning of 18 January 2008. There was nothing further that needed to be worked through on 17 January 2008. On the brokers' side, there were details to be worked through. That was true also of the agreements as to the thousand lots and as to the order to be given for three to four thousand lots. The parties saw no obstacle to those matters being agreed. Indeed, Mr Downes accepted, for the purposes of this application, that the parties on 17^th January 2008 arrived at an arrangement for Natixis to allocate the one thousand lots which was free-standing, was agreed and was not dependent on anything else. I accept Mr Males's submission that if it is indeed the case that the parties had agreed on the essentials then these matters that were to be worked out were no obstacle to a concluded agreement: see the judgment of Lloyd LJ in Pagnan.
121. Man's second submission was that there had to be an 11-way agreement. I have identified in the previous section of this judgment my reasons for thinking that the conference call was on the basis that all 10 clearing houses were participating. No one suggested that any clearing house had ceased to participate. If it were the case that someone ceased to participate - and I have no reason to think that it were - then it was plainly incumbent on that clearing house to say that it was withdrawing from the discussion. On such an occasion, if one or more participants say, 'We will all proceed on a particular basis', and no one dissents then it seems to me that the objective requirements for a meeting of minds can exist.
122. Before turning to Man's first and crucial submission, I shall examine the points made by Mr Downes in his reply. He submitted that there had been six elements pleaded: 1) A co-ordinated approach. 2) Natixis's 1,000 lot contract was to be allocated among all 10 clearing houses. 3) FCO was to place an order for a further purchase of three to four thousand lots. 4) The conditional element, which was FCO being able to give a commitment to pay margin. 5) An agreement to meet the next day. 6) An agreement not to act unilaterally.
123. Fluxo's problem, Mr Downes submitted, was where they slotted in element six. In essence, Fluxo was now saying that the parties had agreed to meet on 18^th January to sort out the ultimate agreement and in consideration everyone would stay their hand in the meantime. That was not the way it was put in the transcripts nor was it how Fluxo put the matter in correspondence. Middleton Potts said in a letter dated 7^th February not long after the meeting and no doubt on instructions that the 'breach of contract' that Fluxo relied on was part of the co-ordinated agreement which was the first element that Mr Downes had identified.
124. In my view, that places too much weight on a very compressed account in the letter of 7^th February. It is true that Fluxo's case has evolved. That is understandable in particular when at a stage after the 7^th February letter a transcript of the conference call becomes available. The period since receipt of Man's particulars of claim has been a period of frenetic activity. During the course of the present application, Fluxo have had the opportunity to refine their arguments and I do not think it right to criticise them for that. The conclusion that I have reached is a conclusion entirely consistent with the 7^th February letter, for the conditional agreement would if necessary have carried with it an implied obligation not to act unilaterally overnight. Analysis of the transcript shows, however, that what would have been an implicit agreement was in fact explicit. As indicated above, the post-Pascal query was followed by repeated occasions on which participants made it clear that discussions were proceeding on the basis that no broker would act unilaterally while the parties were seeking to reach ultimate agreement. From the time that the post-Pascal query was answered, right through to the end of the meeting on 17 January 2008, no one dissented – and in the passage attributed to Mr Chouissi the commitment, which I consider must have been a commitment as to the position overnight, is explicitly repeated.
125. Mr Downes then submitted that during the course of argument Mr Males had found a link with the third element, the agreement that there would be an order for a further purchase of three to four thousand lots. There had then, submitted Mr Downes, been a seventh element introduced where it was suggested that there was some sort of understanding that no one would act while the parties were negotiating in the meeting of 17^th January. Further, Mr Males had, submitted Mr Downes, put forward an eighth element found at page 255 of the transcript [the exchanges concerning the 3,000 to 4,000 lots] saying this was the sealing of the agreement. However if it were to be the 'grand sealing' then the market closed and they could not get it done.
126. It seems to me the fact that the market had closed takes Man no further. The essence of the problem on 17^th January was that FCO's financial position could not be resolved until the following day. The identification of a link with the order for the further purchase of three to four thousand lots was one of the elements on which refinements occurred as this application progressed. For the reasons given earlier, I do not think that Fluxo can be criticised for that.
127. As to the question whether there was some sort of understanding that nobody was going to act while they were negotiating in the meeting, my provisional conclusion (1) is consistent with there being such an understanding. In any event, it seems to me that the essential point which is fairly and squarely made in the draft amended Defence and Counterclaim is that no one would act unilaterally overnight.
128. Mr Downes then referred to his note sent by email on the morning of 7 August. The note had said in the short passage dealing with multi-party contracts that I might derive assistance from Azov Shipping v Baltic Shipping [1999] 2 Lloyd's Rep 159 at p.165. Mr Justice Colman there said:

"…as a matter of principle, where one party to multi-party negotiations directed to a binding agreement declines to accept one of the proposed terms, that party does not, at least in English law, become bound to those terms of the multi-party agreement to which it agrees but not to the term to which it does not agree unless all the other parties agree to be bound to that party on terms excluding that which it does not accept."

129. As it seems to me, that does not take Man any further. As Mr Males pointed out, no one said that they disagreed with any of the crucial matters that Man is relying upon.
130. Additional points were made by Mr Downes to the effect that one did not know who was listening and that when a particular person had said that there was a commitment, not long after the topic had moved on to something else. He placed particular reliance upon Mr Coffin at page 236 using words which he said were inconsistent with an agreement, 'We have a potential agreement.' That last point again seems to me not to assist Man. Those words are perfectly consistent with the conditional agreement that Fluxo is positing.
131. As to the discussion moving on, Mr Downes had earlier asked rhetorically, "What if one person out of 10 says I think we have an agreement, others are non-committal - where is offer and acceptance?" In the previous section of this judgment I observed that Mr Downes questioned whether significance could be attached to remarks of just one person. It seems to me that here context is everything. As indicated in my provisional conclusions (7) and (10), the parties were working on the basis that no formality was necessary to reach agreement. In the circumstances of the present case, where it was being suggested that agreement has been reached on something and that there was a commitment, then there is plainly a need for someone who took a different view to make that clear promptly. All of that is in a context where it was plain that what was needed, and what was under discussion, was agreement on the part of all.
132. Mr Downes submitted that Fluxo's submissions were contrary to public policy. If a mere agreement to meet implicitly involved compromising legal rights, then nobody would ever agree to meet. The law ought to encourage people to meet to discuss their differences. When a customer was in default and a bank agreed to meet that customer, it would be perfectly possible for the bank to change its mind and to appoint a receiver. One needed to insist that legal rights could only be defeated by enforceable agreements. Moreover, submitted Mr Downes, in the customer agreement there was a clause making it clear that if Man did not enforce its rights that involved no waiver. I do not understand how this clause in the customer agreement can assist Man. This is not a case where Fluxo relies on waiver, Fluxo relies on an express agreement. As to public policy, I readily accept that a mere agreement to meet does not in itself involve a compromise of legal rights. The question is whether in the present case there was more than mere agreement to meet.
133. Mr Downes made a further point in reply which concerned reliance by Mr Males on what happened at the 18 January meeting. I do not gain assistance from what happened at the 18 January meeting and accordingly this additional point does not arise.
134. I come then to Man's first and crucial submission. Nothing in Mr Downes's submissions leads to me to depart from my provisional conclusions. The passages in the transcript identified earlier, in my view, clearly show that there was agreement that the clearing houses would not act unilaterally overnight. Further, in my view, they show that the parties were agreed that if FCO could give the commitment to pay margin in a timely fashion - that is, in accordance with the relevant contracts - then the brokers would put in hand arrangements for an orderly reduction in the manner which Mr Farley had approved that day.

Conclusion

135. For the reasons given above I affirm my provisional conclusions and grant declarations that the 17 January meeting ended with the parties having reached:

(1) a binding agreement, effective immediately, under which all participants would proceed on the express basis that no commission or clearing house (including the first claimant) would take action unilaterally overnight to liquidate the first defendant's positions prior to the time fixed for the 18 January meeting; and

(2) a conditional agreement under which all participants would proceed on the express basis that if, at the 18 January meeting, the first defendant could give a commitment to pay margin in accordance with its contracts the commission and clearing houses (including the first claimant) would put in hand steps to achieve an orderly reduction of the first defendant's positions.