Case No: 2008 FOLIO 157
Neutral Citation Number: [2010] EWHC 2690 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 27/10/2010

Before :

MR JUSTICE DAVID STEEL
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Between :

	MAREX FINANCIAL LIMITED	Claimant	
	- and -		
	FLUXO-CANE OVERSEAS LIMITED

-and-
S/A FLUXO COMERCIO E ASSESSORIA INTERNACIONAL
	First Defendant

Second 
Defendant	

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MR ALAIN CHOO- CHOY QC 
(instructed by Messrs. Simmons & Simmons) for the Claimant
The defendants were not represented
Hearing date: 19 October 2010
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Judgment
MR JUSTICE DAVID STEEL : 
1.	In these proceedings, the Claimant (“Marex”), an English registered commodities and options broker, seeks to recover a debt due from the First Defendant (“FCO”), a BVI registered sugar trader, arising out of Marex’s liquidation or close out of the sugar contract positions that FCO held with it on 17 and 18 January 2008 and Marex’s subsequent termination of its trading agreement with FCO on 23 January 2008. 
2.	The claim is one of a number of claims arising out the close out of sugar contract positions held at that time by FCO through the engagement of a numerous of brokers.  The claims are being pursued both in this jurisdiction and elsewhere.  Two have already given rise to judgments in the Commercial Court: ED&F Man Commodity Advisers Ltd v. Fluxo-Cane Overseas Ltd [2010] EWHC 212 (Comm) (David Steel J) and Sucden Financial Ltd v. Fluxo-Cane Overseas Ltd [2010] EWHC 2133 (Comm) (Blair J). 
3.	The principal amount of the debt claimed is US$4,246,094.97. Marex claims contractual interest on that sum from FCO at the rate of 2% over 3 month LIBOR for US dollars per annum from 23 January 2008.  FCO’s indebtedness was guaranteed in writing by the Second Defendant (“FCA”), a Brazilian affiliate of FCO and a major global exporter of sugar. Both FCO and FCA have at all material times been owned and controlled by Mr Manoel Fernando Garcia (“Mr Garcia”), a prominent player in the sugar and ethanol markets, in Brazil and worldwide. In light of FCA’s guarantee, Marex also seeks judgment against FCA in the principal amount of US$4,246,094.97, plus interest at the contractual rate provided for in the guarantee namely LIBOR plus 4%.
4.	By a letter dated 14 October 2010 Marex and the court were informed that by an Order of the Eastern Caribbean Supreme Court (High Court of Justice, BVI, Commercial Division) liquidators had been appointed in respect of FCO with power to commence, continue, discontinue or defend any action or other legal proceedings in the name and on behalf of FCO in the BVI or elsewhere subject to the sanction of the BVI Court. 
5.	In their letter, the liquidators indicated that they had only recently been appointed and required time to familiarise themselves with these proceedings and consider their approach to them.  In the light of this, Marex’s solicitors agreed that Marex’s claim against FCO, and FCO’s counterclaim against Marex, should be stayed.
6.	With regard to the Second Defendant, FCA, whilst its liability to Marex under the Guarantee obviously depends upon the ascertainment of FCO’s liability to Marex, the Guarantee expressly provides that:
a)	the liability of FCA under the Guarantee shall not be discharged or affected in any way whatsoever by reason of the winding up, dissolution, administration, bankruptcy or re-organisation of FCO or any change in its status or ownership (clause 3.2.1); and
b)	before exercising any if its rights under the Guarantee, Marex shall not be obliged to make any demand on FCO, or take any action or obtain judgment in any court or tribunal against FCO, or make or file any claim or proof in a bankruptcy or winding up or dissolution of FCO (clauses 4.1.1 to 4.1.3).
7.	The hearing accordingly proceeded by way of the claim against FCA.  FCA were not represented at the hearing but I am satisfied that it had received proper and full notice of the hearing but had chosen not to appear.  I should add that I am greatly indebted to Mr Alain Choo-Choy QC, counsel for Marex, who furnished a detailed, reliable and convincing skeleton argument on which this judgment is based.
8.	Marex had three witnesses of fact: (i) James Hearn, Head of Agriculture at Marex; (ii) Simon McGuigan, until recently Head of Sugar and Grains at Marex, and (iii) Shique Ismail, Marex’s Legal Counsel. All three had given witness statements.  These I read as constituting their evidence in chief subject to some supplementary questions that were asked by counsel. 
9.	FCO and FCA had served a witness statement from Mr Garcia but he was not present at the hearing.  Indeed, their former solicitors, Messrs Hill Dickinson, had recently indicated by email dated 4 October 2010 (prior to their coming of the record on 14 October 2010) that because “Mr Garcia’s health is poor” and his “condition has worsened considerably” (the situation being described as “serious”), “it now appears obvious that he will not be able to attend [court] to give evidence or to do so by video link”.
10.	Nonetheless I also read his statement.  I did so on the basis that it should only be accorded limited weight, since obviously Marex had no opportunity to cross-examine him on it.  This approach was all the more justified in the light of this Court’s earlier assessment of Mr Garcia’s credibility as a witness. In the Man proceedings, I found that, even making allowance for the fact that Mr Garcia’s English was more expressive than grammatical, “his evidence was often evasive and unimpressive in regard to controversial matters”. 

11.	There were experts’ reports from Dr. M. Desmond Fitzgerald for Marex, and Mr Samuel Levy for FCO and FCA. Their evidence related to the manner in which Marex closed out FCO’s positions. Dr Fitzgerald gave oral evidence which I found to be clear and convincing.  Mr Levy did not attend and thus the views contained in his report can only carry limited weight.  In any event, where there was a conflict I unhesitatingly prefer Dr Fitzgerald’s views.
Factual background
12.	The relationship between Marex and FCO was established in early March 2007 by a trading agreement which incorporated Marex’s “Terms of Business for Market Counterparty” and was signed by Mr Garcia on FCO’s behalf.   The account opening form signed by Mr Garcia on behalf of FCO indicated that FCO:
i)	wished to open an electronic trading account and had traded futures and options through an electronic trading system before;
ii)	had more than 2 years’ experience of options and index options and commodity futures and options;
iii)	intended to trade with Marex on the LIFFE market (although in the event, FCO also traded futures and options on the Inter-Continental Exchange (“ICE”), a US exchange operated by ICE Futures US Inc.); 
iv)	and preferred to receive monthly statements by post and daily statements by e-mail.
13.	In view of the above and Mr Garcia’s (and his companies’) knowledge of and experience in the sugar markets, Marex informed FCO by letter dated 26 April 2007 that it proposed to categorise FCO as a market counterparty for the purposes of the Conduct of Business Rules of the Financial Services Authority. This categorisation was confirmed by Marex to FCO in a letter dated 27 April 2007, which was stated to constitute part of the terms of business between Marex and FCO. 
14.	In so far as material, the Terms of Business contained the following provisions:

1.1.	Clause 2.1: “Subject to Applicable Regulations: This Agreement and all Transactions are subject to Applicable Regulations so that: (i) if there is any conflict between this Agreement and any Applicable Regulations, the latter will prevail; and (ii) we may take or omit to take any action we consider necessary to ensure compliance with any Applicable Regulations and whatever we do or fail to do in order to comply with them will be binding on you.”

1.2.	Clause 2.2: “Exchange Action: If an Exchange (or intermediate broker or agent, acting at the direction of, or as a result of action taken by, an Exchange) takes any action which affects a Transaction, then we may take any action which we, at our discretion, consider desirable to correspond with such action or to mitigate any loss incurred as a result of such action. Any such action shall be binding on you.” 

1.3.	Clause 3.1: “Execution only: We deal on an execution-only basis and do not advise on the merits of particular Transactions, their taxation consequences or the composition of any account.” 

1.4.	Clause 4.1: “Charges:…we will charge you interest (both before and after any judgment) on any amount you failed to pay us when it was due calculated at the rate determined by us to be the cost of funding such overdue amount (“Default Interest”) unless you pay such charges at the time they are incurred…”. 

1.5.	Clause 10.7: “Market disruption (a) In the event of severe market disruption and/or price volatilities which may result or may have resulted in the current market value of a commodity which is the subject-matter of any outstanding Transaction falling to an unacceptable level, we reserve the right to take one or more of the following courses of action: (i) to close out any Transaction where significant loss has occurred or is expected by us; ...” 

1.6.	Clause 11.1: “Margin call: You agree to pay us on demand such sums by way of margin as are required from time to time under the Rules of any relevant Exchange (if applicable) or as we may in our discretion reasonably require for the purpose of protecting ourselves against loss or risk of loss on present, future or contemplated Transactions under this Agreement”. 

1.7.	Clause 13.1: “Events of Default: If at any time: (a) a Party fails to make any payment when due under or to make or take delivery of any property when due under, or to observe or perform any other provision of this Agreement and such failure continues for two business days after notice of non-performance has been given by the other Party to the defaulting Party…(d) a Party is unable to pay its debts as they fall due or is bankrupt or insolvent, as defined under any bankruptcy or insolvency law…; or any indebtedness of a Party is not paid on the due date therefor…; (e) a Party ... disaffirms, disclaims or repudiates any obligation under this Agreement ... (k) it is necessary or desirable for a Party’s protection/any action is taken or event occurs which a Party considers might have a material adverse effect upon a Party’s ability to perform its obligations under [the] Agreement…(each an “Event of Default”)”. 

1.8.	Clause 14.1: “Default: On an Event of Default or at any time after we have determined, in our absolute discretion, that you have not performed (or may not be able or willing in the future to perform) any of your obligations to us, we shall be entitled without prior notice to you: …(iii) to close out, replace or reverse any transaction, buy, sell, borrow or lend or enter into any other transaction or take, or refrain from taking, such other action at such time or times and in such manner as, at our sole discretion, we consider necessary or appropriate to cover, reduce or eliminate our loss or liability under or in respect of any of your contracts, positions or commitments; and/or (iv) to treat any or all Transactions then outstanding as having been repudiated by you, in which event our obligations under such Transaction or Transactions shall thereupon be cancelled and terminated”. 

1.9.	Clause 14.2: “Method: … We may terminate this Agreement immediately if you fail to observe or perform any provision of this Agreement or in the event of your insolvency. Upon terminating this Agreement, all amounts payable…become immediately due and payable including (but without limitation): (a) all outstanding fees, charges and commissions; and (b) any dealing expenses incurred by terminating this Agreement; and (c) any losses and expenses realised in closing out any transactions or settling or concluding outstanding obligations incurred by us on your behalf”. 

1.10.	Clause 15.1: “General exclusion: Neither we nor our directors, officers, employees or agents shall be liable for any direct or indirect losses, damages, costs or expenses incurred or suffered by you under this Agreement (including any Transaction or where we have declined to enter into a proposed Transaction) unless arising directly from our or their respective gross negligence, wilful default or fraud. In no circumstances shall we have any liability for consequential or special damage. …” 

1.11.	Clause 15.2: “Indemnity: You shall pay to us such sums as we may from time to time require in or towards satisfaction of any debit balance on any of your accounts with us and, on a full indemnity basis, any losses, liabilities, costs or expenses (including legal fees), taxes, imposts and levies which we may incur or be subjected to with respect to any of your accounts or any Transaction…or as a result of…any violation by you of your obligations under this Agreement (including any Transaction) or by the enforcement of our rights”. 

1.12.	Clause 16.2: “Notices: Unless otherwise agreed, all notices, instructions and other communications to be given by one of us to the other under this Agreement shall be given to the address or fax number and to the individual or department specified in the account opening form in respect of you and or by notice in writing by such party. (a) Any notice, instruction or other communication shall be deemed to take effect in the case of fax, on dispatch and, in the case of airmail or first class pre-paid post, five Business Days after dispatch. Notices, instructions and other communications made pursuant to this Agreement or any Transaction shall not be effective if given by electronic mail. (b) Each notice, instruction or other communication to you (except confirmations of trade, statements of account, and margin calls shall be conclusive unless written notice of objection if received by us within five Business Days of the date on which such document was deemed to have been received.” 

1.13.	Clause 16.4: “Time of essence: Time shall be of the essence in respect of all obligations of yours under this Agreement (including any Transaction)”. 

1.14.	Clause 17.1: “Governing law: A Transaction which is subject to the Rules of an Exchange shall be governed by the law applicable to it under those Rules. Subject thereto, this Agreement shall be governed by and construed in accordance with English law”. 

15.	Notwithstanding Mr Garcia’s association with FCO, it was a relatively new company and Marex therefore wished to have a guarantee from its longer established affiliate, FCA.  By a “Guarantee of Payment and Performance” dated 2 March 2007 and signed by Mr Garcia on FCA’s behalf (the “Guarantee”), in consideration of Marex making its brokerage services available to FCO, FCA unconditionally and irrevocably covenanted and guaranteed to Marex that it would immediately on demand made to it by Marex pay and satisfy all sums (howsoever arising), whether certain or contingent, which were then or would at the time of such demand be due by FCO to Marex under the Agreement: see clause 1.1 of the Guarantee.
16.	By clause 1.2.1 of the Guarantee, FCA also agreed to pay interest on amounts outstanding to Marex thereunder, from the date of demand on FCA until payment, at the rate of 4% over 3 month LIBOR for the currency in question (here, US dollars) compounded with quarterly rests on such days as Marex might select.
17.	By clause 1.2.2, FCA agreed to pay all legal and other costs and expenses incurred by Marex in enforcing or seeking to enforce payment by FCA of any monies due under the Guarantee.  The Guarantee also contained standard provisions with respect to it being a continuing guarantee for as long as full payment had not been received by Marex (clause 2), not being affected or discharged by any change or modification to any term of the Agreement (clause 3.1.1), and being governed by English law (clause 15.1).
18.	In the event, FCO did not start to trade with Marex until October 2007.  By then, Marex had already written to FCO to inform it that the Markets in Financial Instruments Directive (Council Directive (EC) 39/2004 on markets in financial instruments) (“MiFID”) would be implemented across Europe from 1 November 2007 and that, following such implementation, Marex would be required to classify all new and existing clients into three categories, either Eligible Counterparty, Professional or Retail clients. 
19.	On 8 October 2007, Marex wrote to FCO further regarding the impact of MiFID, stating as follows:

“Following our review of your trading activities with us and based on the information available to us as of 1st November 2007, we propose to classify you as an “Eligible Counterparty” where we conduct “eligible counterparty business” (as defined in the FSA Rules). In respect of all other business we conduct with or for you, we will treat you as “Professional Client”.

You are entitled to request for a different client categorisation. However, we advise that due to our business profile, we are unable to conduct business with Retail Client.

As MiFID further introduces various changes in the way we do business with you, we have to change our Terms. Existing separately negotiated clauses, stand-alone agreements and master agreements with you continue to apply. We invite you to visit our website at www.marexfinancial.com to view our Best Execution Policy, Conflicts of Interest Policy and details of services that we provide.

Please sign and return the Acknowledgment Schedule of the Terms to the above address. We accept confirmation of your consent to the Terms by email at mifid@marexfinancial.com or by facsimile at 44 020 7655 6024. If you have not expressly consented to the Terms, we will deem your acceptance and your willingness to continue business with us under the Terms if you continue to place order with us on or after 1st November 2007.

If you have any questions on the above, please contact us at the above email address or your usual Account Executive.”

20.	The terms attached to Marex’s letter of 8 October 2007 were entitled “Eligible Counterparty Agreement” and in small respects varied the Terms of Business so as to create “the New Terms of Business”.   Since the changes were in the context of these proceedings of marginal importance, they can be taken briefly:
i)	The bracketed words in clause 14.1 of the Terms of Business appeared in clause 15.1 of the New Terms of Business as “(or we reasonably believe that you will not be able or willing in the future to perform) any of your obligations to us”; and
ii)	There was no provision in clause 18.2 of the New Terms of Business (corresponding to clause 16.2 of the Terms of Business) that notices, instructions and other communications made pursuant to the Agreement would not be effective if given by electronic mail.
21.	The Best Execution Policy referred to in the 8 October 2007 letter, which was available on Marex’s website, contained the following express exception:
“2.	Scope

Marex owes a duty of best execution to clients categorised as Professional Clients where we execute orders on your behalf and where we receive and transmit client orders. ...

The Best Execution obligation will not apply when we execute orders for Eligible Counterparties (as defined under MiFID).”

22.	In the result, it does not matter whether the relationship between Marex and FCO was governed by the Terms of Business or the 8 October 2007 letter and New Terms of Business attached thereto.  If and to the extent that the point matters, I accept the contention of Marex (but denied in the Amended Defence and Counterclaim) that the New Terms of Business had contractual effect from 1 November 2007.
23.	FCO’s plea that it “did not expressly consent” to the New Terms of Business (para. 6A(3)(a) of the Amended Defence) is misconceived, since, assuming that the documentation was sent to and received by FCO (as I am ready to accept since it was sent to all of Marex’s clients), the 8 October 2007 letter expressly provided that, in the absence of express consent to the New Terms of Business, FCO would be deemed to have accepted them and be willing to continue business with Marex subject to them if it continued to place orders with Marex on or after 1 November 2007 (as FCO in fact did). 
24.	Given the express terms (including the deemed acceptance provision) of the 8 October 2007 letter, it is impossible, as suggested by FCO, to construe FCO’s conduct in continuing to trade with Marex as amounting to a rejection of the New Terms of Business, or to identify any clear and unequivocal representation by Marex (such as would be required to found an estoppel precluding Marex from relying on the New Terms of Business) that it was willing to trade on the original Terms of Business. On the contrary, the 8 October 2007 letter made it explicit that Marex was only prepared to continue to trade with FCO after 1 November 2007 subject to the New Terms of Business.
25.	The volume of FCO’s trading through Marex increased substantially throughout December 2007 and the beginning of January 2008.  This leads to a critical aspect of the background to Marex’s liquidation of FCO’s positions namely the intervention of ICE with respect to FCO’s positions, in particular, FCO’s substantial short positions in the Sugar No. 11 contract. 
26.	By the second half of 2007, FCO was beginning to establish a substantial short position on the market. This was because Mr Garcia took the view that because of over-supply in the sugar markets, the price of sugar would fall. Through its numerous brokers (who, by reason of customer confidentiality, did not know the number of others involved let alone the overall extent of the company's trading), FCO built up a substantial short position particularly in the March 2008 No.11 Contract. 
27.	As a result of FCO’s build up of a substantial short position, of which ICE was aware through position reporting to the Exchange, ICE’s Market Surveillance division was interested in and closely monitored FCO’s trading activities. From November 2007 onwards, the communications between FCO and ICE regarding FCO’s positions increased in frequency and intensity. In particular, the existence of FCO’s substantial short position led ICE to write a letter to FCO on 13 November 2007 expressing concern about the sensitivity of FCO's position to price changes. ICE requested that FCO's net position on all months combined be kept to a maximum of 65,000 futures equivalent and its net position in any single sugar contract month to a maximum of 60,000 futures equivalent. 
28.	On 19 November 2007, ICE wrote another letter to FCO containing an additional expression of concern about the credit lines available to FCO and as to whether they were revocable or unsecured.  On 20 November 2007, FCO’s lawyers, Clifford Chance, responded to ICE’s letter dated 13 November 2007 expressing concern about the limits that were being imposed by ICE on FCO’s trading.
29.	There were then further e-mail exchanges on 28 and 29 November 2007 between Mr Garcia and Susan Gallant, ICE’s Managing Director of Market Surveillance, in which Ms. Gallant indicated that there were numerous firms carrying and reporting FCO’s positions, that it was important for there to be accurate reporting of FCO’s positions, that FCO should notify ICE immediately if FCO moved positions to a new firm so that ICE could be sure that those positions were being reported to ICE, and that ICE would periodically ask FCO for a breakdown of its Sugar 11 positions to be able to verify that the position data that it had received was complete and accurate, and that such requests might become more frequent towards February.
30.	On 30 December 2007, FCO's lawyers wrote to ICE again giving further information as to FCO's ability to meet margin calls.  However on 10 January 2008 ICE (Ms. Gallant) e-mailed Mr Garcia, stating as follows:  
“My calculations show that your futures equivalent position increased yesterday by about 5000 contracts so that your position was in excess of 80,000 lots entering today's trading. My review indicates that increase was primarily the result of additional selling of futures although deltas did have some impact as well. It is hard to understand how you are trying to reduce your position when you continue to sell thousands of lots of futures. As the price of the market contract is down today we expect to see a substantial decrease in your short futures position.”
31.	The e-mail requested reports on the total position in March 2008 futures, to which Mr Garcia replied later that same day.  The information duly provided by FCO as to its trading activity on 10 January 2008 prompted a further e-mail from ICE on 11 January 2008, as follows:  
“As of receipt of this email, the Exchange is directing you to stop selling the March '08 Sugar 11 futures contract and to cease any other trading strategies that would result in an increase in your Mar '08 short position. You are further directed to immediately cancel all sell orders involving the Mar '08 futures contract as an outright or a spread or any other orders that would increase your short Mar'08 position. These instructions result from your continued violation of your single month position limit and the significant increase in your Mar '08 short position yesterday. Further, data received in this office indicates that you have now exceeded your 65,000 lot all months position limit as well. Please take immediate steps to correct this situation. 
In addition, we are currently considering other steps the Exchange may take to ensure that you bring your positions in compliance with your position limits. You have now been in violation of your position limit for 10 business days.”  

32.	Later the same day (11 January 2008), ICE instructed Mr Garcia as follows:  
“Your March '08 position had been in violation of the single month position limit established for Fluxo-Cane Overseas Ltd. for 10 consecutive days entering today's trading. If your trading activity today did not bring the position in compliance with the position limit, the Exchange will invoke the authority provided by ICE Futures U.S. Rule 6.13 on Monday, January 14, 2008 and instruct firms carrying your positions to reduce such positions by the close of trading on Tuesday, January 15.” 

33.	On 13 January 2008, Mr Garcia responded that FCO was “working hard in compliance with the [ICE] single month limit position”.  On 14 January 2008, Mr Garcia reported on activity with regard to the March 2008 Sugar No. 11 futures contract during the course of 11 January 2008, but this was met by a formal notice from the Vice President of Market Regulation at ICE instructing MF Global Inc (“MF Global”), the ICE clearing member acting for Marex (and ED&F Man), to collect an additional 20% margin on all of FCO’s positions in the Sugar No. 11 contract, effective close of business 14 January 2008.   
34.	The 14 January 2008 notice prompted a response from Mr Garcia to ICE to the effect that such an increase in margin would give rise to liability of no less than US$80 million given FCO’s exposure amongst some ten clearing houses. A call for additional margin was said to be “a sentence of death”. However, ICE came back later that day stating that on its calculation the margin requirement across all firms was US$68 million as of close of business on 11 January 2008, and that accordingly a 20% increase would require an additional deposit, not of US$80 million, but of US$14 million, and querying whether the figure quoted by Mr Garcia was a reference to the total margin.
35.	It appears that the reaction from FCO was to instruct its lawyers to contact ICE on its behalf so as to inform ICE that (i) FCO would reduce its position in March 2008 contracts as from 16 January 2008 and continue to do so over the next 4 business days until they were at or below the level set by ICE, and (ii) that FCO would agree to instruct its clearing firms that if it did not itself reduce a certain number of contract positions each day then the clearing firms were authorised to so themselves.
36.	On 15 January 2008, there was a special meeting of the board of directors of ICE for the purpose of discussing FCO's position. Later that day, FCO informed ICE by e-mail that recalculation suggested any additional margin would be in the sum of US$17 million, which (in FCO’s view) was “a great deal of cash to be asked to provide on just one day notice”. FCO’s e-mail went on: “We have a concern now the Exchange's communications with the clearing firms are prejudicing Fluxo Cane's credit lines which make it more difficult to finance our position. As you know from our earlier correspondence some of our credit lines are revocable. So we ask that the Exchange act reasonably and prudently to achieve its self regulatory objective without unnecessarily imperilling Fluxo Cane's financial abilities.” 
37.	Following its board meeting, ICE sent Mr Garcia an important letter dated 16 January 2008 which read as follows:-  

“I am writing to advise you that a special meeting of the Board of Directors of ICE Futures U.S., 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 Ltd. 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 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 order, as specified above, becomes effective on Wednesday, January 16, 2008 upon the posting of a Release to Members of 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 brings 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 representative. 

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, based on the proportion of Fluxo's position carried by such firm, 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 with respect to the March 08 delivery month, and to not increase the futures equivalent position carried in all Sugar no. 11 delivery months combined, beyond its current level,

(b) not accept any orders, electronic or otherwise, that would result in an increase of Fluxo's short futures equivalent position in the March 08 Sugar No. 11 delivery month or its short futures equivalent position in all delivery months combined; and 

(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. 

You may obtain further details directly from your clearing members regarding the position reductions that have been requested of each such firm, or contact Susan Gallant at the Exchange at 212-748-4030. 

Please be aware that the foregoing action is not intended in any way to preclude the clearing members from further reducing positions or taking any other action which they may deem necessary or proper in light of the relevant circumstances.”

38.	On the same day, ICE sent a “Notice to Liquidate Positions” to MF Global confirming the fact that FCO's position in the March 2008 contracts was significantly in excess of the Exchange’s position limit established for FCO and indeed that it was also in excess of the position limit for all months combined. In those circumstances ICE instructed MF Global to reduce FCO's short futures equivalent position as held at Marex in the March 2008 contract to no more than 6,200 futures equivalent contracts by no later than the close of trading on 23 January and also not to increase FCO's short futures equivalent position for all months combined beyond its current level. Furthermore MF Global were also instructed not to accept any orders that would increase FCO's short futures equivalent position in the March 2008 Sugar No. 11 contract or in all months combined. MF Global were requested to ensure that it could affirmatively monitor or restrict FCO’s order flow to ensure compliance with ICE’s instructions. 
39.	At about 11.20 a.m. New York time (4.20 p.m. London time), ICE also made an announcement over the public speaker in its trading pit that FCO's trading rights were being curtailed. The terms of the pit announcement were:

“Effective immediately and until further notice, all orders for futures and/or options contracts in the ICE Futures U.S. Inc. Sugar No. 11 Contract for the account of Fluxo-Cane Overseas Ltd. and its affiliates (including, but not limited to, Manoel Garcia) may only be accepted directly from a clearing member of ICE Clear US, Inc. and from no other person.”

40.	The gist of this announcement had come to Marex’s attention by about 4.22 p.m. Later that evening, at about 9:20 p.m., ICE’s Susan Gallant sent a further notice directly to Marex (James Hearn) relating to FCO’s positions which read as follows:
“With respect to the Exchange’s instructions issued this morning to certain Clearing Members, including your firm, to reduce futures equivalent positions in the March ’08 Sugar No. 11 contract held by Fluxo-Cane Overseas Ltd. and its affiliates (“Fluxo”), we understand that given the circumstances that existed today with the timing of the notifications and trading activity that may have occurred prior to the instructions, it may have been necessary to receive in or give out positions for Fluxo today. However, effective with the start of business tomorrow, January 17, 2008, [Original emphasis] the Exchange is hereby directing that Clearing Members may not receive positions in from or give positions out to other Clearing Members for Fluxo. This means that trading activity for Fluxo should be cleared by the Clearing Member through which the orders were submitted.

With respect to omnibus accounts, orders may be submitted by the firm carrying Fluxo’s positions as long as the firm has the Clearing Member’s consent and such orders are consistent with the instructions to reduce Fluxo’s short futures equivalent position in the March ’08 Sugar No. 11 position carried by that Clearing Member.” 

41.	Unsurprisingly, the extent to which, and manner in which, ICE had intervened in relation to FCO’s positions caused severe turbulence in the market. All those involved in commodities trading and brokerage who have commented on the nature of the ICE’s intervention in this connection have described it as unprecedented and extraordinary.  
42.	A glimpse of the resulting market disruption is afforded by some of the market reports for trading on 16 January 2008.  For example in an ICAP Daily Sugar Options Report commenting on the daily options activity for 16 January 2008, the ICAP Commodity Derivatives author said that ICE’s announcement that all orders for futures and/or options contracts in ICE’s Sugar No. 11 contract for the account of FCO and its affiliates may only be accepted directly from a clearing member of ICE and from no other person had “fuelled speculation that there would be universal liquidation of positions by the above accounts”, and that “panic spread throughout the pit quickly”. After observing that volatility had spiked up, the author concluded:  “I will not speculate further on what may or may not happen. Let’s enjoy the ride that should follow.”
43.	The upshot of the above developments from Marex’s perspective is described by Mr McGuigan as follows:

“35... There was clear concern amongst Marex management (including my colleague James Hearn who had been monitoring the situation closely) because of the unprecedented nature of the events which had occurred and the effects that they were having on the market. I was additionally concerned because Fluxo was my client. As at 16 January 2008, however, all margin calls had been paid. I was also able to speak to Mr. Garcia again and he confirmed to me that he was on his way to the airport and that he was seeking to arrange a meeting/conference call for the next day in New York, in which he proposed to allay the concerns of his brokers. At that stage I did not appreciate quite how many brokers that call would come to involve.” 

44.	Before the “all broker meeting” referred to above took place on 17 January 2008, Marex communicated throughout the day with FCO with respect to (i) the margining of FCO’s account, and (ii) the steps that FCO would take to comply with the Notice to Liquidate Positions:
i)	At 9.14 a.m., Marex e-mailed a margin call of £95,390.37 in respect of ICE’s 20% increase in margin on FCO’s Sugar No. 11 positions as at close of business on 16 January 2008.
ii)	At 10.50 a.m., Marex sent an updated margin call of US$3,130,843.37 to FCO reflecting the significant market movement that morning.
iii)	At 1.36 p.m., Mr McGuigan spoke to an FCO trader who stated that he had “sent the instructions to the people that take care of the wire transfers” and that as soon as he received the Swift confirmation of payment he would forward it to Marex. 
iv)	In the event, however, contrary to what Mr McGuigan was told by the FCO trader, no confirmation of payment was sent, or payment made, by FCO to Marex.
v)	Between 2.24 and 2.25 p.m., Mr McGuigan exchanged instant messages with the same FCO trader, asking again about the outstanding margin call. The response this time was that there was “nothing until Mr. Garcia’s [i.e. the all broker] conference call”.
45.	In parallel with the discussions about payment of margin, Marex repeatedly raised with FCO the question of partial liquidation of FCO’s positions in order to comply with ICE’s Notice to Liquidate Positions. Marex sought instructions from FCO in that regard. Mr McGuigan had telephone conversations and exchanged constant messages with various FCO representatives throughout the day, enquiring as to what orders FCO was willing to give to achieve daily reductions of its positions as required by ICE.  
46.	FCO’s stance in this connection is well illustrated by the response given by Maria Pia (Mr Garcia’s daughter) during a telephone call raising the question as to whether FCO would give liquidation orders and pay the outstanding margin call:
“[Mr McGuigan]: ... Now I appreciate your situation is that you’re waiting on Manoel coming out of the conference call ... and we’re waiting for that ... but it’s gone from 3 o’clock to 4 o’clock to 5 o’clock and ... you know ... I’m beginning to have less power and my bosses, the directors of the company, are saying to me we either need to have the margin payment made or we need to have orders to buy something.

[Maria Pia]: I know. I know all that OK. ... You’ve told us, everyone’s told us. I told you there is nothing we can do so if you need something to get done, then just do whatever you need to get done, but there is nothing we can do. I cannot give you orders. ... I can not do anything without Manoel’s [i.e. Mr Garcia’s] consent.”

47.	FCO’s continuing failure to make any margin payment (or even give a commitment to make such payment) or to give any orders to liquidate its positions naturally caused considerable anxiety and concern within Marex and led to a management meeting being held. Mr Hearn describes this meeting as follows in his statement:
“15.	It was at this stage, on Thursday afternoon, that a management meeting was held in which I discussed the issue with other senior managers of the business including Mark Slade, Gavin Prentice and Charlie Lesser. Although we did not have all of the facts, certain things seemed clear to us. First, Fluxo and ICE were involved in a major disagreement. Second, ICE was acting in what seemed to us to be a highly aggressive manner, unprecedentedly so. Third, it was clear that Marex needed to comply with the Exchange’s requirement to reduce Fluxo’s positions. Fourth, Fluxo who had previously had a good margin call payment history with Marex, was unable to confirm that the current call or future calls would be met.  And finally, the man at the centre of the storm, Mr Garcia, had decided to fly overnight from Brazil to New York to attend a meeting/conference call with Fluxo’s many brokers, at which everything would apparently be explained.  This was most unusual behaviour.   Meanwhile, the market continued to rally, and the losses on the position continued to mount.  Marex needed to be in a position to protect itself, if needs be, from the possibility of significant losses on Fluxo’s trading account.

16.	It was decided during the course of this management meeting that unless Mr. Garcia could provide some comfort in relation to the size of his overall commitment and a commitment to pay both the outstanding and future margin calls Marex would be left with no alternative in those circumstances but to start to liquidate Fluxo’s positions. We were looking for some positive confirmations from Mr. Garcia. My recollection is that, at least initially, we expected to get them. The all broker call was a call set up in advance. It was clearly important and I certainly expected a man of Mr Garcia’s reputation and importance in the market to have something positive to say during that call. 

17.	Our concerns were not allayed by the fact that the conference call which Mr. Garcia had arranged and which was originally scheduled for 3.00pm (London Time) on 17 January 2008 was postponed from 3.00pm (London Time) to 4.00pm (London Time) and then 5.30pm (London Time). It did not start until about 6.10pm (London Time) when Mr. Garcia finally joined the call.”

48.	As the all broker meeting with Mr Garcia was beginning, Mr McGuigan sent an e-mail to Mr Garcia and another FCO representative stating as follows:
“As per our previous telephone conversations, we are under instruction by the exchange to reduce your NY#11 Sugar position on a daily basis, and to reach a net short of 6200 lots or less by Wednesday 23rd.

We have attempted to speak with Senior Garcia throughout the day, but with no success. The conference call/meeting has been postponed twice, and we await another attempt to speak.

There is an outstanding margin call today, in excess of $3m – and we do require a response.

We want to assist and support you during this difficult period, but we are not receiving any information, whilst the market rallies.

We reserve all our rights to take any action that we may deem appropriate as per the terms of our account with you.”

49.	The all broker meeting was attended by Marex representatives (Mr McGuigan and Charlie Lesser) by telephone (with Mr Hearn and others listening in). The contents of the discussions during this lengthy meeting (which lasted over 3 and ½ hours in total) have been the subject of considerable analysis by this Court and the Court of Appeal in the Man proceedings.  Transcripts of the discussions are available. As I noted at paras. 35-6 of the Man Judgment:
“35.	... The question of how to reduce the FCO short position was discussed at some length as well as whether FCO was in a position to and would meet margin calls. During the course of the discussions one of the brokers spoke to the President of ICE about the situation. 

36 	In due course a dispute arose on the pleadings as to whether an agreement was reached at this meeting to the effect that FCO's short position would be reduced in a coordinated manner with one clearing house carrying out all the necessary transactions on the exchange including the use of spreads. This issue was the subject of a summary judgment application by the claimants. In due course it was held by the Court of Appeal that no such agreement or indeed any agreement had been reached and accordingly this issue has fallen away: see [2009] EWCA Civ 406.”

50.	Prior to Mr Garcia joining the meeting, the representatives of the numerous brokers waiting for him (including Fortis, Bear Stearns, Sucden, Prudential Bache, Marex, ED&F Man, BNP Paribas and Natexis) discussed matters between themselves. The following extracts from the transcripts provide a flavour of the topics of particular concern to the brokers, namely margin and orders for liquidation:

“[Jeff Bauml of BNP] ... I just spoke to [David Yeres] and he said they [are] on their way and will be about 40, 45 minutes. On that I also pointed out to him that the first question that has to be answered immediately if not sooner is the status of the margins because ... every commission house on the hook right now want[s] to know what the status is on margin calls, ...” 

“[Michael Overlander]: Now again, Andy I know that you’re concerned about disclosure issues, and I do understand that but ... generically speaking I think we’re probably all in the same boat. Nobody’s got any [margin] money and nobody’s had any orders.

“[Unknown]: ... are we in unison in preparing after the client describes what’s led up to this, and what they intend to do, that this basically [is] the end of the road for him, in terms of, you know, reacting to his position, and that he’s got to get out of his position. He’s got to show that he’s getting out of it today ... and if he doesn’t, that we’re going to, you know, get out of this position for him.

[Unknown]: I think fundamentally ... he needs to start to demonstrate ... for all of us that he’s making some tangible efforts to adhere to the requests of the Exchange, which are obligations now upon us, and if he can’t give us the commitments to satisfy our obligations, then we’re going to have to take our own actions.

[Unknown]: Because we’re the guys on the boat, all of us, and we’re the clearing members, we’re the people in front of the Exchange. I agree with you Tom [i.e. Tom Cohen of Bear Stearns]. It’s not like it’s an option, we have to do this, and we have to do it today.

51.	Regarding the discussions once Mr Garcia had joined the meeting, in view of the Court of Appeal’s decision in the Man proceedings, FCO no longer contends in this action that those discussions resulted in any legally binding agreement between FCO and its brokers (including Marex) that the brokers would not liquidate FCO’s positions otherwise than in a globally co-ordinated manner. But notwithstanding the abandonment of that contention, the following aspects of the parties’ discussions are material for present purposes:
i)	First, as Mr Hearn describes, he was “shocked that virtually every brokerage firm in sugar was also on the conference call”. This made it clear to him that “this was a big problem and would have an effect on the market as a whole”. 
ii)	Secondly, it was clear from Mr Garcia’s early explanations during the meeting that at least two of FCO’s brokers (Fimat/Newedge and ADM) had already liquidated or were in the process of liquidating FCO’s positions.
iii)	Thirdly, Mr Garcia made it clear to the brokers that
“with this crazy moment I need to protect my company until I have idea what will be the next movement from everyone. ... Unfortunately I have no more control ...” 
52.	All of the brokers were concerned by FCO’s failure to meet margin calls that were outstanding from the morning of 17 January 2008 and anxious to establish FCO’s intention in relation thereto. They asked for firm commitments from Mr Garcia, but he refused to give them. By way of example:
“[Michael Overlander of Sucden]: ... Manoel ... In terms of margin calls that have been called for all day, will you be meeting those?

[Mr Garcia]: I told you I have to know all the movements, each one. I will stop [payment] because it makes no sense to go to the infinitum with everyone [losing] their minds, liquidating partially or totally and so on, ... and out of my control.” 

“[Lou Kayapa of BNP]: That’s not really the choice that the Exchange has given us, and I think that you owe a lot of margin money to a lot of the people around this table, and on the phone. The Exchange has instructed all of us in letters and by phone calls to reduce the positions, and I think we need to know that the margin money that you owe us currently is coming in, the margin calls that were made this morning from yesterday are coming in, and that the margin calls based on market movement today ... [are] going to be met and I haven’t heard an affirmative response from you on that.

[Mr Garcia]: Well I think that I told you. We will stop payment until we know what everyone will do, and if you will do it properly. ...” 

“[Unknown]: “With regards to the margins calls that we made to you this morning ... are you in a position to pay us for those calls?

[Mr Garcia]: First of all I don’t know yet how much was because I stayed here. I went to hotel to be prepared for here, I had a meeting with my lawyer and I went to here. I will look this afternoon the numbers, but the problem is not if I have or not the source for that. It is that we are in a system that there is no more limits. We don’t know how much we have cost this buying side without ... certain protection.”  

“[Unknown]: Is there some way you can get the numbers [of outstanding margin calls] now and tell us whether you can make those, that obligation that is the margin that is due on the basis of prior days, not today’s but prior days?

[Mr Garcia]: Our decision up to now is to not pay up to have any agreement what we can do or not do together. ...” 
53.	In short Mr Garcia was saying that, quite apart from his not knowing what total amount of margin was owed by FCO to its brokers at that stage, he was more concerned by the risk of limitless loss to FCO in the absence of a co-ordinated liquidation of its positions.  It was clear from these exchanges that Mr Garcia simply refused to give any firm and unconditional commitment that FCO would meet its outstanding margin obligations to the brokers. 
54.	Indeed as held in the Man and Sucden proceedings respectively:
“37. As regards the issue of margin Mr Garcia recognised that there was a significant sum owed but no payment would be made until the attitude of the other brokers became clear and in particular whether they were minded to cooperate.”

“15.  Mr Garcia's basic position was that Fluxo-Cane had decided not to pay any margin unless and until some agreement was reached for a co-ordinated reduction. ... Whatever its contractual commitments may have been, it is plain that Fluxo-Cane had no incentive to pay margin unless it got such co-ordination….It seems to me that Mr Garcia also made it clear that, even if co-ordination could be agreed, he would have to consult the company's bankers before he could give any form of commitment, at least going forward, since, as he put it at the meeting, it “make[s] no sense to pay margin calls today and have no support for tomorrow’”.

55.	Several of the brokers expressed dissatisfaction with Mr Garcia’s attitude, not least because, irrespective of the condition that Mr Garcia was seeking to impose for payment of outstanding margin by FCO, the brokers had to put up margin with ICE. Some of their responses were as follows: 
“[Unknown]: ... We [i.e. the brokers] are all going to meet the margin call to the Exchange because that’s what we do, right? If you [are] looking to have a dispute with the Exchange, I think you need to handle it with the Exchange, and leave the brokers out of that dispute. I think that needs to be done by you meeting the monetary obligations on a prompt basis of the margin calls outstanding. ...” 

“[Unknown]: ... I think that the situation you are putting everyone in here by not meeting your margin calls on a timely basis, ... I don’t think that will lead to ... ultimately a good situation. And I think if you [are] looking for an orderly liquidation of those positions, I can probably say with a reasonable amount of [assurance], looking at the people around this table, ... that that will not occur probably if the funds do not come in, because everyone’s going to be looking to cover their own positions.” 

56.	It was also clear during the meeting that, notwithstanding the Notice to Liquidate Positions, Mr Garcia was not prepared to give any buy orders to any of the brokers unless and until a collective agreement for co-ordinated liquidation had been arrived (which never happened). The following exchange took place fairly early on during the meeting:
“[Unknown]: Did you [give] any orders today to buy?

[Mr Garcia]: No because ... I stopped. First of all the idea was to decide here. And second, since the morning, the system was disturbed. ...” 

57.	Having regard to the above, it is instructive to consider Mr Hearn’s evidence:
“19.	... When Mr. Garcia ultimately joined the meeting, he said, on behalf of Fluxo, that he could make no commitment to the payment of margin calls at the current price levels and that he could not give any orders to buy or sell in relation to Fluxo’s positions (which was in direct contravention of the Exchange’s express instructions). 

20.	It was my understanding, based on what Mr. Garcia said on the call, that Mr. Garcia was not aware of the size of Fluxo’s overall exposure and that he was not able to confirm that Fluxo was able to pay its debts as they fell due. Despite having spent a whole day dealing with these issues and being advised by his lawyers, it appeared to me that Mr. Garcia was a man who had lost control and who was unaware of the risks to which Fluxo was exposed.

21.	Hearing these initial comments, Charlie Lesser and Mark Slade broke-off from the conference call to discuss the situation by mobile. I was with Mark Slade. We needed to make a decision as to what should be done in order to protect both Fluxo and Marex. Taking into account all the circumstances together with Fluxo’s non-payment of margin, failure to confirm that the margin would be met and the market disruption and volatility, it was decided that Marex was entitled to and that it was in the best interests of both the client and ultimately the company to start to liquidate Fluxo’s positions.”

It is to be noted with regard to Mr Hearn’s comments about “market disruption and volatility”, the price of March 2008 Sugar No. 11 futures had risen from about 11.75 to above 12.50 between 6.30 a.m. and 6.30 p.m.
58.	To similar effect, Mr McGuigan stated:
“46.	The call began with an attendance call. As the individual brokers indicated their attendance it became clear not only that many, if not all, of the market’s major brokers were affected, but also that certain brokers (such as New Edge), who should have been on the call, were not on the call. It was confirmed by Mr. Garcia later on the call that New Edge and ADM had liquidated Fluxo’s positions prior to the start of the call.

...

52.	Mr. Garcia had been unable to provide the comfort that we were looking for at the start of the brokers’ call. It was our understanding, based on what he had said, that Mr. Garcia was not aware of the size of Fluxo’s overall exposure and that he was not able to confirm that Fluxo was able to pay its outstanding margin obligations at that point or at any point in the future. He was also not prepared to give any buy orders.”

59.	Once the decision had been taken to start liquidating FCO’s positions as described above, Marex proceeded to do so between 6.30 p.m. and 7.51 p.m that evening. All the liquidating trades at that stage related to ICE’s Sugar No. 11 contract.  As explained by Mr Hearn:

“Marex chose not to close-out all of Fluxo’s positions on the evening of 17 January 2008. While this was done partly due to a lack of liquidity on the market, it was also part of a strategy to manage the position.”
60.	The details of the liquidating trades undertaken by Marex for FCO’s account that evening were e-mailed to FCO at about 9.31 p.m., with a request for FCO to pay the attached updated margin call.  Further attempts were made by both Mr McGuigan and Mr Hearn later that evening and early the following morning to speak to Mr Garcia to see whether he was prepared to give specific orders to liquidate FCO’s remaining positions and to ascertain his intentions regarding the payment of outstanding margin. 
61.	On the morning of 18 January 2008, at about 8.24 a.m. Mr Hearn spoke to Mr Garcia (who was then in New York, where the time was 3.24 a.m.) and asked him to clarify what his intentions were as regards the outstanding margin call. Their last exchange went as follows:
“[Mr Hearn]: I just need you to be aware that ... we are at the moment down millions of dollars in the trade which is coming out of our pocket at the moment. If we do not have the comfort that the margin call is going to be paid, we are left with no alternative but to liquidate the position. I need you to be aware of that.

[Mr Garcia]: Okay, okay. Do your decision. Thank you and goodnight.”

62.	Later that morning, at 9.23 a.m., Mr McGuigan sent an e-mail to Mr Garcia  stating that Marex had continued to chase FCO and Mr Garcia as to FCO’s intentions with regard to its March 2008 positions and the payment of the outstanding margin call of 17 January 2008, and that FCO and Mr Garcia had failed to confirm that the margin call would be met. The e-mail went on to point out that the failure to meet the margin call on demand left Marex with no alternative but to take steps to protect itself and stem the losses against FCO’s account, and that Marex had undertaken the attached trades and would continue its systematic liquidation until FCO’s position was closed or Marex received margin from FCO. It was further stated that all of FCO’s credit facilities with Marex had been cancelled. There was no response to that e-mail.
63.	Given the continuing refusal and failure by FCO to give any specific orders or pay or commit to pay outstanding margin, Marex continued to liquidate FCO’s positions between 6.30 a.m. and 1.09 p.m. on 18 January 2008.  By an e-mail sent at 1.32 p.m. Marex notified FCO that all of its positions had been closed out.  A few hours later, at about 7.35 p.m., MF Global e-mailed to Marex a “Withdrawal of Notice to Liquidate Positions” from ICE. 
64.	MF Global followed that up with a further e-mail at 7.42 p.m., explaining that FCO had come within its Sugar 11 position limits and that ICE was therefore withdrawing its instructions to liquidate FCO’s Sugar 11 positions and to collect additional 20% margin. MF Global stated, however, that ICE was still requiring that FCO’s orders in Sugar 11 were only entered through ICE clearing members and that clearing members were still prohibited from any give-ins or give-ups of trades. 
65.	On 23 January 2008, following the liquidation of FCO’s positions on 17 and 18 January 2008, Marex:
i)	notified FCO by e-mail of the final position on its account, which was referred to as “an updated margin call” - the final account showed that FCO owed Marex a total sum of US$4,469,428.97, including a sum of US$223,334 in respect of unpaid commission relating to business executed by Marex for FCO but given up to and cleared by third party brokers (although Marex does not pursue its claim for this unpaid commission against FCO or, by extension, FCA);
ii)	served a final request for payment of the outstanding amount of US$4,469,428.97 and notice of termination of the Agreement by letter of the same date; and
iii)	demanded payment of the same amount by FCA under the Guarantee.
Marex’s entitlement to liquidate FCO’s positions
66.	Against that background, Marex’s case is that it was entitled to liquidate FCO’s positions pursuant to clauses 13.1(e), 13.1(k) and 14.1 of the Terms of Business or, alternatively, the equivalent provisions (i.e. clauses 13.1(e), 13.1(k) and 15.1) of the New Terms of Business (insofar as those applied after 1 November 2007).  Marex had also pleaded that Events of Default arose under clauses 13.1(a) and 13.1(d) at para. 19.2 of the Amended Particulars of Claim. However, it is accepted for present purposes that clause 13.1(a) cannot avail Marex because it never gave two business days’ notice of non-performance of FCO’s failure to pay margin before commencing the liquidation of FCO’s positions on 17 January 2008 and Marex further accepts that it cannot rely on clause 13.1(d) in the light of Blair J’s reasoning at para. 44(2) of the Sucden Judgment on similar wording. 
67.	However, in their submissions at the trial Marex also wished to rely on clause 13.1(e) in addition to clause 13.1(k) as giving rise to an Event of Default. I gave leave for Marex to amend the Amended Particulars of Claim in this regard.  It raises an essentially legal issue as to whether what FCO said and did prior to Marex commencing the liquidation of FCO’s positions amounted to FCO disaffirming, disclaiming or repudiating its obligation to pay margin. 
68.	Before dealing with Marex’s submissions as to how Events of Default had occurred under clauses 13.1(e) and 13.1(k) and/or how its right to close out FCO’s positions under clause 14.1 arose, it is necessary to say something about the nature and scope of FCO’s obligation to pay margin.  Marex’s case is that by the time that it commenced to close out FCO’s positions at 6.30 p.m. on 17 January 2008, FCO had failed to pay the margin call made at 10.50 a.m. earlier that day in breach of clause 11.1 of the Terms of Business (or clause 7.1 of the New Terms of Business): see para. 19.1 of the Amended Particulars of Claim.
69.	FCO has disputed this proposition on a number of grounds, all of which are rightly submitted by Marex to be misconceived.  First, FCO contends that the 10.50 a.m. margin call was void and of no effect pursuant to clause 16.2 of the Terms of Business because it was sent by e-mail (para. 20 of the Amended Defence). As to this there was a consistent course of dealing between the parties whereby margin demands were always made by Marex by e-mail and complied with by FCO as if validly made under the Agreement. This form of demand was adopted for practical and logistical reasons and was never objected to by FCO. The practice is not gainsaid by Mr Garcia and there are numerous examples of it throughout the whole trading period from October 2007 to January 2008. FCO’s willingness to treat e-mail demands as valid under the Agreement must be seen in the context of its own preference (as stated in its account opening form) for daily statements to be sent to it by Marex by e-mail.
70.	Given this course of dealing the parties must be taken to have agreed by their conduct (notwithstanding clause 16.2 of the Terms of Business) that Marex could demand the payment of margin by e-mail, and FCO was accordingly bound to accept this form of demand on 17 January 2008. It is no doubt because of this agreement that FCO did not suggest at the time that the 10.50 a.m. (or earlier) margin call on 17 January 2008 was either void or ineffective.  Further, FCO is, by reason of this course of dealing and Marex’s obvious reliance on it in continuing throughout to demand margin by e-mail, estopped from asserting that this form of demand is not valid under the Agreement or alternatively, in failing ever to object to the form of demand, FCO has thereby waived whatever right it had to insist that margin calls should not be made by e-mail or to claim that this form of demand is contractually ineffective. 
71.	It would be wholly unconscionable in the circumstances to permit FCO to rely on the electronic nature of the margin demand as invalidating it under the Agreement, all the more so where there was no provision in clause 18.2 in the New Terms of Business (to the extent that it applied after 1 November 2007) that notices, instructions and other communications were ineffective if given by e-mail.
72.	Secondly, FCO contends that, if the 10.50 a.m. margin call was valid, payment was due within a reasonable time, meaning “two New York business days after the call”. On this approach, FCO had until 22 January 2008 to meet the call (21 January 2008 being a national holiday in the USA). In his witness statement (at para. 42), Mr Garcia goes even further than this by suggesting, on the basis of (i) an undisclosed letter from the US National Futures Association to the US Securities and Exchange Commission and (ii) the margin rules contained in the ICE Rules, that the party from whom margin was due had up to 5 business days in which to pay it. 
73.	The contractual requirement, whether under clause 11.1 of the original Terms of Business or clause 7.1 of the New Terms of Business, was for payment “on demand”. It is well established, as held by Blair J at para. 33 of the Sucden judgment, that this formula “allows the customer a reasonable time, following demand, for implementing the mechanics of payment (see in the context of demands made by a lender under security, Bank of Baroda v Panessar [1987] Ch 335)”.   
74.	By 6.30 p.m. Marex had had the 10.50 a.m. margin call for over 7 ½ hours, ample time in which to arrange for payment by modern methods of transfer. Indeed, Mr McGuigan was told at 1.36 p.m. that Swift confirmation of payment would be forwarded to him as soon as it was received. It has never been suggested by FCO that insufficient time was allowed by Marex to enable the mechanics of payment to be implemented. Ultimately, the reason why payment was not made by FCO was altogether different. As Mr Garcia made clear at the beginning of the all broker meeting, FCO had decided not to pay unless and until it reached a collective agreement with all brokers for a co-ordinated liquidation of its positions.
75.	Mr Garcia’s reliance on the margin provisions of the ICE Rules is misconceived. This was so held by Blair J at paragraph 57 of the Sucden judgment in the following terms:
“I reject an alternative case that has been advanced by Fluxo-Cane to the effect that it had five business days in which to pay margin by reference to Rule 5.01 of the ICE Rules. As Sucden says, while this Rule defines “reasonable time” as “less than 5 Business Days”, it is plain that this is in the context of and for the purposes of the Rules themselves. The Rules lay down a maximum period within which margin must be paid in order to comply with ICE Rules and avoid regulatory sanction. The Rules do not purport to, and do not, lay down some minimum period to which the payer is absolutely entitled. Nothing in the ICE Rules prevents a broker and customer from agreeing a shorter period between themselves as a matter of contract.”

76.	The above reading of Rule 5.01 is plainly right since Reasonable Time is defined as a period “less than” the specified number of days (which does not in any way, therefore, preclude the payment of margin “on demand”), but it is further reinforced by Rule 5.05 which provides that “Nothing in this Chapter 5 shall prevent any Carrying Member Firm at any time from requiring Original Margins in excess of the amounts prescribed pursuant to these Margin Rules or establishing greater Maintenance Levels for any account, or taking any other action which is not contrary to these Margin Rules or the Rules.” In other words, there is nothing to stop member firms from agreeing with their clients larger and faster margin payments than prescribed by the ICE Rules.
77.	It is also relevant to the present analysis that the margin provision in the Agreement had to cover not only business conducted on ICE but also on LIFFE. Under Rule 3.27 of the LIFFE Rules, members were required to calculate or recalculate clients’ liability for margin “[n]ot less often than once each business day” and to collect margin thus calculated from clients “promptly ... in full” (see Rules 3.27.1 and 3.27.2). In these circumstances, it is hardly surprising that the Agreement required the payment of margin by Marex’s clients (including FCO) “on demand”.
78.	For the above reasons, it is clear in my judgment that, by the afternoon of 17 January 2008, FCO’s failure to meet the 10.50 a.m. margin call amounted to a breach of clause 11.1 of the original Terms of Business (or clause 7.1 of the New Terms of Business).
79.	On the facts, however, there was more than a mere breach by FCO of those provisions. FCO made it clear during the afternoon of 17 January 2008 that it would not – i.e. that it was refusing to - comply with its obligation to pay margin on demand. In particular:
i)	One of FCO’s traders told Mr McGuigan between 2.24 and 2.25 p.m. that there would be no payment until the all broker meeting;
ii)	Mr Garcia’s daughter told Mr McGuigan during the 4.32 p.m. telephone call on 17 January 2008 that there was nothing that could be done by FCO before the all broker meeting;
iii)	Early during the all broker meeting, Mr Garcia repeatedly made clear that FCO would not be paying any outstanding margin unless and until an agreement was reached for a co-ordinated liquidation of FCO’s positions with all brokers. The imposition of this condition was, of course, fundamentally inconsistent with FCO’s obligation to pay margin “on demand”.
80.	By such conduct, I accept that FCO clearly disaffirmed, disclaimed and/or repudiated its obligation to pay margin on demand, thereby giving rise to an Event of Default within the meaning of clause 13.1(e).  Marex also relies on the general principle that a party who is determined to perform a contract only in a manner substantially inconsistent with his obligations under the contract thereby renounces or repudiates the contract: see Chitty on Contracts (30th ed. 2008), para. 24-018. Again I regard that submission as well founded. In this case, FCO was entitled neither to defer payment until the all broker meeting in the evening of 17 January 2008, nor to impose the condition that no payment would be made unless and until an all broker agreement for co-ordinated liquidation had been reached with FCO.
81.	In addition, Marex are justified in relying on clause 13.1(k) in that it considered it necessary or desirable for the protection of both itself and FCO that it should start to close out FCO’s positions as it did. The rationale for and background to Marex’s decision has already been detailed above. But to summarise:
i)	The extent and manner of the intervention by ICE in respect of FCO’s positions had been extraordinary and unprecedented, and indicated that there was a very serious issue between ICE and FCO.
ii)	The entire market knew that FCO was hugely short and would need to buy back a large part of this short position to comply with ICE’s directions.
iii)	There had already been a spike in the price of Sugar No. 11 contracts on the day of ICE’s announcements and directions on 16 January 2008.
iv)	There was a continuing rally in that futures price throughout 17 January 2008, starting at about 11.75 at the beginning of the trading day and ending up above 12.50.
v)	The risk of loss with every 0.01 ct/lb increase in that price was very considerable, exceeding US$80,000 for FCO’s Sugar 11 positions alone. A 0.1 ct/lb increase would thus cause a deterioration of more than US$800,000 in FCO’s account. (Indeed, the size and complexity of FCO’s account with Marex as at 16 January 2008 was such that the Value at Risk (VAR) was in excess of US$4 million.)
vi)	FCO had failed and refused to meet its outstanding margin obligations, not just to Marex but to many other brokers, who were all concerned and deeply unhappy about the situation.
vii)	Furthermore, FCO was refusing to give any firm commitment that it would meet its outstanding or future margin obligations, unless and until an all broker agreement for co-ordinated liquidation had been reached with FCO and, even then, subject to further discussion with its bankers. 
viii)	Mr Garcia was not even sure at the time of the total outstanding margin obligations of FCO and was not prepared to provide any assurance as to FCO’s ability to satisfy those obligations.
ix)	Nor was he prepared to give any orders to liquidate any of FCO’s positions before a global agreement had been reached, notwithstanding the ICE’s direction for immediate daily reductions.
x)	There was plainly huge uncertainty as to whether any agreement of any kind was going to be reached between the large number of brokers taking part in the meeting. Hence, on Mr Garcia’s own approach, there was a real and substantial risk that no further margin payment would be made by FCO at all and that what would happen immediately after, if not during, the meeting would be mass liquidation of FCO’s positions by all brokers.
xi)	At least two other (and probably more) brokers had already started to liquidate FCO’s positions before the meeting and were continuing to do so during the meeting.
82.	In these circumstances, the conclusion of Marex’s senior management that “it was in the best interests of both the client [FCO] and ultimately the company [Marex] to start to liquidate [FCO’s] positions” cannot be faulted.  I accept that Marex properly considered at the time that it was necessary or desirable do so for both parties’ protection (and certainly for Marex’s protection) within the meaning of clause 13.1(k). Indeed, the same facts would also have entitled Marex to consider that the events that had occurred might have a material adverse effect upon FCO’s ability to perform its obligations under the Agreement, within the meaning of the second part of clause 13.1(k).

83.	Given that an Event of Default under either clause 13.1(e) or clause 13.1(k) had occurred by 6.30 p.m. on 17 January 2008, it follows that pursuant to clause 14.1 of the Terms of Business (or clause 15.1 of the New Terms of Business) Marex was entitled without prior notice to FCO to start closing out its positions from 6.30 p.m. onwards. (Subject to FCO’s complaints about the manner in which the close out was effected, this proposition did not appear to be in dispute.)
The conduct of the liquidation
84.	When FCO served its Defence on 4 June 2008, it contained an unparticularised allegation of breach of duty or mismanagement by Marex regarding the manner of the close out of FCO’s positions: see para. 48 of the Amended Defence.  Further particulars of this allegation were subsequently served in the form of a 4 page Appendix which not only raised issues as to the desirability and pricing of some of the trades, but also drew attention to a number of discrepancies between the available documents and the Summary of Liquidating Trades originally attached to the Particulars of Claim.  In due course these discrepancies were the subject of a detailed request for further information by Middleton Potts (FCO’s then solicitors), which was duly and fully answered in a letter dated 13 February 2009 from Simmons & Simmons and a revised Summary of Liquidating Trades.  I need say no more about these points.
85.	FCO’s remaining complaints about the way in which Marex managed the close out now appear to be contained in Mr Levy’s report.  But before dealing with them I must touch on the question of the standards to be expected of Marex in any closing out process.  The key contention advanced by FCO in this respect is that Marex owed the so-called:
i)	Best Interests Obligation, i.e. an obligation to act honestly, fairly and professionally in accordance with the best interests of FCO; and
ii)	Best Execution Obligation, i.e. an obligation to take all reasonable steps to obtain, when executing orders, the best possible result for FCO taking into account the relevant execution factors.
86.	These alleged obligations are said to arise “pursuant to the ... Agreement and/or the FSA Rules”. There is no elaboration as to which FSA Rules are being relied upon, but it is clear from FCO’s pursuit of a similar argument in the Man and Sucden proceedings that the rules being relied upon by FCO are COBS Rules 2.1.1 and 11.2, which provide respectively:
“(1)	A firm must act honestly, fairly and professionally in accordance with the best interests of its client (the client’s best interests rule).” (COBS 2.1.1)

“A firm must take all reasonable steps to obtain, when executing orders, the best possible result for its clients taking into account the execution factors.” (COBS 11.2.1)
 
87.	As was held in the Man proceedings however, COBS 2.1.1 and 11.2.1 do not apply to “eligible counterparty business”, namely business carried on with or for an eligible counterparty: see COBS 1 Annex 1 (Part 1.1) and paras. 71-74 and 76 of the Man judgment.  As explained above by virtue of Marex’s letter dated 8 October 2007, FCO was properly notified of its classification as eligible counterparty.  It follows that the eligible counterparty business exemption from COBS 2.1.1 and COBS 11.2.1 applied to Marex’s liquidation of FCO’s positions (as it did to ED&F Man’s liquidation).
88.	Further, under the new client classification that applied from 1 November 2007, FCO was not a retail client, but was either an eligible counterparty or a professional client. If an eligible counterparty, the exemption referred to above would have applied, and if a professional client, Marex’s Order Execution Policy (which was incorporated by reference in the letter dated 8 October 2007) expressly provided that the duty of best execution owed by Marex to professional clients only applied “where we execute orders on your behalf and where we receive and transmit client orders”. Since however, the close out of FCO’s positions under clause 14.1 (or clause 15.1) was in Marex’s discretion pursuant to its independent right to close out rather than pursuant to FCO’s orders, it follows that the duty of best execution (or COBS 11.2.1) was inapplicable anyhow.
89.	Indeed, the distinction between executing FCO’s orders and exercising a right to close out upon FCO’s default was, in my respectful judgment, rightly relied upon by Blair J in the Sucden proceedings in support of the general proposition that “the COBS ... do not apply when the broker is liquidating the customer’s account pursuant to an Event of Default ... because these rules apply when the broker is executing its customer’s orders, which is not the case in a liquidation” (para. 53 of the Sucden judgment).   
90.	Such an approach is consistent with general market understanding, which is described by Dr Fitzgerald as follows: 

“[The] general market understanding [is] that best execution and best interests obligations do not apply in a situation where a broker is liquidating positions on behalf of a client who is in a state of default” 

“... Moreover, in my view, the requirements of best execution and bests interests would cease to apply if the client is deemed to be in default, when I believe the broker would have a wide discretion in limiting and closing down the set of positions, which could now constitute a direct risk exposure for the broker itself.” 

91.	Moreover, as I held in the Man proceedings, the application of COBS 2.1.1 (where there is no issue as to the honesty, fairness and professionalism of the broker, but a question as to whether he has acted in the client’s best interests) is a difficult one:
“76.	... As regards the best interests of the client, this is a difficult concept in circumstances where the client is refusing to pay margin and expecting [the broker] to close out as best it can. [The broker] was in effect trading on its own account. Furthermore the interests of [the broker] were in common with FCO namely to limit the loss that might be sustained as a result of the liquidation. Thus I reject the suggestion if it be made that [the broker was] obliged by COBS 2.1.1 to manage FCO’s position as if still acting as FCO’s broker but at its own risk and without the provision of margin.”

92.	I conclude that the correct approach has to be that the only relevant standard applicable to Marex’s close out of FCO’s positions was that resulting from clause 15.1 of the Terms of Business (or clause 17.1 of the New Terms of Business), namely, that Marex would not be liable to FCO save in respect of losses “arising directly from [Marex’s] gross negligence, wilful default or fraud”.   Since there is no suggestion by FCO that there was any wilful default or fraud on the part of Marex, the relevant question is whether Marex conducted the close out with “gross negligence”.
93.	Quite what the epithet “gross” adds is not at all clear.  For the moment it is sufficient to consider Marex whether has made out its case that it conducted the close out in a professional and competent manner.  For this purpose, it is important to bear in mind that a broker’s liquidation or close out of its client’s positions when the client is in default is an exercise in risk reduction or elimination. The broker’s primary interest in that situation is (rightly) to reduce or eliminate risk since any resulting losses could end up being borne by the broker. As Dr Fitzgerald put it:
“2.6 	... It needs to be recognised that futures and options brokers are not normally in the business of taking outright risk positions, since they generally have neither the market expertise nor the level of capital required to do so. ... 

2.7	It is also worth pointing out that a broker left with client positions is generally in a more risky situation than a client, such as Fluxo, who is classified as a hedging client. Such a client has the potential to delivery physical commodities against its derivatives positions, and the derivatives losses if any will be offset by profits on the physical positions. The broker by contrast will only have one side of the client’s position, and thus end up with a purely speculative position of someone else’s choosing. In my view, a reasonable broker in such circumstances would be concerned to eliminate the risks as quickly as possible.”

94.	It is important to resist the temptation of hindsight when judging the reasonableness of the broker’s actions. Blair J was well aware of that temptation. As he put it at para. 65 of the Sucden judgment:
“... I am quite satisfied that Dr Fitzgerald is correct to express the view that it is only with the benefit of hindsight that it can be seen that liquidation during the period 22 to 25 January 2008 would have been most advantageous. The market might have risen, as Mr Levy thought it would, or Mr Garcia might have been proved correct in his conviction that the market would fall. I am satisfied that following the action taken by the Exchange, the liquidation of Fluxo-Cane’s positions was going to be extremely problematic, as indeed both Mr Garcia and Mr Overlander foresaw. I very much doubt in these circumstances whether there is a single template by reference to which it can be said that liquidation was, or was not, negligent.”
95.	Indeed the natural reaction of a broker, anxious to mitigate his exposure (and indeed the liability of his client) would be to close out the position quickly, liquidating as much as possible, as soon as possible, even if in the event the exposure was enhanced.  This is precisely what Marex did.  That such was the only sensible course is reinforced by the following considerations:  
i)	the persistent failure on the part of Mr Garcia to pay margin or give orders to buy;
ii)	the extraordinary and unprecedented intervention of ICE in respect of FCO’s positions;
iii)	the severe impact that such intervention had had on the market on 16 January 2008;
iv)	the continuing and significant upward trend in prices throughout 17 January 2008 (rising from 11.77 to 12.57 ct/lb between 6.30 a.m. and 6.30 p.m.); 
v)	the sheer number of brokers who held FCO’s positions and were affected by the problems of unpaid margin and need to reduce positions;
vi)	the uncertainty as to whether any co-ordinated way forward would be possible, failing which mass liquidation was likely to follow;
vii)	the general uncertainty, speculation and panic that was rife throughout the market at that time.
96.	The liquidation process was handled by the joint Heads of Agriculture at Marex. They were senior members of Marex’s management with a long history of experience in the commodities markets. The proposition that people of that experience and calibre grossly (or even negligently) mismanaged the close out is difficult to conceive, all the more so in circumstances in which the broker’s interest in risk reduction or elimination in this context would be expected to be aligned with the client’s interest.  I reject the allegation.
97.	As regards specific complaints there is a suggestion by Mr Levy that FCO’s reduction of its short position by 2,500 lots on 16 January 2008 (from 9,965 to 7,465 March 2008 Sugar No. 11 futures contracts) “seriously undermines one of the most important arguments advanced by Marex for the radical action that it took, summarily liquidating the entire FCO account”.
98.	I agree with Marex that this suggestion is misconceived. It ignores the fact:
i)	that the ICE requirement was for daily reductions of FCO’s positions, so that reductions were required on 17 January 2008, for which Mr Garcia had refused to give any orders to any brokers (including Marex) unless co-ordinated liquidation by all brokers was agreed upon; and
ii)	more fundamentally, that the liquidation action that Marex took on the evening of 17 January 2008 and continued on the morning of 18 January 2008 was not merely designed to comply with the ICE’s Notice to Liquidate Positions, but represented Marex’s exercise of a right to close out FCO’s positions generally in circumstances in which one or more Events of Default had occurred and Marex had properly determined that FCO had not performed or might not be able or willing in the future to perform its margin obligations.
99.	Secondly, there is the general thesis espoused in Mr Levy’s report that the market conditions of 17 and 18 January 2008 were too chaotic and volatile to justify liquidation at that time and that Marex should therefore have waited until after 18 January 2008 “for the price moving in the opposite direction, driven by exhaustion and profit taking” (para. 10). He further states that “in extreme situations, when the market spikes unexpectedly, overshooting all reasonable objectives without any real change in market fundamentals, a reasonably competent and experienced broker will wait for a market reaction, a corrective move, before acting or making recommendations to act, rather than liquidate the account at the peak of the spike” (para. 26).
100.	The obvious fallacy in this reasoning is that it expects the broker to anticipate and allow for the actions of his competitors all faced with the same problem. Supposing all the brokers postponed action until later?  In short it requires the broker to speculate as to when the price reversal or corrective move will occur, whether the current price is the peak of the spike or whether the peak might be even higher, or whether a peak might be followed by a short-lived correction followed by another (and perhaps higher) peak. 
101.	In short, Mr Levy’s approach calls for the broker to take substantial risks by taking a bet as to how the market will move following the client’s default. Predicting the next price movement is difficult enough a task for most professional traders, but, as I put it in the Man proceedings, it is not an exercise which a broker should be required to perform “at its own risk and without the provision of margin”. 
102.	Mr Levy has also challenged the reasonableness of Marex’s liquidation of 2,510 short futures positions in a 10 minute period between 6.30 p.m. and 6.40 p.m. on 17 January 2008. But this point is fully and convincingly addressed by Dr Fitzgerald at paras. 2.24 to 2.26. In short, although this volume of trading probably contributed to some upward pressure on price, the price then remained static around 12.75 ct/lb through to 7.10 p.m., indicating that there were willing buyers and sellers other than Marex at that price. In the remaining period of Marex’s liquidation to 7.51 p.m. the volume traded by Marex was less substantial and unlikely to have created more price pressure. 
103.	More fundamentally, however, given the volume of FCO’s positions with Marex and other brokers, it was inevitable that the liquidation of those positions would or might exert some upward pressure on the price. That did not constitute an excuse for not liquidating at all or liquidating only negligible volumes. Nor does it alter the fact that a rational and prudent broker faced with a client in default should not speculate as to future price movements but proceed to close out the client’s positions promptly. 
104.	Next Mr Levy has raised a number of queries concerning a block trade for 2,500 lots which was booked at 6.30 a.m. on 18 January 2008 and the deletion of a “dummy trade” in a statement supplied by Marex to FCO.  However, all of these relatively minor queries have been raised in correspondence previously and satisfactorily answered in Simmons & Simmons’ letter dated 13 February 2009. None of them in any supports the contention that Marex mismanaged the liquidation process.
105.	Lastly Mr Levy points to the fact that the average liquidating price achieved by Marex on 18 January 2008 was 12.75967 ct/lb, whereas the average for that day was 12.4009 ct/lb. Mr Levy asserts that if Marex had liquidated the 4,989 lots at the day’s average price “which is not asking for much”, the loss to FCO’s account would have been about US$2 million smaller. Once again however, Mr Levy’s point is unrealistic and conclusively answered by Dr Fitzgerald:
“There are several points that need to be made, in my view, with respect to this complaint. First, it is apparent that no-one actually trading on a derivatives market can guarantee to achieve prices equivalent to the average daily price, since that price is known only at the end of the day, after all trading is complete. Second, the price of 12.70¢ per lb includes the block trade, which did not occur during the trading day on 18/1/08. In my view, the actual achieved Marex average price (without the block trade) of 12.51¢ per lb is so close to the actual overall average price of 12.40¢ quoted by Fluxo, as to remove any cause for complaint.”

“... from the opening [of 18 January 2008] the March No 11 futures price traded down to a low of 11.80¢ per lb, before recovering sharply. Marex purchased a net 2394 March No 11 futures contracts (i.e. excluding the block trade) between 06.30 London time and 10.38 London time. All of this trading took advantage of the declining sugar price, and Marex achieved an average price of 12.51¢ per lb. In my view, the purchase of those futures during a falling market at an average price of 12.51¢ per lb, represented a thoroughly reasonable approach to the liquidation process, which achieved a successful result for the Fluxo account.”

106.	As I have already said, since Mr Levy did not attend the trial, the views contained in his report can only carry limited weight.  In any event having regard to all the matters discussed above, I endorse Dr Fitzgerald’s conclusion that the “liquidation trading by Marex on 17/1/08 appears ... to have been controlled and reasonable in the circumstances” and “[the] same appears ... to be the case for the Marex trading on 18/1/08”. 
107.	There is thus no merit whatsoever for FCO’s counterclaim, which must be dismissed.  It follows that there must be judgment against FCA, in the sum of US$4,246,094.97 plus contractual interest (which is not arguably oppressive or penal).