06 Jul 2015

ShippingBulletin - July 2015

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A roundup of developments in shipping law

In this issue we look at:

  • Demurrage time bar - BPVOY4 - "all supporting documentation"
  • Challenging jurisdiction - exclusive jurisdiction clause
  • Container demurrage - whether a penalty
  • Time charter - identity of contract party
  • Direct action against insurers - pay to be paid rule
  • Safe port warranties - demise and time charters
  • Time charter - non payment of hire - no breach of condition
  • Refund guarantees - whether enforceable when seller fraudulent
  • Time charter - repudiation - guarantee
  • GAFTA prohibition clause - export licences
  • Meaning of "in-transit loss" in charterparty - whether applicable to seizure by pirates
  • Cargo claim - ownership of cargo and loss suffered
  • COA - repudiation and breach of jurisdiction clause - damages
  • Bill of lading - exclusive jurisdiction - anti-suit injunction

 

Demurrage time bar – BPVOY4 – "all supporting documentation" 

The vessel MT ADVENTURE was chartered by its owners, Kassiopi to FAL on the BPVOY4 form. The relevant clauses of that form were as follows:

19.7.3 No claim in respect of additional time shall be considered unless accompanied by "copies of all other documentation maintained by those on board the Vessel or by the Terminal in connection with the cargo operations".

20.1 Owners are required to provide "all supporting documentation", failing which the claim was time-barred.

On 5 August 2011 owners submitted a demurrage claim by email which attached certain documents. In the subsequent arbitration it was held that owners had not submitted "all supporting documentation" as required by clause 20, and the claim was time-barred. Owners appealed.

Held (Hamblen J):

The appeal was dismissed: the claim was time-barred.

  1. Clause 19.7.3 did not require owners to provide with their demurrage claim copies of all documents which they would be required to disclose in arbitration.
  2. The wording “maintained by those on board the Vessel” and “in connection with cargo operations” connotes contemporaneous records kept by the vessel relating to the cargo operation. The pumping log was the most obvious example of such a document but some vessels may keep similar but different records. Owners submitted that this wording meant documentation involving regular updates as compared to ‘one-off’ documentation. The judge accepted that distinction "as general guidance rather than as a definition".
  3. "All supporting documentation" is not limited to essential information only. It meant documents which objectively the charterers would or could have appreciated substantiated each and every part of the claim and which meant that they were thereby put in possession of the factual material which they required in order to satisfy themselves that the claim was well-founded.
  4. The documents provided should have included (but did not) the port log and a timesheet. It did not matter that all the relevant information in these documents was in the Statement of Facts.An email from the master on which he had written in manuscript that free pratique had been granted was probably also "supporting documentation" in this case, although in most cases such secondary documentation would not be required.
  5. As all supporting documentation had not been provided, the claim was time-barred.
  6. Although unnecessary for his decision, the judge said that he preferred the decision inThe Eternityover that inThe Sabrewingas to the effect of providing documentation supporting only part of a claim. The general position was that if the required documentation relating to one part of the claim was incomplete the owner was not barred from recovery of another part of the claim, where the two parts were unrelated.

(Kassiopi Maritime v Fal Shipping[ 2015 ] EWHC 318 (Comm))

Challenging jurisdiction – exclusive jurisdiction clause

CH Offshore Ltd brought claims in England for unpaid hire against PDV Marina SA and Astilleros de Venezuela CA ("Astivenca") under charterparties in respect of the vessels “AMETHYST” and “TURQUOISE”.  Astivenca and PDVSA Petroleo SA ("PPSA") were parties to a Services Agreement under which the AMETHYST and TURQUOISE were employed, along with other vessels.  Astivenca sought to join PPSA to the English proceedings, claiming unpaid service charges and an indemnity for the claim from CH Offshore.

PPSA challenged the jurisdiction of the English court on the basis that there was an exclusive jurisdiction clause in the Services Agreement in favour of Venezuela and that they were not a necessary and proper party to the claim.

Held (Carr J):

The challenge to the English court’s jurisdiction was allowed and service of the claim form out of the jurisdiction was set aside.

1 PPSA was not a necessary party to the main action, as demonstrated by the fact that the claim had proceeded almost to trial in the absence of PPSA.
2 PPSA was not a proper party to the main action. The Services Agreement had an overwhelming Venezuelan flavour (both parties, place of signing, place of performance, Venezuelan law) and the charterparties and Services Agreement were not back to back. Although PDV Marina and PPSA were sister companies, they were separate entities in law. The only common issue was the extent of any liability from Astivenca to CH Offshore and it was unrealistic to suggest that PPSA would challenge that finding. There was therefore no real chance of inconsistent findings on a significant and material issue.
3 Further, there was a valid and operable exclusive jurisdiction clause in favour of Venezuela, which provided an additional reason why PPSA was not a proper party.
4 Even if wrong that PPSA was not a necessary and proper party, England and Wales was not the proper place in which to bring the claim against PPSA:
4.1 Where there was an exclusive jurisdiction clause, the English court would exercise its discretion to secure compliance with the contractual bargain, unless there were very strong reasons for suing in a non-contractual forum. Strong reasons did not include factors of convenience which were foreseeable at the time the contract was entered into.
4.2 The evidence put forward that Astivenca would not get a fair trial in Venezuela came nowhere near establishing the proposition to the necessary standard.
4.3 Even if PPSA was joined, there were likely to be separate trials anyway given that the main action was listed for trial in April.
4.4 There were no strong reasons to override the exclusive jurisdiction clause.
5 Even if there was a non-exclusive jurisdiction clause only, there was no clear balance of justice and fairness in favour of bringing the claim in England. All the facts pointed to Venezuela; it was appropriate for the dispute to be litigated in Venezuela.

(Stephenson Harwood acted for the successful Third Party)

(CH Offshore Ltd v (1) PDV Marina SA (2) Astilleros de Venezuela CA (Third Party) PDVSA Petroleo SA [ 2015 ] EWHC 595 (Comm))


Container demurrage - whether a penalty

MSC carried 35 containers of raw cotton under bills of lading for the shipper, Cottonex.  The containers were provided by MSC.  Cottonex sold the cotton to Regent Spinning Mills, the consignee.  Shortly afterwards the price of cotton crashed. The consignee never collected the goods and made it clear that it did not intend to take delivery of the goods.  As at the date of judgment in February 2015, the goods remained at the discharge port, Chittagong, inside the containers.

The shipper took the view that it had no power to take delivery of the goods, as title had passed to the consignee under the sale contract. The local customs authorities refused to allow anyone to remove the containers from the yard without a court order.

MSC claimed over $1m (10 times the agreed value of the containers) in container demurrage for the period from June 2011 to February 2015 under bill of lading terms which provided:

"The Carrier allows a period of free time for the use of the containers… at the Ports of Loading and Discharge…The Merchant is required and has the responsibility to return …the Container…before or at the end of the free time.. Demurrage…will be levied and payable by the Merchant thereafter…

The Merchant shall be liable to indemnify the Carrier for any and all costs incurred reinstating or replacing Containers."

Held (Leggatt J):

The carrier was entitled to demurrage up until 27 September 2011 (3 months).

1 The carrier's obligation to nominate a place for redelivery arose only when the merchant was ready and willing to return the containers. The nomination was not a condition precedent to the obligation to return the containers.
2 The bill of lading terms could be much better drafted. However, on their proper construction, the merchant's obligation on discharge was to take delivery of the containers, unpack the goods and return the containers, all within the free time allowed, with demurrage payable on breach.
3 In relation to mitigation, the principles of mitigation did not apply to a liquidated damages clause such as the present one. Also, it was not the case that the mitigation principle applied to the period of loss, but not to the rate of the loss.
4 Had mitigation principles applied:
4.1 It would normally be reasonable to expect the carrier to exercise its contractual rights to unpack the containers, in order to recover them. However, the customs authorities refused to allow that.
4.2 Shippers had failed to show that the carrier should have brought proceedings in the Bangladeshi courts to secure the containers' release.
4.3 It was reasonable to expect that if the containers were needed, the carrier would have purchased additional containers in order to mitigate its loss.
5 From 27 September, it was clear that the shipper had repudiated the contract, as it was impossible for it to procure collection of the goods, and the delay in collecting the goods had frustrated the commercial purpose of the venture. The carrier had not accepted the repudiation, but had kept the contract in force.
6 The carrier had a legitimate interest in keeping the contract alive while there was a realistic prospect that the shipper would perform its remaining obligations. Once it was clear (after 27 September 2011) that there was no prospect of the shipper performing its obligations, the carrier had no legitimate interest in keeping the contract in force.
7 A contractual option or discretion must be exercised in good faith, not arbitrarily, capriciously or unreasonably, in the same way as the exercise of an option. It would be proper for the carrier to keep the contract in force after repudiation in order to claim demurrage provided there was some basis for supposing that the carrier's inability to use the containers was causing it ongoing financial loss. There was no such basis, so in the circumstances keeping the contracts alive was "wholly unreasonable".
8 If the carrier's right to keep the contract alive had been unfettered, the demurrage provision would have been unenforceable as a penalty, because it allowed demurrage to be recovered indefinitely even when no reasonable carrier would be suffering a loss.
9 Leggatt J. commented that container demurrage is a relatively new phenomenon and that no case was cited which involved a claim for container demurrage. However, the substantial body of case law under voyage charters for “demurrage” paid to the owner for charterers’ failure to load or discharge cargo when agreed was applicable.

(MSC Mediterranean Shipping Company SA  v Cottonex Anstalt [ 2015 ] EWHC 283 (Comm))

Time charter - identity of contract party 

In April 2012 Navig8, as charterers, entered into time charters of four Aframax vessels for one year, with the option to extend.  The charterparties were fixed between Navig8, its brokers Poten, and the fifth defendant, Star Maritime Management Co Pte Ltd ("SMMC"). SMMC contracted as “Disponent Owners Signatory in Contract”. The registered owners did not participate in the negotiation but Navig8 believed SMMC had authority to contract on behalf of the registered owners of the vessels.

In October and December 2012 the vessels were withdrawn from service.  Navig8 claimed damages from the registered owners of the vessels (the first to fourth defendants) on the basis that, by their withdrawal, they were in breach of the charterparties.

Held (Teare J):

Navig8 was entitled to damages from SMMC, not the registered owners.

1 Identifying the parties to a charterparty was a question of fact. The facts to be considered included the terms of the contract and other background evidence. The exercise was an objective one: the subjective intentions of one or other of the parties were not relevant unless communicated to the other party.
2 Usually, the phrase “disponent owner” referred to a person who was himself a charterer of the vessel (i.e. not the registered owner). Applying this interpretation to the facts of the case, the “disponent owner” of the vessels would have been a third party called Sparkle and Shining who, at the time charters were negotiated, had the vessels on bareboat charter. The court, however, had heard evidence that none of Navig8, Navig8’s broker, or SMMC intended the charters to be binding on Sparkle and Shining. Accordingly, the Court concluded that this case is another example of “the phrase disponent owner being used in that, admittedly rare and unusual, sense…” of “being the manager of the vessel”, i.e. SMMC.
3 On the evidence available, registered owners gave no authority to SMMC as claimed. They were not party to the charterparties. Navig8's claim for damages against the first four defendants therefore failed.
4 The relevant contracting party was SMMC, purportedly on behalf of registered owners, however SMMC did not have the requisite authority to contract for the registered owners. SMMC was therefore liable to Navig8 in damages for breach of an implied warranty of authority.

 

(Navig8 Inc v (1) South Vigour Shipping Inc., 3 others and (5) Star Maritime Management Co PTE Ltd [ 2015 ] EWHC 32 (Comm))


Direct action against insurers - pay to be paid rule

Charterers time chartered a container ship and employed it on a liner service between Turkey and North Africa.  The vessel grounded off Mykonos and became a total loss.  Cargo claimants brought claims under the bills of lading, which provided for Turkish law and which had been issued by charterers.  Both owners and charterers were Turkish companies.

Charterers started arbitration proceedings against owners in London under the charterparty.  They also started proceedings against owners' P&I Club in Turkey, under Article 1478 of the Turkish Insurance Contract Law of 2012, which permitted third parties to sue insurers directly in order to recover under the insurance contract between the insurer and the assured.  The Turkish proceedings were a clear attempt to circumvent the 'pay to be paid' rule contained in P&I Club rules, whereby a member can only be reimbursed for claims it has actually paid.

The P&I Club obtained an anti-suit injunction in July 2014 restraining charterers from continuing the Turkish proceedings.  They then applied for the injunction to be continued.

Held (Teare J):

The Club's application was allowed.

1 The anti-suit injunction should be continued.
2 As a matter of characterisation under English law, the right of direct action under Turkish law was a right to enforce the contract between the Club and its member, not an independent right of recovery. This was because the statute, as a matter of interpretation, referred back to the contract of insurance contained within the Club's terms for details such as the insured perils, limits, contract period and time bar.
3 The proceedings in Turkey were not in breach of the arbitration clause in the Club rules in accordance with the principle in the Angelic Grace (1995), because that principle did not apply to cases involving direct rights of action.
4

The intended Turkish proceedings were vexatious and oppressive, because the effect would be to deprive the Club of its right to have claims brought against it in arbitration in London and because there was a real risk that the Club would not be able to rely in the Turkish proceedings on the 'pay to be paid' clause in the Club rules. It was therefore appropriate to issue an anti-suit injunction to avoid such vexation and oppression.

(Shipowners' Mutual Protection and Indemnity Association (Luxembourg) v Containerships Denizcilik Nakliyat ve Ticaret [ 2015 ] EWHC 258 (Comm))


Safe port warranties - demise and time charters

Owners let the Ocean Victory, a Capesize bulk carrier, on an amended Barecon 89 to demise charterers, who had in turn let the vessel on a series of largely back-to-back time charters.  There was a safe port warranty contained within each charterparty.

The vessel was ordered by charterers (at the bottom of the charterparty chain) to discharge at Kashima, Japan.  Before discharge was completed, swell caused by "long waves" endangered the vessel's mooring.  When the master decided to leave the port, the vessel was subject to winds of up to Beaufort Scale 9 while exiting the port along the Kashima Fairway.  The vessel had limited room to manoeuvre in the Fairway, foundered on the breakwater and eventually broke up and became a total loss.

It was found that the vessel had been subject to a rare combination of events: (a) swell generated from the "long waves" (a phenomenon affecting ports around the Pacific rim) and (b) very severe northerly gale force winds.  The difficulty faced by the vessel was that the swell made it potentially unsafe for the vessel to remain at berth, whereas the gale force winds made the Kashima Fairway (the only way in or out of the port) unsafe to navigate safely.

The port itself is a modern port.  It is one of the largest in Japan and has an impeccable safety record.  While it is sometimes exposed to swell from "long waves" and while severe northerly winds could affect the navigability of the Fairway, this was the only time such an incident had occurred in the port's 40 year history.

Claims were brought by hull underwriters as assignees of owners' and demise charterers' claims in the total sum of USD138m, made up of the market value of the vessel, salvage costs, wreck removal and loss of earnings.  The claims were brought on the basis that charterers had ordered the vessel to an unsafe port, in breach of the safe port obligations contained in the charterparty.

At first instance, Teare J held that the port was unsafe because the events which caused the loss were foreseeable.  Charterers were held to be liable for USD138million and appealed.

Held (Longmore, Gloster and Underhill LJJ):

Charterers' appeal was allowed.

1 The port was safe.
2 The test for a safe port was set down in The Eastern City (1959):"… a port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship."A danger posed by “some abnormal occurrence” would not, of itself, render the port unsafe.
3 The question which the first instance judge failed to address was whether the event(s) which occurred were an “abnormal occurrence” or whether it was a normal characteristic of the port? The combination of wind and waves which occurred was an "abnormal occurrence".
4 Mere foreseeability was per se clearly not sufficient to turn a rare event in the history of the port into a normal characteristic or attribute of the port. The Court went on to state that one has to look at the reality of the particular situation in the context of all the evidence, to work out whether the particular event was likely to have become an attribute of the port, otherwise the consequences of a mere foreseeability test might lead to impractical results.
5 The judge should have considered the evidence relating to the past frequency of such an event occurring and the likelihood of it happening again and, he should have taken into account evidence regarding the exceptional nature of the storm in terms of its rapid development, its duration and its severity.
6 The Court of Appeal also dealt with the question of whether demise charterers would actually have suffered any loss, in the event that charterers had been in breach of the safe port warranty. It was suggested that they would not have because clause 12 of the amended Barecon 89 provided for demise charterers to take out marine and war risks insurance (as well as P&I), in the joint names of owners and demise charterers.
7 It was held that the parties had intended there to be an insurance funded result in the event of loss or damage caused by marine risks, without any rights of subrogation. The provision for insurance in joint names and benefit was a complete code for what was to happen in such an event. This meant that had demise charterers been in breach of the safe port warranty, they were not liable to owners, as owners had agreed to look to the insurance proceeds for compensation. As a result, demise charterers would not have had any loss to pass down.

(Gard Marine & Energy Ltd v China National Chartering Co Ltd: China National Chartering Co Ltd v Daiichii Chuo Kisen Kaisha [ 2015 ] EWCA Civ 16)

Time charter – non payment of hire – no breach of condition

Spar was registered owner of three supramax bulk carriers.  The vessels were let to Grand China Shipping (Hong Kong) Co Ltd ("GCS") on a long term time charter on amended NYPE 1993 forms. Clause 11 of the charterparties provided that:

"(a) Failing the punctual and regular payment of the hire, or on any fundamental breach whatsoever of this Charter Party, the Owners shall be at liberty to withdraw the Vessel from the service of the Charterers without prejudice to any claims they (the Owners) may otherwise have on the Charterers"

"(b) Where there is a failure to make punctual and regular payment of hire due to oversight, negligence, errors or omissions on the part of the Charterers or their bankers, the Charterers shall be given by the Owners 3 clear banking days … written notice to rectify the failure …"

Pursuant to the charterparties the defendant ("GCL"), which was the parent of GCS, issued three letters of guarantee on 25 March 2010.  From April 2011 GCS was in arrears in payment of hire and on 16 September 2011 Spar called on GCL for payment under the guarantees. On 23 and 30 September 2011 the three vessels were withdrawn and the charterparty terminated.

Spar commenced arbitration proceedings against GCS claiming the balance of hire outstanding and damages for loss of bargain of the unexpired term of the charters. GCS went into liquidation in Hong Kong and the arbitration proceedings were stayed.  Spar brought claims under the guarantees against GCL.

In addition to defences based on the validity and enforceability of the guarantees (which are not considered in this note), GCL argued that the right of withdrawal was a contractual option under the charters but there had been no breach of the charters giving rise to a right to damages at common law for repudiation or renunciation.

Held (Popplewell J):

Spar's claim was successful.

1 The withdrawal clause did not make payment of hire a condition. It was a question of construction of clause 11, which sought to identify, as the consequence of the triggering event, a remedy in the form of a liberty to withdraw the vessel from service.
2 The starting point was that a contractual termination clause should be treated as an option to cancel which does not confer greater rights to damages at common law than would exist apart from the clause, unless there is clear language to that effect. There was no such clear language in clause 11 or elsewhere in these charters. On the contrary, clause 11 addressed itself solely towards future performance and was neutral as to the common law rights of the parties apart from the clause.
3 A clause which merely provided a contractual remedy for default was not naturally to be interpreted as determining what remedies were available if the contractual remedy was not relied on. Further, if it had been intended to introduce a provision to make clear that payment of hire was a condition, one would expect it to have been framed by reference to the term requiring payment, stating that it was a condition or that time of payment was of the essence.
4 Payment of hire would not be a condition in the absence of clause 11. The inclusion of the express withdrawal right suggested that in its absence there would be no such right. There is a presumption in mercantile contracts that stipulations as to the time of payment are not to be treated as conditions absent contrary indication. Breaches of the term may range from the trivial to the serious. The general approach should be that where predicated breaches of a term may have consequences ranging from the trivial to the serious, that is a strong indication that it is to be treated as an innominate term.
5

Popplewell J declined to follow the reasoning of Flaux J in The Astra [ 2013 ] 2 Lloyd's Rep 69).

(Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [ 2015 ] EWHC 718 (Comm))

 

Refund guarantees - whether enforceable when seller fraudulent

The seller entered into two shipbuilding contracts with the buyers.  Pursuant to the contracts, the seller was obliged to repay advance instalments of the purchase price if the contracts were cancelled.  Bank of China provided refund guarantees to the buyers to secure the seller's obligation to refund.

The ships were not delivered on time. The buyers claimed repayment of sums paid and obtained a London arbitral award against the seller.  They then claimed from the guarantors under the refund guarantees.  The guarantors defended the claims under the guarantees on the basis of orders of the Chinese court which found that the seller had acted fraudulently in relation to the shipbuilding contracts (they had agreed to use defective second-hand engines, instead of new ones) and prohibited the guarantors from making payment under the guarantees.

The buyers sued the guarantors for non-payment.

Held (Carr J):

The buyers' claim was successful.

1 The guarantees were, on their true construction, performance bonds. They created an independent obligation on the guarantors to pay, irrespective of any disputes on the underlying contracts.
2 The judge rejected an argument that the demand under the guarantees had not been validly made.
3 The guarantors argued that the guarantees were discharged by the fraud findings and/or by reason of departure from the contract terms. The judge held that since the guarantees were performance bonds, the usual guarantor's equities did not apply. (Even if they had been true guarantees, their wording excluded discharge for fraud.) The buyers were not seeking to exclude liability for fraud; rather it was seeking to prevent the guarantor from relying on that liability to defend the claim under the guarantees.
4 Therefore the guarantors were liable under the guarantees. The guarantees were intended to protect the buyer's cashflow and English law regards illegality in the place of domicile of the performing party as irrelevant. Further, the guarantors were not at real risk of criminal prosecution in China.

(Spliethoff's Bevrachtingskantoor BV v Bank of China Ltd [ 2015 ] EWHC 999 (Comm))

 

Time charter – repudiation – guarantee

Mitsui, as owners, entered into a long term charter of a bulk carrier with the charterer, Trustworth Shipping Pte Ltd.  The charterparty was guaranteed by the defendant, Salgaocar.

Trustworth terminated the charterparty, alleging that the vessel was unsuitable for alternate loading of iron ore.  Mitsui alleged that Trustworth repudiated the charterparty and Mitsui accepted that wrongful repudiation in January 2013.  Mitsui claimed damages of approx. USD14 million for wrongful repudiation from that date and sought this sum from the guarantor.

Issues arose as to whether Salgaocar had guaranteed the charterparty as negotiations had been conducted through brokers and no copy of the guarantee was produced which was signed by Salgaocar.

Held (Eder J):

Salgaocar was liable under the guarantee.

1 Salgaocar had agreed with Mitsui to guarantee the performance of Trustworth’s obligations under the charterparty. The contemporaneous documentary evidence indicated that the brokers had authority to act on behalf of Salgaocar.
2 The guarantee did satisfy the Statute of Frauds 1677. The requirement that a guarantee be in writing was satisfied even if it was not a single document but several documents taken as a whole. The emails passing between the parties fulfilled this requirement. Although it was not possible to produce a copy of the signed guarantee, the judge came to the conclusion that on the balance of probability, the written guarantee must have been signed and this proof was sufficient.
3 Plainly Trustworth repudiated the charterparty. Mitsui did not warrant that the vessel was capable of loading iron ore in alternate holds so it was not a breach of contract that the vessel was incapable of doing this. The obligation to pay under the guarantee arose immediately on breach by Trustworth and therefore Salgaocar was in breach in not having paid under the guarantee.
4 The quantum of the claim was calculated by reference to the market rate for an equivalent charter of the vessel for the remainder of the charterparty. Credit should be given for periods of off-hire, overpaid hire and bunkers on redelivery.

(Mitsui OSK Lines Ltd v Salgaocar Mining Private Ltd [ 2015 ] EWHC 565 (Comm))

 

GAFTA prohibition clause – export licences

Public Company Rise were sellers of Ukrainian feed corn under three contracts on CPT terms.  Nibulon were the buyers.  Pursuant to the contracts, the seller was obliged to obtain any export licenses required (clause 11.3).  The contracts also contained the GAFTA78 prohibition clause which permitted cancellation of the contract in case of prohibition of export (clause 17).

The Ukrainian Government introduced grain export quota restrictions in October 2010 because of a poor harvest.  Despite their best endeavours, the sellers were not granted the relevant export licenses and purported to cancel the contracts pursuant to the prohibition clause.  The buyers treated this as repudiation and held the sellers in default.  The GAFTA appeal board found in favour of the buyers and awarded them damages of USD17 million. Sellers appealed.  

Held (Hamblen J):

1 Did clause 11.3 override clause 17?
The starting point was that clauses in a contract must be read together where possible and there was no inconsistency unless that could not sensibly be done.

Clause 17 operated as a qualification to clause 11.3 but was not overridden by it.The obligation in clause 11.3 was absolute, meaning that 'best endeavours' was not sufficient.However, this did not mean that the obligation could not be qualified by other terms of the contract.So the obligation to obtain export licences was subject to clause 17 which could be invoked by the seller in the event of a contingency such as a prohibition.
2 Did clause 17 only relieve the sellers of the obligation to obtain export licences where the prohibition amounted to a total ban?
The wording of the clause indicated that it applied to total and partial restrictions of export.Accordingly clause 17 did not only relieve sellers of the obligation to obtain export licenses in circumstances where there was a prohibition amounting to a total ban.
3 Were the sellers not able to rely upon clause 17 where they were only restricted from making shipments, not prevented?
The sellers had to prove the existence of a qualifying event restricting (not preventing) export and that the qualifying event caused the relevant inability to perform. It was not sufficient to prove that there were acts restricting export generally.

The board of appeal did not specifically address the critical causation question and there was insufficient information in the Award for the court to reach a conclusion. The Award was therefore remitted to the GAFTA board of appeal.

    
(Public Company Rise v Nibulon SA [ 2015 ] EWHC 684 (Comm))

 

Meaning of "in-transit loss" in charterparty – whether applicable to seizure by pirates

A voyage charterparty incorporated the Trafigura terms, which included an in-transit loss clause. This provided that owners "will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.5% … In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port." The charterparty also provided (in clause 46) that owners' responsibility was subject to the Hague-Visby Rules exceptions "in respect of any claim made" under the charterparty.

The vessel was seized by pirates, who discharged part of the cargo into a lightering vessel. The issues were whether this fell within "in-transit loss", and whether owners could rely on the Hague-Visby exceptions.  At first instance Andrew Smith J held that the loss did not fall within in-transit loss.  Charterers appealed. 

Held (Longmore, Ryder and Briggs LJJ):

Charterers' appeal was dismissed.

1 The words used in the Trafigura terms connoted loss "incidental to the carriage of the cargo", namely loss which is of the kind encountered on a normal voyage, not loss caused by piracy. This was in line with the commercial reason for the introduction of the clause: because it was notoriously difficult to determine oil shortage claims.
2 Even if the clause did cover piracy, the application of the Hague-Visby Rules would mean that loss by piracy was excluded.

    
(Trafigura Beheer BV v Navigazione Montanari SpA [ 2015 ] EWCA Civ 91)

 

Cargo claim – ownership of cargo and loss suffered

A cargo of swordfish was carried by Maersk from Indonesia to Spain in late 2012. On arrival in Spain it was rejected by the port health authority as being unfit for human consumption and sold for salvage by the receivers of the cargo, the first claimant, CSS. The cargo receivers sought to recover their losses. They claimed the difference between the market and salvage value of the cargo plus handling fees.

The original shipper of the cargo brought a claim against Maersk for cargo damage which was settled by an agreement in which it was stated that the original shipper was acting "as or on behalf of the Shipper and/or Receiver and/or subrogated Cargo Underwriter and/or any other parties interested in the cargo" in full and final settlement. The claimants disputed this and claimed that they suffered the loss.

The preliminary issues which came before the court concerned whether the claimants owned the cargo and whether they had suffered loss. It was common ground that CSS paid for the cargo, was at all relevant times the lawful holder of the bill of lading and was entitled to possession of the cargo. 

Held (Eder J):

1 CSS was at all relevant times owner of the cargo. Although there were issues with title passing further up the line, pursuant to section 25(1) of the Sale of Goods Act 1979, CSS obtained good title as a result of being a bona fide purchaser for value without notice. CSS were therefore properly to be regarded as owners of the goods for the purposes of these proceedings.
2 The claimants had suffered loss as a result of the damage to the cargo. The cargo was damaged by Maersk's breach. Although the seller of the cargo to CSS failed to reimburse CSS when the sale was cancelled, those actions did not break the chain of causation. The loss crystallised when the cargo arrived damaged and actions taken after that could not be an intervening cause. An effective cause of the claimant's loss was Maersk's breach.

 
((1)Carlos Soto Sau(2) AXA Securo Generales SA de Seguros y Reaseguros v AP Moller-Maersk AS [ 2015 ] EWHC 458(Comm))

 

COA – repudiation and breach of jurisdiction clause - damages

Swissmarine allegedly entered into a COA as owner with Gupta as charterer, for six shipments of coal. The alleged contract contained an exclusive English jurisdiction clause. Swissmarine claimed that Gupta was in repudiatory breach of the contract and sought damages.

Gupta denied the contract existed and brought proceedings in India. There were a number of interlocutory proceedings for anti-suit injunctions. Eventually the Indian court dismissed the Indian proceedings on the basis of lack of jurisdiction. Swissmarine amended its claim to include breach of the jurisdiction clause. The defendant did not attend the hearing. 

Held (Judge Mackie QC):

Gupta was liable to Swissmarine.

1 Based on the evidence, there was a contract of affreightment and Gupta were in breach.
2 Swissmarine was entitled to its damages calculated on the basis of profit which would have been made had the contract been performed, less any profit which would have been made on replacement shipments at market rate. Where extra time had been permitted for performance, the market rates were assessed at a point in time when performance could last have been made in accordance with the extended timeframe.
3 Swissmarine's argument that there was no available alternative market at that time was accepted and damages calculated accordingly.
4 Gupta was in breach of the jurisdiction clause and Swissmarine was able to recover its costs of the Indian proceedings and those incurred in relation to anti-suit proceedings in the English courts, as damages.

 
(Swissmarine Services SA v Gupta Coal India Private Ltd [ 2015 ] EWHC 265 (Comm))

 

Bill of lading – exclusive jurisdiction – anti-suit injunction

Hin-Pro was a freight forwarder and CSAV an international shipping corporation. They were involved in disputes in relation to cargo carried from China to Venezuela. The claim from Hin-Pro was that cargo had been released without production of the original bills of lading. The bills of lading contained the following clause:

"This Bill of Lading and any claim or dispute arising hereunder shall be subject to English law and the jurisdiction of the English High Court of Justice in London. If, notwithstanding the foregoing, any proceedings are commenced in another jurisdiction, such proceeding shall be referred to ordinary courts of law. In the case of Chile, arbitrators shall not be competent to deal with any such dispute and proceedings shall be referred to the Chilean Ordinary Courts."

The main issue for decision was whether the above clause was an exclusive jurisdiction clause. First the court had to also decide whether to allow Hin-Pro to appear, even though it was in contempt of court in relation to various previous orders. The first instance judge found that the clause was an exclusive jurisdiction clause. Hin-Pro appealed.

Held (Elias, Beatson and Christopher Clarke LLJ):

Hin-Pro's appeal was dismissed.

1 Hin-Pro had been in continuous breach of orders of the court and deliberately failed to comply with the conditions specified. However, the hearing was in relation to a clause which was the foundation of all the orders which Hin-Pro had disobeyed and raised matters of general importance. Therefore it was appropriate to allow Hin-Pro to appear and was consistent with previous case law which held that the court could hear a person in contempt when the purpose of his application was to appeal against the order disobedience of which put him in contempt.
2 The bills of lading were to be interpreted in light of the facts which were known to the original parties to it or which were reasonably available to them at the time. This included the English language. In agreeing to an English law contract, the parties must be taken to have agreed that it would be interpreted with all the nuances of the English language.
3 The bill of lading provided for exclusive English jurisdiction for the following reasons:
3.1 The words "shall be subject to" were imperative and directory.
3.2 Where there were a number of possible jurisdictions involved in a dispute, there was limited benefit in specifying England as an optional jurisdiction without any obligation on either party to litigate here. However, it would make good commercial sense to agree that disputes should be determined in England and not anywhere else.
3.3 The English court was the best forum for the application of English law.
3.4 The phrase "If notwithstanding the foregoing" recognised that England was the exclusive jurisdiction. This proviso would be unnecessary if England was only an option.
3.5 The second and third sentences recognised the situation where the first sentence was ineffective perhaps because the country in which proceedings were commenced did not recognise exclusive jurisdiction clauses.

 
(Stephenson Harwood acted for CSAV.)
 
(Hin-Pro International Logistics Ltd v Compania Sud Americana de Vapores SA [ 2015 ] EWCA Civ 401)

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