A v B
| Jurisdiction | England & Wales |
| Judge | Sir Ross Cranston |
| Judgment Date | 07 September 2018 |
| Neutral Citation | [2018] EWHC 2325 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: Claim No. CL-2017-000617 |
| Date | 07 September 2018 |
Sir Ross Cranston
Case No: Claim No. CL-2017-000617
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
COMMERCIAL COURT (QUEEN'S BENCH DIVISION)
IN THE MATTER OF AN ARBITRATION CLAIM
Royal Courts of Justice
Strand, London, WC2A 2LL
Vasanti Selvaratnam QC and Ravi Aswani (instructed by Bentleys, Stokes & Lowless) for the Claimants
Christopher Hancock QC & Richard Greenberg (instructed by Thomas Cooper LLP) for the Defendants
Hearing dates: 18–19 July 2018
Judgment Approved
INTRODUCTION
These are applications by the claimants, A (“the owners”), a subsidiary of G, challenging an award for serious irregularity under section 68 of the Arbitration Act 1996, and for permission to appeal the award on points of law under section 69 of that Act. In the underlying arbitration the owners were the respondents. The defendants to these applications, B (“the charterers”), had time-chartered the claimants' vessel, the GA, a VLCC, very large crude oil tanker, which they then placed in a pool by way of sub-charter with similar tankers, called the S tankers pool.
During the course of the charter the vessel was in breach of its terms. Eventually the charterers placed it off hire and claimed for losses in an arbitration by a tribunal of the London Maritime Arbitrators Association, the LMAA. Following a hearing in early December 2016, the tribunal published its Second Partial Final Arbitration Award on 9 May 2017 in favour of the charterers. The tribunal issued a memorandum of clarification on 24 August 2017. (The award, the accompanying reasons and the memorandum are referred to as “the award” in this judgment.) The owners issued their arbitration claim form in this court on 6 October 2017.
BACKGROUND
Contractual context
The relevant contracts for the purposes of these applications are threefold: first, the time charterparty between the parties to these applications, the owners and the charterers; secondly, the sub-charter between charterers and S Tankers Inc (“the S pool”); and thirdly, the contract governing the S Pool (“the S pool agreement”).
The time charterparty between the owners and charterers regarding the GA (“the vessel”) was dated 4 July 2011. It was an amended Shelltime 4 form. Clause 7 provided that the charterers should provide and pay for all fuel. Under clause 8 the charterers were to pay hire of a minimum of US$15,000 per day. It was also agreed under that clause that the vessel would be sub-chartered to the S pool and that, where the pool distribution payable by the latter, the sub-charterers, to the defendant charterers exceeded US$30,000 per day, further sums were payable to the owners. (It was common ground that the pool distributions payable would not have exceeded US$30,000 per day so that the issue of the payment of further sums to the owners did not in practice arise.) The master of the vessel was under the orders of the charterers (clause 13). Despite any sub-charter the charterers always remained responsible to the owners for the due fulfilment of the charterparty (clause 18).
Among the rider clauses, which were deemed to be part of the charterparty, was clause 50, the “oil major eligibility” clause. Oil majors for the purposes of the clause were BP, Chevron, ExxonMobil, Statoil, Shell, Total and Conoco. Under clause 50(i) the owners guaranteed that at all times during the currency of the charterparty, a valid report would be registered on the Sire system (the database of the Ship Inspection Report Programme). Clause 50(ii)(a) provided that on delivery the vessel should be eligible for the business of at least three oil majors at all time. Subsequent to delivery, the owners warranted that they would maintain the minimum level of vetting approvals as per the S pool agreement.
The second contract, the sub-charter of the GA by the charterers to the S pool, was also dated 4 July 2011. It too was an amended Shelltime 4 form. Clause 7 provided that the S pool should provide and pay for all fuel. Clause 8 stated that, subject to what was provided, the S pool should pay for the use and hire of the vessel “at the rate of (see Article X of Pool Agreement) per day…” The “Pool Agreement” referred to in that clause was the S pool agreement, examined shortly. Clause 50(i) of the rider clauses, the oil major eligibility clause, provided that no oil major should have rejected the vessel since the inspection leading to a valid Sire report registered on the Sire system, and that the Sire report must be no more than 6 months old. Clause 50(ii) provided that after delivery the charterers, B, should use best endeavours to obtain as soon as possible eligibility to all remaining oil majors, apart from the three for which the vessel had to be eligible on delivery. The S pool agreement was deemed to be an integral part of the sub-charterparty.
The third contract, the S pool agreement, was entered by the charterers, the S pool (described as the pool company) and H (described as the agent). It was dated 7 November 2011. The recitals recorded that the pool company facilitated the pool, that the agent managed its business, that the charterers desired to enter the GA into the pool, and that there was a charterparty between the charterers and the S pool. Article X stated that the vessel was to earn hire in accordance with the “Pool Point Formula” contained in Article XIII. The vetting clause, Article XIV of the agreement, provided that the charterers should at all times use best endeavours to ensure that the vessel was eligible for charter to as many oil majors as possible. The charterers should also make all necessary arrangements so that a good Sire report was no more than six months old. If the period exceeded six months, the vessel's technical rating lost points, although there was a grace period for compliance. At all times the vessel had to be eligible for charter by a minimum of four oil majors.
Background to the dispute
The background facts, as found by the tribunal, are as follows.
The GA was delivered into service to the charterers on 4 July 2011, with the sub-charter to the S pool on the same day. There were five other G tankers in the S pool at the relevant time.
While discharging at Yingkou in China on the 10 March 2012 the GA was inspected by Statoil, and a critical Sire report produced. There was no other Sire report for the vessel before it was put off hire on 26 October 2013.
On 4 May 2012 the vessel was fixed to Valero, for a cargo from the Basra oil terminal to the west coast of the United States. BP indicated that the vessel would not be acceptable for discharge at its Long Beach terminal because of the Sire report. The vessel performed the Valero fixture and discharged offshore at the Pacific Area Lightering, off San Diego, instead of BP's Long Beach terminal. On 22 July it proceeded to Cape Horn for orders, and then on 26 September to a position in the Atlantic 1981 miles off Bonny, Nigeria. Meanwhile, on 10 September 2012 its Sire report had become six months old.
On 13 September 2012 one of the other the G vessels, the GZ or substitute, was on subjects to CNOOC, the China National Offshore Oil Corporation, for a cargo at Pazfolr. The vessel was turned down by Total so the GA was proposed as a possible replacement. On 18 September the shipper, ExxonMobil, rejected the GA because of the Sire report.
In a witness statement prepared for the tribunal, the chartering manager of the S pool, Mr JH, gave further details of what occurred on this occasion. On 13 September 2012 he had fixed the GZ on subjects to CNOOC for a cargo from ExxonMobil's terminal at Pazfolr to Total's terminal at Dalia. The GZ was turned down by Total because its chief officer did not have sufficient sea time, and so he tried to line up the GA as a possible replacement. However, she was turned down about 18 September by ExxonMobil. In the end, Mr JH explained, he was able to change the chief officer of the GZ, whereupon subjects were lifted.
In his evidence, Mr JH also explained that he tried to fix the GA to the Indian Oil Corporation with laydays 21/22 October 2012 for loading at Nigeria/Angola (intention Girassol) to the East coast of India (intention Paradip). However the fixture failed, possibly because Girassol is a Total controlled terminal and the vessel, as he learnt later, was unacceptable to them.
Attempts to fix the GA following what happened in mid-September were unsuccessful. The vessel was rejected by various oil majors during September and October: Chevron on 27 September, Total on 2 October, Petrobras on 8 and 18 October, and BP on 19 October.
On 26 October 2012 the charterers notified the owners that it was putting the vessel off hire through breach of clause 50 of the charterparty. The owners resumed control of the vessel from that date. Bunkers from that date were for the owners' account. The vessel was formally redelivered to the owners on 14 January 2013.
Reference to arbitration
The charterers' claim against the owners in the arbitration was served on 7 March 2014. For present purposes the relevant issue is its claim for loss and damages as a result of breaches of the oil major eligibility clause. Had there been no breach, the charterers submitted, the vessel could most likely have been profitably fixed after her departure from the west coast of the United States from around mid-August, initially in mid-September for loading in west Africa. However losses were conservatively assessed, the charterers said, by reference to two realistic voyage calculations, the first being obtained and commencing about 26 September 2012 for loading on or about 21 October. It was for a laden leg between Dalia, Angola and...
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