Alpha Marine Corporation v Minmetals Logistics Zhejiang Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Butcher |
| Judgment Date | 05 May 2021 |
| Neutral Citation | [2021] EWHC 1157 (Comm) |
| Docket Number | Case No: CL-2020-000433 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 05 May 2021 |
[2021] EWHC 1157 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Butcher
Case No: CL-2020-000433
In the Matter of an Arbitration Claim
Charles Kimmins QC and Paul Toms (instructed by Mills & Co Solicitors Ltd) for the Claimant
Nichola Warrender QC (instructed by Ince Gordon Dadds LLP) for the Defendant
Hearing date: 21 April 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mr Justice Butcher
Introduction
The Claimant, Alpha Marine Corp (the “Owners”) were the owners of the vessel MV Smart (the “Vessel”). On 1 August 2013, the Owners chartered the Vessel to Minmetals Logistics Zhejiang Co. Ltd (the “Charterers”), for a time charter trip on an amended New York Produce Exchange form (the “Charterparty”).
On 19 August 2013, the Vessel departed the port of Richards Bay in South Africa and, shortly thereafter, ran aground in the course of passing through a channel to depart the port and broke her back.
A dispute between the Owners and the Charterers arose out of the loss of the Vessel which was submitted to arbitration in accordance with the terms of the Charterparty. After a hearing over three weeks in November 2019, the arbitral tribunal, namely Mr Simon Gault, Sir David Steel and Mr Lionel Persey QC (the “Tribunal”), issued its first partial award on 12 June 2020 (the “Award”).
The present arbitration claim is an appeal, pursuant to section 69 of the Arbitration Act 1996 (the “Act”), from the Award by the Owners, permission to appeal on a point of law having been granted by Order of Foxton J dated 13 October 2020.
Before turning to consider the question of law which arises from the Award, and the parties' respective submissions thereon, it is necessary to set out the factual background to the dispute and the relevant parts of the Award.
Background
The contractual structure
The Charterparty contained the following terms:
a. Clause 8 was in materially unamended NYPE form and provided, in relevant part, that “… The Captain (although appointed by the Owners), shall be under the orders and directions of the Charterers as regards vessel's employment and agency… [and the Captain] is to sign Bills of Lading for cargo as presented…”
b. Clause 16 provided that “should the Vessel be lost, money paid in advance and not earned (reckoning from the date of loss…) shall be returned to the Charterers at once.”
c. Clause 18 provided that “the Owners shall have a lien upon all cargoes and sub-hires and all sub-freights for any amounts due under this Charter…”
d. Clause 41 set out the quantity of bunkers which the Vessel would be provided with on delivery and required that the Vessel should be redelivered with about the same quantities of bunkers as provided on delivery. It was further provided that any minor difference in bunker quantities between delivery and redelivery “shall be settled with final hire” at a price of USD 600 per metric tonne for IFO and USD 920 per metric tonne for MGO.
e. Clause 101 provided that the Charterparty was to be governed by English law and that disputes would be resolved by arbitration in London.
The Charterers sub-chartered the Vessel to General Nice Resources (Hong Kong) Ltd (“GNR”) pursuant to a voyage charter dated 1 August 2013 (the “Voyage Charter”). The Voyage Charter was not included in the materials before the Court; however, it is common ground between the parties and evident on the face of the Award that this stipulated that:
a. the “freight [was] deemed to be earned whatever vsl/cargo lost or not”; and
b. 100% of the freight payment was to be effected by GNR on or before 45 days of the Vessel sailing from the load port and after receipt of the freight invoice.
Two bills of lading (“the Bills of Lading”) had been issued by the Owners on 19 August 2013. These provided that freight was payable “ as per charter party”. The charterparty was not identified, but it was common ground that this was a reference to the Voyage Charter. It was not in dispute that these were “owners' bills” and thus contained or evidenced a contract between the Owners and shippers.
Events after the loss of the Vessel
On 23 August 2013, the Charterers issued a freight invoice to GNR in the sum of USD 1,860,390, which represented 100% of the Voyage Charter freight on the basis of the cargo being discharged at Zhoushan. Pursuant to the payment terms contained in the Voyage Charter, GNR would have been required to make payment pursuant to the invoice on or before 3 October 2013.
On 12 September 2013, the Owners issued invoices to the cargo interests for freight due under the Bills of Lading and revoked the Charterers' authority to receive the freight and directed that it be paid into the bank account of the Owners' P&I Club instead (the “First Notice”). On or around this date, the Owners referred the dispute that had arisen between the Owners and the Charterers to arbitration.
On 23 October 2013, the Owners' solicitors advised the Charterers' solicitors that the Owners and GNR agreed in principle for the freight to be held in escrow, but the Charterers did not agree.
On 21 January 2015, the Charterers wrote to the Owners, copying GNR, requesting that they refrain from making any further demands for freight. In response, on 2 March 2015, the Owners gave notice to GNR, copying the Charterers, suggesting that they were entitled to exercise a lien over the Voyage Charter freight pursuant to the terms of the Charterparty on the basis that the Charterers were liable to them for breach of the safe port warranty in the Charterparty (the “Second Notice”).
No payments in respect of freight were made by GNR during this period. On 17 June 2015, GNR reported that the “main reason for the delay over the past two years” in its payments of freight derived from the fact that there was an ongoing dispute between the Owners and the Charterers concerning which party was entitled to receive the freight.
On 6 May 2016, the Owners, the Charterers and GNR entered into a tri-partite escrow agreement in respect of the competing freight claims. However, on 20 December 2016, GNR was wound up by an order of the High Court of the Special Administrative Region. By this time, GNR had paid a total of USD 550,000 into escrow. No further payments were made by GNR in respect of the freight and USD 50,000 of the monies held in the escrow account was subsequently paid out to the Official Receiver in November 2017. As a result, the balance in the escrow account stood at USD 500,000 (plus any interest that may have accrued thereon).
The Arbitration and the Award
In the arbitration, the Owners claimed that the loss of the Vessel was caused by the failure of the Charterers to comply with the safe port warranty in the Charterparty. The Owners advanced various heads of claim and the total quantum of their claim was in excess of USD 100 million.
The Charterers denied that they had provided a safe port warranty in respect of Richards Bay. In the alternative, the Charterers denied that the grounding was caused by any unsafety of the port, contending, instead, that it was caused by negligent navigation by those on board the Vessel. The Charterers also pursued a number of counterclaims, seeking recovery of:
a. A sum of USD 1,860,390 in respect of lost freight which the Charterers argued would have been paid by GNR if it were not for the Owners':
i. Wrongful revocation of the Charterers' authority to collect freight under the Bills of Lading by way of the First Notice. In this regard, the Charterers argued that the Charterparty contained an implied term that the Owners would not revoke their authority to collect freight unless hire and/or sums were due under the Charterparty and that no such sums were due on 12 September 2013 (the “Implied Term Basis”);
ii. Wrongful exercise of the lien contained in clause 18 of the Charterparty by way of the Second Notice. In this regard, the Charterers submitted that there was no “amount due under” the Charterparty as at 2 March 2015 and, as such, the Owners were not entitled to exercise a lien when they purported to do so (the “Lien Basis”); and/or
iii. Tortious actions, in procuring breach of contract by GNR and/or knowingly and/or unlawfully interfering with the Voyage Charter (the “Tortious Basis”).
b. A sum of USD 207,408 in respect of hire which the Charterers had paid in advance for the period after loss of the Vessel and which the Owners were required, pursuant to clause 16 of the Charterparty, to repay “at once” upon loss; and
c. Costs and expenses incurred by the Charterers in dealing with the freight claims, in an amount of GBP 227,136.40 plus USD 80,726.35 (including sums of GBP 13,924.50 and USD 21,550 which were incurred prior to the Owners' issue of the Second Notice).
In the Award, the Tribunal addressed each of the following six issues which had been submitted to it by the parties:
“(1) Does the charterparty contain a safe port warranty in respect of Richards Bay?
(2) If so, did the Charterers breach that safe port warranty?
(3) Were the Master and/or the crew negligent in their handling of the Vessel?
(4) If so, did that break the chain of causation arising from any unsafety of the Port?
(5) To what relief, if any, are the Owners entitled?
(6) To what relief, if any, are the Charterers entitled?”
In summary, on Issues 1 to 4, the Tribunal found that the Charterers had provided a safe port warranty in respect of Richards...
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