Altera Voyageur Production Ltd v Premier Oil E&P UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Salter |
| Judgment Date | 17 July 2020 |
| Neutral Citation | [2020] EWHC 1891 (Comm) |
| Docket Number | Claim No CL-2019-000658 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 July 2020 |
[2020] EWHC 1891 (Comm)
Mr Richard Salter QC
Sitting as a Deputy Judge of the High Court
Claim No CL-2019-000658
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice. Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Sean O'Sullivan QC (instructed by Stephenson Harwood LLP) appeared for the Claimant
Mr Simon Colton QC (instructed by CMS Cameron McKenna Nabarro Olswang LLP) appeared for the Defendant
Hearing date: 8 July 2020
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.
Mr Salter QC:
Introduction
In this action, the claimant (“ Altera”) 1 claims the sum of USD 12,108,072.50 plus contractual interest by way of adjusted hire for the floating production, storage and offloading vessel Voyageur Spirit (“the Vessel”). That sum is said to be due under the terms of a Sub-Bareboat Charter Party dated 9 November 2010 (“ the Charterparty”). The defendant (“ Premier”) disputes that claim and counterclaims for the sum of USD 3,837,580.91 by way of hire that it says that it has overpaid.
The dispute between the parties has resolved itself into a pure question of construction. The parties have agreed that there is no need for any disclosure or witness evidence and have agreed the financial consequences of their rival interpretations of the relevant terms. The sole question for the court to decide at this, the trial of the action, is the correct interpretation of the Hire Adjustment Formula in Section 5 of Appendix M.
That formula consists of a narrative and two worked examples. Those worked examples contain two steps which are not set out expressly in the preceding narrative. In summary, Altera contends that the formula should be applied precisely in the way set out in the worked examples. Premier says that Altera's interpretation produces a result which is inconsistent, not only with the preceding narrative, but also with the other terms of the Charterparty and with commercial common sense. Premier says that the narrative ought therefore to be preferred to the worked examples, as giving effect to what a reasonable person would say was the intention of the parties as conveyed by the words which they have used in the Charterparty, taken as a whole.
Background
The following summary of the factual background is taken from the Skeleton Arguments submitted by the parties.
Premier is an oil exploration company, which at the material time was engaged in developing and producing the Huntington Field oil reserves in the North Sea. For that purpose, Premier bareboat chartered the Vessel from Altera. Altera was the operator of the Vessel, under a charter from the Vessel's owner, Altera's parent company.
The parties entered into the Charterparty on 9 November 2010. On the same date, they entered into a separate “Service Agreement”, under which Altera agreed to operate the Vessel, but on the basis that it “will subcontract a significant part of the Services to a third-party manager”. Among other things, the Service Agreement required Altera to agree planned maintenance schedules with Premier and to obtain approval for the operating budget. The compensation for this was fixed but included an incentivisation bonus, the details of which I shall describe later in this judgment.
The parties also entered into an “Over-Arching Agreement” for the Charterparty and the Service Agreement. The Over-Arching Agreement recited that Altera was going to perform upgrade work (as specified by Premier) to the Vessel. It also identified the scope of the work, both for the upgrade and during operation. There was also a detailed functional specification and Altera's “Execution Plan”. Otherwise, the Over-Arching Agreement was mainly concerned with the conditions precedent to the validity of the various agreements, and the warranties and undertakings to be given to each party by the other.
Importantly for present purposes, the Over-Arching Agreement had 11 Appendices. In Article 1.2.1 of the Charterparty, these Appendices were stated to “have effect for the purposes of” the Charterparty. These included “Appendix B – Compensation” and “Appendix M – Availability and Hire Adjustments”. Appendix D and Appendix H were stated in the Over-Arching Agreement to be “not used”. Article 1.2.2 of the Charterparty stated:
1.2.2 Unless otherwise expressly provided, in the event of any conflict between:
(a) the Charter Documents, the order of precedence shall be the Over-arching Agreement, this [Charterparty], the Service Agreement;
(b) an Appendix and the main body of the Charter Documents, the latter shall prevail;
and
(c) the Appendices, the order of precedence shall be B, M, A, I, C, L, F, G, J, K.
The Charterparty envisaged that, following completion of the upgrade work, the Vessel would be accepted by Premier and the “ Secondary Charter Period” (defined in Article 3.2) would begin. The Secondary Charter Period commenced on 13 April 2013. After an initial dispute, the Daily Base Hire (without adjustment) was paid from 22 February 2014. The Charterparty came to an end (and was replaced with a different agreement) on 13 April 2018.
The provisions of the Charterparty relating to hire
Article 27 of the Charterparty is headed “Compensation” 2. Article 27.1.1 (under the heading “Daily Base Hire”) provides that:
During the Secondary Charter Period [Premier] shall pay [Altera], as compensation for the charter of the [Vessel] in accordance with the terms and conditions of this [Charterparty], the Daily Base Hire in accordance with Appendix B. The Daily Base Hire shall be subject to adjustment during the Secondary Charter Period as provided for in this [Charterparty].
In Article 1.1 (“Definitions”), the “Daily Base Hire” is defined as:
.. the daily amount payable by [Premier] to [Altera] to charter the [Vessel] from [Altera] during the Secondary Charter Period as further described in Appendix B and as may be adjusted from time to time in accordance with Appendix M.
Section 3 of Appendix B states that:
For each day of the Secondary Charter Period [Premier] shall pay to [Altera] the applicable Daily Base Hire set out in Table 1 below.
Table 1: Daily Base Hire
Charter Year
Daily Base hire (US$)
1
215,000
2
210,000
3
205,000
4
200,000
5
195,000
The rate of Daily Base Hire for any Charter Year following the Initial Term shall be US$195,000.
Notes to Table 1:
The Daily Base Hire shall be paid in reimbursement of all costs related to the supply of the [Vessel] including design, engineering, procurement, construction, installation, commissioning and testing. The Daily Base Hire shall be payable from the commencement of the Secondary Charter Period
and is fixed except for agreed Change Orders [under Article 25] and other adjustments pursuant to the terms of the [Charterparty] and Appendix M.
The provisions of the Charterparty relating to adjustments of hire
Article 17 of the Charterparty is headed “Availability Adjustments and Off-Hire”. Article 17.1 (headed “Target Availability; Adjustments to Hire”) provides for the reduction or upward adjustment of the Daily Base Hire in the event that Altera or those for whom Altera is responsible cause a reduction or increase in the “Availability” of the Vessel. That Article states that:
If, during the Service Period, there is a loss of time or reduction in production/processing operations of the [Vessel] attributable to [Altera or its group] as provided in Appendix M, that reduces or impairs the ability of the [Vessel] or any of its Systems to receive and process Well Product, provide water injection services and/or store or discharge Export Product such that the [Vessel] or any of its Systems falls below the Target Availability, then Daily Base Hire may be reduced as provided for in Appendix M.
If there is an increase in the production/processing operations of the [Vessel] attributable to [Altera or its group] as provided in Appendix M, that increases the ability of the [Vessel] or any of its Systems to receive and process Well Product, provide water injection services and/or store or discharge Export Product such that the [Vessel] or any of its Systems increases the Target Availability, then Daily Base Hire may be adjusted as provided for in Appendix M.
“Target Availability” is defined in Article 1.1 of the Charterparty by reference to Appendix M. Section 1 of Appendix M defines “Target Availability” as meaning:
An availability factor (expressed as a percentage) for the [Vessel] and its Systems of ninety-five percent (95%). This percentage is calculated on the basis that [Altera] is entitled to full payment of Daily Base Hire provided the [Vessel] does not exceed 438 hours (equivalent to eighteen point two five (18.25) Days) of permissible shutdown time per year for planned and unplanned maintenance, as follows:
Article 17.2 (headed “Continuous Deficiency”) provides for the consequences of Altera failing continuously or regularly to achieve “Target Availability”. It states:
17.2.1 Subject to Article 17.3:
(a) if the [Vessel] or any of its Systems continuously or regularly operates below the Target Availability; or
(b) [Altera] fails to achieve any of the performance requirements and/or requirements set out in the Statement of Requirements of this Bareboat Charier (whether or not Article...
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