ARK Shipping Company LLC v Silverburn Shipping (IOM) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Gross,Lord Justice McCombe,Lord Justice Leggatt |
| Judgment Date | 10 July 2019 |
| Neutral Citation | [2019] EWCA Civ 1161 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A4/2019/0597 |
| Date | 10 July 2019 |
[2019] EWCA Civ 1161
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION,
COMMERCIAL COURT
MRS JUSTICE CARR
AD2018000045
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Gross
Lord Justice McCombe
and
Lord Justice Leggatt
Case No: A4/2019/0597
Simon Rainey QC and Natalie Moore (instructed by Stephenson Harwood LLP) Appellant
Alexander Wright and Ed Jones (instructed by Wikborg Rein LLP) for the for the Respondent
Hearing dates: 18 June 2019
Approved Judgment
INTRODUCTION
By a bareboat charterparty on an amended standard BARECON 89 Form, dated 17 October 2012 (“the charterparty”), the Respondent, Silverburn Shipping (IoM) Ltd, an Isle of Man company (“Owners”), bareboat chartered their vessel, the tug “ARCTIC” (“the vessel”), to the Appellant, ARK Shipping Company LLC, a Russian company (“Charterers”), for a period of 15 years, on the terms and conditions set out therein.
The sole question of law on this appeal is whether the term (“the term”), contained in cl. 9A of the charterparty (“cl. 9A”), obliging Charterers to:
“….keep the Vessel with unexpired classification of the class indicated in Box 10 and with other required certificates in force at all times….”
was a condition (strictly so called) or an innominate term.
In their Partial Final Award dated 12 March 2018 (“the award”), two maritime arbitrators (“the arbitrators”) held that the term was not a condition.
Reversing the arbitrators and allowing Owners' appeal, brought pursuant to s.69 of the Arbitration Act 1996 (“the 1996 Act”), Carr J, in her judgment dated 22 February 2019 (“the judgment”) [2019] EWHC 376 (Comm); [2019] 1 Lloyd's Rep. 554, held that the term was a condition.
From that judgment, Charterers appeal to this Court.
THE CHARTERPARTY
A bareboat charterparty involves a lease of the ship. By contrast, a time charterparty does not involve a lease and is a contract for the provision of services; so too, no question of a lease arises in connection with a voyage charterparty. As explained in Davis, Bareboat Charters (2 nd ed., 2005), at para. 1.1:
“A fundamental distinction is drawn under English law between charterparties which amount to a demise or lease of a ship, and those which do not. The former category, known as charters by demise, operate as a lease of the ship pursuant to which possession and control passes from the owners to the charterers whilst the latter, primarily comprising time and voyage charters, are in essence contracts for the provision of services, including the use of the chartered ship. Under a lease, it is usual for the owners to supply their vessel ‘bare’ of officers and crew, in which case the arrangement may correctly be termed a ‘bareboat’ charter. The charterers become for the duration of the charter the de facto ‘owners’ of the vessel, the master and crew act under their orders, and through them they have possession of the ship.”
The “hallmarks” of a bareboat charter were summarised by Evans LJ in The Guiseppe di Vittorio [1998] 1 Lloyd's Rep 136, at p.156, as follows:
“What then is the demise charter? Its hallmarks, as it seems to me, are that the legal owner give the charterer sufficient of the rights of possession and control which enable the transaction to be regarded as a letting – a lease, or demise, in real property terms – of the ship. Closely allied to this is the fact that the charterer becomes the employer of the master and crew. Both aspects are combined in the common description of a ‘bareboat’ lease or hire arrangement.”
As already noted, the charterparty was on the BARECON 89 Form, as amended. This is a standard form of bareboat charter in common use in the industry. In The Ocean Victory [2017] UKSC 35; [2017] 1 WLR 1793, Lord Sumption at [95] spoke of the BARECON 89 Form in these terms:
“…The form was originally drafted in 1974 by the Documentary Committee of the Baltic and International Maritime Council, and revised in 1989. It is said to have become, in one or other of its variants, the most commonly used form of bareboat charter worldwide….”
The charterparty provided, in Box 10, for the vessel to be classed by Bureau Veritas (“BV”). Cl.26 stipulated that the charterparty was governed by English law and that any disputes arising out of the charterparty were to be referred to London arbitration.
Cl.9 was headed “Maintenance and Operation” and cl. 9A (in full) was in these terms:
“The Vessel shall during the Charter period be in the full possession and at the absolute disposal for all purposes of the Charterers and under their complete control in every respect. The Charterers shall maintain the Vessel, her machinery, boilers, appurtenances and spare parts in a good state of repair, in efficient operating condition and in accordance with good commercial maintenance practice and, except as provided for in Clause 13(l), they shall keep the Vessel with unexpired classification of the class indicated in Box 10 [i.e., BV] and with other required certificates in force at all times. The Charterers to take immediate steps to have the necessary repairs done within a reasonable time failing which the Owners shall have the right of withdrawing the Vessel from the service of the Charterers without noting any protest and without prejudice to any claim the Owners may otherwise have against the Charterers under the Charter.”
For convenience, I have italicised the wording central to this dispute.
Cl. 13 is headed “Insurance, Repairs and Classification”. Cl. 13B provides as follows:
“During the Charter period the Vessel shall be kept insured by the Charterers at their expense against Protection and Indemnity risks in such form as the Owners shall in writing approve which approval shall not be unreasonably withheld. If the Charterers shall fail to arrange and keep any of the insurances provided for under the provisions of sub-clause (b)….the Owners shall notify the Charterers whereupon the Charterers shall rectify the position within seven running days, failing which the Owners shall have the right to withdraw the Vessel from the service of the Charterers without prejudice to any claim the Owners may otherwise have against the Charterers.”
Though not plainly worded, the reference to “sub-clause (b)” must be construed as a reference to this clause, 13B itself.
The cross-reference in cl. 9A to cl.13(l) was deleted. Cl. 13(l) was itself deleted but would otherwise have provided that, notwithstanding anything contained in cl. 9A, Owners were to keep the vessel “with unexpired classification in force at all times” during the charterparty period. In the event, therefore, the obligation to keep the vessel in class (as provided in cl.9A) rested squarely on Charterers.
THE FACTS
The facts are essentially undisputed and may be taken from the award and the judgment.
The vessel was entered in the St. Kitts and Nevis International Ship Registry (“the St. Kitts Registry”) which had given a dispensation allowing Owners to bareboat charter the vessel outside of St Kitts and Nevis and to allow it to operate under the flag of the Russian Federation (“the Dispensation”).
The vessel was delivered into service under the charterparty on or about 18 October 2012.
Various disputes, it would seem as to hire payments, had simmered under the charterparty and Owners purported to withdraw the vessel (contractually) in March 2017. The arbitrators held that that withdrawal was wrongful and invalid – but, as it had not been accepted by Charterers, the Charterparty continued. Other than as a matter of history, we are not concerned with the March withdrawal.
As helpfully summarised by the Judge (at [7]):
“….The Vessel….arrived at the Caspian port of Astrakhan for repairs and maintenance on 31 October 2017. Her class certificates expired on 6 November 2017, before she entered dry dock for repairs, some five years after her last special survey.”
Box 11 in the charterparty recorded that the last special survey took place in 2012.
On 7 December 2017, Owners sent a “Notice” (“the December Notice”) to Charterers, purporting to terminate the charterparty and demanding redelivery of the vessel. The December Notice, aside from dealing with the issue of hire payments, included the following:
“….Without prejudice to the previous termination of the charter on 15 March 2017 it has recently come to our attention that the vessel is currently in a very poor condition and, of very serious concern that the vessel's class certificates have expired. It is your position that the charter between us continues….and if that position is correct (which we do not accept) then it is your responsibility to strictly comply with your obligations under the bareboat charter. Clause 9 of Part II of the above charter expressly states that as Charterers you must maintain the Vessel in a good state of repair, in an efficient operating condition and in accordance with good commercial maintenance practice. Further, you have an express obligation to keep the vessel with unexpired classification certificates in force. You are also required to take immediate steps to have any necessary repairs done to the vessel within a reasonable period of time which you have clearly failed to do.
The notification that we have received is that the vessel's class certificates have been overdue since 6 August 2017 and that the vessel's class, Load Line, SOLAS, MARPOL, BWM [i.e., Ballast Water Management] convention and AFS [i.e., Anti-Fouling System] convention certificates all expired on 6 November 2017….. Not only have you failed to immediately inform us of the fact that the vessel is out of class, it is clear that no steps have been taken by you to restore the vessel's condition and ensure...
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