B S & N Ltd (BVI) v Micado Shipping Ltd (Malta) ('The Seaflower')
| Jurisdiction | England & Wales |
| Judge | Waller,Rix,Jonathan Parker L JJ |
| Judgment Date | 22 November 2000 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 November 2000 |
Court of Appeal (Civil Division).
Waller, Rix and Jonathan Parker L JJ.
Timothy Hill (instructed by Shaw and Croft) for B S & N Ltd (charterers).
David Joseph (instructed by Norton Rose) for Micado Shipping Ltd (owners).
The following cases were referred to in the judgments:
Apollonius, TheUNK [1978] 1 Ll Rep 53.
Bentsen v Taylor Sons & CoELR [1893] 2 QB 274.
Bunge Corp v Tradax Export SAWLR [1981] 1 WLR 711.
Compagnie Commerciale Sucrees et Denrees v C Czarnikow LtdWLR [1990] 1 WLR 1337.
Compagnie General Maritime v Diakan Spirit SA (“The Ymnos”)UNK [1982] 2 Ll Rep 574.
Greenwich Marine Inc v Federal Commerce and Navigation Co Ltd (“The Mavro Vetranic”)UNK [1985] 1 Ll Rep 580.
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha LtdELR [1962] 2 QB 26.
Lorentzen v White Shipping Co LtdUNK (1942) 74 Ll L Rep 161.
Mihalis Angelos, TheELR [1971] 1 QB 164.
Pennsylvania Shipping Co v Compagnie Nationale de NavigationUNK (1936) 55 Ll L Rep 271.
Routh v MacmillanENR (1863) 2 H & C 750; 159 ER 310.
Shipping — Charterparty — Major oil company approvals clause in tanker charter — Owners guaranteed to obtain Exxon approval for tanker within 60 days — Whether provision was condition of contract giving right to terminate for breach.
This was an appeal from a judgment of Aikens J ([2000] CLC 795) holding that a term in a charterparty by which owners guaranteed to obtain Exxon approval was not a condition of the contract.
The defendant owners chartered the “Seaflower” to the claimant charterers for 11 months, maximum 12 months at charterers' option. Clause 46 of the charterparty was a major oil company approvals clause which provided that the vessel was acceptable to Mobil, Conoco, BP and Shell, and that “Owners guarantee to obtain within 60 days Exxon approval in addition to present approvals”. The daily hire rate (of US$8,500) was to be discounted by US$250 for each missing approval, and if an approval was lost charterers were entitled to cancel if it was not reinstated within 30 days. The vessel was delivered on 5 November 1997. Exxon approval had not been obtained. Between 5 November and 30 December the vessel performed three voyage fixtures carrying fuel oil for BP. On 30 December 1997 the charterers concluded, with “subjects”, a proposed sub-charter commencing 5 January 1998 to carry an Exxon cargo. Owners could not confirm that Exxon approval would be obtained in time and charterers terminated the charter and redelivered the vessel on the basis that the provision for Exxon approval was a condition of the charter and that owners were in repudiatory breach. Aikens J ([2000] CLC 795) determined that the term was not a condition but only an intermediate term. At trial Timothy Walker J ([2000] CLC 802) held that there had not been a repudiatory breach of the intermediate term. Charterers appealed from the decision of Aikens J that the provision for Exxon approval to be obtained was not a condition of the charter.
Held, allowing the appeal:
The term was a condition. It was right to construe cl. 46 so as to achieve consistency in relation to the obtaining of approvals, even if strictly the language of the clause was not consistent. Therefore the failure to provide expressly for cancellation in relation to the obligation to obtain Exxon approval within 60 days was not to be treated as determinative. The obligation to have the oil company consents in place was to be taken, as a matter of construction or by virtue of an implied term, as applying at the date of commencement of the time charter period. On that basis if the loss of one major and failure to reinstate within 30 days provided a right to cancellation, then the failure in effect to reinstate Exxon within 60 days should do so too. That construction would give some weight to the use of the word “guarantee”, which was not of itself determinative, and the 60 day time limit in the context. The US$250 discount was therefore a discount and not liquidated damages during the period allowed for reinstatement, and became a provision for liquidated damages only if charterers opted to continue with the charter. The oil majors clause was not analogous to the obligation of seaworthiness which was an innominate term or a statement or warranty as to class. The term for Exxon approval should be construed as a condition since otherwise it would introduce considerable uncertainty Bunge Corp v Tradax Export SAWLR [1981] 1 WLR 711 applied.
Waller LJ:
1. This is an appeal from a decision of Aikens J given on 2 July 1999 ([2000] CLC 795). He ruled at an interlocutory stage on the true construction of a charterparty that a term, cl. 46, was not a condition breach of which entitled the charterers to terminate automatically. He ruled that the term was an intermediate term in relation to which the charterers would have to establish that the owners were in repudiatory breach before they could terminate the charterparty. The evidence before Aikens J was contained in three affidavits together with a limited number of exhibits thereto.
2. Aikens J ruled that the point on construction was worthy of consideration by the Court of Appeal but that any appeal should be postponed pending the trial of the action so that all matters went to the Court of Appeal at the same time.
3. The matter came on for trial before Timothy Walker J and he handed down judgment on 19 April 2000, reported at [2000] CLC 802. He held in favour of the owners that there had not been a repudiatory breach of the intermediate term. He also held that separate claims brought by the charterers for misrepresentation failed both with respect to the Exxon and BP approvals. He further refused permission to appeal on any aspect, leaving it to the Court of Appeal to decide whether leave should be given on any aspect.
4. The charterers took the decision simply to pursue an appeal on the question whether Aikens J was correct to classify cl. 46 of the charterparty as an intermediate term as opposed to a condition and sought permission to appeal. Permission to appeal was granted by Rix LJ and the matter was argued before us pursuant to that permission on Monday, 6 November 2000.
5. It is possible to take the facts largely from the judge's judgment. Micado Shipping Ltd as owners, chartered their vessel to B S & N Ltd as charterers for a period of minimum 11 months, maximum 12 months. The relevant terms are first, cl. 1, which provides that at the date of delivery, the vessel shall be classed in every way fit to carry fuel oil and vacuum gasoil and/or its products, together with certain other matters; secondly, cl. 5, which provides that the vessel is not to be delivered before 1 November 1997 and if not delivered by 30 November the charterers have the right to cancel. Thirdly, there are the usual provisions in cl. 15 with regard to delivery of bunkers on board and redelivery. Fourthly, cl. 61 provides that the bunker quantities are to be approximately the same on delivery and redelivery. Fifthly, there is the critical clause, which is cl. 46. This is an additional clause at the end of the standard printed clauses and which reads as follows:
“MAJORS' APPROVAL CLAUSE
Vessel is presently MOBIL (expiring 27/1/98), CONOCO (expiring 3/2/98), BP (expiring 28/1/98) and SHELL (expiring 14/1/98) acceptable. Owners guarantee to obtain within 60 (sixty) days EXXON approval in addition to present approvals. On delivery date hire rate will be discounted USD250 (two hundred and fifty) for each approval missing, i.e. MOBIL, CONOCO, BP, SHELL, EXXON.
If for any reason, during the time-charter period Owners would loose (sic) even one of such acceptances they must advise Charterers at once and they must reinstate same within 30 (thirty) days from such occurance (sic) failing which Charterers will be at liberty to cancel charterparty or to maintain same at reduced rate as stipulated above. Hire rate will be reinstated once Owners will show written evidence of approvals from Major Oil Companies.”
6. The charterparty also provided for English law and for the exclusive jurisdiction of the English court.
7. The vessel was delivered to the charterers on 5 November 1997. In fact Exxon approval had not been obtained by the owners at that stage. On 30 December 1997, charterers concluded, with “subjects”, a proposed subcharter of the vessel as is set out in the recap fixture exhibited to one of the affidavits. The vessel was to be delivered not before 4 January and not after 6 January 1998. The recap provides:
“The best of owners' knowledge vessel is acceptable by Shell/BP/Mobil/Conoco/Exxon (to be reconfirmed by owners before lifting subjects).”
8. The charterers sought owners' confirmation that the vessel was to be approved by Exxon but the owners were unable to confirm that there would be such approval. The owners sent a telex at 14.45 on 30 December 1997 explaining that:
“At time of writing vessel is not Exxon acceptable and frankly speaking won't be able to get it within the 5th of Jan 98.”
9. The significance of 5 January is that it was within the laycan period of the subcharterparty and was the date falling 60 days after delivery of the vessel under the head charterparty. The telex explained that the vessel had been subjected to heavy weather and that the vessel would require high level alarms which needed to be fitted in drydock prior to Exxon giving their approval. The telex went on:
“Owners believed to be ready for Exxon inspection by the end of Jan/ely Feb considering also that all the other approvals are elapsing within Jan and owners will apply first to them which are easier to extend. FYG Shell has been extended til July 98.”
10. The subcharter could therefore not be confirmed and the charterers sent a telex to the owners at 17.13 on the same day as follows:
“Reference various telex exchanged we understand that vessel at of...
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