Bernhard Schulte GmbH & Company Kg and Others v Nile Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Cooke,Mr Justice Cooke |
| Judgment Date | 11 May 2004 |
| Neutral Citation | [2004] EWHC 977 (Comm) |
| Docket Number | Case No: 2003/657 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 11 May 2004 |
[2004] EWHC 977 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Cooke
Case No: 2003/657
Mr Graham Dunning, Q.C. and Mr Stephen Houseman (instructed by Holman Fenwick & Willan) for Bernhard Schulte GMBH & Co KG & Others
Mr Nicholas Hamblen, Q.C. and Mr Michael Ashcroft (instructed by Ince & Co) for Nile Holdings Ltd
Hearing dates: 27th, 28th and 29th April 2004
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.
Approved Judgment
Introduction
The Defendant (the Sellers) had, until 2002, a controlling and beneficial interest in a fleet of 11 LPG Carriers constituting the Tarquin Fleet, which is the subject matter of these proceedings. Each tanker was owned by one or other of a number of ship owning companies which were either financing companies or were directly owned by the Sellers themselves. An affiliated company, Tarquin Gas Carriers Limited, operated and managed the fleet. All the vessels were classed with the French Classification Society Bureau Veritas (BV).
The Sellers decided to dispose of their LPG Fleet and entered into negotiations with various potential Purchasers. Each signed a confidentiality agreement and, in order not to reveal to the world that a potential sale was in the offing, none was permitted to inspect the vessels prior to entering into a binding Sale and Purchase Agreement.
On 3rd April 2002 the Sellers entered into such a Sale and Purchase Agreement (the SPA) with the three Claimant companies (the Purchasers) who were given access to the vessels' Class Records as at December 2001. The SPA was a master agreement under which the Sellers undertook to procure the sale of each of the vessels by the owning companies and the Purchasers undertook to procure a nominated Purchaser for each of the vessels. The total consideration for the sale of the Fleet was US$ 161M and the price allocated to each vessel was set out in a Schedule to the SPA. The actual contracts for the sale of each vessel were to be effected by means of individual Memoranda of Agreement (MOA) on a modified Norwegian Sale Form 1993 which were to be executed by 15th May 2002, or such later date as the parties might agree in writing (the Contract Execution date). As it transpired, each of the MOAs was executed on 23rd May 2002.
The final delivery date was to be three months after the Contract Execution date of the MOAs. Under clause 5 of the SPA, following its signature, arrangements were to be made for inspection of the vessels by the Purchasers, without opening up. Clause 3 contained provisions as to a potential adjustment in the purchase price for each vessel should it appear on inspection that the condition of the relevant ship was not consistent with its age and description, taking into account the Class Records made available to the Purchasers prior to the SPA. The detailed terms of that clause are set out later in this Judgment, being the crucial clause upon which the current dispute centres In essence it provided for an expert determination of the price adjustment to be final and binding between the parties.
Very limited liability was assumed under the agreement by the Sellers for the condition of the ships, clause 2.9 excluding all liability, save that which was expressly set out in the agreement itself. Clause 18.1 constituted an "entire agreement clause" and provided that the agreement should not be varied otherwise than by an instrument in writing executed by the parties or their duly authorised representatives. There were two written Amendment letters, dated 10th and 20th May 2002 which did vary the SPA, the terms of which give rise to issues between the parties.
The Applications
Both the Purchasers and the Sellers have issued Applications for Summary Judgment against each other pursuant to CPR Rule 24.2(a) and (b). The Purchasers claim payment of specific sums on 3 of the 11 vessels where an expert, purportedly appointed under the terms of clause 3 of the SPA, has found that there should be a downward adjustment of the purchase price which had been fully paid on delivery. In addition the Purchasers seek Summary Judgment against the Sellers in respect of a number of identified issues relating to the expert's determination of an adjustment to the purchase price on these vessels and 5 further vessels. The Sellers in turn seek reverse Summary Judgment against the Purchasers on all the claims set out by the Purchasers in their Particulars of Claim, and in particular on one specific issue, namely whether the expert should have assessed the condition and costs of repairs of each ship as at the date of the Purchasers' inspection. The Purchasers equally seek reverse Summary Judgment against the Sellers on the latter's Counterclaims for breach of confidentiality and breach of good faith duties.
The Amended Particulars of Claim state that the tankers were inspected by the Purchasers between 3rd April and 10th May 2002 and that, as it then appeared to them that the condition of each ship was not consistent with its age and description in such a way that its value was affected, they referred the question of adjustment of price to an expert to be appointed by the Chairman of BV, as required by clause 3 of the SPA. The Particulars of Claim also allege that the Purchasers supplied details of the specific matters affecting each tanker in accordance with the SPA and the Amendment letters, and that in due course the expert appointed by the Chairman of BV, having inspected the vessels himself and received written submissions from both Sellers and Purchasers, published final reports dated 19th March 2003 containing his findings and conclusions in relation to the adjustment of the purchase price for each of the LPG tankers.
The price adjustments which he determined, in respect of 8 ships, amount to US$ 2,966,500 and, by letter of 11th April 2003, the Purchasers demanded repayment of those sums, which the Sellers have refused to pay.
The Sellers' position is that there was no valid reference made to the expert in the time allowed in the SPA, that the expert acted outside the mandate given to him, that he conducted the reference unfairly and without regard for the agreed procedure, made findings without giving the Sellers an adequate opportunity to make submissions to him and failed properly to take into account such submissions as they did make.
In determining applications under CPR 24.2, the Court may give Summary Judgment against a claimant or defendant on the whole of a claim or on a particular issue if it considers that the party has no real prospect of succeeding on the claim or issue and there is no other compelling reason why the case or issue should be disposed of at trial. In order to defeat the application for Summary Judgment, the respondent must show that it has realistic prospects of success, as set out in the Notes to the Rule and Swain v Hillman [2001] 1 AER 91 and Three Rivers District Council v Bank of England (No 3) [2001] 2 AER 513. In this case there are cross applications by both parties but the starting point must be the existence of an expert determination, purportedly pursuant to clause 3 of the SPA, which the Sellers must challenge in order to succeed on all of the applications, save for those made by the Purchasers in relation to the Sellers' Counterclaims.
The time bar point
The Sellers seek Summary Judgment on all of the Purchasers' claims on the grounds that the Purchasers did not make references "to the expert" within the period provided by clause 3.3 of the SPA, nor identify "to the expert" within the time prescribed by clause 3.4 of the SPA, as varied by the Amendment letter of 20th May 2002, "the specific matters alleged to affect the value of the ship and the amount of any reduction claimed". These points, the Sellers say, are to be determined solely on the basis of construction of the SPA and the Amendment letters. The Purchasers seek Summary Judgment in relation to three vessels and of necessity therefore seek the Court's determination on the self same issues too, in so far as they affect those ships. Both parties agree that the Court should decide these issues at this stage of the proceedings. No waiver or estoppel or acceptance of any variation of the SPA by conduct have been pleaded and the parties have chosen to argue this point on construction alone.
The SPA provided, in so far as relevant, as follows:
1.1. "Expert" means an independent marine surveyor with experience in the survey of ships similar to the Ships to be nominated by the Chairman for the time being of Bureau Veritas". (BV)
"3.3
In the event that, following inspection of any of the Ship[s] in accordance with Clause 5.2, the Purchasers are of the opinion that the condition of the relevant Ship is not consistent with the age and description of the Ship (taking into account the Class Records as made available in December 2001) and is such as to reduce the value of the Ship, the Purchasers shall be entitled within 7 days of the completion of such inspection to refer the matter to the Expert to determine whether any adjustment should be made to the Purchase Price attributable to the relevant Ship. If no...
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