Ceto Shipping Corporation v Savory Shipping Inc.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Baker |
| Judgment Date | 21 October 2022 |
| Neutral Citation | [2022] EWHC 2636 (Comm) |
| Year | 2022 |
| Docket Number | Case No: CL-2022-000277 |
| Court | King's Bench Division (Commercial Court) |
[2022] EWHC 2636 (Comm)
Mr Justice Andrew Baker
Case No: CL-2022-000277
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London EC4A 1NL
Chris Smith KC & Celine Honey (instructed by Stephenson Harwood LLP) for the Claimant
Julia Dias KC (instructed by Waterson Hicks) for the Defendant
Hearing dates: 7, 14 October 2022
Approved Judgment
This is a reserved judgment to which CPR PD 40E has applied.
Copies of this version as handed down may be treated as authentic.
Introduction
This Part 8 Claim concerns a bareboat charter of the product tanker m.t. Victor 1 (previously named m.t. Spirit). The charter was dated 28 February 2019 and was on the Barecon 2001 form, as amended and supplemented by the parties. It was further amended by an addendum dated 24 December 2019. When I refer below to ‘the charter’, unless the context indicates otherwise, I shall mean the charter as amended in December 2019.
Pursuant to the charter, Victor 1 was leased by the defendant, her owner, to the claimant demise charterer, for a period of 36 months at a hire rate of US$7,386 per day. The charter period expired on 1 April 2022.
The charter provided for the sale of the ship by the defendant to the claimant on the terms of an appended MoA on the Saleform 2012 form dated 28 February 2019, as amended by the parties. The sale price was stated as US$12,000,000 less a down payment of US$5,000,000 and bareboat hire paid under the charter. That would mean a sale price reduced to nil if hire were paid in full for 36 months. As I set out below, the sale price came to be stated slightly differently in the December 2019 amendment, but nothing turns on that.
The standard Barecon provisions dealing with redelivery were deleted, presumably in the expectation that they would not be needed because the MoA would be performed at the end of the charter period. That does not mean that the MoA was bound to be performed, because the parties included preconditions, the meaning and effect of which is now contentious between them. The position is, then, that if all went well there would be a sale under the MoA at the end of the charter, and the parties did not include in their contract any provision dealing in terms with what was to happen if the preconditions were not satisfied as the charter period ended so that title was not transferred then.
Technical and crew management was delegated by the claimant to Delfi SA, a company associated with the defendant, under a management contract dated 28 February 2019.
Clause 39.1 of the charter, as originally concluded, was in these terms:
“ On expiration of this charter, and provided that the Charterers have fulfilled their obligations under this Charter, it is agreed that the Charterers will fulfil their obligation to purchase the Vessel. [The] sale will be in accordance with the MoA appended to this contract.”
The addendum in December 2019 resolved a dispute between the parties and amended the charter. The defendant had sent an email withdrawing the ship and cancelling the charter on the basis of non-payment of hire and technical management fees by the claimant. At the instance of the claimant, the ship had been arrested at Khor Fakkan. By Clause 2.1 of the addendum, the defendant agreed to withdraw its withdrawal notice and the parties agreed that it was to be treated as null, void and of no effect. By Clause 3.1 of the addendum, the parties agreed that US$1,133,275.77 had been paid by the claimant to the defendant since the withdrawal notice and that they would reconcile accounts, and any balance under the charter or the management agreement would be paid by the charterer, within 21 days. Clause 4 of the addendum dealt with getting the ship released from arrest.
Clause 6 of the addendum substituted new Clauses 39.1 and 39.2 for original Clause 39.1, in the following terms:
“ 39.1 Purchase and Sale obligations
On expiration of this charter, and provided that the Charterers have paid all hire and any other sums due under this Charter and provided that the Charterers have also paid all management fees and any other sums due under the Management Agreement to Delfi, it is agreed that Owners will sell the Vessel to Charterers for no further consideration, that title to the Vessel will automatically transfer to Charterers and Charterers will automatically be required to purchase and will be deemed to have purchased the Vessel. The sale will be in accordance with the MOA appended to this contract.
39.2 Purchase Option
Notwithstanding any provisions in this Charter, the Charterers shall have the option to purchase the Vessel on an “as is where is” basis … any time prior to the expiration of the Charter period by giving the Owners 28 days' notice in writing (“ Notice to Exercise Option”) together with payment to the Owners of the following:
(i) all outstanding Charter hire and any other amounts due under this Charter;
(ii) all amounts that would be due under the Charter at the expiry of the Notice to Exercise Option; and
(iii) the balance of: the Purchase Price of USD12,976,880, as to which (i) the Down Payment of USD5,000,000 and (ii) any Charter Hire paid under this Charter shall be credited to this figure.
Provided that Charterers have also paid all management fees and any other sums due under the Management to Delfi.
Following the expiry of the 28 days' notice contained in the Notice to Exercise Option, Owners will tender Notice of Readiness in accordance with Clause 5 of the MoA and title to the Vessel shall Vessel [sic.] will automatically transfer to Charterers and Charterers will be deemed to have purchased the Vessel.”
There are now further disputes between the parties. In the summer of 2020, the claimant replaced Delfi as technical and crew managers, placing technical and crew management instead with Saint James Shipping Ltd under a management agreement dated 17 August 2020. The ship is now under arrest and due to be sold in Singapore. The claimant admits that there are claims against it for which, if they are valid claims, it has responsibility under the charter:
i) by Delfi under the February 2019 management agreement, for c.US$2 million;
ii) by Saint James Shipping under the August 2020 management agreement, for c.US$3.5 million;
iii) by the claimant's crew, for unpaid wages, by bunker suppliers, for bunkers supplied during the charter, and by ship chandlers, for supplies to the ship during the charter, for c.US$1.5 million in aggregate.
The order for the sale of the ship was made by the Singapore court on 3 October 2022 at the instance of the crew, the claimant having failed to pay or secure the crew's claim.
The claimant disputes liability in respect of the claims by Delfi and Saint James Shipping. It accepts that at least a substantial proportion of the other claims are valid, so as to be its responsibility as between itself and the defendant under Clause 10(b) of Barecon 2001.
By this Claim, the claimant seeks a declaration that “ Clause 39.1 of the Charter (as amended by the Addendum), on its proper construction, means that the title of the Vessel automatically transfers from the Defendant to the Claimant upon the expiry of the Charter on 1 April 2022, notwithstanding any disputed sums allegedly claimed by … Delfi in respect of the Original Management Agreement.”
The Hearing
The final hearing of the Claim was listed, upon the parties' estimate of half a day, in my Friday list for Friday 7 October 2022. That should not have happened. The Commercial Court Guide (11 th Ed.) spells out what is meant by a half-day hearing in this court:
“ F5.4 The time required for a hearing should be estimated on the basis that the Judge will aim to give immediate judgment at the hearing on any application listed for a hearing of no more than half a day. Therefore:
(a) a hearing of more than half a day must be sought when an application is listed unless the parties are confident that their hearing estimate of half a day or less will be sufficient for (i) the argument of the application, (ii) judgment on the application, and (iii) argument and rulings on costs and other consequential matters arising out of the judgment;
(b) an application should not be treated or listed as an ordinary application (F7.6) unless the parties reasonably expect to require no more than one and a half hours to argue the application.”
On no sensible view was this hearing ever a half-day hearing, given that explanation. In the event, with interventions from and dialogue with the court (which should be allowed for in estimating the time likely to be required for argument), Mr Smith KC took 2 hours for his opening submissions. Ms Dias KC's submissions in response took 1 1/2 hours, followed by a 1-hour reply by Mr Smith KC. So the argument occupied 4 1/2 hours when, by seeking and fixing a hearing on a half-day estimate, the parties were effectively assuring the court of their confidence that they would complete the argument within 1 1/2 hours. It is true that this was the trial of a Part 8 Claim, not a case management conference or interlocutory application. However, if there was any doubt as to whether the court would approach the half-day time estimate differently, particularly given that the hearing was fixed for an ordinary Friday list, that should have been clarified with the court when obtaining the listing. As practitioners in this court should not need to be told, the limit of half a day on time estimates for hearings in the Friday list is designed, amongst other things, to ensure so far as possible that those hearings do not generate reserved...
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Ceto Shipping Corporation v Savory Shipping Inc.
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