CMA CGM SA v Hyundai Mipo Dockyard Company Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BURTON,Mr Justice Burton |
| Judgment Date | 14 November 2008 |
| Neutral Citation | [2008] EWHC 2791 (Comm) |
| Docket Number | Case No: 2008 FOLIO 347 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 14 November 2008 |
[2008] EWHC 2791 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Burton
Case No: 2008 FOLIO 347
In An Arbitration Claim Between
In The Matter Of Arbitrations Between
Mr Nicholas Hamblen QC and Mr Alain Choo Choy (instructed by Izod Evans) for the Claimant
Mr Christopher Butcher QC and Mr Alexander MacDonald (instructed by Clyde & Co) for the Defendan
Hearing date: 3 November 2008
Approved Judgment
This has been the hearing of an appeal by the Claimant (“CMA”) under s69 of the Arbitration Act 1996 on two questions of law arising out of Awards by an Arbitral Tribunal composed of Messrs Mark Hamsher (Chairman), Ian Kinnell QC and Stephen Males QC (“the Arbitrators”) on 13 March 2008, with accompanying Reasons. Permission to appeal was granted by Tomlinson J on 4 July 2008.
The Awards arise out of four identical arbitrations, heard together by the Arbitrators, commenced by the Defendant (“HMD”) against CMA in relation to four container vessels built by HMD pursuant to four Shipbuilding Contracts entered into with subsidiaries of ER Schiffahrt GmbH (which I shall collectively refer to as “ERS”), dated 26 February 2004. The material clauses of these four contracts, which are in materially the same terms, are Articles XIII and XIV, and I shall so refer to them, the material parts of which read as follows:
“Article XIII: ARBITRATION
APPOINTMENT OF THE ARBITRATOR
If any dispute should arise in connection with the interpretation and [fulfilment] of this CONTRACT, same shall be decided by arbitration in the City of London and shall be referred to a single Arbitrator to be appointed by the parties hereto …
ARTICLE XIV: SUCCESSORS AND ASSIGNS
Neither party shall be entitled to transfer any or all of his rights and obligations under this CONTRACT to a third party without the prior written consent of either party, such consent not to be unreasonably withheld or delayed.”
The short background history is that CMA wanted to take over the Shipbuilding Contracts from ERS, and in April 2004 ERS requested HMD's consent to a novation to CMA of the four then existing contracts. HMD refused, its reason being that it did not want to have to account to CMA's supervision during the shipbuilding period. After initially threatening, by letter of 30 June 2004, to “go to court or arbitration in London against [HMD] for irresponsible behaviour and no respect of contractual conditions”, and making various other commercial threats, CMA, as a third party (ERS had taken no steps), issued a claim in the Marseilles Commercial Court on 2 March 2005 (“the French proceedings”) by way of a tortious claim for substantial damages, brought under Article 1382 of the French Civil Code, which provides for a fault-based liability in tort. CMA alleged that HMD had unreasonably withheld its consent to a transfer of ERS's rights under the Shipbuilding Contracts, that this was a breach of those contracts which constituted fault under Article 1382, and that CMA was thus able to recover damages for the losses which it had suffered (largely as a result of an agreement of 13 May 2004, which it had entered into with ERS).
These proceedings were still extant when the parties carried out negotiations to attempt to resolve the issue of the novation. CMA and HMD were unable to meet face to face, but all negotiations took place indirectly, between HMD and ERS and ERS and CMA. The Arbitrators, in paragraph 70 of their Reasons, describe this situation:
“…there had been and remained considerable annoyance and resentment between HMD and CMA. CMA was affronted by what it regarded as HMD's unreasonable refusal to accept it as a contract partner for the four vessels, which it regarded as insulting and completely without justification. HMD in turn was offended by what it regarded as CMA's aggressive tactics in pursuing the novation, and was outraged at being sued in what it regarded as thoroughly unmeritorious proceedings in France. As a result, HMD insisted in dealing only with ERS and refused to negotiate terms … directly with CMA. Thus the negotiations were not merely at arms' length – the atmosphere was positively hostile.”
The outcome was a series of four Novation Agreements, entered into on 12 September 2005, 27 January 2006, 7 April 2006 and 20 June 2006, each for a separate vessel. The terms of the Novation Agreements involved that in each case the novation only took effect after construction work on the vessel had been completed, at a Transfer Date, meaning (by reference to clause 1 of each Agreement, the Definitions section) the “date and time of actual delivery of the Vessel by the Builder [HMD] and acceptance by the New Buyer [CMA] under the terms of the Shipbuilding Contract.” The relevant clauses of each novation agreement, upon which attention was concentrated in the Arbitrations, are as follows:
4. NOVATION
The Original Buyer [ERS], the New Buyer and the Builder hereby agree that on and with effect from the Transfer date the New Buyer shall be substituted in place of the Original Buyer as a party to the Shipbuilding Contract and the Shipbuilding Contract shall thenceforth be construed and treated in all respects as if the New Buyer was named [therein – it is agreed there was a misprint in the Agreement] instead of the Original Buyer. Save for the substitution of the New Buyer as the Buyer under the Shipbuilding Contract pursuant to this Clause, the Shipbuilding Contract shall remain in full force and effect.
The New Buyer hereby agrees with the Builder that, as and with effect from the Transfer Date, the New Buyer shall duly and punctually perform and discharge all liabilities and obligations whatsoever from time to time to be performed or discharged by it or by virtue of the Shipbuilding Contract in all respects as if the New Buyer was named therein instead of the Original Buyer.
Provided that the delivery instalment has been duly paid by the Original Buyer in accordance with clause 3.1 above, the Builder hereby agrees with the New Buyer that, as and with effect from the Transfer Date, the Builder shall be bound by the Shipbuilding Contract in all respects as if the New Buyer was named therein instead of the Original Buyer.
4. Provided that the above delivery instalment has been duly paid by the Original Buyer in accordance with clause 3.1 above and except as provided otherwise herein, the Builder and the Original Buyer hereby, as and with effect from the Transfer Date, mutually release and discharge each other from all liabilities, obligations, claims and demands whatsoever touching or concerning the Shipbuilding contract and, in respect of anything done or omitted to be done under or in connection therewith, the Builder hereby accepts the liability of the New Buyer in respect of any such liabilities, obligations, claims and demands in place of the liability of the Original Buyer.
5. The mutual release contained at Clause 4.4 above shall not apply in relation to the claim of the New Buyer against the Builder currently pending before the commercial court in Marseilles.
…
5. REPRESENTATIONS AND WARRANTIES
1. The Original Buyer represents and warrants to the other Parties to this Agreement that at the date of this Agreement:
…
d. The Shipbuilding Contract is valid and subsisting and without prejudice to clause 4.5 above the Original Buyer is not aware of any facts or circumstances which would entitle the Original Buyer of the Builder to terminate, rescind, cancel or claim damages under or for breach of the Shipbuilding Contract.
2. The Builder represents and warrants to the other Parties of this Agreement:
…
d. The Shipbuilding Contract is valid and subsisting and without prejudice to clause 4.5 above the Builder is not aware of any facts or circumstances which would entitle the Builder or the Original Buyer to terminate, rescind, cancel or claim damages under or for breach of the Shipbuilding Contract.
7. MISCELLANEOUS
The New Buyer confirms to the Builder that there are no further claims arising from the New Buyer against Builder between the date of signing this Agreement and the Transfer Date.”
As can be seen there was no express provision as to what should occur in relation to the French proceedings. The Arbitrators noted in paragraph 69 of their Reasons:
“… all parties were aware of the existence and nature of the French proceedings. That much is obvious from the terms of the Novation Agreement itself.”
CMA continued with those proceedings, in which HMD entered an appearance under protest (it is common ground that they did not thereby submit to the jurisdiction and that no issue estoppel is created by the judgment which eventuated).
The Marseilles Commercial Court delivered its judgment on 30 September 2006, concluding that it had jurisdiction to hear CMA's claim, that the applicable law for considering CMA's claim in tort was French law but that English law was to be applied to the issue as to whether HMD had unreasonably refused its consent to a novation, and held, as described by the Arbitrators in paragraph 62 of their Reasons, that:
(d) … HMD had unreasonably refused to consent to a novation, in breach of Article XIV of the Shipbuilding Contract.
(e) This breach constituted “fault” within the meaning of Article 1382 of the French Civil Code.
(f) CMA was entitled to its full damages of US$ 3,646,125, without any deduction whatsoever, together with € 10,000 by way of...
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