Dalmare SpA v Union Maritime Ltd [QBD (Comm)]

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeFlaux J
Judgment Date13 Dec 2012

[2012] EWHC 3537 (Comm)

Queen's Bench Division (Commercial Court).

Flaux J.

Dalmare SpA
and
Union Maritime Ltd & Anor

Timothy Hill QC (instructed by Ince & Co LLP) for the appellants (sellers).

Simon Rainey QC (instructed by Clyde & Co LLP) for the respondents (buyers).

The following cases were referred to in the judgment:

Air Transworld Ltd v Bombardier IncUNK[2012] EWHC 243 (Comm); [2012] 1 CLC 145.

Ashington Piggeries Ltd v Christopher Hill LtdUNK[1969] 2 Ll Rep 425 (CA); [1972] AC 441 (HL).

Baldry v MarshallELR[1925] 1 KB 260.

Behnke v Bede Shipping Co LtdELR[1927] 1 KB 649.

Bigge v ParkinsonENR(1862) 7 H & N 955; 158 ER 758.

Bominflot Bunkergesellschaft fur Mineraloele mbH & Co KG v Petroplus Marketing AG (The Mercini Lady)UNK[2010] EWCA Civ 1145; [2010] 2 CLC 637.

Brave Challenger, The [2003] EWHC 3154 (Admlty).

Choil Trading SA v Sahara Energy Resources LtdUNK[2010] EWHC 374 (Comm).

Covas v BinghamENR(1853) 2 El & Bl 836; 23 LJQB 27.

Henry Kendall & Sons v William Lillico & Sons LtdELR[1969] 2 AC 31.

Lloyd del Pacifico v Board of TradeUNK(1929) 35 Ll L Rep 217.

MacLeod v EnsUNK(1983) 135 DLR 3d 365.

Mariola Marine Corp v Lloyd's Register of Shipping (The Morning Watch)UNK[1990] 1 Ll Rep 547.

Marshall v Ryan Motors LtdUNK(1922) 65 DLR 742.

Photo Production Ltd v Securicor Transport LtdELR[1980] AC 827.

Polestar Maritime Ltd v YHM Shipping Co Ltd (The Rewa)UNK[2012] EWCA Civ 153; [2012] 1 CLC 381.

Radul v Daudrich[1983] 6 WWR 278.

Smith v Lasko[1987] 5 WWR 412.

Stocznia Gdynia SA v Gearbulk Holdings Ltd[2009] 1 CLC 134.

Wallis, Son & Wells v Pratt & HaynesELR[1911] AC 394.

Ward v HobbsELR(1878) 4 App Cas 13.

Whitecap Leisure Ltd v John H Rundle LtdUNK[2008] 2 Ll Rep 216.

Shipping Sale of ship Contract Exclusion of statutory implied terms Memorandum of agreement on Norwegian Saleform 1993 Condition on delivery Vessel to be delivered and taken over as she was at time of inspection, fair wear and tear excepted Within one week of delivery main engine broke down Arbitrators found crankpin bearing likely to fail within short period of normal operation of main engine after delivery Secondhand ships goods within statute Meaning of words as she was Whether statutory implied terms excluded No market custom or usage pleaded or established Words as she was recorded obligation to deliver vessel in same condition as when inspected Statutory implied term as to satisfactory quality not excluded Words as she was not having same meaning as as is or as is, where is Words could be read down as excluding right to reject vessel whilst leaving right to claim damages for breach of implied terms unaffected Appeal from arbitrators' decision dismissed Sale of Goods Act 1979, s. 14(2), 55.

This was an appeal by sellers on a question of law arising out of an arbitrators' award holding that the respondent buyers' claim for damages for breach by the sellers of a contract for the sale of a ship succeeded in full.

The sale was by way of a memorandum of agreement (MOA) on the Norwegian Saleform 1993. The MOA provided in cl. 4 that the buyers had inspected and accepted the vessel and its classification records. By cl. 11 the vessel was to be delivered and taken over as she was at the time of inspection, fair wear and tear excepted. About five weeks after delivery the main engine broke down. The arbitrators concluded that the state of the no. 1 crankpin at the time of delivery was such that the crankpin bearing was likely to fail within a short period of normal operation of the main engine.

The buyers contended that there was a breach of the implied term as to satisfactory quality implied into the MOA by s. 14(2) of the Sale of Goods Act 1979 as amended. The sellers argued that the terms of cl. 11 were inconsistent with the statutory implied terms in that the vessel was sold as she was. The tribunal rejected that argument, holding that the implied term as to satisfactory quality was to be implied into the MOA, the sellers were in breach of that term and the buyers' claim succeeded in full.

The sellers appealed on the question whether a term as to satisfactory quality was implied into the MOA by s. 14. They submitted that the words as she was in the first sentence of cl. 11 had the same meaning as the words as is or as is, where is or similar phrases in other cases (both of sale of ships and other goods). Such phrases excluded the statutory implied terms, as permitted by s. 55.

The buyers submitted that the arbitrators were correct to find that as she was in cl. 11 was not equivalent to an as is, where is basis of contract, assuming that phrase had the effect of excluding the statutory implied terms; and that, in any event, as is, where is did not exclude s. 14(2).

Held, dismissing the sellers' appeal:

1. The correct starting point was that the s. 14 implied terms would apply to the MOA as to any other English law contract of sale, unless the parties had contracted out of s. 14, as provided for by s. 55(1). Ships were goods within the statute like any other piece of machinery or equipment. Since this was not a case where the sellers contended that the statutory implied terms were negatived by the course of dealing between the parties or by some binding custom or usage, they could only be negatived by express agreement. It followed that the tribunal was entirely correct in taking s. 55(2) as its starting point. (Behnke v Bede ShippingELR[1927] 1 KB 649 applied.)

2. In the absence of an established market custom or usage, clear language had to be used in a contract if the statutory implied terms were to be excluded. That principle was strictly applied. (Bominflot Bunkergesellschaft fur Mineraloele mbH & Co KG v Petroplus Marketing AG (The Mercini Lady)UNK[2010] EWCA Civ 1145; [2010] 2 CLC 637 and Air Transworld Ltd v Bombardier IncUNK[2012] EWHC 243 (Comm); [2012] 1 CLC 145 applied.)

3. The tribunal was clearly right to conclude that the words as she was in the first sentence of cl. 11 were a necessary part of a sentence which was recording the obligation to deliver the vessel in the same condition as she was when inspected. In other words, they were part of a temporal obligation which arose because, usually, there would be a period of time of weeks or even months between inspection and delivery. However, those words said nothing about what the sellers' obligations were, either on inspection or delivery, as regards the quality of the vessel. Hence they did not and could not exclude the implied term as to satisfactory quality under s. 14(2). The words as she was, in the context of the first sentence of cl. 11, were incapable of bearing the same meaning as the free-standing words as is, where is in a sale contract, assuming that those words did exclude the statutory implied terms. Even if the sellers were right that a possible meaning of the words as she was was to exclude the implied terms, it remained the case that the sellers could not establish that that was the only meaning the words were intended to have, since plainly the context indicated the temporal purpose of the words, to make it clear that the vessel was to be delivered in the same condition as when inspected. On the authorities the fact that even on the sellers' best case the words had more than one meaning was fatal to the sellers' case that the words excluded the statutory implied terms.

4. If the point had arisen for decision, the court would have been prepared to read down the first sentence of cl. 11, so that the words the vessel shall be taken over as she was at the time of inspection would exclude the right to reject the vessel as not being of satisfactory quality, but would not preclude the buyers from claiming damages for breach of the s. 14(2) implied term as to satisfactory quality. (Ashington Piggeries Ltd v Christopher Hill LtdELR[1972] AC 441 considered.)

5. It was not necessary to decide the wider question whether the words as is were apt to exclude the statutory implied terms as to satisfactory quality and fitness for purpose.

JUDGMENT

Flaux J: Introduction and background

1. The appellant sellers appeal (with the permission of Hamblen J) a question of law arising out of the final award of the arbitrators, Simon Crookenden QC, Michael Baker-Harber and Simon Gault (the tribunal) dated 8 May 2012 whereby the tribunal decided that the respondent buyers' claim for damages for breach by the sellers of a contract for the sale of the vessel CALAFURIA now renamed UNION POWER succeeded in full.

2. The essential facts as found by the tribunal which are relevant for the purposes of this appeal are as follows. By a memorandum of agreement (the MOA) on the Norwegian Saleform 1993 (Saleform 93) dated 4 September 2009, the sellers agreed to sell and the buyers agreed to buy the vessel, a 1994 built motor tanker, for US$7 million.

3. The relevant terms of the MOA were as follows:

Clause 4. Inspections

(a) The Buyers have inspected and accepted the Vessel and the Vessel's classification records. The Buyers have also inspected the Vessel in Piraeus, Greece on August 18, 2009 and have accepted the Vessel following this inspection and the sale is outright and definite subject only to the terms and conditions of this Agreement.

Clause 6. Drydocking/Divers Inspections

(b) The Vessel is to be delivered without drydocking

Clause 11. Condition on delivery

The Vessel shall be delivered and taken over as she was at the time of inspection, fair wear and tear excepted. However, the Vessel shall be delivered with her class maintained extended to 30 September 2009 without condition/recommendation, free of average damage affecting the Vessel's class. The Vessel's continuous survey cycles of machinery are to be as per current machinery continuous status attached hereto (attached A). Her International, National, Class and Trading Certificates clean, valid until 30 September 2009, except ISSC and SMC to be valid at time of delivery only

4. The buyers inspected the vessel at Piraeus on 18...

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