DS-Rendite-Fonds Nr.106 VLCC Titan Glory GmbH & Company Tankschiff KG and Others v Titan Maritime S.A and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 13 November 2013 |
| Neutral Citation | [2013] EWHC 3492 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 13 November 2013 |
| Docket Number | Case No: 2012-211 |
[2013] EWHC 3492 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Mr Justice Hamblen
Case No: 2012-211
Andrew Baker QC and Graham Charkham (instructed by Clyde & Co LLP) for the Claimant
The Defendants were not represented
Hearing dates: 4, 5 and 6 November 2013
Introduction
This case concerns the proper construction of a Charter Restructuring Agreement ("CRA") made between the owners of a fleet of VLCC vessels, the 1 st–8 th Claimants ("the Owners"), and the vessel charterers, the 1 st–8 th Defendants ("the Charterers"), and a claim, if necessary, for rectification of the CRA.
Each of the Owners is a German Limited Partnership ("KG"), a special investment vehicle, which owns one of the VLCCs. The Charterers are part of the Pac Star group and the 9 th Defendant, Pacific Star International Holding Corporation ("Pac Star"), is guarantor of the Charterers' obligations. The vessels are: Titan Glory, Saturn Glory, Neptune Glory, Mercury Glory, Pluto Glory, Artemis Glory, Leo Glory and Younara Glory ("the vessels").
The vessels were all subject to long-term period time charters based on the Shelltime 4 form. When markets collapsed at the end of 2008 and beginning of 2009, all the time charters had several years to run.
Early in 2009 the Charterers stopped paying the full amount of hire due under the time charters due to alleged financial difficulties. During the course of 2009 there were various discussions between the parties concerning a possible restructuring.
The discussions eventually resulted in the CRA, which was signed on 31 March 2010.
The CRA addressed both the issue of outstanding unpaid hire and how hire was to be paid going forward. In relation to future hire, the essential agreement was for a new rate of hire to be paid during a 'Restructuring Period' of 1 January 2010 to 31 December 2014. The charter rate of hire would still be earned during that period, but payment of any shortfall would be deferred until the end of the Restructuring Period or earlier lawful termination. In respect of hire payments during the Restructuring Period the CRA refers to a 'Market Rate' derived from a Clarkson Index, a 'Floor Rate' of US$22,000 per day, and six-monthly adjustments.
In late January 2011, the parties fell into dispute over the meaning and effect of the Floor Rate and how it features in the six-monthly adjustments. That is the main dispute falling to be resolved at this trial. Further issues have also arisen between the parties concerning the rate of hire payable after the termination of certain sub-charters and also off-hire.
General factual background
Each of the Owners is a KG managed by GVT Gesellschaft für die Verwaltung von Beteiligungen an Tankschiffen mbH ("Dr Peters"). Each KG purchased its VLCC from a company belonging to or controlled by Pac Star and chartered it back to a company within the Pac Star group under a long term time charter which incorporated an option to purchase at the end of the charter period.
From January 2009, the Charterers approached the late Mr Jurgen Salamon, then the Managing Owner of the Dr Peters Group, seeking to renegotiate the terms for the payment of hire. From January 2009 onwards Charterers' hire payments were short, late, or both. The Owners put the Charterers on notice of the shortfalls and reserved their rights, including the right to terminate their respective time charters. This pattern continued alongside the negotiations that led, ultimately, to the CRA.
Mr Ghassan Ghandour was the Managing Director of Gulf Marine Management S.A. and the governing mind and will of the Charterers and of Pac Star for the purpose of negotiating and concluding the restructuring of the time charters. They were also represented at meetings and in correspondence by Mr Antonios (Tony) Kaffas and Mr Andrew Wettern of Gulf Marine.
Mr Salamon and Mr Thomas M Dewner constituted the governing minds and will of the Owners. Mr Salamon died in November 2012. Mr Marc Bartels of Dr Peters also attended one of the meetings and conducted some correspondence.
From mid-2009, the Charterers and Pac Star were also represented by Messrs Navis Corporate Finance GmbH & Co KG ("Naves") and Jefferies International ("Jefferies"), consultants engaged by them to assist in designing restructuring possibilities. The individuals involved from Naves/Jefferies were Mr Axel Siepmann and Mr Robert Rau of Naves and Mr Hamish Norton of Jefferies.
From September 2009, the Charterers and Pac Star were represented in addition by Watson Farley Williams ("WFW") (mainly Mr Francis (Frank) Dunne.
From December 2009, the Owners were represented also by their German lawyers, Ahlers & Vogel (mainly Dr Jan-Erik Pötschke, although Mr Martin Rosenzweig occasionally dealt with the matter in his absence).
Various proposals and counter-proposals were exchanged, and discussed at meetings, during the course of 2009. They culminated in an agreement upon the restructuring terms at a final, main meeting, in Geneva, on 10 December 2009. This was followed by the preparation and signature of a Term Sheet (signed in mid-January 2010) as a written record of what had been agreed in Geneva. Thereafter there was the drafting, agreement and signing of the CRA (signed on 31 March 2010).
I accept and find that at the time of reaching agreement in Geneva, signing the Term Sheet and finally entering into the CRA, both parties were aware that:-
(1) The Charterers were heavily indebted to the Owners, had received numerous demands for prompt payment, backed by the service of anti technicality notices, and were at risk that the time charters might be terminated. The time charters required hire to be paid in full, monthly in advance. The Charterers had asked for a measure of deferral.
(2) Each Owner was a KG investment vehicle, financed by bank loans, and would need a certain minimum time charter revenue to cover their obligations to the banks and pay operating expenses. (The time charters were akin to financing leases or hire-purchase agreements.) The Owners said that the fixed minimum required was US$22,000 per vessel per day.
(3) The Charterers were not willing to divulge the actual earnings of each vessel.
(4) The Clarkson Index, Time Series 69865, is an independent assessment of spot market earnings rates, published monthly in arrears.
(5) The spot market was capable of dramatic rises and falls from month to month. It could well fall below the Floor Rate of US$22,000 per day, as indeed it did during four months in 2009.
(6) The vessels, Mercury Glory, Artemis Glory and Leo Glory ("the Time Chartered Vessels") were to be, and by the time the CRA was signed had been, sub-chartered by their respective Charterers, for 3-year periods that would run until about the end of 2012 or beginning of 2013. The sub-charter hire rates were less than the hire rates in the time charters between the respective Owners and Charterers; but were above the US$22,000 per day minimum the Owners had said they needed to service their obligations to the banks and to pay operating expenses.
The Issues
The principal issues to be determined are:
(1) The semi-annual adjustments — construction/rectification
(i) Whether, upon the true construction of the CRA, when calculating "the average of the Market Rates for the previous period of six months (January to June or July until December each year …)" under Article 2.4.1 and 2.4.2 of Schedule 4, the daily rate input for each month is (a) the higher of (i) US$22,000 and (ii) 3.35% below the Clarkson Index rate referred to in Article 2, para. 2, or (b) 3.35% below the Clarkson Index rate, even if that is less than US$22,000.
(ii) If the answer to (1) is (b), whether the CRA should be rectified so as instead to have effect (a).
(2) Rate of hire after termination of sub-charters
What rate of hire is payable in advance in respect of each Time Chartered Vessel after its respective 'Vessel's Deferred Hire Period'?
(3) Off hire
(i) Was "Saturn Glory" off hire from 17 March 2013 and throughout April 2013 as alleged by Charterers; and
(ii) Was "Neptune Glory" off hire from 2 April 2013 and throughout the remainder of April 2013 as alleged by Charterers?
(4) Relief/Quantum
What relief are the Owners entitled to and how much is now due and outstanding, and not already the subject of judgment, on the monetary claims included in the action?
The trial
In December 2012 the case was set down for trial in November 2013 with a time estimate of 5–7 days.
On Friday 11 October 2013, Clyde & Co LLP, the Owners' solicitors, received notices (one for each Defendant) that the Defendants' solicitors, WFW, were no longer instructed, although it appears that they still represent all of the Defendants "regarding restructuring of the charters and other issues not the subject of the High Court litigation".
So far as this action is concerned, the notices suggested that the Defendants intended to appear "in person", but did not identify any individual(s) by whom the Defendants might intend to appear or indicate when any application might be made for permission to be represented in that way. In the event, no application has been made, nor have WFW been replaced by new solicitors. The Defendants were asked numerous times to communicate their intentions in respect of the trial, but did not respond.
The Defendants did not seek to appear at the trial and it has therefore been conducted in their absence. The Defendants had earlier exchanged witness statements. However, they did not seek to call any...
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