Ease Faith Ltd v Leonis Marine Management Ltd
| Jurisdiction | England & Wales |
| Judge | THE HON. MR JUSTICE ANDREW SMITH,MR JUSTICE ANDREW SMITH |
| Judgment Date | 23 February 2006 |
| Neutral Citation | [2006] EWHC 232 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2004 FOLIO 687 |
| Date | 23 February 2006 |
[2006] EWHC 232 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
The Hon. Mr Justice Andrew Smith
Case No: 2004 FOLIO 687
Nigel Jacobs and Paul Toms (instructed by Brookes & Co) for the Claimant
Susannah Jones (instructed by Hextalls LLP) for the Defendant/Second Part 20 Claimant
Michael Holmes (instructed by Clifford Chance LLP) for the Part 20 Defendant/Second Part 20 Claimant
Hearing dates: 15, 16, 17, 22, 23, 24 November 2005
Approved Judgment
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.
Introduction
The "Kent Reliant" was a bulk carrier built in 1977 that suffered bottom damage as a result of grounding off Puerto Rico in September 2003. She was salved and offered for sale by her underwriters.
Chenco Marine Inc ("Chenco") buy ships for demolition in China. By a Memorandum of Agreement dated 25 November 2003 Chenco bought the "Kent Reliant" "as is where is" San Juan, Puerto Rico from Atlas Navigation Company Limited ("Atlas") for US$530,031.84. A deposit of 10% of the purchase price was paid on 27 November 2003 and the balance on 3 December 2003.
Ease Faith Limited ("Ease Faith") carry on business as purchasers of ships that are sold for demolition. Their Chairman and Managing Director, Mr Zhong Weigo, who is also known as James Zhong, has contacts with ship-breakers in China. From time to time Ease Faith and Chenco have worked together, and in October 2003 Mr Chen Shou Jen, also known as Jimmy Chen, the President of Chenco, asked Mr Zhong whether he could find a ship-breaker in China who was interested in buying the "Kent Reliant". Ease Faith and Chenco decided to co-operate over her purchase and sale, and they entered into an agreement that was recorded in a memorandum dated 27 November 200Chenco were responsible for arranging the purchase of the "Kent Reliant" and for making towage arrangements. Ease Faith were responsible for selling the vessel to Zhanjiagang Wuyu Ship Recycling Company, whom I shall call "the Yard". The memorandum stipulated that the vessel was to be delivered at anchorage in Zhanjiagang, China before 31 March 2004. Ease Faith were to arrange insurance, to purchase the vessel, to take title to her and to sell her. The full purchase price was paid by Ease Faith. Mr Zhong's evidence was that Chenco provided a bill of sale for the "Kent Reliant" in favour of Ease Faith, and I accept this evidence, although the bill itself was not produced in evidence. (Mr Zhong explained that the original bill was handed over to the Yard and a copy of it was not kept). As for the distribution of profits between Chenco and Ease Faith, the memorandum of agreement (in translation) stated as follows: "Both parties will calculate its invested costs respectively after completion of physical delivery of the Vessel. Profit to be proportional distributed as mutually agreed". Chenco and Ease Faith, as I find on the evidence, have not yet decided how profits from the venture, if there are any, will ultimately be split between them.
The "Kent Reliant" was delivered by Atlas on 3 December 2003. By an agreement dated 15 December 2003 (to which I shall refer as the "sub-towcon"), Ease Faith as hirer agreed with Leonis Marine Management Limited ("Leonis") as tugowner that Leonis would use their best endeavours to have a tug called the "Naporistyi" ("the tug") take the "Kent Reliant" to Zhanjiagang. Leonis are a company incorporated in Mauritius for the purpose of chartering tugs for the business of Regulus Shipping Services LLC ("Regulus") of Dubai, who manage and operate deep sea towage and salvage tugs, and sometimes charter in tonnage if business so demands.
The tug was a Russian vessel equipped with two engines and two auxiliary engines. At the relevant time, her master was Captain Domenko. In order to fulfil the sub-towcon, Leonis entered into an agreement (the "head towcon") with Cloudfree Shipmanagement Limited ("Cloudfree") as tugowner for the services of the tug. The head towcon was dated 20 December 2003. Cloudfree were the bareboat charterers of the tug and she was managed and operated on behalf of Cloudfree by Russian Inspectors & Marine Surveyors Corporation ("Rimsco"), whose President is Captain Fazil Aliev. Rimsco are a substantial business with over 2,000 people working for them, and have their own technical department.
On 27 January 2004 the convoy of the tug and the "Kent Reliant" departed from Balboa. They arrived off Shanghai on about 24 April, but by then disputes had arisen between Ease Faith, Leonis and Cloudfree. The "Kent Reliant" was not delivered at Zhanjiagang until 2 May 2004 after a fund had been established under an escrow agreement dated 29 April 2004 to secure claims made by Cloudfree against Leonis and by Leonis against Ease Faith.
Although the sums in dispute are relatively small, the parties raised a multiplicity of issues, a good number of which have been abandoned during the trial. The costs involved in this litigation are clearly quite disproportionate to the importance of the dispute in financial terms.
The towcons
Both the head towcon and the sub-towcon were in standard International Ocean Towage Agreement form. They described the parties as the "Tugowner" and the "Hirer" and stated that it was mutually agreed between the parties that the tugowner should "subject to the terms and conditions of this Agreement which consists of Part I including additional clauses if any agreed and stated in Box 39, and Part II, use his best endeavours to perform the towage or other service(s) as set out herein". The agreement therefore comprised the boxes completed in Part I, any additional clauses mentioned in Part I (at box 39) and standard printed clauses in Part II. Among the printed clauses in Part II of both the sub-towcon and the head towcon were these provisions:
i) Clause 16, which was headed "Cancellation and Withdrawal", inter alia entitled the Tugowner to end the tow and to leave the "Kent Reliant" for the hirer to repossess her in specified circumstances, including if any amount payable under the agreement had not been paid within "seven running days" after it was due.
ii) Clause 18, which was headed "Liabilities", excluded liabilities for certain losses.
iii) Clause 21, which was headed "Lien", provided the Tugowner should be entitled to exercise a possessory lien over the "Kent Reliant" in respect of "any sum howsoever or whatsoever due to the tugowner" under the agreement and should be entitled to a "Delay Payment" at a specified rate for any reasonable delay to the tug resulting from the exercise of the lien.
Part I and the additional clauses of the sub-towcon also included the following provisions :
i) In box 5 the "Kent Reliant" was said to have a gross tonnage of 12,409 long tonnes and a light displacement tonnage of 6,795 long tonnes (the equivalent of 6,904 mt).
ii) Box 6 stated that she had a length of 155 metres and a beam of 21 metres, and that her fore and aft towing draughts were 2.7m and 7.9m respectively.
iii) She was described as "out of class" (box 9), and her "General condition" was "satisfactory" (box 11).
iv) In box 12, which is headed "Particulars of cargo and/or ballast and/or other property on board the tow", it was stated "Deadship in light ballast condition".
v) The tug was said to have a certified bollard pull of "Abt 40 tons" and her indicated horse power was stated as "2 x 1,500 BHP".
vi) In box 23, headed "Contemplated route", there was the provision "direct safe route at tugmaster's discretion at utmost dispatch".
vii) The place of departure was given as Cristobal, although in the event she departed Balboa. The place of destination was Zhanjiagang.
viii) There was a lump sum price for towage of US$550,000 if the tow was from the Atlantic side of the Panama Canal or of US$540,000 if the tow was from the Pacific side (as in fact it was). The towage price was to be paid in five instalments each of 20%, that is to say of US$108,000 each, the first payable upon signing of the agreement, the second upon the tug and tow leaving the place of departure, the third payable upon the convoy passing the 130 west degrees longitude, the fourth payable upon it passing the international date line and the fifth payable two banking days before the arrival of the convoy at the place of destination and the release of the tow. There was provision for interest to be paid upon outstanding sums at the rate of 10% per annum.
ix) Leonis would advise Ease Faith every 24 hours of the tug's position, course and speed and of other matters.
x) The "sea rate" for delay payments was to be US$3,750 per day pro rata.
Part I and the additional clauses of the head towcon, perhaps surprisingly, differed from the sub-towcon, and included these provisions:
i) The "Kent Reliant" was said in box 5 to have a gross tonnage of "12,409" and a light displacement tonnage of "abt 6,500T".
ii) Box 6 stated that she had a length of 159 metres and a beam of 21 metres, and that her fore and aft towing draughts were 2.7m and 7.7m respectively.
iii) As in the sub-towcon, the "Kent Reliant" was described as "out of class", and her "General condition" was said to be "satisfactory".
iv) In box 12 she was described as "Deadship in light ballast condition".
v) The tug was said to have a certified bollard pull of 40 tons and her indicated horse power was stated as "2 x 1,500 BHP".
vi) In box 23, there was the provision...
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