Geden Operations Ltd v Dry Bulk Handy Holdings Inc. and Another
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 28 March 2014 |
| Neutral Citation | [2014] EWHC 885 (Comm) |
| Date | 28 March 2014 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | 2013 Folio 1091 |
[2014] EWHC 885 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Building, Fetter Lane
London, EC4A 1NL
The Hon. Mr Justice Popplewell
2013 Folio 1091
Charles Kimmins QC and Thomas Corby (instructed by Lax & Co) for the Claimant
Timothy Hill QC and Jeremy Lightfoot (instructed by Ince & Co) for the Respondents
Hearing dates: 21 March 2014
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.
This is an appeal pursuant to s.69 of the Arbitration Act 1996 against an award by three experienced maritime arbitrators dated 17 July 2013 ("the Award"). It is concerned with whether disponent owners were in anticipatory breach of a three year time charter so as to entitle the charterers to treat themselves as discharged from further performance. The majority of the tribunal held that the disponent owners were not in anticipatory breach, the charterers were not entitled to terminate, the charterers' purported termination was itself a repudiation which had been accepted by the disponent owners, and the disponent owners were entitled to damages of over US$ 6.5 million. The source of the dispute was the right of the charterers to give voyage instructions for the vessel to transit the Gulf of Aden ("GOA"), a well known area of piracy, for which additional war risk premium is payable. The charterers contended that they were entitled to give orders for such voyages, subject to paying the additional cost. The disponent owners contended that there was no such right and that GOA transit was subject to the disponent owners' consent. The latter was the position under the head charter, such that the disponent owners would only be able to comply with such a voyage order if the head owners gave consent. The Tribunal held that on the true construction of the charterparty GOA transit was not subject to the disponent owners' consent. The disponent owners' rights and obligations were therefore not back to back in this respect.
Permission to appeal was granted by Males J on 11 November 2013.
The reasons attached to and forming part of the Award were those of the majority ("the Reasons"). The other arbitrator published his dissenting reasons for considering that the disponent owners were in anticipatory breach and that the Charterers' termination was lawful. The following facts are taken from the Reasons.
By a time charterparty dated 2 July 2010 on an amended NYPE form, the Defendant ("the Owners") chartered the 58,000 mt Supramax bulk carrier M/V BULK URUGUAY ("the Vessel") to the Claimant ("the Charterers") for about 35 to about 37 months at a daily hire rate of $18,500. The Charterparty was concluded whilst the Vessel was under construction in the Philippines, with delivery anticipated the following year. Clause 8 provided in the usual way that the Captain was to be under the orders and directions of the Charterers as regards employment of the Vessel.
The Charterparty contained (as the arbitrators found) a Conwartime 2004 clause and an amended BIMCO Piracy Clause. The latter had been specifically amended by deletion of paragraphs (a) and (b) which reflected the market practice where it was intended that the vessel could transit GOA without the owner's consent. Such a vessel is marketed as "GOA OK", which gives her a competitive advantage over vessels for which such a route requires owners' consent.
During the negotiations the Charterers had made it plain to the Owners that the ability to transit the GOA without seeking the Owners' permission was a "deal breaker" for the Charterers (Reasons para 136). The Owners knew from the course of the Charterparty negotiations that at that time such GOA OK status was a matter of importance to the Charterers (Reasons paras 132, 134, 145).
By a message via brokers on 8 July 2011, shortly before the Vessel was to be delivered into the Charterparty concluded a year earlier, Charterers indicated that for her maiden voyage from the Yard in the Philippines they were looking to bring the Vessel back to the Atlantic via GOA and asked for information regarding the additional premium costs. The Owners asked head owners for permission in relation to this maiden voyage. Head owners initially refused permission for GOA transit on 11 July 2011. On 15 July 2011 head owners changed their position and granted permission. In doing so they made clear that permission was granted for this voyage only and was not to form a precedent for other voyages.
There followed correspondence, some of which is set out in the Reasons, in which the Owners asserted that the Charterparty terms required their permission in order to transit GOA, and indicated that the Owners' position in relation to giving permission would be dictated by the position taken by head owners. Matters culminated in the Charterers' email of 23 July 2011 (Reasons para 93) in which the Charterers treated the Owners' insistence that prior consent would have to be obtained on each occasion as a repudiatory breach, which they purported to accept as terminating the Charterparty. By an email of 25 July 2011 the Owners accepted the Charterers' purported termination as itself a repudiatory breach.
The Reasons identified the legal test to be applied in determining whether the Owners' stance entitled the Charterers to terminate on 23 July 2011 in the following terms at paragraph 156:
"Two sub-issues seemed to us to arise in the context of the alleged repudiation:-
(a) Did the Owners by their words or conduct evince an intention not to perform, or expressly declare that they would be unable to perform, their obligations under the Charterparty?
(b) If so, did such a refusal have the effect of substantially depriving the Charterers of the whole benefit which it was the intention of the parties that they should obtain from the contract?"
The majority answered both questions no.
As to the first, their reasoning was as follows:
(1) The Owners' position relating to consent was bound to be dictated by the position taken by the head owners, and always would be. The answer to any request made to the head owners for permission to transit the GOA in the foreseeable future might well be no (Reasons para 157).
(2) The Owners' conduct amounted to no more than an assertion that the Charterers required their permission in order to transit the GOA. It did not involve a refusal to comply with an order to transit the GOA (Reasons para 160).
(3) It did not follow from the fact that Owners required the head owners' consent for any GOA transit that such consent would not be forthcoming at such time as the Charterers might have ordered the Vessel to transit the GOA, or that there would necessarily be some delay in complying with the Charterers' orders to do so if and when they were given (Reasons para 162). Had such an order been given, the Owners may well have been able to comply promptly with it (Reasons para 163). The Charterers' case at its highest was that it was possible that on some occasions consent might not have been forthcoming, although this conclusion was essentially speculative (Reasons para 168).
In the light of these findings their conclusion on the first question was expressed in these terms at para 167:
"That being so, we considered that the question was whether a reasonable person viewing the messages sent by the Owners over the whole of the relevant period, would conclude that the Owners had evinced an intention not to comply or not to comply promptly if at some time in the future during the three year period of the charter the Charterers gave orders to transit the GOA. We could not accept that any reasonable person would have reached the conclusion that the Owners had made that clear by 23 rd July."
In relation to the second question the majority's reasoning and conclusion was as follows:
(1) The Vessel would have been traded initially in the Far East; the Charterers' evidence that they were seriously intending to take the Vessel through the GOA on her maiden voyage was rejected (Reasons para 178).
(2) Thereafter it is likely that the Vessel would have been traded in the Far East for the foreseeable future; alternatively if she had been repositioned to the Mediterranean on her maiden voyage, for which head owners had given GOA transit permission, she would have remained in the Atlantic for the foreseeable future and would not therefore have needed to transit the GOA southbound in the foreseeable future (Reasons para 200); the possibility that the Vessel might be unable to transit the GOA at some stage in the foreseeable future could not be regarded as having any significant effect on her earning capacity at the date of delivery (Reasons para 179). Although Mr Kimmins QC argued that the findings in paragraph 200 were addressed to a Golden Victory argument which allowed account to be taken of the intentions of the Charterers after the date of termination, the terms of paragraph 179 of the Reasons make clear that this was the majority's view of the Charterers' intention at the date of termination.
(3) Since the Charterers did not control their own cargoes, the effect of not being able freely to transit GOA in the longer term was to be measured by the competitive disadvantage to the Charterers in seeking potential sub-charterers as against vessels which could be marketed as GOA OK. In this respect the fact that the Vessel could not be marketed as GOA OK put her at something of a competitive disadvantage. This had to be seen against the ability to trade the...
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