Griffon Shipping LLC v Firodi Shipping Ltd and Another
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr. Justice Teare,Mr. Justice Teare |
| Judgment Date | 21 March 2013 |
| Neutral Citation | [2013] EWHC 593 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2012 Folio 1050 |
| Date | 21 March 2013 |
[2013] EWHC 593 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF AN ARBITRATION CLAIM
AND
IN THE MATTER OF AN ARBITRATION
Royal Courts of Justice
Rolls Building 7 Rolls Buildings
Fetter Lane London EC4A 1NL
Mr. Justice Teare
Case No: 2012 Folio 1050
Mr. Marcus Mander (instructed by Reed Smith LLP) for the Claimant
Ms. Charlotte Tan (instructed by Holman Fenwick Willan LLP) for the Defendant
Hearing date: 22 February 2013
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 section 69 of the Arbitration Act 1996 brought with the permission of Hamblen J. It raises a controversial issue as to the true construction of the Norwegian Saleform 1993 ("NSF 1993") and the payment of the buyer's deposit.
The relevant facts may be shortly stated. On 28 April 2010 the Claimant Sellers (the "Sellers") agreed by way of an email recap to sell the mv GRIFFON to the Defendant Buyers (the "Buyers") at a price of US$22m. On 1 May 2010 the Memorandum of Agreement ("MOA") based upon NSF 1993 was signed. A deposit of 10%, some US$2,156,000, was payable within three banking days of signature, that is, by 5 May 2010. The deposit was not paid by 5 May 2010. On 6 May 2010 the Sellers accepted the Buyers' conduct as a repudiation of the MOA and/or cancelled the MOA pursuant to an express contractual right to do so and thereby brought the MOA to an end. The Buyers accepted that their failure to pay the deposit was a repudiatory breach (see paragraph 31 of the Award).
The damages recoverable by the Sellers on the conventional measure of the difference between contract and market price were said to be US$275,000, that is, very substantially less than the deposit.
The preliminary issue determined by the arbitration tribunal was expressed in these terms:
"Is the effect of the Contract and/or the MOA such that, by reason of the failure by Buyers to pay the deposit in accordance with Clause 2 of the Contract and/or Clause 2 of the MOA, Sellers, having been entitled to, and having terminated the Contract and/or the MOA on 6 May 2010, may recover the amount of the deposit as a debt, or by way of damages."
So the question was whether the Sellers could recover the deposit or could only claim damages in a lesser sum. There is no dispute that if the deposit had been paid the Sellers would have been entitled to retain the deposit, even though it would have exceeded the recoverable damages.
The relevant terms of the MOA are as follows:
"1. Purchase price USD 22,000,000 …less 2% total commission.
2. Deposit
As security for the correct fulfilment of this Agreement the Buyer shall pay a deposit of 10% (ten per cent) of the Purchase Price within 3 (three) banking days after this Agreement is signed by both parties and exchange by fax/email. This deposit shall be placed in the Sellers' nominated account with the Royal Bank of Scotland PLC, Piraeus and held by them in a joint interest bearing account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers ………
3. Payment
The said Purchase Price ……..shall be paid …….on delivery of the vessel……..
13. Buyers' default
Should the deposit not be paid in accordance with Clause 2, the Sellers shall have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all expenses incurred together with interest.
Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, in which case the deposit together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all expenses incurred together with interest."
The Sellers' case was that the right to payment of the deposit had accrued before the MOA was terminated and accordingly the Sellers were entitled to claim the deposit either as a debt or as damages for breach of contract. The Buyers' case was that in the event of non-payment of the deposit the Sellers, on the true construction of the MOA and in particular clause 13 thereof, were only entitled to claim "compensation for losses" and not the deposit.
The arbitration tribunal preferred the Buyers' case. It held, by an award dated 9 July 2012, that the Sellers were not entitled to recover the deposit but were restricted to their claim in damages. This was the remedy provided by the first limb of clause 13.
The issue decided by the arbitration tribunal is controversial as the following history shows:
i) In the NSF 1966 the equivalent of clause 13 read as follows:
"Should the purchase money not be paid as per clause 16 the sellers have the right to cancel this contract in which case the amount deposited shall be forfeited to the sellers. If the deposit does not cover the sellers loss they shall be entitled to claim further compensation for any loss and for all expenses together with interest at the rate of 5 per cent. per annum."
ii) It is to be noted that NSF 1966 did not contain the first limb of clause 13 in NSF 1993 which dealt expressly with the non-payment of the deposit. The effect of NSF 1966 was considered in Damon Compania Naviera v Hapag-Lloyd International, the Blankenstein [1985] 1 WLR 435. In that case the deposit was due "on signing". But the MOA was never signed and so no deposit was paid. The sellers claimed the amount of the deposit. The Court of Appeal held that there was a binding contract (notwithstanding that the MOA had not been signed) and, by a majority, that the sellers were entitled to damages for the buyers' repudiation of the contract, the measure of damages being the amount of the deposit; see pp.449–452 per Fox LJ and p.457 per Stephenson LJ. Robert Goff LJ dissented on this point. He held that the sellers were entitled to damages for their loss of bargain, namely, the difference between the contract and market price of the ship, which was less than the amount of the deposit. However, he accepted that if the deposit had fallen due before the contract had been terminated the sellers could claim the deposit in debt; see p.456–7.
iii) Clause 13 was amended in 1983 (before the decision of the Court of Appeal in the Blankenstein) to include the first limb regarding the non-payment of the deposit. The explanatory note produced by the Norwegian Shipbrokers' Association and published by BIMCO did not disclose any particular reason for the addition of the first limb; see the text of the note in Sale of Ships 2 nd.ed. by Strong and Herring at appendix 2 p.325. The new form of clause 13 was repeated in NSF 1987 and read as follows:
13 Buyers' default
Should the deposit not be paid as aforesaid, the Sellers shall have the right to cancel this contract and they shall be entitled to claim compensation for their losses and for all expenses incurred together with interest at the rate of 12% per annum.
Should the Purchase Money not be paid as aforesaid, the Sellers have the right to cancel this contract, in which case the amount deposited together with interest earned, if any, shall be forfeited to the Sellers. If the deposit does not cover the Sellers' losses, they shall be entitled to claim further compensation for their losses and for all expenses incurred together with interest at the rate of 12% per annum."
iv) NSF 1987 was considered by the Court of Appeal of Singapore in Zalco Marine Services v Humboldt Shipping [1998] 2 SLR 536. As in the Blankenstein the contract came to an end before the deposit fell due and the seller again claimed the deposit as damages but the Court of Appeal held that the sellers' only remedy was for "compensation" pursuant to the first limb of clause 13 which was to be assessed on the conventional basis of the difference between the contract and market price. The decision in the Blankenstein was distinguished. On the wording of NSF 1987 the seller was only entitled to "compensation" pursuant to the first limb of the clause as opposed to the forfeiture of the deposit in the second limb of the clause; see paragraph 45 of the decision.
v) The two practitioners' texts on ship sales support the approach of the Singapore Court of Appeal; see Sale of Ships 2 nd.ed. by Strong and Herring at paragraph 5.10 and Ship Sale and Purchase 6 th.ed. by Goldrein, Hannaford and Turner at paragraph 5.50.3.
vi) In a London arbitration in 2011 the arbitration tribunal had to consider a claim for a deposit under NSF 1993 (which is essentially in the same terms as NSF 1987) in circumstances where the deposit had fallen due for payment, but had not been paid, before the MOA was terminated. The tribunal held that the sellers were entitled to the deposit either because it had fallen due for payment (as per the view of Robert Goff LJ in the Blankenstein) or as damages for breach of the obligation to pay the deposit (as per the decision of the majority of the Court of Appeal in the Blankenstein.) With regard to the effect of clause 13 the tribunal considered that there was nothing in it which deprived the sellers of the accrued right to an unpaid deposit and that in any event the "compensation" in the first limb was wide enough to include the value of the deposit which had accrued due.
The facts of the present case are the same as those which confronted the London arbitration tribunal in 2011. Both cases involved the form of clause 13 found in NSF 1993. However, the arbitration tribunal in the present case differed from the...
To continue reading
Request your trial
-
Firodi Shipping Ltd v Griffon Shipping Llc
...COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION, COMMERCIAL COURT Mr Justice Teare [2013] EWHC 593 (Comm) Royal Courts of Justice Strand, London, WC2A 2LL Before: Sir Brian Leveson President of the Queen's Bench Division Lord Justice Tomlinso......
-
Griffon Shipping LLC v Firodi Shipping Ltd [QBD (Comm)]
...EWHC 593 (Comm)" class="content__heading content__heading--depth1"> [2013] EWHC 593 (Comm) Queen's Bench Division (Commercial Court). Teare J. Griffon Shipping LLC and Firodi Shipping Ltd. Marcus Mander (instructed by Reed Smith LLP) for the Charlotte Tan (instructed by Holman Fenwick Willa......
-
PT Sandipala Arthaputra v STMicroelectronics Asia Pacific Pte Ltd and others
...Petroleum Holdings Ltd v Global Process Systems LLC [2013] EWHC 214 (Comm) (“Cadogan”) and Griffon Shipping LLC v Firodi Shipping Ltd [2013] EWHC 593 (Comm) (“Griffon”). For example, in Griffon at [16], the court held that in any case where the question is whether a payment which accrued du......
-
Firodi Shipping Ltd v Griffon Shipping LLC
...due before contract terminated Seller entitled to recover deposit as debt or damages. This was an appeal from a decision of Teare J ([2013] EWHC 593 (Comm); [2013] 1 CLC 741) that where the buyer under a contract on the Norwegian Saleform 1993 had failed to pay the deposit within the time l......
-
Case Note: Griffon Shipping LLC v Firodi Shipping Ltd. [2013] EWHC 593
...to avoid such possible result. On 21 March 2013, Mr Justice Teare handed down judgment in Griffon Shipping LLC v Firodi Shipping Ltd. [2013] EWHC 593, on the claimant Sellers' successful appeal (under section 69 of the Arbitration Act 1996) of an arbitration award dated 9 July 2012. Reed Sm......
-
The Griffon: The Deposit Or Compensation? What Can A Seller Claim When The Buyer Fails To Pay The Deposit?
...Shipping LLC v. Firodi Shipping Ltd (The Griffon) [2013] EWHC 593 (Comm) The recent decision of Mr Justice Teare in this case heralds a departure from the previously held view that under clause 13 of the standard form Norwegian Sale Form 1993, where a buyer fails to pay the deposit under a ......