Griffon Shipping LLC v Firodi Shipping Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Teare J. |
| Judgment Date | 21 March 2013 |
| Date | 21 March 2013 |
| Court | Queen's Bench Division (Commercial Court) |
Queen's Bench Division (Commercial Court).
Teare J.
Marcus Mander (instructed by Reed Smith LLP) for the claimant.
Charlotte Tan (instructed by Holman Fenwick Willan LLP) for the defendant.
The following cases were referred to in the judgment:
Cadogan Petroleum Holdings v Global Process SystemsUNK [2013] EWHC 214 (Comm); [2103] 1 CLC 721.
Damon Compania Naviera SA v Hapag-Lloyd International SA (The Blankenstein)UNK [1983] 2 Ll Rep 522; [1985] 1 WLR 435 (CA).
Dean v WiesengrundELR [1955] 2 QB 120.
Dewar v MintoftELR [1912] 2 KB 373.
Dies v British and International Mining and Finance Corp LtdELR [1939] 1 KB 724.
Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) LtdELR [1974] AC 689.
Hinton v SparkesELR (1868) LR 3 CP 161.
Howe v SmithELR (1884) 27 Ch D 89.
Hyundai Heavy Industries Co Ltd v PapadopoulosWLR [1980] 1 WLR 1129.
Johnson v AgnewELR [1980] AC 367.
McDonald v Dennys Lascelles LtdUNK (1933) 48 CLR 457.
Mayson v ClouetELR [1924] AC 980.
Millichamp v JonesWLR [1982] 1 WLR 1422.
Palmer v TempleENR (1839) 9 Ad & El 508.
Rainy Sky SA v Kookmin Bank [2011] 2 CLC 923; [2011] 1 WLR 2900.
Soper v ArnoldELR (1889) 14 App Cas 429.
Zalco Marine Services v Humboldt Shipping [1998] 2 SLR 536.
Shipping — Sale of ship — Norwegian Saleform 1993 — Deposit — Buyer failed to pay agreed 10% deposit — Seller accepted buyer's conduct as repudiatory — Conventional measure of damages less than deposit — Right to payment of deposit had fallen due before contract terminated — Seller entitled to recover deposit which accrued due unconditionally before sale agreement terminated.
This was an appeal pursuant to s. 69 of the Arbitration Act 1996 concerning the true construction of the Norwegian Saleform 1993 (NSF 1993) and the payment of the buyer's deposit.
The claimant sellers agreed to sell the mv Griffon to the defendant buyers at a price of US$22m. The memorandum of agreement based on NSF 1993 provided for a 10 per cent deposit to be paid within three banking days of signature. The deposit was not paid on time. 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.
The issue for the arbitral tribunal was whether the sellers could recover the 10 per cent deposit rather than damages on the conventional measure of the difference between contract and market price, which was said to be US$275,000. The tribunal held that the sellers were not entitled to recover the deposit but were restricted to their claim in damages; that was the remedy provided by the first limb of clause 13 in NSF 1993.
Held, allowing the sellers' appeal:
The language of the MOA provided that the sellers could recover the amount of the deposit in any event. That intention was to be found in clause 2 of the MOA, which expressly described the payment of the deposit as security for the correct fulfilment of the agreement. That indicated that when the deposit accrued due, as it did before the MOA was terminated, it accrued due unconditionally. The rights provided by clause 13 of the MOA were in addition to the right to claim the deposit as a debt. Clause 13 did not expressly or impliedly deprive the sellers of the right to payment of the deposit in circumstances where it had accrued due. The clear meaning of the MOA was that where the deposit required by clause 2 was not paid on the due date it remained payable and clause 13 provided the seller with an additional remedy rather than with a remedy in place of that which would naturally flow from clause 2.
JUDGMENT
Teare J:
1. 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.
2. 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).
3. 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.
4. 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.”
5. 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.
6. 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.'
7. 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.
8. 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...
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Firodi Shipping Ltd v Griffon Shipping LLC
...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 limited by cl. 2, and......