Haugland Tankers as v RMK Marine Gemi Yapim Sanayii Ve Deniz Tasimaciligi Isletmesi as [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | THE HON. MR JUSTICE LANGLEY |
| Judgment Date | 09 March 2005 |
| Neutral Citation | [2005] EWHC 321 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 09 March 2005 |
| Docket Number | Case No: 2005 FOLIO 57 |
[2005] EWHC 321 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
The Hon. Mr Justice Langley
Case No: 2005 FOLIO 57
Mr H. Davies (instructed by Davis & Co) for the Claimant
Mr C. Karia (instructed by Aequitas Law LLP) for the Defendant
Hearing date: 2 nd March 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.
The Hon Mr Justice Langley:
Background
The Claim Form in this matter was issued on 25 January 2005. Particulars of Claim were served two days later. The Defence is dated 22 February. On 25 February, Cresswell J ordered an expedited trial to be heard on 2 March of the issue whether the claimant is entitled to the declaratory relief claimed in the Particulars of Claim.
The Claim
The claim relates to an Option Agreement for the purchase by the claimant from the defendant of an Oil Product Tanker ("the Option Vessel") to be built by the defendant on the terms of a Shipbuilding Contract ("the Option Contract") to be entered into upon exercise of the Option. The declaratory relief claimed in the Particulars of Claim reads:
"(1) A declaration that the claimant has validly exercised its Option under the terms of the Option Agreement dated 17 September 2003 as amended by the Addendum thereto dated 15 October 2003 by serving a notice on the defendant by fax dated 2 December 2004 declaring the exercise of its Option to purchase the Option Vessel; and/or
(2) A declaration that the Option Agreement dated 17 September 2003 as amended by the Addendum thereto dated 15 October 2003 remains in existence and binding on the defendant; and/or
(3) A declaration that the defendant is obliged to enter into the Option Contract as defined by the Option Agreement dated 17 September 2003 as amended by the Addendum thereto dated 15 October 2003."
The Contract for Hull No. 63
On 17 September 2003 the claimant (as Buyer) and the defendant (as Builder) entered into a shipbuilding contract under which the defendant agreed to design, complete and deliver to the claimant a Double Screw Diesel Engine Driven 4,200 deadweight tonnes Oil Product tanker, Hull No. 63.
The Contract for Hull No. 63 required the price of the vessel to be paid in five instalments. The currencies of payment were $US and Euros in equal proportions. The first instalment was "due and payable" upon the defendant issuing a commercial invoice and the claimant (or its bank) receiving a Refund Guarantee securing repayment of the instalment in stated circumstances. The Contract also provided that if any of the first four instalments were not paid by the claimant within 5 banking days after it became due the claimant would be deemed to be in default and if any default continued for a period of 10 days the defendant might, at its option, rescind the contract by giving a fax notice to that effect confirmed in writing upon dispatch of which "this Contract shall be forthwith rescinded and terminated".
Article XIX referred to Payment Guarantees to be provided by the claimant and Refund Guarantees to be provided by the defendant.
Addendum Number One to the Contract for Hull No. 63 was made on 13 October 2003. It revised the payment terms to require a "Preliminary Payment" of €320,000 to be made by the claimant "at the effectiveness of the Contract" the payment to be deducted from the first instalment of the purchase price. The first instalment itself was to be paid within 30 days of a notice from the defendant the notice to be given between 15 April and 15 May 2004. The Contract was to be effective on "fulfilment of all of the following conditions":
"Receipt of the Buyer of the refund guarantee for the Preliminary Payment.
Receipt of the Preliminary Payment by the Builder until (sic) 30 October 2003.
Approval of the Board of Directors of the Builder …."
Thus the Contract was amended to provide for a preliminary payment to be made by 30 October 2003 but the return of that payment was itself to be guaranteed in the same manner as the instalments of the price.
The Option Agreement
Also on 17 September 2003 the claimant and the defendant entered into the Option Agreement. It is the Option Agreement, and in particular the provisions of clauses 2 and 4, which give rise to the present dispute. The Option Agreement (referring to the claimant as the "Buyer" and the defendant as the "Seller") provides (so far as material and with my emphases) that:
"
Dated ….
BETWEEN
…..
WHEREAS.
(A) The SELLER has entered into a Shipbuilding Contract (hereinafter called the Contract) … for designing and completing … One (1) unit …. Identified as the Shipyard's Hull No. 63.
(B) The SELLER has agreed to grant the BUYER an option for one (1) additional Vessel on the terms and conditions set out herein.
IT IS AGREED
1. The SELLER grants to the BUYER an option (the Option) to purchase one (1) additional Vessel (the Option Vessel), such Option Vessel to be identical to the Vessel as specified under the Contract.
2. Upon the exercise by the BUYER of the Option as per clause 4 below the SELLER shall enter into a Shipbuilding Contract (the Option Contract) for the Option Vessel.
3. The Option Contract and its Specification shall be in the same terms and conditions as agreed for the Vessel as per the Contract with the below mentioned amendments:
(a) The Contract price for the Optional Vessel shall be:
Five Million Four Hundred Seventy Thousand United States Dollars (US$ 5,470,000) plus
Four Million Eight Hundred Fifty Two Thousand Euros (€4,852,000)
(b) The Delivery Date for the Optional Vessel is agreed as follows:
Option Vessel shall be delivered to the BUYER after 16 months of effectiveness of its contract.
(c) The BUYER and the SELLER shall undertake to deliver the securities in the form referred to in Article XIX of the Contract to the BUYER and SELLER respectively promptly before effectiveness of the Option Contract.
4. The Option shall be declared by the BUYER by the service of notice latest within 6 months after effectiveness of Contract for Hull No 63. Simultaneously, the BUYER shall be required to pay one percent (1%) (Commitment Fee) of the Contract Price to the SELLER. In case the remaining fourteen percent (14%) of the Contract Price as the remaining part of the first instalment which shall become due upon notice of construction of the Vessel is not paid by BUYER, then the SELLER shall have the right to retain the commitment fee of 1% and this Option Agreement shall become null and void.
The SELLER has the option of not to commence construction of the Vessel prior to August 1, 2004.
If the Shipbuilding Contract for Hull No. 63 does not become effective ….
5. ….
6. The execution of the new Shipbuilding Contract, pursuant to this Option Agreement, shall take place on or before April 10, 2004.
7. This Option Agreement shall be governed by and construed in accordance with the laws of England and the parties hereto submit to the exclusive jurisdiction of the Courts of England."
The Addendum to the Option Agreement
On 15 October 2003 Addendum Number One to the Option Agreement was agreed. It extended the time for "declaration" of the Option by the claimant and for the obligation to commence construction of the vessel by the defendant. It provided:
"The Optional Vessel to be declared by Buyer within 6 months after the first instalment for the firm Vessel is received by Builder, and the Builder shall commence production within 9 months after declaration of the Option Vessel by Buyer and shall deliver the Option Vessel 16 months after commencement of its production."
The General Effect of the Option Agreement and Addendum
The drafting of the Option Agreement and the Addendum to it is not of the most elegant. But the general effect of the resulting agreement is not really in issue. It gave the claimant an option to buy an identical vessel to Hull 63 and to do so on the same terms save as provided in Clause 3 of the Option Agreement. The option could only be "declared" by the claimant in the 6 month period following payment of the first instalment of the price for Hull 63. In the event that payment was made on 16 June 2004 and so the option could be exercised at any time between 16 June and 15 December 2004. If it was not exercised by the later date the option fell away. The defendant had a period of up to 9 months following the exercise of the option before it was obliged to commence "production" of the vessel and 16 months after the commencement of production to deliver the vessel.
The defendant was obliged by Clause 2 "upon the exercise by the Buyer of the Option as per Clause 4" to enter into the contract to build the vessel. The payment of the 1% "commitment fee" under Clause 4 (which was a sum in the region of US$100,000) was not (in contrast to the equivalent provision in Addendum One of the Contract for Hull No. 63) the subject of any refund guarantee securing its re-payment to the claimant in the event of default by the defendant. The fee was to be forfeited, and the Option was to be "null and void", in the event the claimant did not pay the 14% balance of the first instalment of the price. That payment was to be made "upon notice of construction of the vessel" presumably to be given by the defendant but not further defined.
The Facts
On 26 November 2004 the defendant sent an e-mail to the claimant "since the declaration time is coming near". The point made was that the rise in the Euro against the US$ and the currency split in the proposed contract for the Option...
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