Havila Kystruten A.S. v Abarca Companhia De Seguros, S.A.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henshaw |
| Judgment Date | 16 December 2022 |
| Neutral Citation | [2022] EWHC 3196 (Comm) |
| Docket Number | Case No: CL-2020-000246 and CL-2020-000559 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 3196 (Comm)
THE HONOURABLE Mr Justice Henshaw
Case No: CL-2020-000246 and CL-2020-000559
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane,
London, EC4A 1NL
Sean O'Sullivan KC and Rani Noakes (instructed by Watson Farley & Williams LLP) for Havila Kystruten A.S.
Gemma Morgan and Joseph Gourgey (instructed by Preston Turnbull LLP) for Abarca Companhia de Seguros SA
Paul Henton (instructed by Preston Turnbull LLP) for Hijos de J. Barreras SA
Hearing dates: 11–15 and 18–22 July 2022
Draft circulated to parties: 2 December 2022
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.
| (A) INTRODUCTION | 4 |
| (B) PRINCIPAL ISSUES | 5 |
| (C) WITNESSES | 5 |
| (D) FACTS | 7 |
| (1) The parties | 7 |
| (2) Background to the SBCs | 7 |
| (3) The SBCs | 8 |
| (4) Events leading up to Addendum 7 (signed 28 February 2019) | 10 |
| (5) Addendum 7 | 36 |
| (6) Events leading up to, and terms of, Addendum 8 | 41 |
| (7) Events after Addendum 8 up to 21 June 2019 | 43 |
| (8) The Yard's 21 June 2019 notice and subsequent events | 48 |
| (9) Addendum 9 and subsequent events | 64 |
| (E) WHETHER THE YARD BECAME ENTITLED TO TERMINATE PURSUANT TO ADDENDUM 7 | 78 |
| (1) Principles | 78 |
| (2) Application | 80 |
| (a) The relevant factual background | 80 |
| (b) Meaning of financing “confirmed” by a “written, committed statement” | 83 |
| (c) Was GTLK's 16 July 2019 letter a “written, committed statement”? | 90 |
| (d) The meaning of Addendum 7 § 2.5.1[i] | 90 |
| (e) Whether a right to terminate arose under Addendum 7 § 2.5.1[i] | 94 |
| (F) WHETHER THE YARD WAIVED ANY RIGHT TO TERMINATE PURSUANT TO ADDENDUM 7 | 99 |
| (1) Principles | 99 |
| (2) Application | 101 |
| (G) WHETHER THE YARD BECAME ENTITLED TO TERMINATE PURSUANT TO ADDENDUM 9 | 103 |
| (1) Principles | 103 |
| (2) Application | 106 |
| (H) HAVILA'S ENTITLEMENT TO TERMINATE THE SBCS | 110 |
| (1) Common law termination and recovery of instalments | 111 |
| (2) Termination under SBC Article IV.1(d) (vessel delivery) | 115 |
| (3) Termination under SBC Article XII.3 (insolvency proceedings) | 117 |
| (a) Commencement of proceedings | 122 |
| (b) Effect of subsequent non-admission | 125 |
| (c) Whether dissolution proceedings commenced for SBC Article XII.3 purposes | 127 |
| (d) Affirmation | 128 |
| (I) HAVILA'S CLAIMS UNDER THE INSURANCE BONDS | 129 |
| (1) Payment on demand | 129 |
| (a) Principles | 129 |
| (b) Application | 131 |
| (2) Whether the bonds respond to termination at common law | 136 |
| (J) THE YARD'S CLAIMS FOR DAMAGES | 137 |
| (1) Principles | 137 |
| (a) Election | 137 |
| (b) Repudiatory breach | 140 |
| (c) Exclusion clauses | 142 |
| (2) Application | 143 |
| (a) Election | 143 |
| (b) Repudiatory breach | 144 |
| (c) Exclusion clauses | 145 |
| (K) CONCLUSIONS | 147 |
| ANNEX: THE YARD'S APPLICATION FOR PERMISSION TO AMEND | 148 |
| The proposed amendment | 148 |
| Principles | 149 |
| Application (1): present trial | 151 |
| Application (2): second phase | 155 |
(A) INTRODUCTION
These claims concern the termination of two shipbuilding contracts dated 10 April 2018 between Havila Kystruten AS (“ Havila”) and Hijos de J. Barreras SA (“ the Yard”) (together, “ the SBCs”) for the design and build of two coastal passenger vessels for a price of EUR 108 million per vessel (“ the Vessels”).
The Yard purported to terminate the SBCs on 24 November 2019 on grounds including that Havila had failed to comply with an obligation arising under addenda to the SBCs to provide a written committed statement of its financing for the Vessels, and that (pursuant to the contractual mechanism) the parties had concluded that there was no other financial arrangement to be provided by Havila in order to avoid termination and/or cancellation of the SBCs. The Yard seeks, among other relief, payment of two instalments which it claims fell due from Havila prior to termination, and damages.
Havila claims that the Yard was not entitled to terminate pursuant to those provisions. Havila itself in due course gave notice to terminate the SBCs, on various grounds, on 11 February 2020. On that basis, Havila claims (a) the recovery from the Yard of three instalments which it had already paid to the Yard at the time of termination, in the aggregate sum of €18,400,000 per Vessel, and (b) the same sums from Abarca Companhia de Seguros SA (“ Abarca”) under a series of six insurance bonds dated 1 March, 30 April and 27 May 2019 (collectively “ the Bonds”). The Bonds provided security to Havila (the exact nature of which I consider later) in the event of termination of the SBCs and a claim by Havila to recover instalments it had paid to the Yard.
This judgment follows a trial of these issues in July 2022. For the reasons set out below, I have concluded that the Yard was not entitled to terminate the SBCs; that Havila was entitled to and did validly terminate the SBCs; and that Havila is entitled to recover the instalments from the Yard and, under the Bonds, from Abarca.
On the first and second days of trial, the Yard advanced an application, issued on 28 June 2022, for permission to amend to add an additional claim against Havila for approximately €32.8 million, representing further instalments said to be due from Havila to the Yard under the SBCs. I gave a brief ruling, to the effect that I would not permit the proposed amended case to be advanced at the present trial; and I would decide as part of, or concurrently with, my judgment following trial whether to allow the amendment to be advanced in the context of the second phase of the case (if any). The potential for a second phase existed following an agreement that if the Yard succeeded in principle in its damages claims against Havila, then those would be determined later. I indicated that I would give my reasons for the ruling at the same time as handing down judgment on the substantive issues, in order to minimise disruption to the trial. My reasons are set out in the Annex to this judgment.
(B) PRINCIPAL ISSUES
The main issues can be summarised as follows:
i) whether the Yard was entitled to terminate the SBCs for breach of Havila's obligations under Addendum 7 to the SBCs (as construed by reference to Addendum 8);
ii) if so, whether the Yard waived any such right;
iii) whether the Yard was entitled to terminate the SBCs for breach of Havila's obligations under Addendum 9 of the SBCs;
iv) if the Yard did not validly terminate the SBCs, whether Havila was entitled to terminate them:
a) on the basis of the Yard's purported termination having been a repudiatory act which Havila accepted;
b) under Article IV.1(d) of the SBCs (vessel delivery); and/or
c) under Article XII.3 of the SBCs (insolvency proceedings).
v) whether the insurance bonds issued by Abarca are in the nature of ‘on demand’ bonds, and whether they respond to a damages claim following termination by Havila of the SBCs at common law; and
vi) if the Yard was entitled to terminate the SBCs, whether it is entitled to claim damages from Havila for wasted expenditure.
(C) WITNESSES
Havila called Per Saevik, Stein Pettersen, Arild Myrvoll and Alfredo Cabellos Ballenilla as witnesses of fact.
Mr Saevik is the founder of the Havila group, whose holding company is Havila Holding AS. He is Chief Executive Officer of Havila Holding AS and chairman of Havila Kystruten AS's board of directors. Although I felt that a few of his answers were unfocussed, I am satisfied that once he clearly understood the questions being asked, he answered them to the best of his ability, and that overall he was a good witness.
Mr Pettersen is counsel at the Bergen office of Wikborg Rein Advokatfirma AS, a law firm which acts for Havila and other companies in its group. His main role was to advise and assist on the contractual documentation for the project. I am satisfied that he gave his evidence fairly and to the best of his recollection. He could occasionally be slightly argumentative in his oral evidence, but overall I found his evidence reliable.
Mr Myrvoll is the former Chief Executive Officer of Havila, a position which he held from 1 August 2018 to July 2021. He was a good witness.
Sr Cabellos is a partner at Watson Farley & Williams Spain SL, and acted for Havila in relation to these transactions, particularly on integrating Havila's financing with a Spanish tax lease structure. He was a good witness.
Abarca presented significant parts of the case on behalf of both itself and the Yard, including calling witnesses from inter alia the Yard. Abarca/the Yard called Juan Gonzalez-Crespan (“ Sr Gonzalez”), Carlos Perez-Bouzada, Fernando Morales (“ Sr Morales”), Luiz Fernandez Santos (“ Sr Santos”) and Luis Fernandez (“ Sr Fernandez”) as witnesses of fact. For ease of exposition, I have referred from time to time in this judgment to submissions made by “ Abarca”, even where (as was frequently the case) the Yard also joined in them.
Sr Gonzalez was Chief Financial Officer of the Yard at all material times. He resigned on 26 September 2019. On the whole he gave his oral evidence in a straightforward way, though he sometimes sought to answer before the question had been asked, or to argue the case. He made clear that he did not generally take notes of meetings, so that when saying what had occurred at them was reliant on either his memory and/or ensuing emails or agreements.
Sr Perez-Bouzada is a lawyer...
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