Isabella Shipowner Sa v Shagang Shipping Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke |
| Judgment Date | 26 April 2012 |
| Neutral Citation | [2012] EWHC 1077 (Comm) |
| Docket Number | Case No: FOLIO 1156 OF 2011 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 26 April 2012 |
[2012] EWHC 1077 (Comm)
Queen's Bench Division (Commercial Court).
Cooke J.
Timothy Hill QC and James Shirley (instructed by Ince & Co LLP) for the claimant.
Timothy Young QC and Simon Milnes (instructed by Holman Fenwick Willan LLP) for the defendant.
The following cases were referred to in the judgment:
Attica Sea Carriers Corp v Ferrostaal Poseidon Bulk Reederei GmbH (The Puerto Buitrago)UNK [1976] 1 L1 Rep 250 (CA).
Clea Shipping Corp v Bulk Oil International (The Alaskan Trader)UNK [1984] 1 All ER 129.
Gator Shipping Corp v Trans-Asiatic Oil SA (The Odenfeld)UNK [1978] 2 L1 Rep 357.
LauritzenCool v Lady Navigation Inc [2005] 1 CLC 758; [2005] 1 WLR 3686 (CA).
Lesotho Highlands Development Authority v Impregilo SpA [2005] 2 CLC 1; [2006] 1 AC 221.
Ministry of Sound (Ireland) Ltd v World Online LtdUNK [2003] 2 All ER (Comm) 823.
Ocean Marine Navigation Ltd v Koch Carbon Inc (The Dynamic)UNK [2003] 2 L1 Rep 693.
Reichman v BeveridgeUNK [2006] EWCA Civ 1659; [2007] Bus LR 412 (CA).
Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (The Scaptrade)ELR [1983] 2 AC 694 (HL).
Stocznia Gdanska SA v Latvian Shipping Co [1995] CLC 956; [1996] CLC 1410 (CA).
White and Carter (Councils) Ltd v McGregorELR [1962] AC 413.
Shipping — Time charter — NYPE form — Early redelivery in anticipatory breach — Whether entitled to refuse redelivery and hold charterers liable for hire for balance of minimum period — Earning of hire after purported redelivery not dependent on any performance by charterers — Application of principles in White and Carter (Councils) Ltd v McGregor[1962] AC 413– Owners had legitimate interest in maintaining charter for balance of period and claiming hire — Insistence on maintaining contract not wholly unreasonable — Arbitrator erred and award varied accordingly.
This was an appeal by shipowners against an arbitration award on a question of law under s. 69 of the Arbitration Act 1996, and a challenge on the ground of serious irregularity under s. 68.
The owners chartered their vessel to the defendant charterers on an amended NYPE form for a duration of 59-61 months. The charter also included an express warranty that the vessel would not be re-delivered before the minimum period of 59 months.
In admitted anticipatory breach of the charter, the charterers stated that they would re-deliver the vessel several months early. The owners commenced arbitration before re-delivery occurred, seeking a partial final award declaring that the owners were entitled to refuse such re-delivery and to affirm the charterparty, holding the charterers liable for hire for the balance of the minimum period. The charterers re-delivered the vessel 94 days early. The arbitrator held that the owners were required to take re-delivery of the vessel, trade the vessel on the spot market by way of mitigation and claim damages in respect of their loss.
The arbitrator accepted the charterers' argument that the owners could not complete the charter without the charterers doing something and that the charter involved co-operation between them so that the principle set out by the House of Lords in White and Carter (Councils) Ltd v McGregorELR [1962] AC 413 was of no application. Additionally, the arbitrator found that the owners had no legitimate interest in insisting that the charter remained alive.
The owners appealed on the question whether they were entitled to refuse early re-delivery and affirm the charter, or were bound in law to accept early re-delivery and sue for damages. The owners also contended that there was serious irregularity under s. 68 inasmuch as the arbitrator failed to give any sufficient weight to certain of the owners' submissions.
Held , allowing the appeal:
1. A time charter was subject to the rule in White and Carter. The owners could claim hire from the charterers under the time charter without the need for the charterers to do anything under the charter. If the charterers failed to give any orders, the vessel would simply stay where it was, awaiting orders but earning hire. Although the master was under the orders of the charterer, the master and crew were the servants of the owners and the ship was available to the charterers for any order they wished to give. Hire continued to be earned. Although the charterers were obliged under the terms of the charter to provide and pay for fuel, should the bunkers run out whilst awaiting orders, it was open to the owners to stem the vessel and to charge that to the charterers' account. The earning of hire after purported re-delivery was not dependent on any performance by the charterers of their obligations. The position was different in the case of a demise charter, where possession of the vessel was given to the demise charterer so that, as soon as possession was retaken by the owner, the latter could no longer be entitled to hire under the demise charter. There was therefore a clear error of law on the part of the arbitrator in finding that the White and Carter principle was of no application to the time charter in issue. (White and Carter applied; Attica Sea Carriers Corp v Ferrostaal Poseidon Bulk Reederei GmbH (The Puerto Buitrago)UNK[1976] 1 Ll Rep 250 (CA)distinguished.)
2. The arbitrator applied the wrong test when considering whether or not the owners had a legitimate interest in maintaining the charter for the balance of 94 days and claiming hire, as opposed to accepting the repudiatory breach of the charterers as bringing the charter to an end, trading on the spot market in mitigation of loss and claiming damages for the difference. He never asked himself whether it would be “wholly unreasonable” to keep the contract alive; and whether the charterers had discharged the burden of showing that this was an extreme case where damages would be an adequate remedy and where an election to keep the contract alive would be so unreasonable that the owners should not be allowed to do so. He should have explored whether there was any benefit to the owners, whether or not small in comparison to the loss to the charterers. The innocent party's right to elect was not trammelled by the need to act reasonably: it required something beyond that before the courts would interfere and prevent the innocent party insisting on performance of the contract. The arbitrator was right to conclude that there was nothing exceptional, extreme or unusual about the charterers” repudiation, but that factor operated in favour of the owners and not against them. (White and Carter and Gator Shipping Corp v Trans-Asiatic Oil SA (The Odenfeld)UNK[1978] 2 Ll Rep 357applied.)
3. Applying the right test to the facts of the case, as found by the arbitrator, the outcome was inevitable. With only 94 days left of a five-year time charter in a difficult market where a substitute time charter was impossible, and trading on the spot market very difficult, it would be impossible to characterise the owners' stance in wishing to maintain the charter and a right to hire as unreasonable, let alone beyond all reason, wholly unreasonable or perverse. As the arbitrator said, this was not an extreme or unusual case and in such circumstances the exception to the White and Carter principle could not apply. The award should therefore be varied to declare that the owners were entitled to refuse the purported re-delivery by the charterers and were entitled to hire in accordance with the terms of the charterparty.
4. The s. 68 challenge failed. It was clear on the evidence that the arbitrator had studied in detail the submissions which owners complained he had not properly considered. Although he made no express reference to them in the award, he was not in any way bound to do so.
1. The claimant ship owners challenge an award made by Mr William Robertson dated 6 September 2011 on two grounds. First, with permission, the owners appeal under section 69 of the Arbitration Act 1996 on the following question of law: “Whether, as a matter of law, owners were entitled to refuse early re-delivery of the Aquafaith (the vessel) at Jintang on 9 August 2011 and affirm the charter, or whether they were bound in law to accept early re-delivery and merely entitled to sue for damages”. Secondly, the owners contend that there was serious irregularity affecting the proceedings and/or the award, within the meaning of section 68 of the Arbitration Act, inasmuch as the arbitrator failed to give any, or any sufficient, weight to the owners” submissions dated 22 August 2011 when deciding the issues which arose between the parties. In so doing, he failed to comply with section 33 of the same Act.
2. Under a charterparty on an amended NYPE form dated 19 September 2006 (the charter), the vessel was chartered by the owners to the defendant charterers for a duration of 59-61 months. The charter also included an express warranty “that the vessel will not be re-delivered before the minimum period of 59 months”.
3. In admitted anticipatory breach of the charter, on 6 July 2011, the charterers stated that they would re-deliver the vessel on dropping the last outward sea pilot after discharge in China under the then current voyage. The charterers made it plain that they had no further use for the vessel for the balance of the minimum period of charter, which expired (at the earliest permissible date) on 10 November 2011.
4. The owners commenced arbitration on 25 July 2011, before re-delivery occurred, seeking a partial final award declaring that the owners were entitled to refuse such re-delivery, as they had done, and to affirm the charterparty, holding the charterers liable for hire for the balance of the minimum period. Submissions were made in writing to the arbitrator both before and after the re-delivery of the vessel on 9 August and in his award of 6 September 2011 the arbitrator held that the owners were...
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