Kuwait Rocks Company (Appellants/Charterers) v Amn Bulkcarriers Inc. (Respondents/Owners)
| Jurisdiction | England & Wales |
| Judge | The Hon Mr Justice Flaux |
| Judgment Date | 18 April 2013 |
| Neutral Citation | [2013] EWHC 865 (Comm) |
| Docket Number | Case No: 2012 FOLIO 640 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 18 April 2013 |
[2013] EWHC 865 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
AND
IN THE MATTER OF AN ARBITRATION CLAIM
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon Mr Justice Flaux
Case No: 2012 FOLIO 640
MV "ASTRA": Charterparty dated 6 October 2008
Miss Josephine Davies and Mr Rupert Hamilton (instructed by Watling & Co) for the Appellants/Charterers
Mr Robert Bright QC (instructed by Reed Smith LLP) for the Respondents/Owners
Hearing dates: 28th to 31st January 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.
Introduction and background
The Appellants (to whom I will refer as "the charterers") appeal, with the permission of Christopher Clarke J, two questions of law arising out the Second Partial Arbitration Award dated 11 April 2012 of the arbitrators, Messrs Patrick O'Donovan, Mark Hamsher and Christopher Moss ("the tribunal") whereby the tribunal found in favour of the Respondents (to whom I will refer as "the owners") that their claim for damages arising out of the termination of a time charterparty of the vessel ASTRA succeeded. By a Respondents' Notice, the owners seek to uphold the Award on alternative grounds.
The essential facts found by the tribunal which are relevant for the purposes of this appeal are as follows. The owners were the disponent owners of the vessel and chartered her to the charterers for a period of 5 years by a time charterparty dated 6 October 2008 on the NYPE 1946 form as amended.
The relevant terms of the charterparty were as follows:
"Clause 5
Payment of said hire to be in London net of bank charges in cash in United States Currency 30 days in advance and for the last 30 days or part of same the approximate amount of hire, hire is to be paid for the balance day by day as it becomes due, if so required by Owners, otherwise failing the punctual and regular payment of the hire, or bank guarantee, or any breach of this Charter Party, the Owners shall be at liberty to withdraw the vessel from the service of the Charterers, without prejudice to any claim they (the Owners) may otherwise have on the Charterers. …
Clause 31
…Referring to hire payment(s), where there is any failure to make 'punctual and regular payment' due to oversight or negligence or error or omission of Charterers' employees, bankers or agents, Owners shall notify Charterers in writing whereupon Charterers will have two banking days to rectify the failure, where so rectified the payment shall stand as punctual and regular payment."
The rate of hire payable under the charterparty was US$28,600 per day. From the outset of the charterparty, because market rates of hire were falling in the wake of the collapse of Lehman Brothers, this rate was higher than the charterers could hope to command by way of sub-charter rates of hire. The charterparty provided for the charterers to put up a bank guarantee. On 12 November 2008, the charterers asked the owners to waive this requirement and the owners asked for a cash deposit of US$1 million in lieu, but the charterers refused. In January 2009, the charterers sought a reduction in hire to US$19,600 per day and similar requests for a reduction, with the balance outstanding to be paid later, were made in February and March 2009. Then on 26 March 2009, the charterers asked for hire to be reduced to US$22,000 per day from the next hire payment. That request did not include a proposal to pay the balance later and the message through the broking channel which conveyed the proposal stated: "unless the Owners accepting to revise the hire to USD 22,000 pd the owners (Kuwait cement and national industries [i.e. the owners of the charterers]) will simply declare company's bankruptcy."
A message on 22 April 2009 repeated the request for a reduction in hire to US$22,000 per day and explained that the various owners of the charterers had sent their lawyers; "to discuss this case and all the eventual consequences for going bankrupt…" In an email on 27 May 2009 the charterers' broker advised that after completion of the current voyage, the charterers had no more cargoes for the vessel and that, unless the owners agreed to hire of a maximum of US$20,000 per day, the charterers would have to declare insolvency and redeliver the vessel. On 5 June 2009 when the current loaded voyage was completed, the charterers' position was that unless the owners agreed to immediate redelivery for three months and reduction in hire to a more reasonable level, the charterers would have no option but to declare immediate bankruptcy.
The instalment of hire due on 1 June 2009 was not paid and, on 8 June 2009, the owners served the two day anti-technicality notice provided for in clause 31 of the charterparty. The owners extended the deadline and following without prejudice negotiations, the parties entered into an agreement set out in Addendum no. 1 to the charterparty dated 7 July 2009 which provided for a reduced rate of hire of US$21,500 per day for the period 7 July 2009 to 7 July 2010. Clause 4 of the Addendum (the so called "compensation clause") provided as follows:
"4. In the event of the termination or cancellation of the Charter by reason of any breach by or failure of the Charterers to perform their obligations, Charterers shall, in addition to any amounts due to Owners at the date of termination or cancellation, pay to the Owners compensation for future loss of earnings in respect of the unexpired period of the Charter on the basis of the difference between the market rate and USD 28,600.-:"
On 18 July 2009, the vessel was delivered into a sub-charter with Western Bulk Carriers ("WBC"), who had the option to keep the vessel until March 2010. On 20 November 2009, the charterers requested the owners to reduce the hire to the same level as being paid by WBC, US$16,000 per day, until the end of the WBC sub-charter and thereafter at the reduced rate provided for in Addendum no. 1. The charterers' message said the situation in the company was very critical and the shareholders might decide to liquidate the company at their forthcoming meeting. The owners did not agree and the correct amount of reduced hire was paid for December 2009, albeit four days late. The charterers did not pay the instalment of hire due on 3 January 2010, so the owners exercised a lien on sub-freights coming into the hands of WBC, which led to the outstanding hire being paid on 5 January 2010.
In March 2010, the charterers refixed the vessel to WBC for a further 5/7 months at a rate of hire which, net of brokerage, was slightly less than US$20,000 per day. The chairman of the charterers wrote to the principal of the owners again requesting a reduction in hire, including from July 2010 when the charterers were due to start paying the full charter rate again. He stated that making payment of US$28,600 would surely lead to them declaring bankruptcy.
The charterers did not pay the hire due on 2 July 2010 and on 7 July the owners issued an anti-technicality notice pursuant to clause 31. The charterers asked for more time to pay, then on 13 July 2010 asked the owners to extend the reduced rate beyond the period stipulated in addendum no. 1, stating that they could not pay the full rate under the charterparty. The owners offered to extend the reduced rate for a further 22 days to 29 July 2010, on terms that the charterers pay the outstanding hire for the period from 2 to 29 July by 16 July and that they pay the next 30 days of hire due on 29 July 2010, at the full charterparty rate, the owners reserving their right to withdraw the vessel and claim damages. This proposal was accepted by the charterers on 13 July 2010 and the owners were asked to send a draft Addendum. The charterers also indicated that they wanted a meeting to discuss matters before 29 July 2010.
The owners in fact sent the charterers two versions of Addendum no. 2 both in similar terms, but one of which preserved the owners' rights to claim damages, including under Addendum no. 1 whereas the other included at clause 6 a provision in the same terms as clause 4 of Addendum no. 1. Neither draft was signed by the charterers. There was an exchange about the terms of addendum no. 2 and the charterers sought to renegotiate the terms, challenging that any agreement had been made on 13 July 2010, although they accepted that they had agreed to pay hire on 16 July 20However, in view of the arbitrators' finding that the charterers had accepted the owners' proposal, the charterers now accept that Addendum no. 2 was agreed on 13 July 2010.
In fact, the charterers failed to pay anything at all on 16 July 2010 and then failed to pay the next hire instalment due on 29 July 2010 (which, pursuant to what had been agreed on 13 July 2010, was to be paid at the full charterparty rate). On 30 July 2010, the owners served an anti-technicality notice in respect of that instalment. On 3 August 2010 the charterers paid US$568,788.75 in respect of the outstanding balance of hire at the reduced rate which had fallen due on 2 July 2010 and which they had agreed to pay by 16 July 2010, saying it was being paid "to show goodwill". However, the owners pointed out that the next instalment of US$858,000 (i.e. at the full charterparty rate) had been due on 29 July 2010 and remained unpaid. The owners advised that unless payment was made by midnight on 3 August 2010, the owners would withdraw the vessel and they reserved the right to treat charterers' conduct as repudiatory.
Payment was not received by midnight...
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