Lansat Shipping Company Ltd v Glencore Grain BV (The "Paragon")
| Jurisdiction | England & Wales |
| Judge | Lord Clarke of Stone-cum-Ebony MR,Lord Justice Goldring,Lord Justice Patten |
| Judgment Date | 31 July 2009 |
| Neutral Citation | [2009] EWCA Civ 855 |
| Docket Number | Case No: A3/2009/0823 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 2009 |
[2009] EWCA Civ 855
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Hon Mr Justice Blair
QUEENS BENCH DIVISION
COMMERCIAL COURT
Lord Clarke of Stone-cum-ebony Mr
Lord Justice Goldring and
Lord Justice Patten
Case No: A3/2009/0823
2008 Folio 525
Mr Andrew Baker QC (instructed by Ince & Co) for the Appellant
Mr Jonathan Hirst QC and Mr Simon Birt (instructed by Birketts Llp) for the Respondent
Hearing date: 22 July 2009
Introduction
This appeal arises out of the dismissal by Blair J ('the judge') of an appeal by the appellant ('the owners') from an interim award dated 7 May 2008 made by three arbitrators, namely Michael Baker–Harber, Alan Burbridge and Robert Gaisford, in which they decided that a provision in a charterparty is unenforceable on the ground that it is a penalty. The charterparty is dated 23 November 2006 and is on an amended New York Produce Exchange form under which the respondent ('the charterers') chartered the vessel Paragon for “about minimum 3 to about 5 months (about means +/- 15 days)”. By clauses 4 and 36, the rate of hire was US$29,500 “per day or pro rata”.
The critical clause is clause 101 which is in these terms:
“The Charterers hereby undertake the obligation/responsibility to make thorough investigations and every arrangement in order to ensure that the last voyage of this Charter will in no way exceed the maximum period under this Charter Party. If, however, Charterers fail to comply with this obligation and the last voyage will exceed the maximum period, should the market rise above the Charter Party rate in the meantime, it is hereby agreed the charter hire will be adjusted to reflect the prevailing market level from the 30 th day prior to the maximum period date until actual redelivery of the vessel to the Owners.”
It is the second sentence of clause 101 that the arbitrators held to be a penalty.
The owners appealed to the High Court with the permission of Andrew Smith J but the decision was upheld by Blair J who gave permission to appeal to this court. His order was dated 25 March 2009.
The facts
The vessel was delivered under the charterparty at 16.45 GMT on 29 November 2006 and it is common ground that the latest time for redelivery of the vessel to the owners was 16.45 GMT on 14 May 2007. In the event the vessel was redelivered at 20.45 GMT on 20 May 2007, which was 6.166 days after the latest permissible time for redelivery under the charterparty. The last voyage in fact took 77 days.
The owners claimed damages for breach of the charterparty by reference to clause 101. They said that the prevailing market rate calculated in accordance with the clause was US $46,083.22 per day as compared with the charterparty rate of US $29,500 per day. There is a dispute about the market rate which is not relevant to the issue before us. The charterers accept that the owners are entitled to the normal measure of damages for late delivery, which is the market rate for the period between the last permissible date for redelivery and the date of actual redelivery. On that basis they accept liability for $89,560.87, which they have paid the owners.
However, the owners claim an additional sum of US $471,603.32 which is calculated (they say) in accordance with clause 101. The owners say that they are entitled to enhanced hire at the market rate, not just for the six or so days the vessel was late but from 30 days before the contractual redelivery date, that is from 14 April 2007. There are other issues in the reference, which include the question whether there was in fact a breach of clause 101 and, if it is enforceable, the proper approach to the market rate under the second sentence of the clause.
Late redelivery – the principles
For present purposes it is convenient to consider first the correct approach to late redelivery and to do so by reference to the terms of the charterparty but without reference to clause 101 and on two alternative assumptions. The first is that the last voyage was a legitimate last voyage and the second is that it was not a legitimate last voyage. The reason that this seems to me to be a relevant exercise in this appeal is that to my mind it throws considerable light on the correct approach to the construction of the instant charterparty.
The exercise first raises the question what is a legitimate last voyage. At [7] of his judgment the judge correctly described it by reference to the judgment of Bingham LJ in this court in Hyundai Merchant Marine Co Ltd v Gesuri Chartering Co Ltd (“ The Peonia”) [1991] 1 Lloyd's Rep 101 at 107–8. An order given by charterers for a 'legitimate last voyage' is an order for the employment of the vessel on a voyage which can reasonably be expected to be performed by the time for redelivery under the charterparty. By contrast, an order for an illegitimate last voyage is an order for the employment of the vessel on a voyage which cannot reasonably be expected to be performed by the time for redelivery.
In the case of a legitimate last voyage, as the judge correctly stated at [7], The Peonia established that the charterers are nevertheless liable in damages if the vessel is not redelivered within the contractual period. In such a case, the charterers are of course liable to pay hire until the contractual date of redelivery and it is not in dispute that the measure of damages is the market rate of hire for the period between the contractual date of redelivery and the actual date of redelivery. In this case, as I have already stated, the contractual time and date of redelivery was at the latest 16.45 GMT on 14 May 2007. It follows that, if the order was for a legitimate last voyage, the vessel was delivered 6.166 days late in breach of the charterparty and the measure of damages would be 6.166 times the market rate per day.
In the case of an illegitimate last voyage Bingham LJ described the position in this way in The Peonia:
“The charterer gives orders for the employment of the vessel which cannot reasonably be expected to be performed by the final terminal date [that is, the date by which the charterer is contractually obliged to redeliver the vessel]. He is therefore seeking to avail himself of the services of the vessel at a time when the owner had never agreed to render such services. It is accordingly an order which the charterer is not entitled to give … and in giving it the charterer commits a breach of contract (perhaps a repudiatory breach but that we need not decide). The owner need not comply with such an order because he never agreed to do so. Alternatively, he may comply with the order although not bound to do so: if he does comply, he is entitled to payment of hire at the charterparty rate until redelivery of the vessel and (provided he does not waive the charterers' breach) to damages (being the difference between the charter rate and the market rate if the market rate is higher than the charter rate) for the period between the final terminal date and redelivery. In the further alternative, if (which we do not decide) the charterer's breach is repudiatory, the owner may accept the repudiation, treat the charter as at an end and claim damages. … the charterer's order is illegitimate because he was not contractually entitled to give it, and the voyage (whether performed or not) is stigmatised as illegitimate because it is one the charterer could not under the charter-party lawfully require the owner to perform.”
Thus, as the judge put it at [8], an order to proceed on an illegitimate last voyage is a breach of the contract. It may or may not be a repudiatory breach when the order is given. Although the mere giving of an illegitimate order will not be a repudiatory breach, the terms in which the order is given might evince an intention no longer to be bound by the terms of the charterparty. A more likely case in which the breach would be repudiatory would be where the charterers persist in an illegitimate order: see Torvald Klaveness A/S v Arni Maritime Corporation (The Gregos) [1994] 1 WLR 1465 per Lord Mustill at 1475A.
At [9] the judge correctly stated that, in the case of an illegitimate last voyage, the owners are entitled to damages if any harm has been suffered. The relevant principles were stated by Lord Denning MR in The Alma Shipping Corporation of Monrovia v Mantovani (The Dione) [1975] 1 Lloyds Rep 115 at 118 as follows:
“If the charterer sends the vessel on an illegitimate last voyage – that is, a voyage which it cannot be expected to complete within the charter period, then the shipowner is entitled to refuse that direction and call for another direction for a legitimate last voyage. If the charterer refuses to give it, the shipowner can accept his conduct as a breach going to the root of the contract, fix a fresh charter for the vessel, and sue for damages. If the shipowner accepts the direction and goes on the illegitimate last voyage, he is entitled to be paid – for the excess period – at the current market rate, and not at the charter rate … The hire will be payable at the charter rate up to the end of the charter period, and at the current market rate for the excess period thereafter.”
It can thus be seen that, when the illegitimate last voyage is performed, the measure of damages is the same as in the case of a legitimate last voyage.
As the judge observed at [11], that principle was applied by Steyn J in ...
To continue reading
Request your trial
-
Fahim Imam-sadeque v Bluebay Asset Management (services) Ltd
...considerations. The fact that the parties are of equal bargaining power does not itself displace the doctrine (see Lansat Shipping Co Ltd v Glencore Grain BV (The Paragon) [2009] 2 Lloyds Rep 688). But the Court should be reluctant to hold that there is no commercial justification for a ter......
-
MSC Mediterranean Shipping Company SA v Cottonex Anstalt
...is clearly necessary to take into account the mitigation principle: see Chitty on Contracts (31 st Edn, 2012), para 26–175; Lansat Shipping Co Ltd v Glencore Grain BV [2009] 2 Lloyd's Rep 688. 114 Applying these principles, if the position were that, in the face of a repudiation of the cont......
-
Gard Marine & Energy Ltd v China National Chartering Company Ltd
... ... in Leeds Shipping Co. Ltd. v. Société Francaise Bunge (The Eastern City) ... ...
-
Lansat Shipping Company Ltd v Glencore Grain BV
...EWCA Civ 855" class="content__heading content__heading--depth1"> [2009] EWCA Civ 855 Court of Appeal (Civil Division). Lord Clarke of Stone-cum-Ebony MR, Goldring and Patten L JJ. Lansat Shipping Co Ltd and Glencore Grain BV. Andrew Baker QC (instructed by Ince & Co) for the Jonathan Hirst ......