Maridive & Oil Services (SAE) and another v CNA Insurance Company (Europe) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mance,Lord Justice Chadwick,Lord Justice Ward |
| Judgment Date | 25 March 2002 |
| Neutral Citation | [2002] EWCA Civ 369 |
| Docket Number | Case No: A3/2001/1369 & 1374 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 March 2002 |
[2002] EWCA Civ 369
Lord Justice Ward
Lord Justice Chadwick and
Lord Justice Mance
Case No: A3/2001/1369 & 1374
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION) ON
APPEAL FROM THE QUEEN'S BENCH DIVISION
(COMMERCIAL COURT) HHJ HALLGARTEN QC
SITTING AS A DEPUTY HIGH COURT JUDGE
Joe Smouha (instructed by Messrs Holman, Fenwick & Willan) for the Appellant
Richard Millett (instructed by Messrs Howe & Keates) for the Respondent
Introduction
This is an appeal against the answers given by HHJ Hallgarten QC on 7 th June 2001 to two out of four preliminary issues tried before him in the Commercial Court. We also have before us an application for permission to appeal, with the appeal to follow if such permission is granted, arising out of the judge's order dismissing the claimant's action in the light of his answers to the preliminary issues and ordering the claimants to pay to the defendant the costs of the whole of the action on the standard basis. The proceedings arise from an unusual document described as a "Lease Bond".
The terms of the Lease Bond are central to the issues that we have to consider, and I set them out in full:
"ANNEX 'E" to Uniform Time Charter for Offshore Service
Vessels Code Name: 'SUPPLYTIME 89"—dated 19th January 1998
Bond No. 158515684
COPY
KNOW ALL MEN BY THESE PRESENTS, That we, Oceanografia, S.A. de C.V.
(hereinafter called Principal) as Principal, and CNA Insurance Company (Europe) Limited of the United Kingdom (herein after called Surety) as Surety, are held and firmly bound unto P&I Club, The Shipowners' Mutual Protection and Indemnity Association (Luxembourg), (hereinafter called the Obligee) a legally representative of Maridive & Oil Services, (S. A..E) in the penal sum of USD $406,000 (Four Hundred Six Thousand U. S. Dollars), for the payment of which the said Principal and Surety bind themselves, jointly and severally, firmly by these presents,
WHEREAS, the Principal has entered into a written agreement with
… the obligee as the legally representative of Maridive & Oil Services, (S.A.E.) who provides a marine support services to Principal with MARIDIVE VIII" as per BIMCO "Supplytime89" charter Part dated 19th January 1998.
NOW, THEREFORE, the condition of this obligation is such that if the Principal should well and truly perform all agreements and conditions of said lease on the part of said Principal to be performed, then this obligation shall be void; otherwise to remain in full force and effect.
PROVIDED, HOWEVER, that the following express conditions shall apply:
FIRST: That in the event of any default on the part of the Principal and upon written demand by the Obligee delivered by registered mail to CNA Insurance Company (Europe) Limited, Underwriting Office, 117 Fenchurch Street, London, EC3M 5DY, the Surety shall pay to Obligee the penal sum within a period of thirty (30) days.
SECOND: That in no event shall the Surety be liable for a greater sum than the penalty of the bond.
THIRD: Any suit, action or other proceeding in law or equity shall be, brought or maintained within thirty (30) days after the termination hereof.
FOURTH: This Bond shall expire on 31st July 2000, unless previously cancelled by the Obligee on any date prior thereto or as may be extended thereafter as necessary by mutual agreement of Principal and Obligee and upon notice in writing from the Principal to the Surety's representative."
The charter was for offshore services in the Gulf of Mexico for 730 days firm from (in the event) 30 th April 1998 with the charterer ("Oceanografia") having options for two one year extensions. Notwithstanding the manner in which the box in the Lease Bond was completed, the charter was in fact between the first appellant ("Maridive") and "Oceanografia". The inapposite completion of the box no doubt arose because the original charter provided for a Lease Bond to be executed in the form of Annex D to the charter by United States Fidelity & Guaranty Company in favour of Maridive as "Obligee". However, on 19 th March 1998 the charter was varied to provide as follows:
"With reference to the [charterparty] the following amendments have today been agreed by both Charterers (Oceanografia S.A.) and Owners (Maridive and Oil Services S.A.E.) and shall thereafter supersede anything in the original contract to the contrary:
1. The Lease Bond per 'Annex D' of the contract is to be amended to reflect the following changes and as a result will be issued as per 'Annex E' (attached):
a) The Lease Bond is to be issued in London under English law by CNA.
b) Owners hereby nominate The Shipowners' Mutual Protection and Indemnity Association (Luxembourg)….. to act as their U.K. representative in respect of the above mentioned Lease Bond and agree to The Shipowners' Mutual Protection and Indemnity Association (Luxembourg) being named on the said Lease Bond as 'Obligee' to act on Owners' behalf. …"
No evidence was adduced before the judge to explain the genesis of or background to this variation, or why therefore it was decided to introduce the second claimants ("the Club") into the Lease Bond as (in terms) the "Obligee".
The charter came to a premature end on or about 1 st March 1999, with each party contending that this was due to the other's repudiatory breach. A demand for payment under the bond was made by Holman, Fenwick & Willan on 4 th May 1999 in the following terms:
"We are London solicitors instructed by Maridive Oil and Services (SAE) of Egypt ("Maridive").
We refer to a Lease Bond in the sum of US$406,000 executed in Maridive's favour as a Deed on 3rd April 1998. Pursuant to the Lease Bond, CNA Insurance Company (Europe) Ltd agreed to act as Surety for the obligations of Oceanografia SA de CV, the Charterers of the "MARIDIVE VIII" and described as the Principal in the Lease Bond. A copy of the Lease Bond is attached. The original is held in our safe.
We write to advise you that Oceanografia has defaulted on payments due to Maridive under the Charterparty and the total sum outstanding currently stands at US$409,550.90 (plus interest). Copies of the relevant outstanding invoices are attached, under cover of a letter from Maridive confirming non-payment. You have already seen a copy of Maridive's letter of demand to Oceanografia dated 16th March 1998.
You should be aware that the Charterparty was terminated with effect from 1st March 1999 and Maridive's vessel was withdrawn. Accordingly Maridive are further entitled to the demobilisation fee of US$ 100,000.
In the circumstances, on our client's behalf we now call upon you to make payment of US$406,000 within the 30 day period stipulated in the Lease Bond, to the bank account details set out below, being this firm's US$ Client Account:—
Lloyds Bank Plc, Fenchurch Street Branch (Sort Code: 30–93–23)
USD Client Account No: 11123106
In favour of Holman, Fenwick & Willan
We look forward to receiving confirmation by return that you are making immediate arrangements for payment of the full amount of Lease Bond."
We were told that, in subsequent correspondence, the respondent ("CNA") took the single point that the Lease Bond constituted a conventional guarantee, and that Oceanografia had not been in default. Maridive and the Club began proceedings on 18 th November 1999, pleading at the end of paragraph 5 of its particulars of claim that "a demand for payment of the sum of US$406,000 was made to CNA under the Bond on 4 th May 1999". In its defence served 8 th February 1999 CNA took both the point that the Lease Bond was a conventional guarantee, and the point that no or no valid demand had been made by or on behalf of the second appellant, the Club, under the Bond. That led Holman, Fenwick & Willan to write to CNA on 13 th March 2000 in the same terms as previously, save that the letter now commenced:
"We are the London solicitors instructed by Maridive Oil and Services (SAE) of Egypt ("Maridive") and The Shipowners' Mutual Protection and Indemnity Association (Luxembourg) ("SOP").
We refer to a Lease Bond in the sum of US406,000 executed in SOP and Maridive's favour as a Deed on 3 rd April 1998. ….."
In a reply served on 14 th March 2000 Maridive and the Club pleaded that:
"On the true construction of the Bond, the written demand for payment from CNA was to be sent either by SOP, as Maridive's agent, or by Maridive. Further or alternatively, the demand of 4 th May 1999 was made by Messrs. Holman, Fenwick & Willan on behalf of both Maridive and SOP. Further a second letter of demand was sent to CNA by Messrs. Holman, Fenwick & Willan on behalf of SOP and Maridive on 13 March 2000."
But no application was made to amend the particulars of claim. On the other hand no objection appears to have been raised, and certainly no application to strike out was made, in respect of the plea in the reply of the second demand. On 30 th August 2000 the contractual period provided by condition 3 of the Bond for the bringing or maintenance of "any suit, action or other proceeding in law or equity" expired.
The preliminary issues
On 25 th September 2000 Moore-Bick J. made an order (following, we were told, agreement between counsel) to this effect:
"1. The Claimants have permission to amend paragraph 5 of the Particulars of Claim to add the words "alternatively 13th March 2000" (without prejudice to preliminary issue (iv) below).
2. The following questions be tried as preliminary issues:
(i) Whether on a true construction of the Bond the Defendant is entitled to...
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