Sea Master Shipping Inc. v Arab Bank (Switzerland) Ltd Yousef Freiha & Sons Sal
| Jurisdiction | England & Wales |
| Judge | Pelling,Pelling QC |
| Judgment Date | 28 July 2020 |
| Neutral Citation | [2020] EWHC 2030 (Comm) |
| Docket Number | Case No: CL-2017-000567 |
| Date | 28 July 2020 |
| Court | Queen's Bench Division (Commercial Court) |
[2020] EWHC 2030 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
HIS HONOUR JUDGE Pelling QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2017-000567
Mr Michael Collett QC (instructed by Jackson Parton) for the Claimant
Mr John Russell QC (instructed by HFW) for the Defendants
Hearing dates: 20 th May 2020
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.
HIS HONOUR JUDGE Pelling QC SITTING AS A JUDGE OF THE HIGH COURT
HH Judge
Introduction
This is the hearing of an appeal by the claimant under s.69 of the Arbitration Act 1996 from the conclusion of an arbitral tribunal (“Tribunal”) contained in a Partial Final Award dated 16 May 2019 (“Award”) in relation to two questions of law determined by the Tribunal. Permission was granted by Picken J on the basis that “… the questions identified by the Claimant in Claim Form at paragraph 3 are questions of law which are open to serious doubt and which are also of general public importance” – see his Order of 4 November 2019.
The Claimants (“Owner”) are the assignees of the registered owners of the MV Sea Master (“Vessel”) who chartered the Vessel to Agribusiness United DMCC (“Charterer”) by a voyage charter on the Norgrain 89 form (“Voyage Charter”). The issues of law that arise concern a contract of carriage (“Contract of Carriage”) contained in or evidenced by a bill of lading dated 7th November 2016 known in these proceedings as the Second Switch Bill (“Bill”), which incorporated all the “… terms, conditions, liberties and exceptions …” of the Voyage Charter – see clause 1 of the Conditions of Carriage endorsed on the Bill (“Incorporation Clause”). The First Defendant (“Bank”) was involved in financing the cargo carried under the Contract of Carriage (“Cargo”). The Second Defendant (“Receivers”) took delivery of the Cargo.
There is no factual narrative included within the Award other than that set out in paragraphs 4–6 of the Award, which are in these terms:
“4. In June 2016, the vessel “SEA MASTER” loaded various parcels of corn at Rosario in Argentina, for carriage under bills of lading which provided for discharge at named ports in Morocco. She then proceeded to San Lorenzo in Argentina, where she loaded various parcels of soya hull pellets and of soya bean meal under bills of lading which again provided for discharge at named ports in Morocco.
5. The vessel sailed to Morocco and, in August 2016, the corn cargo and soya hull pellets were discharged at the ports named in the relevant bills of lading.
6. The parcels of soya bean meal were ultimately discharged at Tripoli in Lebanon, in February 2017. The arrangements that made this possible were complicated and took a substantial period to finalise. They included the issue of two new bills of lading which covered the entire quantity of soya bean meal and which were switched for the previous bills of lading issued for the various parcels of soya bean meal. The soya bean meal cargo was ultimately discharged and delivered by reference to the second of these new bills of lading (“the second switch bill of lading”).”
Two references give rise to these proceedings, both of which relate to a claim or counterclaim by the Owner for demurrage or damages in lieu of demurrage. In one arbitration reference, the First Defendant commenced a claim against the Owner for damages for mis-delivery and the Owner sought to bring a counterclaim for demurrage or damages in lieu of demurrage. The other arbitration reference is one commenced by the Owner against the Second Defendant for demurrage or damages in lieu of demurrage. The Tribunal is seised of both references.
At a directions hearing in both references on 11 February 2019, the Tribunal directed the hearing of the preliminary issues referred to below in both references. There is no factual narrative or findings in the Award that sets out the basis the counterclaim in the First Defendant's reference or that which forms the basis of the claim in the Owner's reference. It follows that, aside from the assumptions to which I refer in the following paragraph, the preliminary issues were decided in a factual vacuum. The Defendants submit that the claim has been pleaded against them as a demurrage claim or at least a claim that they are responsible for delaying discharge without stating what it is alleged they should have done or failed to do that is a breach in particular of what I refer to below as the First Implied Term. It is common ground however that the Charterer is in insolvent liquidation and unable to meet any of its obligations under the Voyage Charter.
The Tribunal was invited to assume for the purposes of determining the issues of law that arose and it is common ground that I should similarly assume that:
“(1) The Receivers were the holders of the [Bill] and took delivery of the cargo to which it related at the discharge port. Pursuant to section 3(1) of COGSA 1992, they became subject to the same liabilities under the [Contract of Carriage] as if they had been a party to that contract.
(2) Although the Bank's status is disputed, for the purposes of these Preliminary Issues only, it is to be assumed that the Bank was either (i) the original contracting party to the Bill or (ii) the party who pursuant to section 3(1) of COGSA 1992 became subject to the same liabilities under that Contract of Carriage as if it had been a party to that Contract, and questions 1 and 2 are to be answered for each of those assumptions.”
— see Award, paragraph 24.
The questions of law that the Tribunal decided as preliminary issues were those set out in paragraph 25 of the Award, being:
“The Preliminary Issues
1. As a matter of contractual construction are the following liable for discharge port demurrage under the Contract of Carriage:
1.1 The Bank?
1.2 The Receivers?
2. If answer to 1. 1 or 1.2 is no, was it an implied term of the Contract of Carriage, sounding in damages for delay for the Owners, that the Bank and/or the Receivers would:
2.1 Take all necessary steps to enable the cargo to be discharged and delivered within a reasonable time; and/or
2.2 Discharge the cargo within a reasonable time?”
I refer hereafter to the implied term referred to in paragraph 25.2.1 of the Award as the “ First Implied Term” and that referred to in paragraph 25.2.2 as the “ Second Implied Term”.
The Tribunal answered Questions 1.1 and 1.2 in the negative. There is no appeal from that conclusion. The basis for that conclusion was the acceptance by the Tribunal of the Defendants' submissions summarised at paragraph 44 of the Award in these terms:
“The Bank and the Receivers said that clause 20 1 of the [Voyage Charter] was critical and must not be ignored. They said that, taken as a whole, the laytime and demurrage provisions in the Voyage Charter had the effect that, in the context of the Voyage Charter, the Charterers had the exclusive responsibility for paying demurrage; and that the general incorporation clause in the second switch bill of lading had the effect that the same result applied in the context of the second switch bill of lading.”
This led the Tribunal to:
“… ask ourselves what the relevant parties intended, when they agreed to incorporate the terms of the Voyage Charter, and in doing so we are obliged to assume that those parties could have consulted the Voyage Charter. If they had done so, they would have understood its laytime and demurrage regime as resulting in demurrage at the discharge port to be payable exclusively by the Charterers, i.e. Agribusiness, not by the Bank or the Receivers. It seems to us that, by incorporating the provisions of the Voyage Charter, they must be taken to have intended to achieve the same result, i.e. that demurrage should be payable by Agribusiness, not by the Bank or the Receivers.”
I return to the express terms of the Contract of Carriage below.
The Tribunal answered Question 2 in the negative. It is from that conclusion that the Owner appeals, contending that the answer should have been in the affirmative. The Defendants maintain (as they did before the Tribunal) that:
“… the Owners entered into contracts pursuant to which their only remedy for delay in discharge was a claim in demurrage against the Charterers. Due to the Charterers' subsequent
insolvency, the Owners are out of pocket. They now, illegitimately, seek to pin liability on the Cargo Owners, despite that being inconsistent with the express regime they entered into, and the credit risk which they took.”
— see paragraph 12 of the Defendants' written submissions.
The Terms of the Contract of Carriage
It is common ground that the effect of the Incorporation Clause was as stated by the Tribunal namely to incorporate into the Contract of Carriage the terms of the Voyage Charter “… in so far as they are appropriate and relevant for such incorporation, and subject to the legal principles set out in the decision of the House of Lords in Miramar Maritime Corp v Holborn Oil Trading (“ The Miramar”) [1984] AC 676; [1984] 2 Lloyd's Rep. 129; and in the subsequent authorities that have developed the law in this area”.
The Voyage Charter was a recapitulation of an earlier charterparty relating to another vessel, the MV Sea Honest. In so...
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