E.n.e. Kos v Petroleo Brasileiro S.a. (petrobas)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE ANDREW SMITH,Mr Justice Andrew Smith |
| Judgment Date | 23 July 2009 |
| Neutral Citation | [2009] EWHC 1843 (Comm) |
| Date | 23 July 2009 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2008–937 |
[2009] EWHC 1843 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Andrew Smith
Case No: 2008–937
Bernard Eder QC (instructed by Ince & Co.) for the Claimant
Andrew Baker QC and Henry Byam-Cook (instructed by Thomas Cooper) for the Defendant
Hearing dates: 11 & 12 June and 15 July 2009.
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.
Mr Justice Andrew Smith :
Introduction
This case concerns claims by the Owners of a ship after they have withdrawn her from the service of the Charterers because of a failure to pay hire under a time charter. More specifically, it is about whether the Owners are entitled to compensation for (i) the detention or use of the ship while the Charterers' cargo remained on board after the ship was withdrawn; (ii) bunkers consumed while the Charterers' cargo remained on board after the ship was withdrawn; (iii) bunkers consumed in unloading cargo; and (iv) expenses incurred in providing and maintaining a bank guarantee after the Charterers asserted that the withdrawal was wrongful and that they were entitled to security for their claim. The case raises questions of some general importance and, to my mind, some difficulty, and I am very grateful to counsel for their helpful submissions.
The facts
By a charterparty on Shelltime 3 form dated 2 June 2006, the claimant Owners chartered the M/T Kos to the defendant Charterers for 36 months (plus or minus 15 days at Charterers' option). She is a 300,965 mt, double hulled Very Large Crude Carrier (VLCC) built in 2001, and is of high quality.
Hire under the charterparty was payable in advance, and if it was not paid the Owners had the right to withdraw the vessel “without prejudice to any other claim Owners may otherwise have on Charterers under this charter”. The charterparty had no anti-technicality clause. It did have in clause 13, which has a side-note “Bills of lading”, a provision that, “The Master (although appointed by Owners) shall be under the orders and direction of Charterers as regards employment of the vessel, agency or other arrangements … Charterers hereby indemnify Owners against all consequences or liabilities that may arise … from the Master otherwise complying with Charterers' or their agents' orders …”. Clause 14 provided that the Charterers should accept and pay for all bunkers on board at the time of delivery of the vessel and “Owners shall, on the expiry of this charter, pay for all bunker oil then remaining on board at actual purchase price …”.
The charterparty provided that it was to be construed and the relationship between the parties governed by English law. It included an agreement that any dispute should be determined by “the English Courts”, and went on to provide that “without prejudice to any party's right to arrest or maintain the arrest of any maritime property” either party might elect for London arbitration “in accordance with the provisions of the Arbitration Act 1950, or any statutory modification or re-enactment thereof for the time being in force”. (Neither party has so elected.) The charterparty also provided that
“It shall be a condition precedent to the right to a stay of any legal proceedings in which maritime property has been, or may be, arrested in connection with a dispute under this charter, that that party furnishes to the other party security to which that other party would have been entitled in such legal proceedings in the absence of a stay”.
The Owners applied for summary judgment for a declaration that the vessel was validly and lawfully withdrawn. The Charterers were given conditional leave to defend, but, as Field J determined on 8 April 2009, they did not fulfil the condition and judgment was entered for the Owners for a declaration that the withdrawal was “lawful and valid”. The Charterers' counterclaim for damages for breach of the Charterparty based upon their contention that the withdrawal of the vessel was wrongful was dismissed. The Charterers were given permission to appeal, and are appealing, against the determination of 8 April 2009, but I must deal with the issues before me on the basis that judgment was properly entered and therefore on the basis that the withdrawal was lawful and valid. The position with regard to payment of hire and bunkers up to the time when the ship was withdrawn has been settled by agreement: the remaining dispute is about use of the vessel and expenses incurred thereafter. This is the trial of those issues.
When notice of withdrawal was given, the vessel was at Angra dos Reis, Brazil, where she had been ordered to proceed by the Charterers for discharge and backloading. She tendered Notice of Readiness on 30 May 2008 to backload two parcels of cargo owned and nominated by the Charterers and to take on bunkers arranged by the Charterers. She began to load the first parcel on 31 May 2008, and completed loading it on 1 June 2008. She also took on bunkers on 1 June 2008. The second parcel was not available for loading until (at the earliest) 2 June 2008 and in the event was not loaded.
On 2 June 2008, after checking that hire had not been received, the Owners, by their agents, gave the Charterers notice of withdrawal at 14.41 hrs GMT. They wrote “Accordingly, Owners are instructing Master to stop further cargo operations and Owners now call upon Charterers to make arrangements for receipt ashore at Angra dos Reis their cargo presently on board the vessel”. They went on to say, “wholly without prejudice” to that, that they would perform the voyage ordered by the Charterers at the time of the notice of withdrawal on the terms of the charterparty other than the contractual rate of hire.
In subsequent exchanges, the Charterers sought to persuade the Owners to revoke the withdrawal, but the Owners declined to do so. Thus on 2 June 2008 at 20.12 hrs the Charterers wrote: “We would … kindly ask Owners cancel the message withdrawing the vessel from service. Indeed we would like to meet with you at your convenience to confirm our wish to build good working relations for the future between our companies”. On 3 June 2008 at 11.30 hrs the Owners wrote this:
“The present position is that the vessel has been withdrawn and Charterers must decide if they wish to reinstate the time charter or continue with the voyage instructions on a voyage charter basis. If they do wish to continue on one of these bases then they must do so at the current market rates which Owners have indicated to Charterers. If Charterers consider the market rate to be different then please advise so Owners can consider.
Alternatively if Charterers do not wish to reinstate the time charter or continue on a voyage basis then they must make prompt arrangements for receipt back of their cargo.
While Charterers are deciding how they wish to proceed or (if that is what they decide to do) making arrangements for off-loading of their cargo, Owners will proceed on the basis that Charterers have requested that Owners store Charterers' cargo on board and reserve the right to claim remuneration at current market rates for such storage.”
At 15.02 hrs on 3 June 2008 the Charterers repeated their request: “… Charterers once again expect Owners to reconsider latest decision and keep vessel on service and the [charterparty] in force. Charterers look forward to hearing asap from Owners in order to decide next steps, considering we have cargo on board, to decide if we authorize terminal to receive it back or proceed loading operation”. At 16.16 hrs the Owners confirmed their decision to withdraw the vessel. At 18.25 hrs on 3 June 2008 the Charterers wrote asserting that the Owners had waived their right to withdraw the vessel, and continued, “In view of Owners' clear breach of Charter, unless Owners are now prepared to confirm that they will continue with the charter as it stands, Owners should contact the terminal to arrange for discharge of the cargo and discharge of Charterers' bunkers. Please note that in such circumstances, Charterers will immediately be taking such steps as are open to them to secure all losses suffered as a result of Owners' unjustified withdrawal of the vessel”. The Owners replied at 20.22 hrs that they were no longer under any obligation to perform the charterparty and therefore it was for the Charterers to make arrangements with the terminal: they requested the Charterers to “take the necessary steps without delay”. At 21.36 hrs the Charterers wrote that they would contact the terminal to arrange for it to receive the cargo and that they would consider the Owners' request about bunkers. Mr. Bernard Eder QC, who represented the Owners, accepted that, for the purpose of determining the matters before me, I should accept that the Charterers went about arranging for the discharge of the cargo shortly thereafter, some 1.29 days after the vessel was withdrawn from service.
At 01.55 hrs on 4 June 2008 the Charterers wrote that they would contact the terminal to receive back the cargo. They threatened proceedings for wrongful withdrawal of the vessel and requested security before the vessel departed from the terminal. At 02.23 hrs the Owners were informed by the brokers that the Master was refusing to discharge the cargo without authority from the Owners to do so, but at 03.07 hrs the Owners confirmed to the Master that he had that authority.
At 14.15 hrs on 4 June 2008 the Charterers again wrote that they considered that the withdrawal of the vessel was wrongful and required the immediate provision of...
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