Polestar Maritime Ltd v YHM Shipping Company Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Aikens,Lord Justice Lloyd,President of the Queen's Bench Division |
| Judgment Date | 17 February 2012 |
| Neutral Citation | [2012] EWCA Civ 153 |
| Docket Number | Case No: A3/2011/0921/QBCMF |
| Court | Court of Appeal (Civil Division) |
| Date | 17 February 2012 |
[2012] EWCA Civ 153
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
The Hon. Mr Justice Field (2010 Folio 824)
Royal Courts of Justice
Strand, London, WC2A 2LL
President of the Queen's Bench Division
Lord Justice Lloyd
and
Lord Justice Aikens
Case No: A3/2011/0921/QBCMF
Mr Michael Coburn QC (instructed by MFB Solicitors) for the Appellant (Defendant)
Mr Julian Kenny (instructed by Ince & Co Llp) for the Respondent (Claimant)
Hearing date: Monday 31 st of January 2012
Synopsis
The principal question on this appeal is: under the terms of the sale contract on an amended Norwegian Saleform 1993 (known as the "NSF") what certificates was the seller of the bulk carrier "Rewa", ("the Vessel"), obliged to provide when the vessel was delivered to the buyer? The key provision in the Memorandum of Agreement for the sale of the Vessel dated 23 July 2008 ("the MOA") between the appellant buyers ("the Buyers") and the respondent sellers ("the Sellers") was "…the vessel shall be delivered with…her National/International trading certificates, as well as all other certificates the Vessel had at the time of her inspection…". The Vessel had been inspected by the Buyers in July 2008. Then on 27 September 2008 a new requirement under Annex IV of the International Convention on the Prevention of Pollution from Ships ("MARPOL") came into force, requiring vessels such as Rewa to have an International Sewage Pollution Prevention ("ISPP") certificate by 27 September 2008. Rewa did not have one at any stage. The vessel was tendered for delivery on 30 September 2008. The Buyers said the lack of an ISPP Certificate entitled them to cancel the sale contract. Were they right?
There is a second issue between the parties. The MOA provided, in clause 14, that "…the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation as per Clause 8…". Clause 8 and Addendum No 1 of the MOA refer to the original documents the Sellers have to provide to the Buyers upon delivery of the vessel in respect of the "…transfer of ownership, registration of the Vessel and change of flag to Buyer's choice…". One of these documents was a Bill of Sale, which the parties had agreed would contain a covenant by the Sellers (as "Transferors") that the ship to be transferred to the Buyers (as "Transferees") free from "…all charters, encumbrances, detentions, mortgages, maritime liens and any other debts whatsoever…". On 30 September 2008 the vessel was detained by the port authorities in Hong Kong, where she was to be delivered under the MOA, because of her lack of an ISPP Certificate. In fact the detention was lifted within a day because the Sellers obtained an exemption from the authorities in respect of the ISPP Certificate. Meanwhile, on 1 October 2008 the Buyers cancelled the MOA, relying on both the lack of an ISPP Certificate and the fact that the Vessel was under detention and so was not free from detentions as the Sellers had covenanted in the Bill of Sale. The second question on this appeal is: did the Sellers have three banking days in which to make "…arrangements" so that the Vessel would comply with the covenant in the Bill of Sale that she be free of all "…detentions"?
Clause 16 of the standard NSF wording provides for disputes to be resolved by Arbitration either in London, according to English law, or in New York in accordance with US and New York law, or by arbitration in some other venue of the parties' choice. In this case the parties, who are, respectively, Indian and St Vincent and Grenadine companies, chose arbitration by a sole arbitrator in London. The whole arbitration and appeal process is, therefore, governed by the Arbitration Act 1996.
In default of agreement between the parties, the Commercial Court appointed Mr Richard Rayfield as sole arbitrator. Ningyuan Shipping Company Co Ltd (the second respondents) did not take part in the arbitration and it has not done so on appeal. Mr Rayfield published his Award on 15 June 2010. He held that the Sellers were obliged to provide the ISPP Certificate upon delivery of the Vessel. He also held that the fact of the detention of the Vessel on 30 September 2008 did not require or entitle the Sellers to "…make arrangements for the documentation set out in clause 8". There was nothing wrong with the Bill of Sale as tendered; it was just that the Sellers could not comply with their covenant in it that the Vessel be "free of detentions". The arbitrator concluded that both the lack of an ISPP Certificate and the fact of detention contrary to the covenant in the Bill of Sale on completion entitled the Buyers to cancel the MOA and to have their deposit of US$1.9 million returned.
By his order dated 30 March 2011, Field J allowed an appeal by the Sellers on three questions of law arising out of Mr Rayfield's Award. Only the two questions outlined above are now relevant. Field J gave leave to appeal to this court pursuant to section 69(8) of the Arbitration Act 1996. In doing so he had to satisfy himself that a point of "general public importance" was involved or that there was some other "special reason" why the question should be considered by the Court of Appeal. As the judge pointed out, the NSF terms constitute a standard form of ship sale and purchase contract which is frequently used around the world. Although the relevant wording of the MOA which we have to consider was modified by the parties, the obligations of a Seller under an NSF form of MOA as to what certificates must be on board the vessel when she is delivered under the sale contract are obviously of general importance to the shipping world. So too, in my view, is the question of what constitutes "arrangements" for the purposes of clause 14 of the NSF.
We heard concise oral argument from Mr Michael Coburn QC on behalf of the Buyers and Mr Julian Kenny on behalf of the Sellers on 31 January 2012 which further elucidated their written submissions. We reserved judgment.
Further Facts
Rewa (which has now been sold for scrap) was a grain-fitted bulk/lumber carrier of 25,332 tons deadweight and built in 1984. She was registered under the Indian flag and classed by both Lloyd's Register and the Indian Register of Shipping. She was put on the market for sale in early 2008 and was inspected by surveyors who reported on 2 April 2008 on her condition. There was then another pre-purchase survey and a further report was prepared. That report made it clear that the Vessel did not comply with Annex IV of MARPOL in that she did not have an ISPP Certificate nor the requisite modifications to her sewage plant so as to be able to comply with Annex IV. The second report also stated that the Vessel would require such a certificate by 27 September 2008, the date when Annex IV began to apply to Rewa.
The Buyers had both reports before they signed the MOA of 23 July 2008. Attached to the MOA was a Lloyd's Register printout which noted that ships over 400 gross tons carrying more than 15 crew had to comply with Annex IV of MARPOL from 27 September 2008. The agreed sale price for the Vessel was US$ 19 million. The Buyers paid a deposit of $ 1.9 million when they signed the MOA. Clause 1 of the MOA named YHM Shipping Co Ltd of St Vincent and the Grenadines as the Buyer. That state would therefore be the Buyer's "flag state". It is a signatory to MARPOL Annex IV, as is India and the People's Republic of China. Clause 5(b) of the MOA provided that the "Expected time of delivery" of the Vessel would be between 20 August 2008 and 30 September 2008 at the Sellers' option. It also stated that 30 September 2008 was the "Date of cancelling" in the Buyers' option.
The summer of 2008 saw the start of the world financial crisis. Lehmann Brothers defaulted on 15 September 2008. The world market in second hand ships (as well as freight rates) suffered a vertiginous decline. The arbitrator's Award records, at [30], that the value of the Vessel on 1 October 2008 was US$ 9 million.
On 19 August 2008 the parties executed Addendum No 1 to the MOA in which they listed the original "delivery documents" that the Sellers agreed to furnish to the Buyers. One of the documents stipulated in Part II of this Addendum was a Legal Bill of Sale in such form as to be registrable with the St Vincent and the Grenadines Ship Registry. Clause (4) of Part II of Addendum No 1 stipulated that the Sellers, as transferors of the Vessel, would covenant in the Bill of Sale that "…the Vessel is free from mortgages, encumbrances, maritime liens and any debts whatsoever….". That wording therefore said nothing about being free of "detentions". However, the arbitrator found, at [57.3] of his Award, that the Sellers sent a draft Bill of Sale to the Buyers on 27 August 2008 and this draft had contained the word "detentions" amongst the transferors' covenants. The arbitrator found that the parties subsequently agreed that the agreed Bill of Sale wording (as set out in Addendum No 1) would be amended so as to add the word "detentions" to the covenants of the Sellers/transferors. That finding of fact has not been challenged. Thus the Sellers became obliged to deliver to the Buyers a Bill of Sale in which the Sellers covenanted, as transferors, that the ship to be transferred "is free from all charters, encumbrances, detentions, mortgages, maritime liens and any other debts whatsoever".
From 18 August 2008 the Sellers...
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