Priyanka Shipping Ltd v Glory Bulk Carriers Pte Ltd
| Jurisdiction | England & Wales |
| Judge | David Edwards |
| Judgment Date | 28 October 2019 |
| Neutral Citation | [2019] EWHC 2804 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Claim No: CL-2019-000461 |
| Date | 28 October 2019 |
[2019] EWHC 2804 (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
David Edwards, QC (SITTING AS A JUDGE OF THE HIGH COURT)
Claim No: CL-2019-000461
James M. Turner, QC (instructed by Reed Smith LLP) for the Claimant
Timothy Hill, QC and Alex Carless (instructed by Ince Gordon Dadds LLP) for the Defendant
Hearing dates: 24 September 2019
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.
David Edwards QC
David Edwards, QC (sitting as a Judge of the High Court):
At the conclusion of the trial on 24 September 2019 I gave my decision on one of the three matters before me, referred to in the interlocutory orders preceding the trial as “the Injunction Counterclaim”. I said that detailed reasons for my decision would follow. This judgment contains those reasons.
This judgment also contains my decision and my reasons in relation to the other two matters that fell to be determined at the trial, namely “the Damages Declaration” and the “Damages Counterclaims”. The meaning of those expressions is explained in the paragraphs below.
The Parties
The Defendant (“the Seller”) is a Singapore company and is the former owner of the 2002-built Capesize bulk carrier “CSK Glory” (“the Vessel”). Prior to the sale described below, the Vessel was operated by a Shanghai subsidiary of Tai Chong Cheang Steamship Co. (H.K.) Limited (“TCC”), a family-owned shipping company.
The Claimant (“the Buyer”) is a one-ship company incorporated in Nevis which purchased the Vessel pursuant to the terms of a Memorandum of Agreement concluded on an amended Saleform 1993 form dated 26 April 2019 (“the MOA”). The Buyer's agents for the sale and purchase and for the subsequent chartering of the Vessel were GMS Dubai (“GMS”). Following the delivery of the Vessel to the Buyer she was renamed “Lory”.
The Facts
The facts that have given rise to the dispute between the parties can be shortly stated. They are, in large part, uncontroversial.
On 26 April 2019, as explained in paragraph 4 above, the Buyer purchased the Vessel from the Seller. Clause 1 of the MOA provided that the purchase price of the Vessel was US$458.75 per net long ton light ship weight giving rise to a total purchase price of US$9,623,184.90. The price was paid and the Vessel was delivered to the Buyer on 14 May 2019 at Singapore.
Clause 19 of the MOA was in the following terms:
“19. The vessel is sold for the purpose of demolition only and the Buyers hereby guarantee that they will not trade the Vessel further nor sell the vessel to a third party for any purpose other than demolition and will, on completion of demolition, furnish to the Sellers a certificate stating that the vessel has been totally demolished.”
The evidence before me suggested that similar provisions are often, though not invariably, used where vessels are sold for scrap. I was shown clauses in standard BIMCO DEMOLISHCON and RECYCLECON forms.
According to the first witness statement of Symeon Dimitriou of GMS, served on behalf of the Buyer, as at the date when the MOA was concluded and up to the time of the Vessel's delivery on 14 May 2019, the Buyer intended to sell the Vessel for demolition as clause 19 required.
By 20 May 2019, however, having had little interest from potential scrap buyers and in circumstances where the market price for tonnage for recycling had dropped but the freight market for Capesize bulk carriers had risen, GMS began to make enquiries about obtaining cargo for the Vessel for a laden voyage.
Emily Koo Chih Ya, a Director of TCC, who served a number of witness statements on behalf of the Seller, suggested that the Buyer's decision to trade the Vessel may, in fact, have been taken earlier. For the purposes of the matters I have to determine, this is not an issue that I consider I need to decide; insofar as it matters, on the evidence before me I am not satisfied that the decision was taken any earlier than 20 May 2019.
Having decided to investigate the possibility of trading the Vessel, on 20 May 2019 GMS sent an email to the Seller, via the Seller's brokers, Braemar, in the following terms, asking the Seller, in effect, to release the Buyer from the restriction imposed by clause 19:
“further telcon kindly provide TCD and class status. Buyers would like to look for any opportunity out there to see if any voyage can be undertaken due to the significant fall in the subcont in terms of sentiment and steel prices. Buyers are bound to lose a lot of money thus kindly requesting for this info and for the green light to have the option to trader her to at least be able to speculate on the market and try and minimize the losses as much as possible.”
Mr Dimitriou's evidence was that, whilst he received no written reply, the verbal answer given by Braemar to this request was “no”, i.e., that the terms of clause 19 would not be relaxed. Ms Koo's evidence was that GMS's email was not passed on to her but that she was asked by Braemar if TCC would be prepared to waive clause 19 and she said that it would not.
Ms Koo's explanation, both for the presence of clause 19 in the MOA and for her refusal to release the Buyer from its terms, was that since 2016 TCC had pursued a policy of scrapping its older vessels with a view to reducing the oversupply of tonnage in the market which impacted on TCC's revenues through depressed charter rates. A number of TCC-operated Capesize vessels, she said, were fixed on period charters with rates linked to the Baltic Capesize Index (BCI).
A BIMCO commentary, exhibited to Ms Koo's first witness statement, reflected a general appreciation in the market at the time of the sale and delivery of the Vessel that overcapacity was indeed a problem. Ms Koo also referred to a 1 May 2019 post by BIMCO's Chief Shipping Analyst which said that:
“Due to the falling demand for commodities traditionally carried by Capesize ships, limiting fleet growth will become even more important if freight rates are to be profitable.”
Mr James M. Turner, QC, who appeared on behalf of the Buyer, submitted in a note of “Defendant's Non-Points” that he handed up at the trial that TCC's values and policies were irrelevant to the issues that I had to decide. He made clear in his reply submissions that he was not inviting me to assess or make any finding as to TCC's scrapping policy; he was, thus, not asking me to make a finding that the policy did not exist or was to be criticised in some way.
I proceed in these circumstances on the basis that TCC did indeed have a policy in favour of scrapping its older vessels. The existence of the policy would seem to be confirmed by the fact that, as the documents show, prior to the sale of the Vessel to the Buyer, Ms Koo rejected an approach from a broker suggesting that she could sell the Vessel for trading at a premium to its scrap value.
Despite the terms of clause 19 of the MOA, and despite the Seller's refusal to waive its terms, in the three months following the delivery of the Vessel the Buyer did, in fact, conclude two trading fixtures.
Each fixture was with the same charterer, DHL Project & Chartering Ltd, and each was for the carriage of a cargo of coal. The first (“the First Fixture”) was concluded on 31 May 2019 and was for a voyage from Indonesia to India. The second (“the Second Fixture”) was concluded on 15 July 2019 and was for a voyage from South Africa to India.
There is a dispute about the profitability of the First Fixture and the Second Fixture. The position appears to be that at least one of fixtures was profitable, and that a profit was made overall. The precise position is, however, not a matter that I have to decide at this hearing.
In paragraph 15 of its Reply in this action, the Buyer said that:
“… the [Buyer] may (although it is not certain that it will) continue to trade the Vessel if the Court does not restrain it by injunction from doing so.”
Very shortly before the present hearing, and in full knowledge that a hearing was taking place at which I was being asked to grant a final injunction preventing any further trading of the Vessel in breach of clause 19, the Buyer concluded a third fixture. I say more about this later.
The Indian Proceedings
On 20 June 2019 Ms Koo learnt about the conclusion of the First Fixture. She sent an email on that date to the Buyer, via its brokers, referring to the fact that the MOA stated that the Vessel had been sold for demolition only and was not to be used for trading, and reserving the right to claim damages.
On 17 July 2019 the Seller commenced proceedings against the Vessel and the Buyer in the High Court of Gujarat at Ahmedabad (“the Indian Proceedings”). The Vessel was arrested and released only when security equivalent to approximately US$520,000 was provided.
The Buyer says, but the Seller disputes, that the Indian Proceedings included not merely a claim for security but also a claim for substantive relief. The Buyer claims that in these circumstances the Seller was in breach of an exclusive jurisdiction clause contained in clause 16 of the MOA, which provided as follows:
“16. Arbitration
If any dispute should arise in connection with the interpretation and fulfillment of this Agreement, same shall be exclusively decided by the High Court of Justice of England and Wales in London in accordance with the Laws of England. Both parties undertake to nominate London solicitors authorised to accept service of High Court proceedings and to file an acknowledgment of...
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...Privé) v Moghtadaei, 2020 ONSC 8199 ..................................117 Priyanka Shipping Ltd v Glory Bulk Carriers Pte Ltd, [2019] EWHC 2804 (Comm) ......................................................................590 Pro Swing Inc v Elta Golf Inc, 2006 SCC 52 .............................
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Enforcement of Contracts by Injunctions
...ahead of positive obligations has been followed. The 4 Ibid at para 39. 5 Priyanka Shipping Ltd v Glory Bulk Carriers Pte Ltd , [2019] EWHC 2804 (Comm). 6 Ibid at para 91. 7 See McDonald’s Restaurants of Canada Ltd v West Edmonton Mall Ltd (1994), 159 AR 120 (QB) [ McDonald’s ]; Servicemast......