Progress Bulk Carriers Ltd v Tube City Ims LLC

JurisdictionEngland & Wales
JudgeThe Hon. Mr Justice Cooke
Judgment Date17 February 2012
Neutral Citation[2012] EWHC 273 (Comm)
Docket NumberCase No: 2011–851
CourtQueen's Bench Division (Commercial Court)
Date17 February 2012
Between:
Progress Bulk Carriers Limited
Claimant
and
Tube City Ims L.L.C.
Defendant

[2012] EWHC 273 (Comm)

Before:

The Hon Mr Justice Cooke

Case No: 2011–851

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Mark Jones (instructed by Marine Law Solicitors Limited) for the Claimant

Paul Henton (instructed by Reed Smith LLP) for the Defendant

Hearing date: Thursday, 9th February and Friday 10th February 2012

The Hon. Mr Justice Cooke
1

This is an appeal under section 69 of the Arbitration Act 1996 from a majority award dated 10 th June 2011, permission having been given by Burton J on 14 th October 2011. The point of law is expressed thus:—

"On the basis of the findings of fact in the Award and Reasons, was the Settlement Agreement made between the parties on 28 th April 2009 voidable for duress, and, in particular did [the owner's] conduct amount to the "illegitimate pressure" required to establish duress in law?"

The Facts found in the Award and Reasons

2

The essential facts as found by the Arbitrators are fairly simply stated. The claimants, who were the disponent Owners of the vessel Cenk Kaptanoglu (hereafter, the "Cenk K") (the Owners), concluded a charter on amended Gencon form with the respondents (the Charterers) for carriage, on that named vessel, of a cargo of shredded scrap from the Mississippi River to China. The charter did not give any right to substitute the vessel. The agreed laycan was 15 th-21 st April 2009. The identity of the performing vessel was important to the Charterers or, more particularly, to their receivers, whose approval was required by the terms of the Charterers' sale contract to them. That sale contract dated the 16 th January 2009 provided for a final shipment date of 30 th April 2009.

3

The charter was concluded on the 2 nd April 2009 but from 3rd April onwards the Owners indicated they would like to substitute the Cenk K with another vessel with later laycan. On 7 th April, without any response from the Charterers to a suggestion made the previous day of an unnamed substitute with laycan of 15 th-24 th April, the Owners fixed the Cenk K to another charterer (referred to in the majority reasons as Daewoo) without informing the Charterers. On the 15 th April, the Owners stated that they intended to perform the voyage with a possible vessel substitution with laycan 15 th-24 th April, whilst Charterers were pressing for the contracted vessel, stating that they had barges waiting with the cargo to be loaded. Any substitution, they said, was strictly subject to their own and the receiver's approval.

4

On the 16 th April, the Charterers discovered that the Owners had chartered the Cenk K to Daewoo. The Arbitrators found that whilst the Charterers may have agreed in principle that the Owners could make a substitution, they did not agree that the Cenk K could be switched to Daewoo before a suitable substitute had been found and approved by their receivers. The Owners were in repudiatory breach of the charter, but the Charterers did not accept that breach as terminating the contract, which therefore remained alive, although there was by this time no realistic chance of fulfilment by the named vessel which was loading elsewhere, nor of making the agreed laycan.

5

On the 18 th April, the Owners conceded to the Charterers that they had made a mistake and said they would find an alternative vessel to load between the 27 th and 30 th April and that they would compensate the Charterers for all damages resulting from their failure to provide the contracted vessel, the Cenk K.

6

The Arbitrators found that the Charterers reasonably relied upon these assurances and did not seek to find an alternative vessel elsewhere. On the 23 rd April, the Owners proposed the Agia as a substitute performing vessel with an ETA of 7/8 th May. On the following day, which was a Friday, the Charterers passed on the details of the Agia to their buyers, the receivers, for consideration, seeking to obtain an extension of time from the receivers for shipment from 30 th April to 15 th May, as well as substitution of the vessel.

7

On Monday 27 th April, the receivers stated that they would agree to extend the shipment date to 15 th May but only on condition that the purchase price was reduced by $8 per metric ton. The Charterers relayed this to the Owners, holding them responsible for the $8 per metric ton loss which they would suffer, claiming, in addition, barge demurrage and interest in respect of the delay. They pointed out that the deal with the receivers was the best that could be done in the circumstances, since selling elsewhere would result in a much greater loss as the market had moved downwards by more than the $8 differential sought by the receivers. The Arbitrators did not find that the parties had agreed a variation of the charter at this point, though there was clearly an in principle agreement to the Agia and to an extension of the shipment date.

8

On the 27 th April, the Owners replied stating that they would grant a $1 per metric ton discount on the freight rate. The Charterers protested at this, since they said they had no opportunity to negotiate a better deal with their receivers and, the same day, the Owners offered a $2 per metric ton discount on the freight. It appears from the dissenting award of one of the Arbitrators that a figure of $6 was then mentioned by the Charterers, plainly as a result of further negotiation with the receivers, who eventually agreed to accept a $6 discount on the price as compensation for the late shipment on a different vessel from that originally agreed. This the Owners would not accept and later that day, the Charterers informed the Owners that they accepted the Agia as the performing vessel with a $2 discount for the cargo but reserved their rights in respect of all claims for damages arising out of the breach of the 2 nd April charter party.

9

On the 28 th April, the sale contract with the receivers was amended with the diminished price for the cargo and a later shipment date of "on or before 15 th May 2009".

10

On the same day, the Owners told the Charterers that there was no point in them offering a $2 discount if the Charterers still reserved their right to make claims against them. The Arbitrators found, in accordance with the evidence of the Owners' representative, that the Owners made a "take it or leave it" offer. The Owners required acceptance of the Agia, clean, with a $2 reduction per metric ton on the freight and the agreement of the Charterers to waive all claims for loss and damage arising out of the nomination of a substitute vessel outside the contractual laycan and its late arrival. This was plainly inconsistent with their prior assurances of finding a substitute vessel and compensating the Charterers for the loss and damage caused by their repudiatory breach of charter.

11

The Charterers, in reply, said "given the exigencies of the circumstances and our urgent need to mitigate our losses and accommodate our customer in China, we are forced to accept the Owners terms under protest."

12

In the arbitration, the Owners argued that the Charterers had failed to mitigate by not going out into the market and obtaining another vessel. The Arbitrators found as a fact that there was no failure to mitigate by the Charterers because, from the 16 th April onwards, the Owners were assuring them that they would be in a position to nominate a substitute shortly. The Arbitrators found that the Charterers were not only entitled to believe that a vessel would be forthcoming but, as the days passed, they were "increasingly driven into a corner" from which they could not escape. It was not until the 23 rd April that the substitute vessel, the Agia, was proposed and the Arbitrators found that, by the 28 th April, the Charterers had no choice but to accept the Owners' full and final, take it or leave it proposal. The Arbitrators made this finding both in the context of the argument about failure to mitigate but also, expressly, in the context of the argument about economic duress. The Charterers had been "lulled into a false sense of security" by the Owners and had promptly consulted with their buyers, the receivers, and responded to the Owners, following the Owner's suggested substitution of the Agia on the 24 th April. When the Charterers, on Monday the 27 th, passed on the receiver's agreement, they expected the Owners to stand by their earlier assurances and honour the "commitment to compensate" which had been given by them. By the next day, the 28 th April, the Charterers had run out of time, and there was nothing else they could do if they were to fulfil their sale contracts.

The Arbitrators' Conclusion of Law

13

The majority of the Arbitrators held that the Charterers' agreement, under protest, to waive all their claims for damages in respect of the repudiatory breach, was procured by economic duress. The key paragraphs of the reasons are paragraphs 8–10 which must, as both parties accept, be read "in full in a fair and reasonable way and should not be subjected to minute textual analysis. The courts do not approach awards with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults or with the object of upsetting or frustrating the process of arbitration". (see paragraph 16 of Pace Shipping Co. Ltd v Churchgate Nigeria Ltd [2010] 1 Lloyds Law Rep page 183 and the Elbrus [2010] 2 Lloyds Law Rep 315).

14

Whilst the reasons do not state in terms what test was applied by the Arbitrators in coming to the conclusion that the settlement agreement was...

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