Progress Bulk Carriers Ltd v Tube City IMS LLC [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Cooke J. |
| Judgment Date | 17 February 2012 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 February 2012 |
Queen's Bench Division (Commercial Court).
Cooke J.
Mark Jones (instructed by Marine Law Solicitors Limited) for the Claimant.
Paul Henton (instructed by Reed Smith LLP) for the Defendant.
The following cases were referred to in the judgment:
Adam Opel GmbH v Mitras Automotive (UK) LtdUNK [2007] EWHC 3481 (QB).
Alf Vaughan & Co Ltd v Royscot Trust plcUNK [1999] 1 All ER (Comm) 856.
Borrelli v TingUNK [2010] UKPC 21.
Carillion Construction Ltd v Felix (UK) LtdUNK [2001] BLR 1.
CTN Cash & Carry Ltd v Gallaher LtdUNK [1994] 4 All ER 714.
Dalwood Marine Co v Nordana Line A/S (The Elbrus) [2010] 1 CLC 1.
Dimskal Shipping Co SA v International Transport Workers Federation (The Evia Luck)ELR [1992] 2 AC 152.
DSND Subsea Ltd v Petroleum Geo Services ASAUNK [2000] BLR 530.
Huyton SA v Peter Cremer GmbH & Co [1999] CLC 230.
Pace Shipping Co Ltd v Churchgate Nigeria Ltd [2009] 2 CLC 446.
Pao On v Lau Yiu LongELR [1980] AC 614.
Universe Tankships Inc of Monrovia v International Transport Workers FederationELR [1983] 1 AC 366.
Shipping — Duress — Charterparty — Repudiatory breach — Owners fixed vessel elsewhere in repudiatory breach of charter — Owners agreed to find alternative vessel and to compensate charterers for all damages resulting from failure to provide contracted vessel — Sale contract with receivers of cargo amended with reduced price and later shipment date — Owners then made “take it or leave it” offer of alternative vessel with waiver by charterers of all claims — Arbitrators right that agreement voidable for duress — Owner's conduct amounted to illegitimate pressure — Conduct did not have to be unlawful — Arbitrators entitled to find illegitimate pressure in owner's repudiatory breach of charter and subsequent attempts to take advantage of position created by that unlawfulness.
This was an appeal by shipowners from an arbitrators' award holding that the settlement agreement between the parties was voidable for duress.
The disponent owners of a vessel chartered it on amended Gencon form to the respondents to carry 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 15-21 April 2009. Immediately after the charter was concluded the owners indicated they would like to substitute another vessel with a later laycan. They then fixed the vessel to another charterer without informing the respondents.
The owners stated that they intended to perform the voyage with a possible vessel substitution with laycan 15-24 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.
The arbitrators found that 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 that time no realistic chance of fulfilment by the named vessel which was loading elsewhere, nor of making the agreed laycan.
On 18 April, the owners conceded to the charterers that they had made a mistake and said that they would find an alternative vessel to load between 27 and 30 April and that they would compensate the charterers for all damages resulting from their failure to provide the contracted vessel.
The parties discussed a replacement vessel and an extension of time for shipment. The receivers agreed to extend the shipment date on condition that the purchase price was reduced. The charterers relayed that to the owners, holding them responsible for the loss which they would suffer, claiming, in addition, barge demurrage and interest in respect of the delay.
The charterers informed the owners that they accepted the replacement vessel with a discount for the cargo but reserved their rights in respect of all claims for damages arising out of the breach of the charter. The owners then made a “take it or leave it” offer requiring 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. The charterers said that they were forced to accept the owners” terms under protest.
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 and therefore voidable.
The owners appealed arguing that economic duress only operated if the victim was subjected to pressure by unlawful action on the part of the perpetrator. Alternatively, if conduct which was lawful could amount to the requisite “illegitimate pressure”, the bar had to be set very high and pressure should only be branded as “illegitimate” where it could be considered on a par with conduct that the law did expressly recognise as illegal or criminal.
Held , dismissing the appeal:
1. The exertion of pressure by lawful means did not prevent the operation of the doctrine of economic duress. It was clear from the authorities that “illegitimate pressure” could be constituted by conduct which was not in itself unlawful, although it would be an unusual case where that was so, particularly in the commercial context. (CTN Cash & Carry Ltd v Gallaher LtdUNK[1994] 4 All ER 714followed.)
2. Economic pressure could amount to duress provided that the economic pressure could be characterised as illegitimate and constituted a significant cause inducing the plaintiff to enter the relevant contract. (The Evia LuckELR[1992] 2 AC 152andHuyton SA v Peter Cremer GmbH & Co[1999] CLC 230followed.)
3. It was also clear that a past unlawful act, as well as a threat of a future unlawful act, could in appropriate circumstances amount to “illegitimate pressure”. (DSND Subsea Ltd v Petroleum Geo Services ASAUNK[2000] BLR 530 and Borrelli v TingUNK[2010] UKPC 21considered.)
4. It could not be said that the arbitrators applied the wrong test and there was no issue raised by the owners on appeal as to causation. They complained solely that the facts found by the arbitrators could not amount to “illegitimate pressure”. That position was unsustainable since illegitimate pressure could involve the doing of acts which were not unlawful in themselves, albeit unusually in commercial cases, but in any event, the refusal to substitute the vessel unless the charterers agreed to waive their prior breach had to be seen both in the light of owners” prior repudiatory breach which was unlawful and their subsequent attempts to take advantage of the position created by that unlawfulness.
5. The owners” alternative test for illegitimate pressure was not supported by any authority, and each case was fact sensitive. The pressure created by the owners in their demand for a waiver of rights by the charterers had to be seen both in the light of their repudiatory breach and in the light of their subsequent conduct, including their deliberate refusal to comply with the assurances they had previously given about providing a substitute vessel and paying full compensation in respect of that breach. Their refusal to supply the substitute vessel to meet the charterers” needs, in circumstances which they had created by their breach and their subsequent misleading activity, unless the charterers waived their rights, could readily be found by the arbitrators to amount to “illegitimate pressure”. Not only was that a finding which the arbitrators could properly reach when applying the correct test in law, it was the right decision on the facts of the case.
Cooke J:
1. This is an appeal under section 69 of the Arbitration Act 1996 from a majority award dated 10 June 2011, permission having been given by Burton J on 14 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 28th April 2009 voidable for duress, and, in particular did [the owner's] conduct amount to the ‘illegitimate pressure’ required to establish duress in law?”
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 15-21 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 January 2009 provided for a final shipment date of 30 April 2009.
3. The charter was concluded on the 2 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 April, without any response from the Charterers to a suggestion made the previous day of an unnamed substitute with laycan of 15-24 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 April, the Owners stated that they intended to perform the voyage with a possible vessel substitution with laycan 15-24 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 April, the Charterers discovered that the Owners had chartered the Cenk K to Daewoo. The...
To continue reading
Request your trial
-
A v B ("The Tai Hunter")
...Nigeria Ltd of Nigeria [2009] EWHC 1975 (Comm); [2009] 2 CLC 446. Progress Bulk Carriers Ltd v Tube City IMS LLC [2012] EWHC 273 (Comm); [2012] 1 CLC 365. Ramburs Inc v Agrifert SA [2015] EWHC 3548 (Comm); [2016] 1 CLC 46. Reliance Industries Ltd v Union of India [2018] EWHC 822 (Comm); [20......
-
Balbir Singh Chaggar v Raghbir Singh Chaggar
...Construction v Felix UK Ltd (2000) 74 Con LR 144 at §24. Most recently, in Progress Bulk Carriers v Tube City IMS [2012] EWHC 273 (Comm) [2012] 1 CLC 365, Cooke J reviewed and approved the earlier authorities. From these authorities, the following principles can be stated: (1) A contract wh......