Ravennavi SPA v New Century Shipbuilding Company Ltd
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE GLOSTER, DBE,Mrs Justice Gloster, DBE |
| Judgment Date | 04 April 2006 |
| Neutral Citation | [2006] EWHC 733 (Comm) |
| Docket Number | Case No: 2005 Folio 341 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 04 April 2006 |
[2006] EWHC 733 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Gloster, Dbe
Case No: 2005 Folio 341
Richard Waller Esq (instructed by Messrs DLA) for the Claimant
James Turner Esq (instructed by MessrsLane & Partners) for the Defendant
Hearing dates: 2 nd December 2005
Further written submissions: 7 th, 12 th & 15 th December 2005
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.
This was originally an application by the defendant, New Century Shipbuilding Company Limited ("the Yard") for an order pursuant to CPR Part 11 that the order of Cresswell J dated 14 June 2005 (permitting service of the claim form out of the jurisdiction and service of the claim form) be set aside, alternatively that the action be stayed pursuant to section 9 of the Arbitration Act 1996.
The relevant facts may be briefly summarised as follows. The Yard is a Chinese shipyard. The claimant, Ravennavi SpA ("the Buyer"), is a shipowning company incorporated under the laws of Italy, and domiciled there. By Clause 1 of an option agreement dated 12 December 2003 ("the Option Agreement"), the Yard granted the Buyer or its nominee an option exercisable at any time up to 31 January 2004 to require the Yard to design, build, launch, equip and complete up to two 73,400 dwt crude and product oil tankers (therein defined, and referred to as "the Option Vessels") "on terms and conditions of the [shipbuilding] contracts dated 13 February 2003" and two addenda "as amended by the terms and conditions of this Option Agreement". The remainder of Clause 1 set out, in sub-clauses 1.1 to 1.3, amendments which were to be made to the original shipbuilding contract in relation to price, instalments and payment security (with which Clause 2 is also concerned). Clause 3 provided that the option could be exercised by the Buyer giving one or more notices to the Yard prior to 31 January 2004.
Clause 4 of the Option Agreement provided as follows:
"(i) Delivery of the first vessel of Optional Vessels shall be on or before 31 st October 2007. Delivery of the second vessel of Optional Vessels shall be on or before 31 st December 2007.
(ii) Should the Sellers [the Yard] could [sic] find any possibility to anticipate delivery of the optional vessel(s) (for instance a previously booked berth becomes free), then the Seller will grant the Buyer or its nominee the earlier delivery position for the optional vessel(s)."
Clause 5 set out the consequences of the exercise of the option, namely that a contract in relation to each vessel on these terms would automatically come into effect which, with a month, would then be replaced by a fresh contract substantially in those terms:
"On receipt of BUYER'S notice referred to in Clause 3, a Shipbuilding Contract … shall be deemed signed and automatically in effect … on the terms of the Shipbuilding Contract dated 13 th February 2003 [and its aforesaid addenda] duly amended as per Clause 1.3 here above. After declaring the OPTION and on or before 1 (one) month after such declaration, the BUYER shall procure that … itself executes formally the Option Shipbuilding Contract(s) as BUYER … substantially in the form of the Shipbuilding Contracts dated 13 th February 2003 [and its aforesaid addenda] duly amended as per Clause 1.3 here above."
The reference to amendment "as per Clause 1.3 here above" appears to have been erroneous and is inconsistent with the words in clause 1; in addition to that clause, clauses 1.1, 1.2, 2 and 4 also contained provisions which would or might have resulted in amendment of the original shipbuilding contract dated 13 February 2003.
Clause 6 provided for confidentiality to be observed by the parties "within the validity of this agreement".
Clause 7 of the Option Agreement contained an English choice of law clause and an exclusive English jurisdiction clause in the following terms:
"7. Law and Jurisdiction
7.1 This agreement shall be governed by and construed in accordance with English Law.
7.2 In the event of any dispute or claim arising out of, or relating to or in connection with this Agreement, the same shall be determined only by the High Court of Justice in London to whose exclusive jurisdiction the parties hereby irrevocably agreement and submit."
The option was exercised by the Buyer on or about 28 January 2004 in respect of the two Optional Vessels. Pursuant to the exercise of the option two shipbuilding contracts dated 28 February 2004 were entered into between the Yard and the Buyer, being Contract No NCS-CT0307331 for the construction of Hull No 0307331, and Contract No NCS-CT0307332 for the construction of Hull No 0307332 ("the Shipbuilding Contracts").
Article XIII of the Shipbuilding Contracts provided:
"In the event of any dispute between the parties hereto as to any matter arising out of or relating to this Contract or any stipulation herein or with respect thereto which cannot be settled by the parties themselves, such dispute shall be resolved by arbitration in London, England in accordance with the Laws of England. Either party may demand arbitration of any such disputes by giving written notice to the other party."
Article XIX.4 of the Shipbuilding Contracts contained an entire agreement clause in the following terms:
" 4 ENTIRE AGREEMENT
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertakings and agreements on any subject matter of this Contract prior to signing of the Contract."
The Buyer now contends that the Yard is in breach of Clause 4(ii) of the Option Agreement. It contends that the Yard has contracted with third parties to deliver other 73,4000 dwt crude and product oil tankers on dates falling earlier than the dates for delivery of Hull Nos 0307331 and 0307332 as specified by Article VII, paragraph 1 of the Shipbuilding Contracts, without first offering to the Buyer those (or any other) earlier dates. It is thus the Buyer's case that Clause 4(ii) survived the exercise of the option and the coming into force of the Shipbuilding Contracts and that it has a claim for damages in the region of US $ 20 million.
By fax dated 1 March 2005, the Buyer wrote to the Yard stating:
"[W]e understand from market sources (many international shipping brokers) that your are marketing for sister ships two available berths for delivery December 2006 and September 2007.
Should what above is correct, we would remind you that the 'Option Agreement no.3' dated 12 December 2003 and signed in Genoa provides on Art. 4, second paragraph, that earlier delivery dates must be granted to the above mentioned hull numbers.
Please check and confirm to us by return that you will granted the following new and anticipated delivery dates:
Hull No 0307331 December 2006
Hull No 0307332 September 2007
or whatever delivery dates which should be available in the meantime. Suitable addenda to the relevant contracts to be issued and signed."
The Buyer contends that there was no satisfactory response to their request.
For the purposes of this application only, the Yard accepted that it had indeed contracted with third parties to deliver other tankers on dates falling earlier than the contractual dates for the delivery of the Optional Vessels, and that from June 2004 it would have been possible for the Yard to have offered the Buyer earlier delivery dates.
As I have said, Cresswell J granted permission to serve the claim form out of the jurisdiction on 7 June 2005. The Buyer asserted that the basis of jurisdiction was Part 2.20, paragraphs 5(c) and/or 5(d) (viz. a claim made in respect of a contract which was governed by English Law or which contains a term to the effect that the Court shall have jurisdiction to determine any claim in respect of the contract). Service having been effected, on 23 September 2005 the Yard lodged an acknowledgement of service indicating an intention to contest the Court's jurisdiction. The application was then issued and served on 19 October and evidence from both sides followed.
At the oral hearing before me, Mr James Turner, for the Yard, argued that leave to serve out of the jurisdiction should be set aside on two main grounds:
i) The first ground was that the claim had no reasonable prospect of success. That, he argued, was because, on the true construction of the Option Agreement and the Shipbuilding Contracts (including, in particular, the entire agreement clause in the latter) the obligation imposed on the Yard in clause 4(iof the Option Agreement was co-terminous with the exercise or expiry of the Option. Since the Buyer was unable to advance any case that there was a breach of contract to offer an earlier delivery date before the Option's expiry, Mr Turner argued that the claim was bound to fail.
ii) The second ground was that the Shipbuilding Contracts contained an arbitration clause which meant that this was a dispute that the parties had agreed to arbitrate, or alternatively was one which could more appropriately be dealt with by arbitration. Therefore, he contended, the claim should be stayed pursuant to section 9 of the Arbitration Act 1996, so that an arbitration could take place. He also submitted that there had been a breach of the Buyer's obligation of full and frank disclosure on the application for permission to serve out, since it had failed to mention the existence of the entire agreement clause or the arbitration clause in the Shipbuilding Contracts,...
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