Teekay Tankers Ltd (a company incorporated in the Marshall Islands) v Stx Offshore & Shipbuilding Company Ltd (a company incorporated in the Republic of Korea)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Walker |
| Judgment Date | 15 February 2017 |
| Neutral Citation | [2017] EWHC 253 (Comm) |
| Docket Number | Case No: CL-2014-000271 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 15 February 2017 |
[2017] EWHC 253 (Comm)
The Honourable Mr Justice Walker
Case No: CL-2014-000271
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Huw Davies QC & James Willan (instructed by Haynes and Boone CDG, LLP) for the Claimant
Stephen Hofmeyr QC & Gavin Geary (instructed by MFB Solicitors) for the Defendant
Hearing dates: 11, 12, 13, 14, 18, 19 April 2016
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 may be treated as authentic.
Paul Walker, 15 February 2017
Table of Contents
| A. Introduction and outcome | 4 |
| A1. The context and the issues | 4 |
| A1.1 The parties and the proposed oil tankers | 4 |
| A1.2 The March 2013 LOI: "firm four" vessels, & LOI options | 4 |
| A1.3 The April contracts: the firm SBCs and the option agreement | 5 |
| A1.4 The arbitrations and awards under the firm SBCs | 5 |
| A1.5 Past and current issues in the present claim | 5 |
| A2. The written evidence | 6 |
| A3. The course of the trial | 7 |
| A3.1 Overview of the trial | 7 |
| A3.2 An initial ruling | 8 |
| A3.3 TT's estoppel/ abuse of process assertions | 8 |
| A3.4 Protecting the confidentiality of the arbitrations | 8 |
| A4. The outcome | 11 |
| B. Background and history | 11 |
| B1. Background and history: general | 11 |
| B2. LOI clause 6: delivery dates for optional vessels | 11 |
| B3. Vancouver, 3 to 5 April 2013 | 12 |
| B3.1 Doubts about STX's financial stability: proposal for a VBNP | 12 |
| B3.2 The firm SBCs | 13 |
| B3.3 The option agreement: April options 1, 2 and 3 | 16 |
| B4. May to October 2013 | 18 |
| B4.1 EOT to 17 June for provision of refund guarantees | 18 |
| B4.2 From 11 to 18 June: refund guarantees not provided | 19 |
| B4.3 Two meetings on 20 June 2013 | 20 |
| B4.4 The VBNP is signed in July 2013 | 21 |
| B4.5 Events in August 2013 | 21 |
| B4.6 TT on 2 Oct 2013 exercises April option 1 | 22 |
| B4.7 Emails 7, 11 Oct, and an EOT for the April option 1 contracts | 23 |
| B4.8 ND/SMK telcon on 18 October, and emails 21/22 October | 24 |
| B4.9 TT's internal emails, 27 and 30 October 2013 | 25 |
| B5. Events in November 2013 | 26 |
| B5.1 TT's November claim for USD 61m under April option 1 | 26 |
| B5.2 STX's response of 21 November 2013 | 26 |
| B5.3 TT on 22 Nov 2013 exercises April option 2 | 28 |
| B5.4 STX on 26 November sends April option 1 contracts | 29 |
| B5.5 STX seeks replies to e-mails of 21 and 26 November | 30 |
| B6. December 2013 | 30 |
| B6.1 STX on 2 December sends April option 2 contracts | 30 |
| B6.2 STX's 2 December expedited hearing email | 31 |
| B6.3 CDG's December letter to STX | 33 |
| B7. Events in 2014 | 35 |
| B7.1 MFB's January letter to CDG | 35 |
| B7.2 CDG's February letter to MFB | 36 |
| B7.3 STX on 20 March 2014 brings the Seoul claim | 37 |
| C. Was the option agreement void for uncertainty? | 37 |
| C1. Uncertainty: introduction | 37 |
| C2. Uncertainty: statements of case & framework at trial | 39 |
| C3. Agreements to agree: principles of contract law | 42 |
| C4. Other principles of contract law | 50 |
| C4.1 Other principles: introduction | 50 |
| C4.2 Implication of terms: general principles | 50 |
| C4.3 Provisions as to "best efforts" to agree | 55 |
| C5. Uncertainty: the arguments at trial | 60 |
| C5.1 TT's arguments on uncertainty | 60 |
| C5.2 STX's uncertainty arguments: introduction | 64 |
| C5.3 STX's uncertainty arguments: categories 1 and 2 | 64 |
| C5.4 STX's uncertainty arguments: category 3 | 65 |
| C5.5 STX's uncertainty arguments: category 4 | 65 |
| C5.6 TT's submissions in reply | 67 |
| C6. Uncertainty: analysis | 68 |
| C7. Uncertainty: conclusion | 75 |
| D. Repudiation/ renunciation | 75 |
| D1. Repudiation/ renunciation: introduction | 75 |
| D2. Renunciation | 78 |
| D2.1 Renunciation: introduction | 78 |
| D2.2 Alleged renunciation of the firm SBCs | 79 |
| D2.3 Renunciation: STX's statements & conduct | 83 |
| D2.4 Renunciation: STX's oral agreement assertion | 87 |
| D2.5 Renunciation: STX's uncertainty assertion | 87 |
| D2.6 Renunciation: conclusion | 88 |
| D3. TT's allegation of repudiatory breach | 88 |
| E. Quantum of damages | 88 |
| E1. Quantum: introduction & a fundamental principle | 88 |
| E2. STX's nil loss contention | 91 |
| E2.1 STX's nil loss contention: introduction | 91 |
| E2.2 The no RG obligation proposition | 97 |
| E2.3 The enhanced refund sole remedy proposition | 99 |
| E2.4 TT's assumed full performance objection | 100 |
| E2.5 STX's nil loss contention – conclusion | 101 |
| E3. Relevant dates for assessing damages | 101 |
| E3.1 The exercised options damages assessment date | 101 |
| E3.2 Relevant dates for April option 3 | 103 |
| E4. Quantification: April options 1 & 2 | 106 |
| E4.1 April option 1 & 2: assessment at termination date | 106 |
| E4.2 April options 1 & 2: assessment at delivery date | 106 |
| E5. April option 3: would it have been exercised? | 116 |
| E6. April option 3: quantification issues | 118 |
| E6.1 April option 3: assessment in the option strike period | 118 |
| E6.2 April option 3: assessment at dates of delivery | 118 |
| E7. Quantum of damages: conclusion | 118 |
| F. Issue estoppel and abuse of process | 119 |
| F1. Issue estoppel/abuse of process: introduction | 119 |
| F2. The principle of privity of interest | 120 |
| F3. Privity of interest: application to the present case | 122 |
| G. STX's counterclaim | 124 |
| Annex 1: abbreviations and short forms | 126 |
| Annex 2: the ND/SMK telcon on 18 October 2013 | 136 |
A. Introduction and outcome
A1. The context and the issues
A1.1 The parties and the proposed oil tankers
This case concerns a dispute between a shipping company and a shipbuilder. For ease of reference, Annex 1 sets out abbreviations and short forms used in the present judgment.
The claimant, Teekay Tankers Ltd, is a company incorporated in the Marshall Islands. I shall refer to it as "TT". TT is publicly listed on the New York Stock Exchange. Roughly a quarter of its shares are indirectly held by Teekay Corporation ("Teekay Corp"). Teekay Corp is also a Marshall Islands company publicly listed on the New York Stock Exchange. Both TT and Teekay Corp have their operational base in Vancouver, Canada. From that base TT operates a fleet of oil tankers.
The defendant, STX Offshore & Shipbuilding Co., Ltd., is a company incorporated in the Republic of Korea. I shall refer to it as "STX". On 7 June 2016 the Korean court made an order commencing a Korean rehabilitation proceeding, broadly comparable to an English administration, in respect of STX. In England and Wales an order made on 23 June 2016 in the Companies Court recognises the Korean rehabilitation proceeding as the "foreign main proceeding" under Article 17 of Schedule 1 to the Cross-Border Insolvency Regulations 2006. The effect of the Companies Court order is to stay the present proceedings save for the handing down of the present judgment and a hearing to deal with certain matters consequential upon the present judgment.
In the spring of 2013 TT and STX entered into agreements which envisaged the construction by STX at its yard in Korea of 16 vessels of a type generally known as "Aframax" tankers. They were each to be 113,000 DWT crude oil tankers of identical design, including in relation to each vessel a choice of additional coatings to enable her to carry a refined product. A tanker with the benefit of such coatings was described as "product ready".
A1.2 The March 2013 LOI: "firm four" vessels, & LOI options
On 15 March 2013 TT and STX signed a letter of intent ("the LOI") for STX to build and TT to purchase "firm four" vessels ("the firm vessels"), and for STX to grant to TT options ("the LOI options") for a further three sets of four vessels ("the optional vessels").
A1.3 The April contracts: the firm SBCs and the option agreement
On 5 April 2013 four shipbuilding contracts ("the firm SBCs"), each concerning one of the firm vessels, were made between STX as builder and, in the case of each firm SBC, a wholly owned subsidiary of TT as buyer.
Also on 5 April 2013 TT and STX signed an option agreement ("the option agreement") which provided, among other things, for TT to have options to order three additional sets of up to four vessels. I shall refer to these three options together as "the April options", in order to distinguish them from the LOI options. Individually I shall refer to the three April options as "April option 1", "April option 2", and "April option 3" respectively. Turning to the vessels contemplated by the respective options, I refer to them respectively as "the April option 1 vessels", "the April option 2 vessels" and "the April option 3 vessels", and generally as "the April option vessels".
The terms of the April options differed from those set out in the LOI options, in particular in relation to delivery.
I shall refer to the firm SBCs and the option agreement together as "the April contracts", and to the four buyers under the firm SBCs as "the firm SBC buyers".
A1.4 The arbitrations and awards under the firm SBCs
In 2014 each firm SBC buyer began arbitration proceedings ("the arbitrations") against STX. The eventual tribunal in each of the four arbitrations comprised the same three arbitrators: Sir Bernard Rix, Mr Timothy Young QC and Mr Alistair Schaff QC. On 4 December 2015 they issued four awards ("the awards"), along with a document ("the arbitrators' reasons") giving the reasons for the awards. The operative part of each award stated that the relevant firm SBC...
To continue reading
Request your trial
-
PJSC National Bank Trust v Boris Mints
...there is some uncertainty”). ii) There was also no argument on the issue in Teekay Tankers Ltd v STX Offshore & Shipbuilding Co Ltd [2017] 1 Lloyd's Rep 387, [397]–[408], in which Walker J proceeded on the basis that an arbitration award was capable of binding Gleeson privies, but found th......
-
Eva Green v White Lantern Film (Britannica) Ltd
...any such renunciatory words or conduct must be clear and unequivocal — see Teekay Tankers Ltd. v STX Offshore & Shipbuilding Co Ltd [2017] EWHC 253 (Comm) at [217] per Walker 208 There are warnings in the authorities about too much reliance on propositions derived from other cases that ine......
-
Back To The Business Of Brexit What's A 'Brexit Clause'?
...would likely be unenforceable as UK courts will not force parties to agree (as was recently reaffirmed in Teekay Tankers Ltd v STX [2017] EWHC 253 (Comm)). Is there an Whilst the debate rages on about the structure of a Brexit clause, one possible alternative has sprung up. This involves th......