Ullises Shipping Corporation v Fal Shipping Company Ltd The Greek Fighter
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE COLMAN,Mr Justice Colman |
| Judgment Date | 14 July 2006 |
| Neutral Citation | [2006] EWHC 1729 (Comm) |
| Docket Number | Case No: 2003 FOLIO NO. 627 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 14 July 2006 |
[2006] EWHC 1729 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Mr Justice Colman
Case No: 2003 FOLIO NO. 627
Mr Thomas Raphael (instructed by Hill Taylor Dickinson) for the Claimant
Mr Michael Davey (instructed by Hextalls) for the Defendant
Hearing dates: 13 June 2005 —2 August 2005, 21–22 September 2005, 8 March 2006, 11 May 2006 and 16 June 2006
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.
Introduction
Ullises Shipping Corporation ("Owners") were owners of a tanker called the Greek Fighter which in December 2001 was under time charter to Fal Shipping Company Limited ("Fal"). This is a claim by Owners against Fal for damages for breach of that time charter or alternatively for an indemnity in respect of their losses. The basis of the claim is that in December 2001 the vessel and its cargo were detained by the Coastguard of the United Arab Emirates ("UAE") at Khorfakkan and, having been under detention, the vessel was then confiscated by the UAE authorities and sold at public auction on 12 March 2003. The detention and subsequent confiscation and sale of the vessel and its cargo were said by the UAE authorities to be justified by the fact that the vessel had on board oil of Iraqi origin which Fal and/or its holding company, Fal Oil Company, were in the course of attempting to smuggle or deal with in contravention of the UN Sanctions then applicable to Iraq. Owners claim US$3,761,180 in respect of the loss of the vessel. They further claim a total of US$2,539,256 for (i) unpaid hire and (ii) in respect of the amount by which payment of hire was reduced under agreements made between Owners and Fal on 17 April 2002 ("the First Hire Agreement") and in July 2002 ("the Second Hire Agreement") together with various fees and disbursements of Hill Taylor Dickinson ("HTD") in Dubai (AED 674,183.30) and Piraeus (US$5,000) and of Gulf Agency Company, Owners' port agents in UAE (US$28,393.07).
Fal were using the vessel as an oil storage facility at anchor off Khorfakkan. They have consistently denied that they caused any Iraqi oil to be transferred to the vessel in breach of the United Nations prohibitions. During the period of detention of the vessel they pursued a number of claims in the UAE courts designed to bring about the release of the cargo. Owners, although they did not bring court proceedings in UAE, also attempted by negotiation to persuade the UAE authorities to release their vessel. They too challenged the Coastguard's allegations that Fal had transferred Iraqi oil to the vessel. However, by the time they commenced these proceedings in July 2003, Owners had taken the view on the evidence then available to them that at least part of the cargo transferred into the vessel by Fal was of Iraqi origin and was being unlawfully dealt with by Fal in contravention of the UN embargo and Oil for Food Programme and of UAE law. Whether the oil transferred into the vessel by Fal was indeed of Iraqi origin thus became the central issue in the case.
Owners further advance an alternative case. They submit that, even if Fal never illegally transferred Iraqi oil into this vessel, their other oil movements involving other vessels, both before and after the Coastguard first detained the vessel in December 2001, were such as to demonstrate or at least to arouse a justifiable suspicion on the part of the UAE authorities and the UN Maritime Intervention Force ("MIF") that Fal was involved in smuggling Iraqi oil. In this connection Owners say that Fal demonstrated an elaborate exercise in deception designed to give the appearance of innocence, including their conduct in commencing the various proceedings in the UAE courts and that they created an entirely fictitious transaction apparently involving their introducing on board the vessel quantities of oil acquired by a company called Palatex which was said to have purchased the oil at public auction in UAE. This transaction further involved the blending of the oil emanating from Palatex with oil which Fal had already transferred to the vessel. Fal does not admit that the Palatex cargo originated in Iraq. It goes no further than adducing evidence that Palatex had acquired that oil at public auction in UAE. It does not challenge the proposition that there would be a high probability that oil sold at public auction would have been confiscated by the UAE authorities because, having originated in Iraq, it was being smuggled in breach of the Oil for Food Programme. It will be necessary to consider later in this judgment whether the Palatex cargo or the underlying transaction ever existed. Owners' case is that Fal invented the transaction and the cargo transfer to the vessel in order to cover themselves against a finding that part of the cargo on board the vessel originated in Iraq and that it was aware of that origin. It is said that by ascribing the origin to the public auction with Palatex as purchaser and by introducing the blending operation, Fal's object was to provide itself with cover in case it should be suggestion that it was complicit in storing and then exporting Iraqi oil.
The Palatex cargo forms the basis of only one of a very large number of allegations advanced by Owners that Fal have presented bogus evidence to the MIF and in proceedings in the UAE courts and in these proceedings to cover up its true conduct in dealing in contraband cargo. Indeed, Owners have challenged the authenticity of a total of no less than 57 separate documents disclosed by Fal. These challenges have presented the court with unique problems of trial management and with difficult issues of evidential analysis.
It will be necessary to investigate Owners' allegations in some detail later in this judgment. This process unavoidably involves matters of considerable complexity.
The contractual basis of Owners' claim can be outlined as follows.
The time charter which was entered into on 23 January 2001 incorporated the Shelltime 4 form and was for an initial period of 3 months with charterers' option to extend for one or two additional periods of 4 months. In the event it was extended until 30 January 2002.
The brokers' fixture message of 18 January 2001 to Fal confirmed that the vessel was to be fixed on
"3 MONTHS TIMECHARTER FOR TRADING ALWAYS AFLOAT WITHIN IWL VIA SAFE PORTS/ANCHORAGES AG/GULK OF OMAN AREA EXCL. IRAN/IRAQ WITH LAWFUL CARGOES OF FUEL OIL/CRUDE OIL"
This was subsequently accepted. The fixture also incorporated the terms, conditions and exceptions of an immediately preceding time charter of the vessel between the same parties dated 16 March 2000. That time charter in turn incorporated the Shelltime 4 form which included the following:
"Owners agree to let and Charterers agree to hire the vessel for a period of ……. commencing from the time and date of delivery of the vessel for the purpose of carrying all lawful merchandise (subject always to Clause 28) including in particular….."
Owners say that on various occasions during the period from October to December 2001 Fal caused various cargoes of smuggled Iraqi oil to be loaded on board the vessel in breach of UAE law and that the loading of these unlawful cargoes caused the detention and ultimate sale of the vessel.
Clause 28 of Shelltime 4 provided:
"No voyage shall be undertaken, nor any goods or cargoes loaded, that would expose the vessel to capture or seizure by rulers or governments."
Owners say that, even if the cargoes did not include oil that was contraband in the sense that it was being moved unlawfully in relation to the Oil for Food Programme, it exposed the vessel to seizure because the Palatex cargo was Iraqi origin oil but Fal was unable to demonstrate its legitimacy. In particular, its documents in relation to the previous sale of that oil at auction were forgeries and, even if it had been sold at auction, it was illegal to blend that oil with non-Iraqi oil. Further, Fal's cargoes were or were about to be transferred into the vessel from vessels called Gulf Prince and Julia II. There were suspicious features of those vessels, their cargoes and the circumstances in which they came alongside Owners' vessel. Fal did not have a convincing and coherent set of unforged documents capable of establishing the origin of their cargoes and its submissions to the Courts of Khorfakken and Abu Dhabi were therefore suspicious to the Coastguard. Further, some of Fal's previous cargo operations were such as to arouse the suspicions of the UAE authorities. Accordingly, in view of this background, there were characteristics of the cargo —namely its association with Fal – which presented a real risk of seizure by the UAE authorities. Consequently, even if the cargo on board at the time of seizure was not Iraqi, the fact that previous cargoes of Fal had been Iraqi and that Fal had made false submissions in court caused the loading of the cargoes in this case to present a risk of seizure. As to the burden of proof, since the UAE authorities claimed that it was the presence of Fal's cargo on board which brought about the seizure, the evidential burden of proving that the arrest of the vessel was in reality unrelated to that cargo rests on Fal which is in possession of knowledge of far more of the relevant facts than Owners.
Clause 13(a) and (b) of Shelltime 4 provided:
"(a) The master (although appointed by Owners) shall be under the orders and direction of Charterers as regards employment of the vessel, agency and other arrangements, and...
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