В этом выпуске содержатся материалы, в которых анализируются решения судов по вопросам, связанным с пиратством, продажей судов, соглашением об урегулировании претензий, гарантийными письмами, а также ценами на бункерное топливо (ст. 15 тайм-чартера “Шеллтайм-4”). Особый интерес вызывает решение Апелляционного суда по гарантийным письмам, которые издаются грузополучателями, причем такие письма сохраняют силу в отношениях с судовладельцами, даже если они не упомянуты в этих документах, но действуют в качестве агентов лиц, которым гарантийные письма адресованы.
Bunker prices, charter chains and SHELLTIME 4
In the “BONNIE SMITHWICK” [2012] EWHC 202 (Comm) (Eder, J.), the Commercial Court was asked to consider clause 15 of the SHELLTIME 4 charterparty which deals with payment for bunkers on delivery and redelivery.
The version of the clause considered was the one which was inserted into the SHELLTIME 4 in 2003 and provides as follows:
“15. Charterers shall accept and pay for all bunkers on board at the time of delivery, and owners shall on redelivery … accept and pay for all bunkers remaining on board, at the price actually paid, on a first-in-first-out basis. Such prices are to be supported by paid invoices.”
In a chain of time charters, the question raised by this clause is what is meant by “price actually paid”. On redelivery, does this require the owner to pay the price actually paid by the party seeking reimbursement (i.e. his immediate charterers) or the price actually paid for the bunkers, possibly by a sub-charterer?
The context was a head charter between TTMI as owners and Eitzen as charterers and various sub-charters, including a time charter trip with Cargill and a time charter trip by which Eitzen re-let the vessel to TTMI. The Cargill charter provided for fixed bunker prices on delivery and redelivery (US$625pmt IFO). The Cargill charter came to an end in October 2008, by which time bunker prices had dropped dramatically below the prices set out in the Cargill charter. The vessel was then delivered to TTMI under the sub-charter and TTMI paid Eitzen the bunker prices set out in the Cargill charter. During the sub-charter TTMI stemmed IFO at around US$270pmt. The vessel was then redelivered from TTMI to Eitzen and from Eitzen to TTMI. The issue was whether TTMI had to pay Eitzen the Cargill prices (which Eitzen had paid) or the prices actually paid for the bunkers by TTMI. The arbitrators stated that TTMI were liable for the actual price paid to the bunker suppliers when the bunkers were stemmed, not the Cargill prices.
On appeal from the arbitration award Eder J. held that this construction was correct. Clause 15 required TTMI to pay Eitzen the price paid to the bunker suppliers when the bunkers were stemmed, rather than the higher price that Eitzen had paid to Cargill. The alternative construction was unbusinesslike because the head owner would have to pay a bunker price on redelivery over which he had no control and which is not necessarily related to any particular market price or price paid to a bunker supplier. The reference to payment on a “first-in first-out”basis in clause 15 supported this construction because it seemed to refer to the actual physical act of stemming bunkers in and out, and to link the price paid to these physical movements.
Where the party seeking reimbursement is the party which stemmed the bunkers, obviously the problem in this case does not arise. However, in the common situation where there is a chain of time charters and where this version of SHELLTIME 4 is being used, this case provides useful guidance on bunker prices under clause 15. For the owner it means that he pays a price more likely to approximate to market price (although regional variations must be taken into account); and is not bound by whatever agreement or speculation may have been made by the charterer down the chain in agreeing e.g. fixed prices at both ends (which is common for time charter trips). Eitzen argued in this case that the arbitrators’ construction was unworkable since it may not be possible to obtain bunker invoices from sub-charterers to present to the owners. The arbitrators did not consider that this would be impossible. Whether or not such practical difficulties in obtaining invoices are real or speculative remains to be seen.
Letters of indemnity and third parties
In Great Eastern Shipping v (1) Far East Chartering; (2) Binani Cement [2012] EWCA Civ 180 the Court of Appeal reviewed the decision of the High Court which we reported in our October 2011 Bulletin.
This case looked at the ability of a shipowner to rely upon a letter of indemnity for delivery of cargo without production of a bill of lading which had been given by cargo receivers (Binani) to an intermediate charterer (Visa) in the contractual chain.
Perhaps rather curiously, the argument revolved around the question whether on its true interpretation the Binani LOI was addressed to Visa. The Binani LOI was addressed to “the owners/disponent owners/charterers” . Binani argued that “owners/disponent owners/charterers”amounted only to a description intended to refer to whichever party in the contractual chain may be the contracting carrier with possession of the cargo, in this case owners. They argued this because the owners had been unaware of the existence of the Binani LOI at the time that they discharged the cargo in accordance with instructions from Visa in compliance with a separate letter of indemnity provided to them by Visa. The High Court had given a clear indication that they considered that, as a matter of law, the offer to indemnify contained in the Binani LOI could not be accepted so as to generate a binding contract by someone who did not know that the offer had been made. So, if the Binani LOI was only addressed to owners, no binding contract had come into place between owners and Binani. On the other hand, if it was also addressed to Visa, there would be a binding contract in place and owners would be able to enforce the Binani LOI because, in delivering the cargo on Visa’s instructions, they were acting as their agents and the LOI extended the indemnity to “servants and agents” of Visa. On that basis, owners would be entitled to enforce the LOI under the Contracts (Rights of Third Parties) Act 1999.
The Court of Appeal agreed with the High Court. They held that, on its ordinary natural meaning, the Binani LOI was addressed to both owners and Visa and therefore could be accepted by owners as Visa’s agents by their conduct in delivering the cargo. The court also considered whether public policy should prevent the enforcement of the Binani LOI by owners. These arose because, at the time the cargo was being delivered from the port, owners became aware of a dispute between Binani and the shippers from whom Binani had bought the cargo. Owners had, at the time, tried to prevent the delivery of the cargo out of the port to Binani but had proved powerless in face of the delivery order that had been generated. The court took the view that there was no issue of public policy in owners’ conduct: there was an ongoing bona fide dispute as to the price payable for the cargo and therefore, the LOI was not sought or given for a delivery that owners knew to be wrongful.
The importance of the case is the confirmation that the 1999 Act can apply to give an owner rights under a LOI even if he is not named in it and the LOI was not provided to him. This is potentially useful in the current climate where an owner’s immediate charterer or one of the charterers in the chain could be insolvent. Furthermore, the court’s attitude that LOIs are important commercial documents which need to be interpreted in a straightforward and robust way is helpful. These documents are often issued and relied upon by parties for whom English is not a first language. Whilst lawyers may come up with sophisticated arguments based on close textual analysis there seems to be some recognition that a straightforward reading should be preferred where possible. Nevertheless, this litigation reinforces our view that clients should exercise great caution in relation to requests to accept letters of indemnity and reminds us that even greater caution should be exercised if there is the slightest reason to suspect a dishonest motive behind any such request.
Settlement agreements and duress
In the “CENK KAPTANOGLU” [2012] EWHC 273 (Comm) Mr Justice Cooke was asked to determine whether a settlement of disputes between an owner and a charterer was voidable because of economic duress applied by the owner. Allegations of duress in the context of discussions between two commercial entities are rare, and it is even rarer that such allegations succeed. The case is interesting for its analysis of the type of financial pressure that will be considered to amount to duress.
Owners and charterers had concluded a voyage charter for carriage of shredded scrap from Mississippi River to China. Charterers had entered into a sub-fixture with a final shipment date of 30th April 2009. Despite the fact that there was no express right to substitute another vessel, owners fixed the vessel to another charterer. Charterers did not terminate the contract but demanded that owners find a substitute vessel. Owners stated that they would find a substitute vessel to load between 27th and 30th April and that they would compensate charterers for all damage suffered as a result of their breach.
Charterers relied upon owners’ assurances and did not seek to fix an alternative vessel. Owners eventually nominated the “AGIA” which had an ETA of 7/8th May. Unsurprisingly, charterers’ receivers would only agree to extend the shipment date if the purchase price of the cargo was reduced by US$8pmt. On 27th April charterers stated that they would claim their losses from owners. Owners responded that they would grant only a US$2pmt reduction in freight and refused to accept any further reduction. Later the same day the charterers accepted the “AGIA” with a US$2pmt reduction in freight, reserving their right to claim damages later. On 28th April owners made what the arbitrator described as a “take it or leave it offer”, requiring acceptance of “AGIA” clean with the US$2pmt reduction and an agreement to waive all claims for loss and damage arising out of owners’ breaches. Charterers accepted this offer under protest.
Owners argued that they had not done an unlawful act and that therefore their conduct could not amount to economic duress. Nor had they done anything so morally outrageous or manifestly beyond ordinary commercial practice that could be considered on a par with criminal conduct.
The court held that economic duress required “illegitimate pressure”, but the cases were clear that economic duress could arise even where what owners did was not illegal or actionable in itself. Cases where a lawful act would be held to be duress were rare, especially in commercial cases. However, this was such a case. Owners’ repudiatory breach was the root cause of the problem and their continuing conduct was designed to put charterers in a position where they had no option but to accept the settlement agreement in order to ship the cargo to China and avoid further huge losses on the sale contract with the receivers. Owners had manoeuvred charterers into this position in order to drive a hard bargain.
This decision probably does not open up the law on duress to much wider application and the vast majority of commercial settlements or negotiations will not be affected. The Courts recognise that there are always commercial and financial pressures operating upon parties, and that there is often an inequality in bargaining power. What tipped this case over the edge was the fact that the owners, having breached the contract and lulled charterers into a false sense of security that an alternative vessel would be arranged and compensation provided, then sought, at the last minute when charterers had no option but to accept owners’ vessel, to force them to give up their claims and to renege on the earlier promise of compensation. Whilst hard bargains are often driven in the commercial world, the conduct was found to be a step too far and commercially improper. Nevertheless, it may give pause for thought to owners or charterers who are considering their options in the current difficult freight market.
In Polestar Maritime Ltd v YHM Shipping Co & Anor [2011] EWCA Civ 153 , the Court of Appeal revisited the decision of Field J. on a question arising out of a sale on the Norwegian Saleform 1993 (summarised in our July 2011 Bulletin).
By way of recap, in this case Polestar agreed to sell a bulk carrier to YHM on the 1993 form, together with an addendum of necessary documentation and a bill of sale which contained a covenant that the vessel was not subject to detention. At the date of the MOA the vessel did not have, and was not required to have, an International Sewage Pollution Prevention (ISPP) certificate. However, before the vessel was delivered 2008 MARPOL Annex IV came into force requiring the vessel to have an ISPP certificate. YHM refused, on this basis, to accept delivery of the vessel. The same day the vessel was detained by port authorities because, inter alia, of the lack of ISPP certification. YHM purported to cancel the MOA the following day.
The arbitrator agreed that the respondent was entitled to cancel on the basis of lack of certification and of detention on the delivery date. The arbitrators’ decision was reversed on appeal by Field J., who held that clause 11 of the 1993 form only required the seller to provide all her national and international certificates as well as others it had when the vessel was inspected. In addition, since Polestar had 3 banking days under the MOA to arrange the necessary documentation (which included obtaining the vessel’s release from detention), YHM were not entitled to cancel one day after the delivery date on the grounds of detention.
The Court of Appeal upheld Field J.’s decision, although for slightly different reasons, in relation to clause 11. Firstly, the MOA required the vessel to be delivered and taken over “as she was at the time of inspection” i.e. the contract was an “as was” sale contract. Secondly, since elsewhere the MOA contemplated that the sellers would have given to the buyers copies of all the trading, class, national and international certificates “…in accordance with the MOA” before closing and would deliver the originals to the buyers at closing, the obligation on the sellers in clause 11 concerning documentation was clear. The vessel should have on board the originals of her national and international certificates as well as all other certificates that the vessel had at the time of her inspection. In the absence of any wording that imposed any duty to provide further certificates that the vessel did not have at the time of her inspection by the buyers, there is no obligation in clause 11 to provide such further certificates.
The Court of Appeal stressed that a seller could not be expected to know exactly where a vessel would be traded in future, which cargoes she would carry etc. and so very clear wording would be required to impose an additional obligation on the sellers. The buyers in this case had also been warned in advance about the lack of an ISPP certificate and of the fact that when the new MARPOL regulations were brought into force such a certificate would be required. They also cancelled on a rapidly falling market for second-hand vessels and these factors combined may have played a part in the court’s lack of sympathy for their plight.
Piracy footnote – the “TRITON LARK”
Teare J. has issued a further clarifying judgment ([2012] EWHC 70 (Comm)) on the meaning of clause 2 of CONWARTIME 1993 and in particular what is meant by “exposed to acts of piracy” (one of the War Risks defined in clause 1.)
The judge stated that the question to be addressed by an owner or master, when ordered to go to a place, is whether there is a real likelihood that the vessel will be exposed to acts of piracy in the sense that the place will be dangerous on account of acts of piracy. Whether or not a place was dangerous will depend on the particular facts of each case – the degree of likelihood that acts of piracy will occur and the gravity of the consequences for the vessel, cargo and crew if they do occur.
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