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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Classic Maritime Inc. v Limbungan Makmur SDN BHD & Anor  EWHC 2389 (Comm) (13 September 2018)
Cite as:  2 All ER 622,  1 All ER (Comm) 647,  Bus LR 2471,  EWHC 2389 (Comm),  CILL 4219,  1 Lloyd's Rep 349,  WLR(D) 579
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
B e f o r e :
| Classic Maritime Inc.
|- and -
|(1) Limbungan Makmur SDN BHD
(2) Lion Diversified Holdings BHD
Simon Rainey QC and Andrew Leung (instructed by Hill Dickinson LLP) for the Defendants
Hearing dates: 16-18, 23 and 25 July 2018
Crown Copyright ©
Mr. Justice Teare :
The charterer and its related companies
The mining companies in Brazil
The present claim
Neither the vessel, her master or Owners, nor the Charterers, Shippers or Receivers shall be Responsible for loss of or damage to, or failure to supply, load, discharge or deliver the cargo resulting from: Act of God,…floods….accidents at the mine or Production facility….or any other causes beyond the Owners' Charterers' Shippers' or Receivers' control; always provided that such events directly affect the performance of either party under this Charter Party…"
The position immediately before the collapse of the dam
Mr. Lu's actions after the dam collapse
"At the time the Samarco dam burst, none of the Lion Group companies had an extant long term contract with Vale for the sale and purchase of iron ore pellets ex-Tubarao. I sent Vale International numerous enquiries and spoke to them over the phone several times to find out whether they had any iron ore pellets available ex Tubarao which would enable Limbungan to perform the COA. Those enquiries came to naught. I was informed on four occasions that Vale did not have any DR-grade pellets ex Tubarao and on 4 February 2016 it was similarly confirmed that Vale did not have any BF-grade pellets ex Tubarao."
"As discussed the other day, please let us have your both FOB and CFR price idea.
Alternatively, is there any DR grade cargo available ex-Tubarao?"
"kindly note the below option number 3 is just a price indication, since we do not have RM20 pellets availability especially after the accident and railroad stoppage in Brazil"
The issues in the case
"No relevant arrangements"
"First of all, the defendants must show that they had manufactured and had available for this contract starch flour in sufficient quantities to fulfil this contract."
"Secondly, they must show that they had made, or were prepared to make, all necessary and proper arrangements with the Railway Companies for transporting this starch flour from their manufactories or wheat belt to the seaboard. Thirdly, they must show that they had received in good time shipping space sufficient to cover the space that was required to send these particular parcels of goods from the seaboard to this country. If they can show all these things, and then if they can show that they were prevented from sending these goods forward by some action of the duly constituted Authorities in America, then they will show a case of force majeure which will excuse them from the performance of this contract."
"The general principle exemplified in these cases is not altogether easy to define in that if a party has a period of time within which at his option to perform, the principle does not seem to require that in order to escape liability for non-performance he must show prevention by means of the operation of the exception throughout the whole period. If he arranged to perform at the end of his optional period or could have performed and the inhibiting occurs, he can it would seem escape liability for non-performance on showing that nothing he could do, or perhaps reasonably do, after the occurrence of the inhibiting event would have enabled him to perform within the contract period. This shows that even when the principle applies regard is permissible to the intentions or arrangements made by the party seeking relief. "
"The general principle is clear and was accepted by both parties. If a contract provides for alternative methods of performance, and one such method comes to be prevented by an excepted peril, then the party affected must generally perform or seek to perform by one of the alternative methods. "
"If it is established that due to a restraint of princes no cargo could be shipped from Libya, the country from which both parties expected the cargo to be shipped, and that no alternative cargo could be procured from any other contractual source, has there been "a failure in performing ….arising or resulting from …..restraint of princes" ? There appears to be no authority in point. I think that a reasonable and realistic businessman would answer this question in the affirmative. He would say that in these circumstances the effective cause of the non-performance was the restraint of princes. But for this the cargo would have been shipped, but due to it was not. "
"It is clear law, based on many decided cases, that, in general, where the seller has undertaken to supply goods shipped from one or other of a number of ports, he cannot rely on an event included in an exceptions clause, if that event happens but affects only one of the ports, unless, at any rate, he can show , the burden being on him, that, despite reasonable efforts …………..he could not have shipped goods complying with the contract description, and within the permitted time for shipment, from any one of the other ports."
"The reason for that is not far to seek: it is implicit in a contract of this kind that the seller will either supply the goods himself or (more likely) will make arrangements, directly or indirectly, for the goods to be supplied by others. In other words, he undertakes a personal obligation to procure the delivery of contractual goods and thereby takes the risk of his supplier's failure to perform. That obligation will be discharged by frustration if a supervening event not contemplated by the contract renders that performance impossible or fundamentally different from what was originally envisaged, but most events which result in the failure of a supplier to provide the goods will not fall into that category. A few, however, such as a prohibition of export rendering the shipment of the goods unlawful, usually, will.
The "but for" test
"Questions of causation are sensitive to the legal context in which the question arises; see ENE Kos v Petroleo Brasileiro  2 AC 164 at paragraph 12 per Lord Sumption and at paragraph 76 per Lord Clarke. They are to be resolved by reference to common sense; see The Eurus  1 Lloyd's Reports 351 at p.361-2 per Staughton LJ and also ENE Kos v Petroleo Brasileiro at paragraph 74 where Lord Clarke approved a statement in an earlier case that causation was to be determined by a "broad common sense view of the whole position".
"The clause applies "in case of prohibition of export …..preventing fulfilment" so that a question may arise of causation. Was it the prohibition that prevented fulfilment or something else ? This question may be phrased more specifically by asking whether the seller must prove that he had the goods ready to ship within the contract period, and a ship to carry them. The answer to it, in my clear opinion, is in the negative. The occurrence of a frustrating event – in this case the prohibition of export – immediately and automatically cancels the contract, or the portion of it affected by the prohibition."
"The test to be applied is similar to that applied in cases of frustration, in which a party may rely upon a frustrating event as excusing further performance of his obligations, even though he would in fact have been unable to perform his obligations under the contract: see Avery v Bowden (1855) 5 E&B 714."
"It might be thought, and I once did think, that the result of the House of Lords decision was, in effect, to rewrite clause 21 so as to eliminate the words "preventing fulfilment" and "so affected". But this is not so. If shippers or other sellers wish to take the benefit of the clause, they must still prove that the embargo would have prevented fulfilment of the contract on the assumption that they would otherwise have been in a position to fulfil it."
"The clause is concerned with writing into the contract what is to occur should it be frustrated at common law. No doubt the contract supersedes the common law but it cannot, in my view, be construed as taking away from the sellers what would have been their protection at common law unless it does so in plain terms."
"This must be on the assumption that they had the first kind of cargo ready for shipment but for the excepted cause."
"a reasonable and realistic businessman would …….say that in these circumstances the effective cause of the non-performance was the restraint of princes. But for this the cargo would have been shipped, but due to it was not. "
The factual issue
The Vale issue
A discrete point of construction