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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> SK Shipping (S) Pte Ltd v Petroexport Ltd [2009] EWHC 2974 (Comm) (24 November 2009) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2009/2974.html Cite as: [2009] EWHC 2974 (Comm), [2010] 2 Lloyd's Rep 158 |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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SK SHIPPING (S) PTE LTD |
Claimant |
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- and - |
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PETROEXPORT LTD |
Defendant |
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Mr Stephen Phillips QC and Mr Richard Sarll (instructed by Reed Smith LLP) for the Defendants
Hearing dates: 2nd – 5th November 2009
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Crown Copyright ©
The Hon. Mr Justice Flaux :
Introduction
(1) Did the defendant by its words or conduct renounce the charterparty, thereby entitling the claimant to accept that renunciatory breach as terminating the charterparty?
(2) If there was not a renunciation, can the termination nonetheless be justified on the basis that by the date of termination performance of the charterparty by the defendant was impossible? Of course if the answer to both these first two issues is no, then it necessarily follows that the claimant was itself in repudiatory breach.
(3) Did the claimant fail to mitigate its loss by not accepting one of the alternative proposals put forward by the defendant?
The terms of the charterparty
Part I
B Laydays: Commencing; 27th August 2008 (0001 hours) Cancelling: 29th August 2008 (2359 hours)
C Loading Port(s): One safe port Karachi, Pakistan
D Discharging Port(s): One safe port Taiwan
One safe port Korea, Yosu-Ulsan range
One safe port Japan, not North of but including Tokyo Bay range
E Cargo: Charterer's option up to full cargo, one/two grades clean petroleum products, unleaded undarker than 2.5 NPA. Excluding casingheads/lubes/solvents/chemicals/pentanes/methyl tetra butyl ether/pentane plus and pygas, one/two grades within vessel's natural segregation. No heat.
F Freight Rate: Basis one/one
United States Dollars One Million for Taiwan discharge
United States Dollars One Million and Fifty Thousand for Korea discharge
United states Dollars One Million and One Hundred Thousand for Japan discharge.
H. Total Laytime in Running Hours: Seventy Two hours, Sundays, holidays inclusive.
I. Demurrage per day pro rata United States Dollars Twenty Thousand.
Part II
Clause 6 NOTICE OF READINESS
Upon arrival at customary anchorage at each port of loading or discharge, the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the Vessel is ready to load or discharge cargo, berth or no berth and laytime...shall commence upon the expiration of six hours after the receipt of such notice....
Clause 12 DUES-TAXES-WHARFAGE
The Charterer shall pay all taxes, dues and other charges on the cargo... The Charterer shall also pay all taxes on freight at loading or discharging ports...
Clause 29 DIVERSION CLAUSE
Notwithstanding anything else to the contrary in this Charter Party, and notwithstanding what loading and/or discharging port(s)/range(s) may have been nominated and Bill(s) of Lading issued, the Charterer shall have the right to change its nomination of the loading and/or discharging ports in accordance with Part IC and D of the Charter. Any extra time and expenses incurred by Owner in complying with Charterer's orders shall be for Charterer's account and calculated in accordance with Part II Clause 4 of this Charter Party. The Charterer shall have the right to make as many changes as it deems necessary.
Clause 32 AGENTS CLAUSE
Owner to appoint their (Owner's) ship agents in accordance with Charterer's suggestion at load and discharge port(s), provided competitive.
Assessment of the witnesses
Detailed factual chronology
The fixture of the vessel
The purchase of the two parcels of cargo
"Buyer has to submit US$50,000 as performance guarantee before signing contract (pls see page 5 of the contract)
Awaiting your final version of the contract with above changes incorporated."
Negotiations for the sale of the cargo and the defendant's alternative proposals
Proposal 1
Instructions to the vessel and other events
Proposal 2
Communications between the parties from 27 August 2008 until termination
"1. Pls confirm if chrs will load cargo at Karachi as per our CP or not"
2. Pls confirm if chrs already bought cargo at Karachi at the moment or not
3. Pls advise why chrs couldn't clear freight tax matter at Karachi till now?"
"Due to circumstances beyond charterers control, it may become necessary to declare force major [sic].
Charterers have offered owner two possible alternatives in order to assist owners to mitigate the situation.
Charterers will consider releasing the vessel from its current charter in order to permit owner to seek other business with owner and charterer agreeing to a mutual cancellation.
Please discuss with owners and obtain their agreement for a mutual cancellation of reference charter."
"With reference to the message from the charterer, we would like to clear the matter as follows:
1. The message from the charterer shall be considered as a declaration of non performance of the charter.
2. To mitigate our loss we, SK Shipping (s) Pte Ltd, have to / will find cargo in the market from right now.
3. Huge loss (roughly more than $0.5 mil) has incurred from the ballast voyage from Hochiminh to Karachi to comply with the charter party made on 17th Aug. 2008 and the loss may increase further as it is very difficult to find a prompt cargo in this area.
4. We reserve our right to claim against the charterer for any loss, damage and/or expense incurred / to be incurred..."
"… Charterers reject owners declaration of non-performance.
Owners have been advised that Charterers have the means to mitigate any alleged losses of Owners by taking the vessel on time charter from Karachi at $18.000 per day for trip via port or ports with redelivery Singapore/S. Korea range with estimated duration of 45/60 days wog.
Charterers have cargo to load promptly from west coast India to east cost [sic] Africa hence from AG going east.
If Owners really interested in mitigating losses, they will agree to charterers proposal above.
On completion of time charter, owners and charterers will be able to calculate Owner's position of alleged losses.
Charterers sincerely regret current circumstances and are doing everything possible to maintain a good relationship with Owners for ongoing business as discussed with your Mr. Se Un Kim in Athens.
Urgent for owners to agree to charterers proposal of time charter in order not to loose the cargo from west coast India and AG…"
"As you know, vessel already released from sub chrs last night and pls make sure with Petroexport what is true right now.
Follows from owners:-
…..
Pls note that vessel is not on subs at the moment and owners already dropped other business yesterday until clearing with current charterer as Petroexport."
"In the time available I have reviewed the various messages.
In view of the ambiguity of Charterers' messages (and in particular their most recent rejection of "Owners' declaration of non-performance") I would recommend sending one final message along the following lines.
This may help avoid a future argument by Charterers that they could in fact have performed the charterparty.
QUOTE
We refer to Charterers' message earlier.
It is clear from Charterers' last message and their previous message that they do not intend to perform the charterparty…
Charterers are now saying that they wish to carry an alternative cargo ..from India to East Coast Africa on a time charter basis. They are not entitled to do so under the charterparty which has been agreed.
As we say, it is clear to us that Charterers do not intend to perform their obligations under the charterparty. Therefore, unless Charterers confirm unequivocally and unconditionally by [0900 Singapore time] tomorrow, 29 August 2008 that they will provide a full cargo for loading and discharging in accordance with their obligation in the charterparty, then we will (1) assume that Charterers do not intend to perform the charterparty and (2) treat Charterers' conduct as repudiating the charterparty.
Owners' rights are fully reserved in the meantime.
UNQUOTE"
"It appears that the Owner is trying to intimidate the Charterer by fixing the "pro Victor" on other business without the knowledge of the Charterer, and issuing ultimatums with self-serving emails.
…..
Please ask owners to confirm that [details were then sought of the fixture on which the vessel was said to be on subs]
If the owner refuses to answer the above now, they risk being implicated in a conspiracy to commit tortuous [sic] interference.
Charterers have been dealing in good faith. Charterers wish to maintain a good relationship with Owners for future business as stated in Charterers email to Mr Yang Woo-Mun."
"Pls note that owners didn't received [sic] any reply from charterer until time bar as 1500LT spore 29 Aug, 2008 against owners' last."
"We refer to our emails timed at 22.51 yesterday and 10.35 today (Singapore time) initially giving Charterers until 9am Singapore time today and then until 3pm Singapore time today to confirm their intention to perform their obligations under this charterparty.
In the absence of any response whatsoever, Charterers have unequivocally re-confirmed their intention (as evidence by their messages yesterday) not to perform this charterparty and we have now treated Charterers' conduct as repudiating the charterparty.
In order to mitigate our losses at the earliest opportunity and to protect our position, we have therefore re-fixed the vessel."
Renunciation
"The law on the right to rescind is succinctly stated by Lord Porter in Heyman v. Darwins Ltd. [1942] AC 356, 397 as follows: "The three sets of circumstances giving rise to a discharge of contract are tabulated by Anson as: (1) renunciation by a party of his liabilities under it; (2) impossibility created by his own act; and (3) total or partial failure of performance. In the case of the first two, the renunciation may occur or impossibility be created either before or at the time for performance. In the case of the third, it can occur only at the time or during the course of performance."
The third of these is the ordinary case of actual breach, and the first two state the two modes of anticipatory breach. In order that the arguments which I have heard from either side can be rightly considered, it is necessary that I should develop rather more fully what is meant by each of these two modes.
A renunciation can be made either by words or by conduct, provided it is clearly made. It is often put that the party renunciating must "evince an intention" not to go on with the contract. The intention can be evinced either by words or by conduct. The test of whether an intention is sufficiently evinced by conduct is whether the party renunciating has acted in such a way as to lead a reasonable person to the conclusion that he does not intend to fulfil his part of the contract. This application is fully discussed in Forslind v. Bechely-Crundall 1922 SC (HL) 173 and forms the basis for the arbitrator's findings.
Of the two modes, renunciation has since the decision in Hochster v. De la Tour (1853) 2 E&B 678 established itself as the favourite. The disadvantage of the other is that the party who elects to treat impossibility as an anticipatory breach may be running a serious risk. Suppose, for example, that a man promises to marry a woman on a future date, or to execute a lease or to deliver goods; and that before the day arrives he marries another, or executes the lease in favour of another, or delivers the goods to a third party. The aggrieved party may sue at once. "One reason alleged in support of such an action," Campbell C.J. observed in Hochster v. De la Tour [at 688] "is, that the defendant has, before the day, rendered it impossible for him to perform the contract at the day: but this does not necessarily follow; for, prior to the day fixed for doing the act, the first wife may have died, a surrender of the lease executed might be obtained, and the defendant might have repurchased the goods so as to be in a situation to sell and deliver them to the plaintiff." But if the plaintiff treats the defendant's conduct as amounting to renunciation and justifies his rescission on that ground, the defendant could not avail himself of this defence.
I said that it was after Hochster v. De la Tour that renunciation established itself as the favourite, because until then it was not certain that a man who said "I will not perform" would be held to his word. In Hochster v. De la Tour it was argued that he could change his mind, and that the fact that at one time he said he was not ready and willing did not necessarily mean that he would be unwilling when the time for performance came. Hochster v. De la Tour established that a renunciation, when acted upon, became final. Thus, if a man proclaimed by words or conduct an inability to perform, the other party could safely act upon it without having to prove that when the time for performance came the inability was still effective."
"The learned Judge formulated the test to be applied as being "whether M.T.C. and the owners acted in such a way as to lead a reasonable person to conclude that they did not intend to fulfil their part of the contract", and referred to the judgment of Mr. Justice Devlin in Universal Cargo Carriers Corporation v. Citati [1957] 1 Lloyd's Rep. 174; [1957] 2 Q.B. 401 at pp 193 and 436, and Maple Flock Co. v. Universal Furniture Products (Wembley) Ltd. [1934] 1 K.B. 148 at p. 157 . Since Mr. Justice Mustill gave judgment, the House of Lords has given judgment in Woodar Investment Ltd. v. Wimpey Construction U.K. Ltd. [1980] 1 WLR 277. While that decision is not directly in point it is useful for its review of the authorities. For present purposes we take from it the following propositions:
(a) Dissolution of a contract upon the basis of renunciation is a drastic conclusion which should only be held to arise in clear cases of a refusal to perform contractual obligations in a respect or respects going to the root of the contract.
(b) The refusal must not only be clear, but must be absolute. Where a party declares his intention to act or refrain from acting in a particular way on the basis of a particular appreciation of his obligations, either as a matter of fact or of law, the declaration gives rise to a right of dissolution only if in all the circumstances it is clear that it is not conditional upon his present appreciation of his obligations proving correct when the time for performance arrives.
(c) What does or does not amount to a sufficient refusal is to be judged in the light of whether a reasonable person in the position of the party claiming to be freed from the contract would regard the refusal as being clear and absolute?
One further proposition must be added, although it is not gleaned from or confirmed by the decision in Woodar's case, namely, that (d) the conduct relied upon is to be considered as at the time when it is treated as terminating the contract, in the light of the then existing circumstances. These circumstances will include the history of the transaction or relationship. Later events are irrelevant, save to the extent that they may point to matters which the parties should have considered as hypothetical possibilities at the relevant time."
"If one of the parties to a contract, either in express terms or by conduct, leads the other party to the reasonable conclusion that he does not mean to carry out the contract, this amounts to a repudiation which will justify the other in treating the contract as at an end.."
"If, in short, A, a party to a contract, acts in such a fashion of ignoring or not complying with his obligations under it, B, the other party, is entitled to say: "My rights under this contract are being completely ignored and my interests may suffer by non-performance by A of his obligations, and that to such a fundamental and essential extent that I declare he is treating me as if no contract exists which bound him". The accent of the psychology is not upon the mind of the person who is defiant or heedless of his obligation, but as Lord Herschell put it, upon the mind of the person who is suffering from the defiance."
"Of course the question was not what actually influenced [the innocent party], but what effect the conduct of the [other party] would be reasonably calculated to have upon a reasonable person."
(1) This was the first occasion on which the parties had contracted, so that there was no history of dealings against which to judge the defendant's conduct;
(2) The defendant had ordered the vessel to slow steam when en route to Karachi. Given that the vessel was expected to berth on arrival, this was indicative of some problem at Karachi so far as the defendant was concerned;
(3) The defendant had failed to put up the letter of credit required under its sale contract with PRL and as a consequence, upon arrival the vessel was ordered to wait at the outer anchorage and not to enter the port;
(4) The defendant had not returned the signed copy of the charterparty sent on 22 August 2008, required by the authorities in Pakistan before an exemption from freight tax would be considered. Whilst it is true that the claimant itself had not by this stage obtained the attested certificate of incorporation also required by the authorities, this was in hand. Furthermore, it seems to me that if the defendant was set fair for loading the cargo in Karachi, what one would have expected to happen is that it would have returned the signed charterparty promptly and then started putting pressure on the claimant to produce the attested certificate required of it. After all, if the cargo was loaded in Karachi and the freight tax exemption had not been obtained, it was the defendant which was responsible for paying the tax under the terms of the charterparty;
(5) The alternative proposals for a voyage charter to Aqaba and time charter trip back to the Singapore area or for a 3 month time charter with an option for a further three months were, as I have already held, only consistent with there being problems with the sale of the cargo to Delta Oil having fallen through and the defendant looking round for alternative buyers and/or cargo, although it is fair to say none of that was known to the claimant. Proposal 1 had in effect vanished into thin air after the claimant had put forward an indication of rates of US$900,000 for the voyage charter element and "low 20s" for the time charter element. The defendant had never come back on that, but instead had put forward proposal 2, the 3 month/3 month time charter. The claimant had gone on subjects (specifically as to the defendant's management approval) for this on 27 August 2008 on the basis of a rate of hire of US$20,500 per day, which had seemed to be acceptable to the defendant, but just before the time for lifting of subjects expired, as I have also already found, the defendant countered with a much lower rate of hire of US$13,000/14,000 per day. This was unacceptable to the claimant. The fate of these two proposals was unlikely to have inspired confidence in the defendant, and, on the basis of Mr Yang's evidence, did not do so.
Impossibility
"if the owner can establish that in the words of Lord Sumner [in British & Beningtons Ltd v NW Cachar Tea Co [1923] AC 48 at 70] the charterer had on July 18 [the date when the owner purported to terminate] become "wholly and finally disabled" from finding a cargo and loading it before delay frustrated the venture, he is entitled to succeed."
Mitigation
Quantum of the claim
The counterclaim