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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Dolphin Tanker Srl v Westport Petroleum Inc [2010] EWHC 2617 (Comm) (21 October 2010) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2010/2617.html Cite as: [2011] 1 Lloyd's Rep 550, [2011] Bus LR D110, [2010] EWHC 2617 (Comm) |
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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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Dolphin Tanker Srl |
Claimants |
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and |
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Westport Petroleum Inc |
Defendants |
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Mr Richard Southern QC and Mr Michael Holmes (instructed by Winter Scott) for the Defendants
Hearing date: 6 October 2010
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Crown Copyright ©
Mr Justice Simon:
Introduction
... should be (sic) Vessel be failed on three (3) consecutive oil major vetting reviews/inspections due to Owners' / Vessel's reason, the Charterer's (sic) shall have the option to put the vessel immediately off-hire until the vessel next passes a vetting /inspection ... and shall have the option to cancel the charter ... A vetting review/inspection is defined as a nomination by the Charterer's (sic) to an oil major and the oil major reviewing the vessel by either a physical inspection or latest SIRE inspection report…
At this stage I shall refer to this passage as 'the relevant part of clause 50'; but it will be necessary to look at the entirety of the clause and its commercial context in the course of this Judgment.
A summary of the issues on the appeal
The terms of clause 50
50. VESSEL'S APPROVAL CLAUSE. (AMENDED)
1.1 UPON DELVERY FROM SHIPYARD: OWNERS SHALL USE BEST ENDEAVORS TO OBTAIN PRE-APPROVALS, WHICH SHALL INCLUDE, BUT NOT LIMITED TO, INSPECTION OF THE VESSEL IN THE SHIPYARD OR AT FIRST BUNKERING OPERATION IF/WHEN POSSIBLE. IF PRE-APPROVALS ARE NOT OBTAINED WHEN THE VESSEL IS IN THE BUILDING YARD OR AT THE FIRST BUNKERING, OWNERS WILL USE BEST ENDEAVORS TO OBTAIN THE MINIMUM 3 (THREE) MAJOR OIL COMPANY APPROVALS AS SOON AS POSSIBLE, HOWEVER, SAID APPROVALS MUST BE IN PLACE NOT LATER THAN 60 (SIXTY) DAYS FROM DATE OF DELIVERY (SUBJECT TO VESSEL'S TRADING AREAS AND AVAILABILITY OF INSPECTORS).
1.2 (1) IF OWNERS FAILS TO SECURE THE 3 (THREE) MINIMUM APPROVALS AFTER 60 (SIXTY) DAYS OF DELIVERY FROM THE SHIPYARD, CHARTERER'S HAVE THE OPTION, TO EXTEND THE 60 (SIXTY) DAY PERIOD OR TO PLACE THE VESSEL OFF-HIRE FROM THE DATE AND TIME THAT SHE FAILS TO HOLD THE MINIMUM 3 (THREE) APPROVALS.
1.3 IF OWNERS SUBSEQUENTLY FAIL TO SECURE THE 3 (THREE) MINIMUM APPROVALS AFTER AN ADDITIONAL PERIOD OF 60 DAYS, CHARTERER'S MAY, WITHOUT PREJUDICE TO ANY OTHER TERMS OF THIS CHARTER, TERMINATE THE CHARTER PARTY BY SERVING NOTICE OF EARLY REDELIVERY TO OWNERS.
2.1 DURING THE CURRENCY OF THIS CHARTER PARTY: OWNERS WILL (IF SO REQUESTED BY THE CHARTERER'S) CO-OPERATE IN HAVING THE VESSEL INSPECTED BY OIL COMPANIES IF ANY CURRENT SIRE REPORT HAS TO BE RENEWED.
2.2 OWNERS WILL USE BEST ENDEAVORS TO HAVE THE VESSEL INSPECTED AND APPROVED BY A MINIMUM OF 3 OF BP, SHELL, EXXONMOBIL, CHEVTEX AND TOTAL FINAL ELF WITHIN 60 DAYS OF THE DELIVERY OF THE VESSEL INTO THIS CHARTER.
2.3 (i) IF THE VESSEL IS REJECTED OR REFUSED PERMISSION TO CARRY OUT CARGO OPERATIONS BY ANY SUB-CHARTERER OR TERMINAL OPERATOR CONSEQUENT UPON ANY VETTING INSPECTION CARRIED OUT UNDER THE SIRE SYSTEM, OWNERS WILL RECTIFY THE FAULTS IDENTIFIED IN THE VETTING INSPECTION AND HAVE THE VESSEL INSPECTED AGAIN AS SOON AS IS REASONABLY PRACTICABLE.
2.4 (ii) SHOULD THE CHARTERER'S OTHERWISE REQUIRE VETTING INSPECTIONS OF THE VESSEL AND IF THESE INSPECTIONS ARE CARRIED OUT DURING THE CURRENCY OF THIS CHARTER, THEN ANY LOSS OF TIME, DEVIATION COSTS AND INSPECTION FEES IN CONNECTION WITH THE INSPECTION SHALL BE FOR THE CHARTERER'S' ACCOUNT.
3.1 A FAILED VETTING INSPECTION UNDER THE SIRE SYSTEM BY THE CHARTERER'S OR ANY OTHER COMPANY SHALL NOT OF ITSELF CONSTITUTE A REASON FOR THE CHARTERER'S TO PUT THE VESSEL OFF·HIRE OR ENABLE THE CHARTERER'S TO ASSERT A CLAIM UNDER THIS CHARTER.
3.2 HOWEVER, SHOULD BE VESSEL BE FAILED ON THREE (3) CONSECUTIVE OIL MAJOR VETTING REVIEWS/INSPECTIONS DUE TO OWNERS'/VESSEL'S REASON, THE CHARTERER'S SHALL HAVE THE OPTION TO PUT THE VESSEL IMMEDIATELY OFF-HIRE UNTIL THE VESSEL NEXT PASSES A VETTING INSPECTION, SUCH FAILURE SHALL AMOUNT TO A BREACH OF THIS CHARTER AND CHARTERER'S SHALL HAVE THE OPTION TO CANCEL THECHARTER WITHOUT RECOURSE TO EITHER PARTY, GIVING 30 DAYS NOTICE OF SUCH CANCELLATION.
3.3 A VETTING REVIEW / INSPECTION IS DEFINED AS A NOMINATION BY THE CHARTERER'S TO AN OIL MAJOR AND THE OIL MAJOR REVIEWING THE VESSEL BY EITHER A PHYSICAL INSPECTION OR LATEST SIRE INSPECTION REPORT. A FAILURE WOULD CONSIST OF THE OIL MAJOR REJECTING THE VESSEL DURING THIS PROCESS.
4. THE VESSEL'S VPQ WILL BE MAINTAINED FULLY UP TO DATE BY OWNERS WHENEVER NECESSARY DURING THE CHARTER.
The factual background
13. ... [owners and charterers] wished to ensure that an acceptable supply of safely managed tankers was available for hire and to take all necessary steps to ensure that chartered tankers carried and delivered their cargoes safely and without risk to human life and to the environment ...
17. When a company carries out a vetting review for a proposed operation or contract it evaluates the inspection report(s) (together with any other documentary material upon which the company would normally rely) and makes its own judgment upon the data. It is quite possible, therefore, for one oil major to deem a vessel to be acceptable for a particular piece of business based on the latest SIRE report, whereas another oil major might deem the same vessel to be unacceptable for that same piece of business. Negative vetting decisions are normally communicated to the party proposing the business without reasons and without the vetting company separately informing the operator. Thus a vessel operator will usually not know why the vessel has not been accepted.
21. I am satisfied on all the evidence that I have read and heard that an oil major will use the SIRE system and have recourse to the latest SIRE report as part of the database from which information is drawn in order to vet the vessel ...
22. Further, I am satisfied that the reasonable owner/operator and charterer of an oil tanker entering into this charter will have reasonably (and correctly) assumed that the latest SIRE report on the database would form at least part (and probably a very important part) of the data considered by an oil major when carrying out a vetting.
The events giving rise to the notice of cancellation
The admissibility of factual material relied on by the Claimants
86. ... As a general rule, the only documents which should be put before the court on an arbitration appeal are the award itself and the relevant contract. Unless clearly incorporated by reference, other arbitration documents are usually irrelevant and inadmissible. Unless there is a disputed issue as to whether the question of law was one which the tribunal was asked to determine, the same applies to applications for permission to appeal.
87. As clearly stated by the Court of Appeal in Universal Petroleum Co Ltd v Handels und Transport GmbH [1987] 1 WLR 1178 at page 1189:
'… under subsection (2) appeals are only permitted 'on any question of law arising out of an award…,' and 'question of law' in subsection (4) has the same meaning. The emphasised words are crucial. The question of law must arise 'out of (the) award', not out of the arbitration.'
88. Although Kerr LJ was there referring to the 1979 Arbitration Act, his statement is equally applicable to the 1996 Act, in which the same language is used. For the purpose of determining an appeal on a question of law 'arising out of an award' it is the award itself which has to be considered.
12.5. ... no arbitration documents may be put before the court other than ...
(2) any document (such as the contract or the relevant parts thereof) which is referred to in the award and which the court needs to read to determine a question of law arising out of the award ...
In this Practice Direction "arbitration documents" means documents adduced in or produced for the purposes of the arbitration.
...
12.10 If either party wishes to invite the court to consider arbitration documents other than those specified in paragraph 12.5 above the counsel or solicitor responsible for settling the application documents must write to the court explaining why that is necessary.
...
12.15 The bundle for the hearing of any appeal should contain only the claim form, the respondent's notice, the arbitration documents referred to in paragraph 12.5, the order granting permission to appeal and the skeleton arguments
44. ... The arbitrator helpfully identifies the relevant correspondence and documents in his award although, for obvious reasons, he does not recite them from beginning to end. Nevertheless, for the purpose of this appeal, the court needs to look at the contractual correspondence and documents which the arbitrator has identified ...
45. In my view the guidance given in the HOK Sport case should be modified to this extent. The principal document which should be considered in any appeal under section 69 of the 1996 Act is the arbitral award itself. In addition to that, however, the court should also receive any document referred to in the award, which the court needs to read in order to determine a question of law arising out of the award.
This was also the approach followed by Ramsey J in the White Young Green Consulting case (referred to above) at [25]
It seems to me that, in general terms, where the court is considering the question of leave to appeal against an award, it is also necessary to have before the court both the award and any documentation which is referred to in the award and which is needed so as to make clear what the arbitrator is referring to within the part of the award relevant to the appeal. Obviously, if the arbitrator sets out the document in its full terms there is no need for that document to be supplied but, where documents are merely referred to or summarised, it may sometimes be helpful to have those documents in front of the court ...
... The arbitrators are the masters of the facts. On an appeal the Court must decide any question of law arising from an award on the basis of a full and unqualified acceptance of the findings of fact of the arbitrators. It is irrelevant whether the Court considers those findings of fact to be right or wrong.
Later in the same passage Steyn LJ identified the numerous means by which dissatisfied parties have sought to challenge the findings of fact.
This catalogue of challenges to arbitrators' findings of fact points to the need for the Court to be constantly vigilant to ensure that attempts to question or qualify the arbitrators' findings of fact, or to dress up questions of fact as questions of law, are carefully identified and firmly discouraged.
The same vigilance will be applied to cases under the 1996 Act.
The application of these principles
i) The 26 February Notice of Cancellation is relied on as showing that the Charterers were asserting that a particular company was a Major Oil Company, although they no longer do so. This is said to be 'important factual background necessary for the court to consider' on the first issue.
I doubt whether the post contractual position of the Charterers was ever relevant. It is not important factual background, it is not referred to by the Arbitrator and it is not 'necessary' for the court to consider it. It is wholly irrelevant and inadmissible.
ii) The Expert Reports are relied on because 'the Award does not encapsulate all of the expert evidence necessary to determine the issue of construction.'
The evidence was before the Arbitrator and was considered by him. It is plainly not admissible on an appeal. The expert evidence is, in any event, properly summarised in the Reasons, and on the issue to which it is relevant, was common ground.
iii) 'Intertanko documents'. These are relied on to show that there are standard clauses which refer to oil majors by name.
These documents were not even placed before the Arbitrator. This material is, on any view, wholly irrelevant and inadmissible.
iv) The BP 'Pass' email to Owners dated 12 January 2010. In the Owners' skeleton argument they submit 'simply that it is necessary for the Court to see this document, which lies at the heart of the second ground of appeal.'
The document is not admissible on this basis since it does not fall into the category of documents which the Court needs to see in order to decide the second issue, which depends on the construction of the Charterparty. In any event the document was referred to explicitly and fully at §75 of the Award.
v) The Q88 questionnaire which was referred to in §25 of the Award. It is said that 'it is necessary for the Court to see how the oil major approvals are communicated in the industry as part of the commercial background.'
It was for the Arbitrator to make findings about the commercial background, which he did. This document was not part of the relevant commercial background, it is simply part of an attempt to introduce inadmissible factual material.
vi) The evidence of two rejections which were found not to be Qualifying Rejections, but which are relied on as directly contradicting the Arbitrator's finding about the evidential difficulties which would arise if the Charterers were right in their construction on the third issue.
This is another illegitimate attempt to introduce new factual material to support an argument which might (in any event) be made without reference to evidence.
The first issue: the meaning of the term 'Oil Majors' in §3.2 of clause 50
A VETTING REVIEW / INSPECTION IS DEFINED AS A NOMINATION BY THE CHARTERER'S TO AN OIL MAJOR (emphasis added)
It would make no commercial sense, in my view, for in-service approvals to be limited to a sub-set of oil majors. The tradability of the vessel will be affected by a good or poor report from any of the oil majors.
The second issue: did the BP 'pass' break the sequence of consecutive rejections?
A VETTING REVIEW / INSPECTION IS DEFINED AS A NOMINATION BY THE CHARTERER'S TO AN OIL MAJOR AND THE OIL MAJOR REVIEWING THE VESSEL BY EITHER A PHYSICAL INSPECTION OR LATEST SIRE INSPECTION REPORT (emphasis added)
If there is no nomination by the Charterers to a particular oil major the vetting review/inspection process is, as a matter of clear wording, irrelevant for the purpose of §§3.2 and 3.3 of clause 50.
In my opinion, a court when construing any document should always have an eye to the consequences of a particular construction, even if they often only serve as a check on an obvious meaning or a restraint upon adoption of conceivable but unbusinesslike meaning.
The third issue: the significance of the latest SIRE inspection
A NOMINATION BY THE CHARTERER'S TO AN OIL MAJOR AND THE OIL MAJOR REVIEWING THE VESSEL BY EITHER A PHYSICAL INSPECTION OR LATEST SIRE INSPECTION REPORT (emphasis added)
A FAILURE WOULD CONSIST OF THE OIL MAJOR REJECTING THE VESSEL DURING THIS PROCESS.
The relevant process is the process by which the oil major reviews the vessel either by a physical inspection or latest SIRE inspection report. The Arbitrator found that oil majors do not normally give reasons for a rejection and that data sources other than the latest SIRE inspection report may be taken into account. It is therefore sufficient that the rejection is 'during this process.' It would often be impossible (even for the oil major, where the vetting procedure is carried out by computer) to say that the rejection was 'caused' by the latest SIRE inspection report.
45. ... it is recognised that oil majors will have access to, and will always consider, a range of information when vetting (including earlier SIRE reports in order to assess whether the latest report shows an improvement or decline in standards);
and,
104. ... It is common ground on the expert evidence that oil majors look at the history of SIRE inspection reports as part of the vetting process in order to identify positive and negative trends.
(a) Rejection on 1 December 2009, ChevTex 'probably referred to the latest SIRE report,' (Reasons §68)
(b) Rejection on 9 February 2010, ConocoPhillips 'probably did review the SIRE report,' (Reasons §88) and
(c) Rejection on 24 February 2010, ChevTex 'would have considered the latest report ...'
Conclusion