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||Neutral Citation Number:  EWHC 1836 (Comm)
||Case No: 2002 FOLIO 1306
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
||Royal Courts of Justice
Strand, London, WC2A 2LL
||27 July 2004
B e f o r e :
THE HONOURABLE MR JUSTICE TOULSON
|| LOG-O-MAR A.G.
(a company incorporated in Germany)
||- and -
||CRAFT ENTERPRISES INTERNATIONAL LIMITED
(a company incorporated in England and Wales)
CROYNDON FINANCIAL LIMITED
(a company incorporated in the British Virgin Islands)
THE "TIGER V"
Mr Michael Collett (instructed by Walterson Hicks) for the Claimant
Miss Geraldine Clark (instructed by Davies Johnson & Co) for the Defendants
Hearing dates: 17-24 May 2004
HTML VERSION OF JUDGMENT
Crown Copyright ©
The Honourable Mr Justice Toulson:
- D-bars are steel bars used for reinforcement of concrete. They need a high degree of flexibility because they have to be bent to various angles in the course of building and engineering work.
- This action concerns d-bars destined for supply to Iraq during the time of Saddam Hussein under the United Nations' so-called Oil-For-Food programme.
- Iraq under Saddam Hussein preferred to source supplies permitted under that programme from some countries rather than others. Favoured sources included Russia.
- The second defendant, Croyndon, is a company incorporated in the British Virgin Islands, but it was operated at the relevant times from Moscow by Mr Purnendu Kanji. It no longer trades and has taken no part in this action.
- Croyndon controlled two companies, Klotto and Radioexport, which were incorporated in Russia and were approved by the Iraqi authorities to supply steel under the Food For Oil programme.
- The first defendant, Craft, is a company incorporated in England and Wales, but it operates from Moscow. It buys and sells metal products. Its managing director is Mr Dimitri Trifonov.
- According to a statement by him, put in evidence under the Civil Evidence Act, Craft was introduced to Croyndon in February 2001 by an officer of Craft's bank, BNP Paribas in Geneva, who dealt also with Croyndon's account and was aware that Croyndon had credits under the Oil-For-Food programme for supply of metal products to Iraq.
- BNP had been chosen in consultations between the government of Iraq and the United Nations Secretariat to handle the revenue from the Food For Oil programme.
- In March 2001 Craft made a contract with Croyndon for the supply of 150,000 mt of d-bars of Ukrainian origin cif Baghdad, via the port of Umm Qasr. The quantity was later increased.
- Croyndon through Klotto and Radioexport had contracts to supply d-bars of Russian or Ukrainian origin to the Iraqi State Trading Company for Construction Materials (ISTCCM). Delivery was to be to warehouses in Baghdad or elsewhere in Iraq, via Umm Qasr.
- The claimant, Log-o-Mar, is a company incorporated in Germany. It is now in liquidation but at the relevant time its main activity was the carriage of steel products.
- By various contracts made during the period between April 2001 and July 2001 Log-o-Mar agreed to charter five vessels to Croyndon and/or Craft for voyages carrying steel from Black Sea ports to Umm Qasr. One of the vessels was the Mega S. Disputes arose in relation to these contracts. I am not concerned with their merits, because they were settled by a written agreement made on 11 November 2001 between Log-o-Mar, described in it as the carriers, and Craft and Croyndon, jointly described in it as the charterers.
- The present dispute arises under that settlement agreement.
The settlement agreement
- The settlement agreement included the following principal terms:
a) All claims relating to past shipments on [five vessels including the Mega S] are waived by both parties save any cargo claims appearing later which will be handled in the normal way.
b) The Carrier will charter the Mega S or another suitable vessel in order to transport the cargo currently lying at Jebel Ali to Umm Qasr.
c) The Charterers will pay all of the costs associated with (b) above on a "cost" basis. Carriers will present a pro forma voyage calculation substantiating costs and the Charterers will put the Carriers in funds, prior to commencement of the [voyage], equivalent to 75% of the said costs. Any amount outstanding will be settled with[in] ten days of completion of the vessels discharging operations in Umm Qasr.
d) The Charterers will pay to the Carrier within three days of signing this agreement, on fax, an amount of US$ 150 000.
- There were later some variations or alleged variations, but it is not presently necessary to refer to them.
- The reference in clause (b) to "the cargo currently lying at Jebel Ali" requires some explanation, because the present dispute concerns the nature and quality of that cargo and what happened to it. As will become clear, the crucial question is whether it included bundles of d-bars of exceptional brittleness so that they were liable to break when lifted.
Background to the settlement agreement
- The Mega S had been fixed on 26 July 2001. It loaded various consignments of d-bars at Sevastopol between 31 July and 6 August 2001.
- Three Mate's Receipts were issued by the vessel in respect of the cargo loaded at Sevastopol, each dated 6 August 2001. The first was for 8936 mt (net) of 12 mm d-bars in 3011 bundles and 52 mt (net) of 16 mm d-bars in 18 bundles. The second was for 3011 mt (net) of 25 mm d-bars in 1023 bundles. The third was for 8369 mt (net) of 12 mm d-bars in 2812 bundles, 5209 mt (net) of 16 mm d-bars in 1772 bundles, 1449 mt (net) of 25 mm d-bars in 506 bundles and 331 mt (net) of 32 mm d-bars in 110 bundles.
- The Sevastopol bill of lading details were as follows:
i) Bill of lading no.1 acknowledged shipment of the same quantities of cargo as Mate's Receipt No. 1. The shipper was named as Radioexport and the goods were consigned to the order of ISTCCM.
ii) Bill of lading no. 2 acknowledged shipment of the same quantities of cargo as Mate's Receipt No.2. The shipper was named as Klotto and the goods were consigned to the order of ISTCCM.
iii) Bill of lading no. 3 acknowledged shipment of the same quantities of cargo as Mate's Receipt No. 3. The shipper was named as Klotto and the goods were consigned to the order of ISTCCM.
- The Mega S proceeded to Ilychevsk, arriving on 7 August 2001. Between 8 and 10 August 2001 she loaded completion cargo, including hot rolled steel plates for Croyndon.
- The Mega S's voyage was delayed for reasons with which I am not presently concerned. On 12 September 2001, following the events of 11 September 2001, Log-o-Mar informed Croyndon and Craft that it expected to discharge the Umm Qasr cargo at Dubai in view of threatening war risks due to recent events in the USA. On the same day Log-o-Mar ordered the vessel, which was completing discharge of other cargo at Jebel Ali, to anchor out of port limits after sailing and wait for further instructions. On 20 September 2001 the vessel was ordered to return to Jebel Ali and discharge her cargo there, which she did between 21 and 28 September 2001. This was the cargo referred to in clause (b) of the settlement agreement.
The voyage of the Tiger V
- After the conclusion of the settlement agreement, a vessel named the Tiger V was nominated to carry the ex-Mega S cargo from Jebel Ali to Umm Qasr.
- It was anticipated that the voyage would take around 25 days. As events turned out, the vessel was not completely discharged after 156 days. At that stage the vessel departed from Umm Qasr and returned to Jebel Ali with some of the cargo still on board.
- Loading of the Tiger V began on 18 November and was completed on 28 November 2001. The cargo from the Mega S was not the vessel's entire cargo. Also loaded was a cargo of 139 bundles of 12 mm d-bars which Log-o-Mar had been carrying on another vessel, the Nordsund. These bundles formed part of a consignment shipped by a company called Belmetalenergo. It had been shipped at Ilychevsk in July 2001 and the consignee was ISTCCM. The Nordsund had arrived at Umm Qasr on 27 August 2001 but discharge of her cargo was stopped by order of the Iraqi authorities on 2 September. Log-o-Mar's agents were told that a bundle of the d-bars had broken in the middle while being discharged. It is not clear whether the breakage was reported to have occurred at the port or the warehouse to which the bundle was being delivered; but the consignees required samples to the taken from ten destinations of the cargo. Before the results were received, Log-o-Mar ordered the Nordsund to sail and discharge its remaining cargo at Jebal Ali.
- The Nordsund arrived at Jebel Ali on 22 September 2001 and discharge of the 139 bundles took place on 23 September. On the same day the Iraqi port authorities at Umm Qasr gave permission for the Nordsund cargo to be unloaded on condition that it was not considered to be fully received.
- The loading of the 139 bundles of ex-Nordsund d-bars on the Tiger V took place on 27 and 28 November 2001. This was at the end of the period of loading of the Tiger V. It was done without consultation with Craft or Croyndon.
- The Tiger V arrived at Umm Qasr on 1 December. On 4 December samples were taken from the vessel at anchor.
- On 11 December Log-o-Mar was informed by its port agents that the 12 and 16 mm d-bars had passed, the 25 mm d-bars had failed and the 32 mm d-bars were still under test. They were also told that the receivers had given instructions that the Tiger V should not be allowed to berth or begin to discharge because there was a dispute in relation to inland transportation fees for the ex-Nordsund cargo.
- On 13 December more samples were taken. On 24 December Log-o-Mar's agents were told that the samples had now been approved. On the same evening the Tiger V berthed at berth 4, and discharge began on the following day. On 28 December discharge was stopped by the port authority. Log-o-Mar's agents were told that a bundle of 12 mm d-bars had broken at the centre in the course of unloading from a truck at Qaddysia (which is between Umm Qasr and Baghdad, but not on a straight line).
- On 30 December more samples were taken by the receiver's representatives. By 10 January 2002 there were no results and Log-o-Mar was concerned about the increasing costs of the voyage in the absence of any further payment or guarantee of payment by Craft and/or Croyndon.
- On 11 January Log-o-Mar ordered the Tiger V to shift and not to berth if ordered to do so. On 14 January Log-o-Mar was informed that the 16 and 25 mm bars were accepted and that the consignees needed them to be discharged as soon as possible.
- On 15 January Log-o-Mar reached an agreement with the owners of the Tiger V to hold the owners harmless from any consequences of sailing away from Umm Qasr with cargo on board and to make an additional payment to the owners for following Log-o-Mar's orders. On the same day the Tiger V declared a medical emergency and sailed to Jebel Ali, where the vessel received fuel and there was a crew change.
- There was then a period of negotiation between Log-o-Mar and Craft over provision of a bank guarantee, which was issued by BNP. Once Log-o-Mar was satisfied this was going to be forthcoming, it gave instructions to the vessel to return to Umm Qasr.
- On 2 February the Tiger V arrived at Umm Qasr anchorage. On the next day Log-o-Mar was told that permission had been granted for discharge of all cargo except the 12 mm d-bars. On 4 February the vessel berthed at berth 8 and more samples were taken of the 12 mm d-bars. On the following day the vessel re-commenced discharging.
- On 10 February Log-o-Mar was told that the sampling of the 12 mm d-bars was satisfactory, so all the cargo could be discharged. However, on 12 February Log-o-Mar was told that another bundle of d-bars had broken, and discharge was again stopped.
- The vessel was shifted off the berth at the orders of the port authorities. Discharge never resumed, although the vessel remained at Umm Qasr until 7 May 2002.
- On 26 April Log-o-Mar faxed a message to Craft and Croyndon stating:
"To the extent that you may be responsible for the refusal to take the cargo and subsequent delays, whether because of the provision of sub-standard cargo or whatever to Iraq, we hold you in repudiatory breach of contract, which breach we accept as terminating the contract."
- Craft replied to the effect that Log-o-Mar must act as it saw fit and that Craft did not accept that it or Croyndon was under any obligation to take delivery of the remainder of the cargo on board.
- By those expressions of their respective positions and by their conduct from that time on Log-o-Mar and Craft both treated the settlement agreement as being at an end.
- On 7 May Tiger V sailed from Umm Qasr without the knowledge of the port authorities or indeed of Log-o-Mar, although the sailing of the vessel coincided with Log-o-Mar's intentions. On the same day the port authorities sent a message which appeared to give permission to discharge the remainder of the cargo, but this was too late so far as Log-o-Mar was concerned. The Tiger V proceeded to Jebel Ali, where the remainder of the cargo on board was discharged between 19 and 20 May. It was sold on Log-o-Mar's instructions by auction in December 2002.
Repudiatory breach and the rogue 12 mm d-bars
- Log-o-Mar and Craft accused one another of acting in repudiatory breach of the terms of the settlement agreement. The principal issue is which of them is correct.
- It is common ground that the Tiger V's cargo contained some rogue 12 mm d-bars; that these amounted to what has been described as legally dangerous cargo; that whichever party was responsible for their being on the vessel was guilty of a breach of an implied term of the settlement about not shipping legally dangerous cargo; and that the breach was of such seriousness as to entitle the other to treat the agreement as repudiated.
- The critical question is whether the rogue d-bars came from the Mega S or the Nordsund.
- If they came from the Mega S, Log-o-Mar was justified in sending its fax to Craft on 26 April treating the settlement agreement as discharged by breach on the part of Craft, which Log-o-Mar accepted as repudiatory.
- If they came from the Nordsund, Log-o-Mar was not entitled to act as it did and was itself in repudiatory breach of its contractual obligations to Craft.
- Written and oral evidence was given by the distinguished metallurgist Dr Baker, who was a jointly appointed expert. It is clear from his evidence that it would be a most extraordinary event for an entire bundle of d-bars to break in the middle during the course of normal operations, even if dropped from a height.
- Dr Baker examined and arranged for tests to be carried out on five samples taken from the d-bars which were discharged from the Tiger V at Jebel Ali in May 2002. They fell into two groups. Three samples, which he labelled A, B and E, were quite satisfactory. The other two, C and D, were grossly unsatisfactory, and their chemical composition indicated that they came from the same heat of steel. A heat is a melt of steel which will produce a large number of bars of very similar composition.
- The composition of samples C and D was extremely unusual. They had an extraordinarily high level of manganese, and testing showed a high susceptibility to stress corrosion cracking. They had extraordinarily high core hardnesses. Normally a d-bar would be sufficiently ductile to be able to be bent round a carafe of water. Instead of being very ductile, the composition of samples C and D made them very brittle.
- No oral evidence was given by anyone who was present either during the loading of the Tiger V at Jebel Ali in November 2001 or during the sampling and discharging operations at Umm Qsar between December 2001 and February 2002.
- The only witnesses who have given oral evidence, apart from Dr Baker, were Mr David Sharman and Mr Ino Kruger, who were both called by Log-o-Mar. Mr Sharman has twenty five years experience as a shipping broker and at the relevant time acted for Log-o-Mar as a consultant. Mr Kruger was Log-o-Mar's managing director. Both were involved in the Tiger V saga but their knowledge of what happened at Jebel Ali and Umm Qasr came from what they were told by others.
- Log-o-Mar's supercargo for the discharge of the Tiger V was Mr Mohammed Khokhar until 2 January 2002, when his visa for staying in Iraq expired and he had to leave the country. A statement by him was admitted under the Civil Evidence Act.
- Mr Harold Korth took over from Mr Khokhar for a period of time as supercargo for the discharge of the Tiger V. There is no witness statement from him. Mr Sharman explained that Mr Korth felt aggrieved over the way he had been treated when Log-o-Mar went into liquidation.
- Craft had no employee at Umm Qasr. It regarded its responsibilities as complete when the goods had been loaded and it left matters from that point onwards to Croyndon. Craft and Croyndon are no longer on friendly terms.
- Craft introduced under the Civil Evidence Act what is described as a statement made by Mr Kanji to Craft's solicitor, Mr Davies, in May 2002. The statement was compiled from notes made by Mr Davies of a meeting with Mr Kanji.
- I approach all the statements admitted under the Civil Evidence Act with the caution appropriate when the maker has not been available for cross-examination. I treat Mr Kanji's so-called statement with particular caution for three reasons.
- First, it was not taken as a witness statement nor has it been read and approved by Mr Kanji.
- Secondly, as Miss Clark properly pointed out in her written opening submissions on behalf of Craft, the meeting took place long before proceedings were begun and Mr Davies was not trying to obtain detailed evidence from Mr Kanji about events at Umm Qasr during the Tiger V's stay there.
- Thirdly, there are grounds for questioning Mr Kanji's credibility. Mr Sharman's witness statement contains evidence of apparent fabrication by Mr Kanji of a fax transmission slip. The matter was not explored because it has no direct bearing on the matters now in issue, but it might have been explored if Mr Kanji had been called as a witness as a matter going to his reliability.
- There is a particular passage in Mr Kanji's statement to which I should refer. Speaking of the time during the unloading of the Tiger V when the consignees complained of damaged d-bars, Mr Kanji said that he suspected that the damaged cargo was that which had previously been carried on the Nordsund. It was most unusual for d-bars to be broken. He saw the bundle of d-bars. He added:
When I saw the damaged d-bars, it was obvious they were not steel. There were one or two rods in our bundles. We suspect that Log-o-Mar put them there to get us into trouble. I took a sample of these defective d-bars, which I gave to Dimitri [Trifonov].
- Craft has not pursued the suggestion that Log-o-Mar deliberately switched a few bars to incriminate Croyndon or Craft, but Mr Kanji's statement that he gave some sample bars to Mr Trifonov is confirmed in the witness statement of Mr Trifonov, who described them as being about one metre long.
- Mr Trifonov passed the samples to Mr Araf'ev, who was a director of Craft responsible for the purchase of steel products. Mr Araf'ev said in his witness statement that he was given by Mr Trifonov two or three samples, which he described as about half a metre in length and he passed them on to Craft's agent's in Dnepropetrovsk for independent inspection. The samples were sent on to Bureau Veritas, who arranged for them to be analysed, and the results of their analysis were considered by Dr Baker.
- Three samples appear to have been examined by two separate laboratories with consistent results. Two of the samples were similar to Dr Baker's rogue examples C and D. The third was satisfactory.
- It is not possible to prove scientifically, either from Dr Baker's analysis or from the analysis arranged by Bureau Veritas, the identity of the manufacturer either of the rogue samples or of the good samples.
- It is logically possible that the rogue 12 mm d-bars on the Tiger V came in part from the Mega S and in part from the Nordsund, but this is not a conclusion for which either party contended. The extraordinary occurrence of d-bars breaking during ordinary handling is explained if they had the chemical composition of the rogue bars sent to Bureau Veritas and the rogue bars examined by Dr Baker. That d-bars of such strikingly abnormal composition should have happened to be loaded on the same vessel at the same time in two unrelated consignments would be a most improbable coincidence.
Log-o-Mar's case as to the provenance of the rogue d-bars
- From the starting point that breakages of d-bars were reported on 28 December 2001 and 12 February 2002, and that there were rogue d-bars in the cargo discharged at Jebel Ali after the vessel returned there in May 2002, Log-o-Mar's case that these bars had been part of the Mega S's cargo is principally based on a study of the contemporaneous evidence about the loading and unloading of the Tiger V and contemporaneous evidence about statements made by the consignees and others.
- As to the loading of the Tiger V, Log-o-Mar relies on daily loading reports of its agent at Jebal Ali, Emirates National Shipping Services (ENSS), the vessel's log book, the hatch-wise load details and a summary of cargo loaded.
- The last of these showed that the 12 mm d-bars were stowed as follows:
- There were therefore two holds with mixed cargo, holds 2 and 4. According to Log-o-Mar's case, in hold 4 the single bundles would have been carefully identified as samples; in hold 2 the Nordsund bundles were loaded at a late stage and would have been kept separate from the Mega S bundles, as was confirmed by ENSS in a message dated 12 December 2001.
- Craft questions the reliability of this evidence on a number of grounds. First, it points out that surveys at Jebel Ali before the Tiger V was loaded showed that it was not possible to identify the former bill of lading numbers of all the Mega S cargo; and that some of the Nordsund bundles had lost their tags, but, because they were in heap, it was impossible to ascertain the number without tags.
- Secondly, Craft relies on a statement of facts made by ENSS at the end of the loading in which it referred to changes of the stowage plan which had led to gangs having to keep shifting from one hold to another and sometimes shifting cargo from one hold to another. Mr Collett on behalf of Log-o-Mar submitted that any shifting of cargo between holds was likely to have been before the Nordsund cargo was loaded. Miss Clark submitted that this is impossible to tell and that there may well have been shifting of cargo between holds during the final stages of loading.
- Thirdly, Craft points to differences between the hatch-wise load details and the summary of cargo loaded as evidence of confusion and uncertainty on the part of ENSS about where the cargo was loaded and, in particular, of a possible mix up of sample bundles from the Mega S and the Nordsund in hold 4. Mr Collett submitted that the likely explanation for the discrepancies was that there were clerical errors in the hatch wise load details which were recognised and corrected in the summary of cargo loaded. Miss Clark submitted that this is guess work and that it is at least as likely that there was in fact a mix up.
- As to the discharging of the vessel at Umm Qsar, Log-o-Mar relies on the vessel's log to show that enough packages were discharged from holds 2,4 and 5 for all the ex-Nordsund bundles to have been discharged by 26 December 2001. It also relies on statements by, in particular, the master and Mr Khokar that the vessel had discharged all the ex-Nordsund d-bars by that date. After discharge was stopped on 28 December, because a bundle of 12 mm d-bars had reportedly broken at the centre in the course of unloading from a truck at Qaddysia, Log-o-Mar's agents were told by the consignees that the bundles of ex-Nordsund d-bars had been sent to Baghdad, in which case the bundle which broke must have come from the ex-Mega S cargo. Further, if all the ex-Nordsund d-bars had been unloaded by 26 December, the bundle reported as broken on 12 February (shortly after discharging had re-commenced) must have come from the Mega S.
- Miss Clark submitted that it would have been difficult for those involved in the discharge physically to identify which 12 mm bundles were ex-Mega S and which were ex-Nordsund because tags were missing from both cargoes. If there was mixed stowage, nobody could know whether all the Nordsund bundles were sent to Baghdad. By the time of the second breakage there had been further shifting of cargo in the holds, because the vessel's inability to discharge 12 mm d-bars after discharging recommenced on 5 February, but before approval was given for the discharge of all remaining 12 mm d-bars on 10 February, had led to listing of the vessel. Miss Clark also pointed out that the position of the Iraqi authorities about what cargo was discharged was not only second hand but also inconsistent. There is evidence in a witness statement by Mr Mark Galloway, a representative of the Tiger V's owners' P & I club, and in a report dated 27 May 2002 by his associate Captain Sabih (a marine surveyor), that after the vessel had sailed from Umm Qsar on 7 May 2002 Captain Sabih visited ISTCCM's import control department and also the post authority to obtain their figures for discharge. Both recorded 313.28 mt of ex-Nordsund cargo as remaining on board after the second period of discharge had ended on 12 February 2002.
Craft's case as to the provenance of the rogue d-bars
- Craft's case is that all the d-bars shipped on the Mega S (and other vessels chartered from Log-o-Mar by Croyndon for shipments to Iraq) were produced by the Krivorozstal steel mill in the Ukraine and sold by Krivorozstal to Craft. This was stated by Mr Aref'ev and Mr Trifonov in their witness statements, but, as I have commented, they were not available for cross examination. At, but only at, an inexcusably late stage of the trial Craft produced what it asserts was the relevant contract. It produced some other relevant financial documents, particularly import and export letters of credit, but on analysis these were incomplete and did not all relate to the Mega S shipment. It also produced quality certificates from Krivorozstal which, according to Craft's case, covered nearly but not quite all of the d-bars shipped on the Mega S and gave the relevant contract number.
- In November 2001 Murray Fenton carried out a survey of the condition of the ex-Mega S cargo lying in the open at Jebal Ali before it was loaded on to the Tiger V. Their photographs included two bundles with tags whose details could be read. In June 2002 Inchcape Shipping Services (Dubai) carried out a survey of the 12 mm d-bars discharged from the Tiger V at Jebal Ali. Their report gave two sets of identifying details on similar tags. In those four instances the heat and lot numbers can be positively identified with quality certificates issued by Krivorozstal.
- The good samples examined by Dr Baker (A, B and E) corresponded well in their chemical composition with the quality certificates issued by Krivorozstal. Dr Baker considered it most unlikely that a plant producing steel of that quality would also have produced samples C and D, because they were so very different.
- Mr Collett complained with good cause about the late production of Craft's contract with Krivorozstal. He also pointed to the incomplete nature of the documentation by which Craft sought to link that contract and the quality certificates. He referred, for example, to the absence of forwarding certificates of receipt (FCRs) and railway consignment notes, and he commented fairly on the absence of any witness from Craft who could be questioned about such matters. He submitted that in the absence of FCRs or other records proving what documents were loaded on the Mega S, it is impossible to know whether those d-bars all came from Krivorozstal or elsewhere and, if they came from Krivorozstal, whether they were covered by the quality certificates that had been disclosed.
Conclusion as to the provenance of the rogue d-bars
- I have not rehearsed all the arguments and counter-arguments on this issue which were put forward by Mr Collett and Miss Clark in their full and helpful submissions, but have confined my summary to what seem to me to be the most central points.
- On balance I conclude that the rogue d-bars are more likely to have come from the Nordsund than from the Mega S. As I have said, it is clear from Dr Baker's evidence that for a bundle of d-bars to break in the middle in the course of normal transportation would be a most extraordinary occurrence, resulting from quite exceptional defects in the composition of the d-bars.
- The first bundle of d-bars reported to have fractured in this way unquestionably came from the Nordsund. It was reported as occurring within a few days after the Nordsund began discharging her cargo at Umm Qsar on 27 August 2001. This does not mean that the entire Nordsund cargo was defective, but it does strongly suggest that it included some rogue d-bars.
- If the Mega S d-bars all came from Krivorozstal, it is extremely unlikely that any of them would have been of such sub-quality. Craft's evidence that the Mega S d-bars came from Krivorozstal is supported to some extent by the documents disclosed. There are gaps in that evidence, and therefore the documentary evidence does not logically disprove the possibility that (contrary to Craft's assertions) it may have sourced the Mega S d-bars in part from Krivorozstal and in part from some other manufacturer who produced d-bars of gravely defective quality. However, given the exceptional nature of the defects which would have caused a bundle to break in half in normal transportation, it would be a remarkable coincidence that the Nordsund and the Mega S should both have happened to carry cargoes including a number of bundles of that unusual quality, which Log-o-Mar then loaded on the Tiger V.
- Log-o-Mar's evidence about the loading and discharging of the Tiger V, and the reported views of the Iraqi consignees, does not on balance persuade me that the residue of the Nordsund cargo carried on the Tiger V was all of good quality and that the defective d-bars carried on the Tiger V came from the Mega S. As I have said, I heard no oral evidence from anyone who was present during the loading of the Tiger V at Jebel Ali in November 2001 or during the sampling and discharging operations at Umm Qasr between December 2001 and February 2002. At the time when the Tiger V was loaded, the bundles from the Nordsund and the Mega S were not all tagged, so if (as ENSS stated at the end of the loading) gangs shifted cargo from one hold to another, it is not difficult to see how mix ups could have occurred. I do not feel able on the documentary evidence to draw firm conclusions about what shifting of cargo occurred, when and where; nor can I draw firm conclusions about the reasons for the discrepancies between the hatch wise load details and the summary of cargo loaded; nor can I draw firm conclusions about the reliability of the records of the consignee's import control department and the port authority about the d-bars which remained undischarged when the Tiger V finally departed from Umm Qsar in May 2002. However, in light of (a) the reported breakage of Nordsund d-bars prior to the Nordsund and Mega S cargos being loaded on the Tiger V, (b) the highly unusual nature of such an occurrence, (c) Craft's evidence about Krivorozstal, (d) the lack of identification tags on all the Mega S and Nordsund cargo when loaded on the Tiger V and (e) the uncertainties affecting the evidence about the loading and discharging of the Tiger V, I reach the overall conclusion that the rogue bundles are more likely than not all to have come from the same source and that they were part of the cargo originally carried on the Nordsund.
Consequences of the conclusion that the rogue 12 mm d-bars came from the Nordsund
- It follows for the reasons already given that Log-o-Mar was in repudiatory breach of its contractual obligations to Craft in sending its fax to Craft on 26 April 2002, treating the settlement agreement as discharged, and in subsequently causing the vessel to sail to Jebel Ali and discharge there.
- Mr Collett submitted that Log-o-Mar is nevertheless entitled to recover the balance of the costs of the voyage (over and above what it has already been paid) in so far as they relate to time properly spent and services properly provided during that time. He submitted that the sentence in the settlement agreement "Any amount outstanding [beyond the 75% of the estimated costs which were to be paid prior to commencement of the voyage] will be settled within 10 days of completion of the vessels discharging operations in Umm Qsar" was not a condition precedent to payment but, at most, a provision fixing the time for payment. The overriding principle of the settlement agreement was that the charterers would pay all of the costs associated with the voyage on a "cost" basis. On the termination of the contract, Log-o-Mar was therefore entitled to such payment.
- In support of this argument Mr Collett cited The Karin Vatis  2 Lloyd's Rep 330 and The Lefthero  2 Lloyds Rep 599.
- In my judgment this argument is unsound. The payment of the balance of the costs of the voyage was to be made in consideration of Log-o-Mar fulfilling its obligations under the contract, and the time for payment of the final amount was to be within 10 days after completion of the discharging operations. I am not here concerned with a case in which the contract was discharged without fault on the part of Log-o-Mar (e.g. by frustration), nor with a case in which Log-o-Mar substantially performed the contract. In this case Log-o-Mar acted in repudiatory breach and I do not interpret the contract as entitling Log-o-Mar in those circumstances to recover the balance of the costs incurred by it prior to its repudiation of the contract. Its contractual entitlement to recover those costs was intended (as I interpret the contract) to be conditional on the completion of performance of its essential obligations under the contract.
- The Karin Vatis and The Lefthero are both distinguishable from the present case. In each of them the contract contained a "freight earned" provision which was construed as meaning that freight was to be regarded as earned, and therefore there was an obligation to pay, as soon as the vessel was loaded. There is no parallel provision in the settlement agreement. Further, in neither of those cases was the claimant in repudiatory breach. In The Karin Vatis the vessel sank. In The Lefthero there were problems in the vessel reaching its contractual destination because of the Iran-Iraq war and the parties agreed on a different place for discharge.
- It follows that Log-o-Mar's claim fails.
- Craft is entitled to judgment on its counterclaim for damages to be assessed. At the hearing the parties did not go into detailed points of quantum, but there are two short points with which I should deal.
- Log-o-Mar put Craft to proof of its title to sue. I accept that the ex-Mega S d-bars loaded on the Tiger V came from Krivorozstal and that property in the goods passed to Craft.
- There was some argument whether there was a shortage in the goods loaded on the Tiger V at Jebel Ali. Craft raised the issue whether Log-o-Mar was in breach of the terms of the settlement agreement by failing to load all the cargo previously on board the Mega S. Log-o-Mar's pleaded case (in paragraph 12 of its amended reply and defence to counterclaim) was that the quantities shown in the bills of lading issued in respect of the ex-Mega S cargo shipped on board the Tiger V at Jebel Ali were the quantities actually shipped. In those circumstances I cannot see injustice to either party if Craft's damages are calculated on that basis. Craft is entitled to be put in the same financial position as if Log-o-Mar had duly performed its obligations in respect of those goods under the settlement agreement.
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