E.N.E. Kos v Petroleo Brasileiro S.A. (Petrobas), Court of Appeal - Commercial Court, July 23, 2009, [2009] EWHC 1843 (Comm)

Reporting Judge: [2009] EWHC 1843 (Comm)

President: E.N.E. Kos v Petroleo Brasileiro S.A. (Petrobas)

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Extract

E.N.E. Kos v Petroleo Brasileiro S.A. (Petrobas), Court of Appeal - Commercial Court, July 23, 2009, [2009] EWHC 1843 (Comm)

Neutral Citation Number: [2009] EWHC 1843 (Comm)

Case No: 2008-937

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 23/07/2009

Before :

MR JUSTICE ANDREW SMITH

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Between :

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Bernard Eder QC (instructed by Ince & Co.) for the Claimant

Andrew Baker QC and Henry Byam-Cook (instructed by Thomas Cooper) for the Defendant

Hearing dates: 11 & 12 June and 15 July 2009.

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JudgmentMr Justice Andrew Smith :

Introduction

1. This case concerns claims by the Owners of a ship after they have withdrawn her from the service of the Charterers because of a failure to pay hire under a time charter. More specifically, it is about whether the Owners are entitled to compensation for (i) the detention or use of the ship while the Charterers' cargo remained on board after the ship was withdrawn; (ii) bunkers consumed while the Charterers' cargo remained on board after the ship was withdrawn; (iii) bunkers consumed in unloading cargo; and (iv) expenses incurred in providing and maintaining a bank guarantee after the Charterers asserted that the withdrawal was wrongful and that they were entitled to security for their claim. The case raises questions of some general importance and, to my mind, some difficulty, and I am very grateful to counsel for their helpful submissions.

The facts

2. By a charterparty on Shelltime 3 form dated 2 June 2006, the claimant Owners chartered the M/T Kos to the defendant Charterers for 36 months (plus or minus 15 days at Charterers' option). She is a 300,965 mt, double hulled Very Large Crude Carrier (VLCC) built in 2001, and is of high quality.

3. Hire under the charterparty was payable in advance, and if it was not paid the Owners had the right to withdraw the vessel ``without prejudice to any other claim Owners may otherwise have on Charterers under this charter''. The charterparty had no anti-technicality clause. It did have in clause 13, which has a side-note ``Bills of lading'', a provision that, ``The Master (although appointed by Owners) shall be under the orders and direction of Charterers as regards employment of the vessel, agency or other arrangements ... Charterers hereby indemnify Owners against all consequences or liabilities that may arise ... from the Master otherwise complying with Charterers' or their agents' orders ...''. Clause 14 provided that the Charterers should accept and pay for all bunkers on board at the time of delivery of the vessel and ``Owners shall, on the expiry of this charter, pay for all bunker oil then remaining on board at actual purchase price ...''.

4. The charterparty provided that it was to be construed and the relationship between the parties governed by English law. It included an agreement that any dispute should be determined by ``the English Courts'', and went on to provide that ``without prejudice to any party's right to arrest or maintain the arrest of any maritime property'' either party might elect for London arbitration ``in accordance with the provisions of the Arbitration Act 1950, or any statutory modification or re-enactment thereof for the time being in force''. (Neither party has so elected.) The charterparty also provided that

``It shall be a condition precedent to the right to a stay of any legal proceedings in which maritime property has been, or may be, arrested in connection with a dispute under this charter, that that party furnishes to the other party security to which that other party would have been entitled in such legal proceedings in the absence of a stay''.

5. The Owners applied for summary judgment for a declaration that the vessel was validly and lawfully withdrawn. The Charterers were given conditional leave to defend, but, as Field J determined on 8 April 2009, they did not fulfil the condition and judgment was entered for the Owners for a declaration that the withdrawal was ``lawful and valid''. The Charterers' counterclaim for damages for breach of the Charterparty based upon their contention that the withdrawal of the vessel was wrongful was dismissed. The Charterers were given permission to appeal, and are appealing, against the determination of 8 April 2009, but I must deal with the issues before me on the basis that judgment was properly entered and therefore on the basis that the withdrawal was lawful and valid. The position with regard to payment of hire and bunkers up to the time when the ship was withdrawn has been settled by agreement: the remaining dispute is about use of the vessel and expenses incurred thereafter. This is the trial of those issues.

6. When notice of withdrawal was given, the vessel was at Angra dos Reis, Brazil, where she had been ordered to proceed by the Charterers for discharge and backloading. She tendered ...

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