Settlement of claims

The Court of Appeal case Khanty-Mansiysk Recoveries Limited v Forsters LLP [2018] EWCA Civ 89 considers the ambit of settlement agreement wording and the extent to which this can cover future claims.

Background facts

Forsters LLP (“Forsters”) were solicitors who had been instructed by Rupert Galliers-Pratt (“RGP”) to assist with preparatory work required to incorporate Irtysh Petroleum plc (“Irtysh”).

Once Irtysh were incorporated, Forsters were also instructed on their behalf to acquire an oil exploration opportunity in Russia. In this respect, Irtysh agreed to buy shares in a company called YBI, which owned 49% of three companies each holding an oil field exploration licence.

Forsters issued an invoice to Irtysh for the sum of £129,853.22 inclusive of VAT. There was a dispute between the parties as to how much of the invoice was in respect of work carried out by Forsters for Irtysh and how much was in respect of work carried out by Fosters for RGP.

Forsters brought a claim against RGP for payment of the invoice pursuant to a guarantee that RGP had given.

The parties subsequently agreed to a settlement by which Irtysh and/or RGP would pay Forsters the sum of £90,000 in return for the action being discontinued, and a settlement agreement was drawn up between Irtysh, Forsters and RGP to this effect.

Clause 2.1 of that Settlement Agreement provided “This Agreement and the terms set out herein shall be in full and final settlement of all or any Claims which the Parties have, or could have had, against each other (whether in existence now or coming into existence at some time in the future, and whether or not in the contemplation of the Parties on the date hereof)”.

The term “Claims” was defined in Clause 1.1 as being “any claim, potential claim, counterclaim, potential counterclaim, right of set-off, or potential right of set off, right of contribution, potential right of contribution, right to indemnity, potential right to indemnity, cause of action, potential cause of action or right or interest of any kind or nature whatsoever, whether known or unknown, suspected or unsuspected, however and whenever arising in whatever capacity or jurisdiction, whether or not such claims are within the contemplation of the Parties at the time of this Agreement arising out of or in connection with the Action or the invoice dated 1 July 2010 addressed to [Irtysh] by [Forsters] and referred to in the Action”.

After the Settlement Agreement had been entered into, Irtysh discovered that it did not own YBI due to the fact that there had not been an actual transfer of shares to Irtysh.

Irtysh subsequently went into liquidation and its claims against Forsters were allegedly acquired by a company called KMR from the liquidators. KMR brought a claim against Forsters in negligence and sought damages in excess of £70 million in respect of the failure to transfer the shares in YBI (“KMR’s Claim”). Continue Reading

Safe berth: meaning of “always accessible”

In the Aconcagua Bay [2018] EWHC 654, the Commercial Court Judge differentiated “always accessible” from “reachable on arrival”, holding that the term berth “always accessible” refers not only to entry, but also to the departure of the vessel from berth.

On the facts of the case, a bridge and lock were damaged whilst the vessel was loading, meaning she could not use a channel and was therefore unable to leave the berth. Owners claimed damages for detention from the Charterers for the period of delay.

In a short decision, the Judge decided, having considered, inter alia, the Baltic Code and BIMCO laytime definitions, the need for the meaning to reflect the inclusion of the word “always” and the context, that he could “see no basis for a conclusion that” by using the phrase “always accessible” to address the question of accessibility, the parties “should be taken to have addressed entry only”.

Conclusion

Both Owners and Charterers may wish to consider their standard chartering terms in light of this decision.

Shipowners face risk of criminal liability for illegal demolition of end-of-life vessels

A Rotterdam court has found Dutch reefer operator Seatrade and two of its directors criminally liable last week for illegally selling vessels for demolition in South Asian yards in breach of the EU Waste Shipment Regulation.

The decision appears to be the first time an EU shipowner has been held criminally liable for the illegal export of vessels for demolition to South Asian yards.[1] The Dutch public prosecutor brought the cases against Seatrade over historic sales of vessels for demolition in India, Bangladesh and Turkey in 2012. The sales of the vessels took place via cash buyers. All vessels departed from Rotterdam and Hamburg on their last voyage to the South Asian yards.

Seatrade and its directors were fined up to 750,000 euros and the directors have been banned from working in the shipping industry for a year. The public prosecutor also sought prison sentences for the directors, but the court did not impose these.

The decision sets a precedent in the Netherlands. It makes it clear that shipowners who sell vessels for demolition in South Asian scrap yards in breach of the EU Waste Shipment Regulation risk facing criminal liability. It is the first successful prosecution of a shipowner for non-compliance with the EU Waste Shipment Regulation, which prohibits the export of hazardous waste to non-OECD countries, and bans the export of waste for disposal.

Importantly, the case reflects the political climate and the greater interest shown by European countries in environmental issues and may be followed by other European countries.  Cases of illegal demolition of vessels are currently being investigated by national authorities, such as the UK and Norway. In Norway for example, the vessel the MV “Tide Carrier” was arrested by the Norwegian environmental authorities, and these have been investigating its owners for illegally selling the vessel to a South Asian yard for demolition.

Shipowners should therefore take greater notice of the regulations when considering demolition. Continue Reading

Update – what is the requisite experience for an arbitrator?

On 13 March 2018, the Court of Appeal reversed the Commercial Court decision in Tonicstar Limited v (1) Allianz Insurance PLC; (2) Sirius International Insurance Corporation. Legatt LJ gave the leading judgment in which it was held that a QC with more than ten years’ experience in insurance legal practice is eligible for the appointment as arbitrator for the purposes of a clause requiring arbitrators to have “not less than ten year’s experience of insurance or reinsurance”. Therefore, the term is not restricted only to experience obtained in the insurance or reinsurance industry “itself” which the Commercial Judge considered to be separate and distinct from the experience of insurance or reinsurance law (although it should be noted that the judge at first instance said that, uninhibited by authority, he may well have decided that the QC satisfied the requirements of the clause, but he considered himself bound by the decision of the Commercial Court in Company X v Company Y (17 June 2000)).

The Court of Appeal highlighted that reasonable parties incorporating the clause in question would give the term a wider meaning, i.e. covering both industry and law practice experience, given the close relationship between insurance and reinsurance and the law relating to the same. Further, the Court overruled the decision in Company X v Company Y, by which the Commercial Court felt bound, noting that it doubted most people incorporating the clause were aware of that decision.

The Court of Appeal adopted a more sensible and industry-orientated approach on the interpretation. However, this dispute is a kind reminder for the need of clarity in commercial contracts, absence of which might fuel litigation. Interestingly, the wording of JELC clause, which was in dispute here, has been recently amended as follows:

The Arbitrators shall be persons…. with not less than ten years’ experience of insurance or reinsurance within the industry or as lawyers or other professional advisors serving the industry” .

You can read our blog on the previous decision here.

Is the shipping industry embracing the digital age?

How ready is the shipping industry for data and digital technologies?

We are conducting a short anonymous survey to discover whether the shipping industry is embracing the digital age. Through collecting responses from companies representing the industry across different sectors and geographies, we’ll be looking to analyse how prepared different segments of the market are for the digital age.

We want your insight – take part in our short survey. This will only take a few minutes to complete and we greatly appreciate your participation.  

Singapore launches an ambitious blueprint to drive Singapore Port as the future global maritime hub

On 12 January 2018, Singapore’s Minister of State for Transport, Lam Pin Min, launched Singapore’s new “Sea Transport Industry Transformation Map.”

Considering the maritime industry’s pivotal role in Singapore’s economy, and the fierce competition between global ports, Singapore’s government is determined to ensure the country remains a leading maritime trading hub. The strategic blueprint aims to create over 5,000 new jobs in the maritime sector and grow its “value-add” by S$4.5bn (US$3.50bn) by 2025, by developing technological innovation, workforce talent, and connectivity between maritime industry actors.

The strategic blueprint will be implemented by the Maritime and Port Authority of Singapore with close support from industry stakeholders and Singapore research centres, and will operate through a collaborative effort of public and private initiatives and the promotion of tech start-ups. Continue Reading

“Demurrage claims” for the purposes of documentary time bars

On 2 February 2018 the Commercial Court allowed an appeal from a decision of the Arbitration Tribunal  in Lukoil Asia Pacific Pte Ltd v Ocean Tankers Pte Ltd.

The Judgment serves as a reminder to Owners to ensure that, if they have a claim for demurrage (no matter how it arises under the charter), as opposed to a claim for which any delay is compensated at the demurrage rate, they comply with any time bars in relation to demurrage claims.

The Claim

The question before the Court was whether a claim categorised as one for delay waiting for orders, was in fact a demurrage claim.

The clause under which the claim was brought provided:

Litasco Clause 4 – Waiting for Orders Clause

If Charterers require vessel to interrupt her voyage awaiting at anchorage further orders, such delay to be for Charterers’ account and shall count as laytime or demurrage, if vessel on demurrage. Drifting clause shall apply if the ship drifts.

Under Litasco Clause 2, claims for demurrage had to be presented to Charterers in writing within 90 days of completion of discharge. The clause included a list of supporting documents which were to be provided whenever possible.

Tribunal Decision

The Tribunal had already decided that the majority of the Owners’ claims for demurrage were time barred, but they treated the claim arising under Litasco Clause 4 as falling outside the scope of the time bar defence.

Judgment

The Judgment includes a discussion of the principles that Courts must adopt in relation to the construction of commercial documents. It distinguishes between clauses referring to time counting “… as laytime or demurrage, if vessel on demurrage”, and those, such as the BIMCO ISPS Clause and the Interim Port Clause in the Fixture Recap in this case, which referred to “any delay caused by such failure shall be compensated at the demurrage rate” and “…Charterers to pay for additional interim port at cost with additional steaming time, at demurrage rate”.

A distinction was therefore made between claims which are, in fact, demurrage claims, and those where the quantification of loss is at the demurrage rate. The decision emphasises that where different wording is used, it is to be “inferred that the parties have taken care with the language used”, and “the presumption [is] that where parties have used different language in different parts of their contract they intend to achieve a different effect”.

 

Prohibition on the carriage of non-compliant marine fuels

The global 0.5% sulphur cap for marine fuel, due to take effect from 1 January 2020, has led to calls for a prohibition on the carriage of non-compliant marine fuels. This is due to concerns that the cap will not achieve the desired benefits unless it can be consistently enforced worldwide.

A proposal has been made to the IMO which involves an amendment to Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL Convention), stipulating that “the sulphur content of any fuel oil carried for use on board ships shall not exceed [0.50% m/m sulphur]”, unless they are using an approved alternative compliance method, such as “scrubbers” (see the full proposal here).

Whilst this prohibition will provide significant health benefits for the population and the environment, it has also given rise to a number of concerns of ship owners: Increased ship owners’ costs in complying with the prohibition, and the fear that an inability of Governments to enforce the prohibition consistently could lead to “market distortion and unfair competition” (BIMCO Press Release, 22 January 2018).

The increasing rate of scrapping of tankers is also thought to be attributable, in part, to ship owners’ concerns about the prohibition. For example, low-sulphur fuel is expected to be more costly, therefore increasing ship owners’ costs and rendering the maintenance of inefficient vessels unjustifiable (TradeWinds, ‘Deluge of tankers set to be torched as regulations kick in’, 1 February 2018).

The prohibition proposal is widely supported and will be discussed by the IMO at its Pollution, Prevention and Response meeting this week (5–9 February 2018).

 

Summary judgment in respect of quality claim

Trafigura Beheer Ltd v Renbrandt Ltd

On 1 December the Commercial Court gave a judgment for the Claimant seller in this matter, which arose out of the sale of a cargo of gas oil in 2008.

The facts

The cargo was to be loaded by STS transfer from a mother vessel.

The Quality clause in the sale contract provided that the sulphur content should not exceed 3%; and that “The Seller gives no guarantees, conditions, warranties or representations, express or implied… in relation to the quality… of the product … which extend beyond the description of the product and any specifications contained in this contract.

The Determination of [Quantity and] Quality clause provided that “Quality shall be as already determined at the time of loading of the mother vessel.” This was to be by a certificate of quality which was final and binding on the parties for all purposes save for fraud or manifest error, in the usual way. There was a further requirement that any claim regarding quality had to be submitted in writing, with various documents attached, within 5 days of the bill of lading date.

There was a confused jurisdiction clause in the contract providing for English law and High Court jurisdiction but reference to commencement of arbitration within five days of the bill of lading date if disputes arose and were not settled (with a carve out for particular types of claim).

Delivery took place in October 2008 but no claim about the quality was made by the Buyer until the following year, when it first commenced proceedings in Nigeria. These were withdrawn but further proceedings were commenced, again in Nigeria, in 2016.

The Claimant Seller sought a declaration of non-liability from the English court and summary judgment in respect of that claim.

The decision

The Court made short work of finding that the Claimant was entitled to summary judgment.

  1. In relation to whether the claim form was validly served in Nigeria, the Defendant’s evidence was found to be of no evidential value and the CPR’s aim of protecting the position of a defendant who wishes to dispute jurisdiction from being required to engage in the merits of the claim pending such application does not apply where the time limit for filing an acknowledgement of service has passed and no jurisdictional challenge has been raised.
  2. The arbitration provisions in the jurisdiction clause related to quantity / quality disputes, not a claim for a declaration of non-liability.
  3. There was found to be no undue delay by the Claimant in bringing its claim, in circumstances where it was claiming in the contractually agreed forum that the Defendant’s claims were time barred, the latter having been brought out of time in a non-contractual jurisdiction.
  4. It confirmed that the purpose of a conclusive evidence clause is to avoid disputes as to quality and to achieve finality. Quality here was to be determined at the time of loading of the mother vessel.
  5. The Court’s declaration would serve a useful purpose insofar as it would assist the Nigerian courts, in circumstances where the contract was governed by English law, to have a ruling of the English court on the issue.

Significance

The decision confirms the role of conclusive evidence clauses and that a claim for a non-declaration of liability in respect of a quality / quantity claim is not impacted by any restrictive time bars relating to the underlying claim. It also provides a useful insight for practitioners on the role of summary judgment, as opposed to default judgment, proceedings.

The Yangtze Xing Hua

Transgrain Shipping (Singapore) Pte Ltd V Yangtze Navigation (Hong Kong) Co Ltd [2017] EWCA Civ 2107

This was a further appeal, to the Court of Appeal, from an LMAA arbitration award, considering the true construction of the sweep-up provision at sub-clause 8(d) of the Inter-Club Agreement 1996 (“ICA ‘96”); specifically, whether the meaning of the term “act” in the phrase “act or neglect” should be restricted to a culpable act or given a broader meaning that included positive (no-fault) conduct.

As with the Tribunal and High Court (Teare J) before it, the Court of Appeal has found that “act”, even though paired with “neglect” as an alternative, is to be given the broader meaning in this context and not to be confined to culpable (fault) conduct.

The decision also confirms that clause 8 of the ICA ’96 is a mechanical process for the allocation of risk to which the critical factual enquiry is one of causation and not fault.

Our previous blog on this case can be found here.

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