England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Rolls Building Fetter Lane, London EC4A 1NL
		07/05/2013

The Hon Mr Justice Popplewell:

1. This is an application by the Claimant ("Kingsway") for summary judgment against the Defendant ("STX") in respect of some of the issues which arise in respect of its claim. The claim arises out of the alleged grounding of the "M.V. Yong Jin" ("the Vessel") in Jubail, Saudi Arabia on 2 December 2011. Kingsway was the head owner of the Vessel. STX was the sub-charterer. The intermediate charterer was Victory Shipping Sbn Bhd ("Victory"). Kingsway claims directly against STX for alleged losses arising out of the grounding pursuant to a "guarantee" which STX provided in an email sent to the Master. The Vessel had loaded a cargo of iron ore pellets at Sohar, Oman for discharge at Jubail. Whilst the vessel was at the loading port, and following a dispute as to how much cargo she could be required to load, STX sent the email addressed to the Master in the following terms:

"Dear Captain

… Chtrs guarantee the vsl is safety at disport with loading cargo bss max draft 13.3m at high water for disch cargo, and also chrtrs STX Gulf Shipping will take all responsibilities for the problems occurred caused by loading cargo with max draft 13.3m high water at the disport, if any."

I shall refer to this email as the Guarantee.

2. The charterparty chain was as follows:

(1) The vessel was owned by KDB Capital Corporation, a South Korean company. It was demise chartered to Kingsway, also a South Korean company, in 2006.

(2) On 28 July 2011 Kingsway time chartered the vessel on an amended NYPE form to Victory, a Malaysian company, for a period minimum 2 months maximum 4 months via safe berths/safe ports. The brokers acting for both parties to this charterparty, which I will call the head charter, were OHY Shipping. The head charter contained the unamended NYPE clause 8 providing that the Captain should be under the orders and directions of the charterers as regards employment and agency.

(3) On 17 November 2011 Victory sub-chartered the Vessel to STX, a Dubai company, for a time charter trip from Sohar to one safe port Persian Gulf on subjects which were lifted on 17 November 2011. The brokers acting for both parties to this charterparty, which I will call the sub-charter, were Merit Maritime. The fixture recap identifies the commercial terms but not the charterparty form, which was to be "per owners proforma c/p", which was not in evidence. It is reasonable to assume that it contained a provision such as clause 8 of the NYPE form or equivalent entitling the charterers to give instructions to the Owners or to the Master as to the quantity of cargo to be loaded. By clause 5 the fixture included a safe port warranty in relation to the discharge port. The recap identified the head owners as KDB Capital Corporation and Kingsway as managers. In this it was in error, but Mr Kumar of STX says in his witness statement that throughout the relevant communications he understood that to be the position further up the chain.

(4) STX voyage chartered the vessel to an unknown voyage charterer. So far as the evidence shows, that charterparty, which I shall call the sub-sub-charter, was for a voyage from one safe port one safe berth Sohar to one safe port one safe berth Jubail to carry a cargo of 70,000 mt, 10% more or less in owner's option, of iron ore pellets in bulk.

3. The Claimant's case is that the Guarantee contained a contract of indemnity whereby STX agreed for valuable consideration to indemnify Kingsway against any damage caused by the Vessel loading a cargo quantity commensurate with arrival drafts of 13.3m. STX's case is that the Guarantee, as with all other communications by STX with the Master, was sent to the Master in his capacity as representative and agent of Victory, who were STX's contractual counterparty as the disponent owners under the sub-charter. STX say not only that the Guarantee was given to Victory, not to Kingsway, but also that the Guarantee did no more than confirm or repeat to Victory, through the Master, that STX would comply with the safe port warranty already contained in the sub-charter.
4. These are the issues which Kingsway seeks to have determined by way of summary judgment on this application. STX also contends, in the alternative, that on its true construction the Guarantee did not involve STX assuming responsibility for (a) the negligence of the Vessel, her Master, crew and/or pilot and/or (b) any loss or damage which could have been avoided by good navigation and seamanship. That is not an issue which arises on the present application.
5. The principles to be applied in determining whether or not to give summary judgment under CPR Part 24 are not controversial. They were summarised in paragraph 10 of the judgment of the Chancellor in Ardagh Group SA v Pillar Property Limited [2012] EWHC3649 (Ch). Those which are pertinent on the present application are the following:

"(1) The court must consider whether the defendant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 2 All ER 91;

(2) a "realistic" defence is one that carries some degree of conviction. This means a defence that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];

…

(5)…… in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence which can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;

(6) Although a case may turn out at trial not to be really complicated, it does not follow that it should not be decided without a fuller investigation into the facts at trial than is possible or permissible on a summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Limited v Bolton Pharmaceutical Co 100 Limited [2007] FSR 63."

The Issues

6. Initially Mr Sarll on behalf of Kingsway put the application for summary judgment on two bases. The first was that as a matter of objective construction of what he identified as the critical 27 email exchanges, the Guarantee purported to be given by STX to the Master, and accepted by him, in his capacity as representative and agent of Kingsway. The second was that the Master had authority to do so for Kingsway, but not for Victory. At the hearing he accepted for the purposes of the present application that there was a triable issue as to whether the Master had the relevant authority on behalf of Victory. This was realistic, not least because although some documents emanating from Victory were obtained by Kingsway and put in evidence, the full extent of the exchanges between Kingsway, the Master and Victory were not before me.
7. Although there were some telephone conversations directly between STX and the Master, nothing is said to turn on the content of those conversations and the important communications were all conducted by email. The court is therefore as well placed now as it will be at trial to reach a conclusion on the basis of that written correspondence as to whether the Guarantee was given to, and accepted by, the Master purporting to act as representative or agent of Kingsway. Although there was no formal cross application for summary judgment from STX, Mr Thomas QC submitted on behalf of STX that if the issue was capable of being determined solely upon a construction of the written communications, it should be determined in STX's favour with the result that the claim should be dismissed. Mr Thomas QC further submitted that if this issue were resolved in Kingsway's favour, there were additional triable issues:

(1) whether Kingsway were the demise charterer and therefore whether the Master, if not acting for Victory, was acting for someone else in the chain than Kingsway; and

(2) whether if the Master purported to be requesting and receiving the Guarantee on behalf of head owners, that should be treated as being in favour of Kingsway when Mr Kumar's understanding derived from the sub-charter was that Kingsway were merely managers for KDB Capital as head owners.

8. The first and main issue on the application for summary judgment is therefore one of construction of the email exchanges.
9. By an email at 1546 on 17 November 2011 from Mr Kumar of STX to the Master of the vessel, Mr Kumar welcomed the Master to "our time charter" and said that "we [STX] will operate your good vessel during the currency of this charterarty". The email gave brief details of the sub-charter between Victory and STX and notified details of the sub-sub charter. It then set out at length the standard operational instructions which STX required in relation to the giving of notices etc. It was copied via brokers to Victory. In communicating in this way directly with the Master, STX would not have been understood as intending to conflate the contractual chain of charterparties. As Mr Kumar explains, such direct communications with the Master by a sub-charterer are common industry practice when a chain of charterparties is involved and provide a simple short cut to save time. Mr Thomas QC submitted that these instructions were to be understood as being given to the Master in his capacity as a representative of Victory, and Mr Sarll accepted that that was so (notwithstanding that under clause 8 of the NYPE form the owner confers a right on the charterer to give employment instructions to the Master rather than the owner). The text of the instructions to the Master was copied by STX in a separate email to the sub charter brokers, Merit Maritime, with a request that it be forwarded to "owners" (i.e. Victory) for their reference.
10. On 18 November 2011 the Master emailed STX, with a copy to Victory and to Kingsway, with a stowage plan for a total of 64,945 mt of cargo as the maximum loadable quantity consistent with a safe draft at the discharge port of 12.6m. Again the direct communication was for operational reasons without intending to conflate the charterparty relationships. It would operate as a notification by Kingsway to Victory and by Victory to STX. To that extent the Master purported to be acting as representative or agent for Victory vis a vis STX.
11. On the evening of 19 November 2011 Mr Kumar emailed the Master asking him to advise the maximum loadable quantity with a pre-stowage plan on the basis of a 13.3m maximum draft at discharge port at high water. This direct communication was again an operational shortcut of what the parties understood to be a communication having effect under the dual legal relationships of the head charter and sub charter. STX was requesting the Master to provide the loadable quantity on behalf of Victory under the sub-charter.
12. It is against this background that the critical exchanges fall to be interpreted. In doing so I keep in mind that what is legitimately available to assist in the process of interpretation is only that which was reasonably available to the parties. It is therefore necessary to exclude communications which were not known to, or available to, one or other of STX and Kingsway. For this reason a number of the communications between Kingsway and Victory upon which Mr Sarll placed reliance are irrelevant. STX did not know the extent or content of communications between Victory, Kingsway and the Master, save when STX was copied in. In any event it would be inappropriate to place reliance on such communications on this summary judgment application when the full extent of those communications may not be before the court.
13. I will set out the critical exchanges in numbered sub paragraphs for ease of subsequent reference.

(1) By an email response at 1319 on 20 November 2011 from the Master to STX, with a copy to Victory and Kingsway, the Master attached a pre-stowage plan on the basis of a draft of 13.3 m but described it as for reference only. He continued

"As I previously informed you that my vsl will be loaded cargo at Sohar based on max. draft at Jubail as 12.60m at all times only for the ship's safety purpose.

If you request us to load cargo basis of max. draft at disport as 13.3m on high water, kindly issue a your "Guarantee letter" for the safety of vessel for loading with 13.3 m on high water at disport, and for your taking all the responsibilities if any problems occurred at disport port caused by loading draft 13.3m. If you issued your "Guarantee letter" mentioned above to us, we can accept yr request for loading cargo at Sohar based on disport max. draft as 13.3m on high water as per attached pre-stowage plan. awaiting for yr prompt confirmation/reply on this matter. "

(2) There followed a series of telephone calls from STX, both from Mr Kumar and his general manager who tried to put pressure on the Master to accept orders to load to 13.3 metres and said that the Master was holding up acceptance by the terminal. These were reinforced by an email from Mr Kumar to the Master advising that a draft of 13.3 metres was available at the discharge port at high water and that the agents had been instructed to berth the vessel during high water only. The email asserted that there was therefore no need to issue a guarantee letter, and continued

"Kindly note in case vessel is not loaded up to maximum available draft at high water at discharge port berth then all losses will be recovered from owners."

(3) The Master responded by email sent at 1446 on 20 November 2011. The email was addressed to STX with copies to Kingsway and Victory. In that part of the email addressed specifically to STX the Master said

"I will repeat that vsl will be loaded cargo at Sohar based on Max draft at Jubail as 12.60m only for the safety of the vessel. So pls give us the yr Guarantee letter for the safety of the vsl at Jubail by loading draft 13.3 mtrs on high water including yr responsibilities for this matter, if you want load cargo at Sohar based on 13.3 m on high water at Jubail"

Below that the Master specifically addressed to Victory and Kingsway as the parties receiving the email in copy:

"Pls ref to msg fm sub chtrs, and kindly advise us of yr opinions on this matter by return."

(4) Eleven minutes later Mr Kumar sent an email addressed to the Master with copies to Victory and Kingsway. It said:

"We hereby confirms/gurantee for vsl to load basis 13.3 mtr draft at discharge port berth at high waters. Hope above fulfil your requirement….".

This was the first of three offers of a guarantee, the third of which gives rise to the claim in these proceedings.

(5) At 0302 on 21 November the Master gave notice of readiness to the agents at Sohar with copies to Kingsway, STX and Victory. The NOR indicated that the vessel would load 64,945 metric tonnes of iron ore pellets.

(6) STX responded with an email addressed to the Master, with copies to Kingsway and Victory in the following terms:

"We cannot understand why the NOR is tendered basis 64945 mts cargo qty even after our gurantee/confirmation of 13.3 mtr draft at discharge port berth. …Kindly revise the NOR basis 69537 basis 13.3 mtr draft at discharge port. Needless to mention all losses arises due to this will be recovered from owners."

(7) Shortly thereafter STX sent an email to Merit Maritime, the brokers acting under the timecharter trip charterparty with Victory for onward transmission to Victory. Merit passed on that message to Victory who passed it up the line to the head charter brokers OHY Shipping. That message provided:

"We already gave our gurantee / confirmation to master for 13.3 mtr draft at discharge port berth, however, master keep repeating his stand tht vessel will load only up to 12.6 mtr…. Kindly urgently request owners to instruct master to revise NOR and inform agents and load port terminal that vessel will load 69537 mt Cargo qty basis 13.3 mtr draft at discharge port berth. In case master / owners still maintain their decision then we have no other choice but to claim all losses from owners. Owners urgent action and confirmation will be appreciated."

(8) There followed a telephone conversation between Mr Kumar of STX and the Master which Mr Kumar describes at paragraphs 20 and 21 of his witness statement as follows:

"Given the lack of progress, on the morning of 21 November 2011 I telephoned the Master of the Yong Jin to try to persuade him to load the quantity relating to a 13.3m draft at the discharge port but he maintained his request for a guarantee letter. I tried my best to convince the Master to accept that a 13.3 m draft was available in the discharge port during high water and also asked him to check the port website but he was not persuaded. I finally explained that if the vessel would not load the maximum quantity in accordance with the 13.3m draft then all losses would be claimed from the Owners. The Master was adamant in his approach, refusing to consider the port parameters and simply wanting the guarantee letter from STX Gulf Shipping. The Master did not, however, make any reference to STX Gulf Shipping providing a direct guarantee to the ultimate Owners of the vessel or that matters would not otherwise be dealt with in the usual way through the charterparty chain. As a result of this conversation it was clear to me that we were not going to progress matters without giving Victory Shipping the guarantee the Master required. Since no further progress was likely to be made, I could not see any real point in pressing the matter through the Charterparty chain on a formal basis so reverted to the short-cut process outlined above and sent a further email direct to the Master. "

(9) That email was sent at 1408 on 21 November and contained the second form in which the guarantee was offered by STX. The email was sent to the Master and addressed to the Master with copies to Kingsway and Victory. It was also expressed to be copied to "Merit Maritime (for onward delivery to Owners)". It was passed up the broking chain by Merit to Victory and thence to OHY Shipping. It provided:

"We hereby confirm and gurantee 13.3 draft at discharge port berth with high water. Also, we take responsibility of consequences related to loading of cargo qty basis 13.3m draft available at discharge port berth with high water. Please urgently confirm vessel will be loading basis 13.3 m draft at discharge port berth."

(10) The next email came from the Master to STX with copies to Kingsway and Victory, in the following terms:

"Further to yr msg below, as you promised with me through phone when you called me today that you will send guarantee letter to us with mentioned put it there regarding the safety of the vessel and taking your responsibilities for problems occurred caused by loading cargo BSS max draft 13.3m high water at disport, if any. But, there is no mentioned concerning the aboves required facts on yr msg below. T'fore, I hereby strongly request you repeatedly that you should put the undermentioned facts on yr guarantee letter w/out fail, and is to be sent to us ASAP.

QTE

"Chtrs guarantee that vsl is safety at disport with loading cargo BSS max draft 13.3 m high water for disch cargo, and also chtrs STX Gulf Shipping will take all responsibilities for the problems occurred caused by loading cargo with max draft 13.3m high water at the disport, if any"

Awaiting for yr prompt response. TKS in advance."

(11) At 1626 on 21 November 2011, STX sent the Guarantee in the terms which the Master had requested. That email was addressed to the Master with copies to email addresses at Kingsway and Victory. It was also copied to Merit Maritime "for onward transmission to owners". Victory did pass the message on through the broking chain to OHY Shipping saying:

"Pls find below guarantee sent to Master/Owners which as per Masters request. Pls call owners and confirm order".

(12) At 1829 on 21 November 2011 the Master sent an email to STX accepting the guarantee. The email was copied to Kingsway and Victory and provided as follows:

"Received yr msg below with many thanks. Attached pls find the vsl's update stowage plan. Pls be informed that we accepted below msg fm chtrs and vsl will be loaded cargo at Sohar as per update stowage plan by max draft at disport as 13.3m high water. Brgds/Master."

14. Email (1) came against the background of a dialogue between the Master and STX about the quantity of cargo to be loaded. It was common ground between the parties that in that dialogue the Master was communicating with STX in the capacity of a representative of Victory. In email (1) the Master sought a guarantee to be given to "us" as the quid pro quo for complying with STX's instructions to load a larger quantity of cargo. If, as is accepted, those instructions were given by STX to the Master in his capacity as representative of Victory, the natural interpretation of email (1) is that the Master was seeking the guarantee in the same capacity and that the reference to "us" is to Victory so far as the request was addressed to STX. Mr Sarll argued that the Master must have been purporting to act for Kingsway, not Victory, for essentially two reasons. First he submitted that owners are not ordinarily entitled to ask for such an indemnity from their charterers. I disagree. There was a dispute as to whether STX were entitled to give the loading instructions to Victory and there would be nothing unusual in the parties to a charterparty resolving such dispute by a letter of guarantee. Parties to a charterparty not uncommonly use separate guarantees or indemnities to vary or clarify their rights and obligations. Letters of indemnity from charterers to owners to enable cargo to be released without production of bills of lading are an obvious example. Secondly Mr Sarll submitted that the Master would be expected to be seeking to protect his employers, the head owners, and there was no automatic back to back arrangement implicit in the Master's request. I agree that email (1) would be interpreted as the Master seeking protection for his employers, the head owners, but it is implicit that he was doing so on Kingsway's behalf under the head charter, as well as on Victory's behalf under the sub-charter. Victory was copied in to the request. It was made directly to STX because Victory as an intermediate time charterer had no commercial interest in the quantity of cargo loaded; but that did not alter the charterparty chain of rights and obligations of which all were aware. STX might expect Victory to adopt, vis a vis head owners, whatever guarantee it, STX, was prepared to give to Victory (absent any concern over credit risk), but was not privy to all the communications between the Master/Kingsway and Victory.
15. I am therefore unable to treat email (1) as changing the agreed capacity in which the Master had been communicating with STX on the subject of the quantity of cargo to be loaded. The request from the Master came against the background of a conversation on the subject in which the accepted position of the parties is that the Master was purporting to act as a representative of Victory vis a vis STX. There is nothing in email (1) to suggest a change in such capacity. On the contrary, the natural inference is that his capacity was the same in this continued dialogue on the same subject.
16. The subsequent emails are all consistent with the Master communicating and being addressed in that same capacity, and in some respects reinforce that analysis. Email (2) has STX threatening a claim against "owners" if the Vessel refuses to load the greater quantity instructed by STX, which can only be the threat of a claim against Victory, not Kingsway.
17. Email (3) refers to email (2) coming from sub-charterers. It asks Victory for its opinion, thereby recognising the legal relationships in the charterparty chain whilst addressing the substance of the issue directly with STX for operational convenience.
18. The first version of the guarantee at email (4) was addressed to the Master, but copied to Victory and Kingsway. Had the debate become one solely between Kingsway and STX, as Kingsway contends, there would have been no need to copy in Victory.
19. Emails (5) and (6) dealing with the NOR were communications from the Master in his capacity as representative of STX under the sub-sub-charter. They emphasize that the Master was acting in a number of different capacities in his exchanges about how much cargo was to be loaded, all of them prima facie to be interpreted by reference to the contractual chain of charterparties.
20. Email (7) was sent through the broking chain, suggesting that STX were looking to Victory to treat the first guarantee as sufficient and expecting Victory to adopt that position vis a vis Kingsway. Again the threat to claim losses from owners can only be a reference to a claim by STX against Victory. It is in the context of such a claim that the first form of guarantee is said to be sufficient. The natural inference is that the guarantee is in Victory's favour.
21. Email (9), containing the second form of guarantee proffered by STX was sent to the Master but copied to the brokers Merit Maritime for onward delivery to "Owners". This was a formal communication through the broking chain addressing the guarantee to Victory. Again it suggests that the guarantee is being treated as being given in accordance with the legal relationships in the charterparty chain.
22. Emails (10), (11) and (12), in which the final form of the Guarantee was sought by the Master, given to the Master, and accepted by the Master were each copied to Victory. Again this recognises the legal relationships in the charterparty chain and would have been unnecessary if Kingsway were correct in its contention that the guarantee was a matter directly between STX and head owners. STX was not concerned with the rights and obligations between Victory and head owners, which it would not know, and STX could assume that so far as Kingsway and Victory were concerned they had communicated so that such rights and obligations were regulated to their mutual satisfaction. STX was concerned with its own right to have a larger quantity of cargo loaded, and that was a right which lay solely against Victory, not against the head owners. By giving the Guarantee STX had resolved a dispute with Victory, not with head owners.
23. For these reasons I conclude that the Guarantee purported to be given to, and accepted by, Victory, not Kingsway or whichever head owners Mr Kumar thought were involved. STX sent the Guarantee to the Master in that capacity, and the Master was purporting to act in that capacity when he communicated to STX his acceptance of it.
24. Accordingly the application for summary judgment is dismissed and Kingsway's claim in this action must fail.