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Polestar Maritime Ltd v YHM Shipping Co Ltd & Anor (Rev 1)

[2012] EWCA Civ 153

Neutral Citation Number: [2012] EWCA Civ 153
Case No: A3/2011/0921/QBCMF
IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION (COMMERCIAL COURT)

The Hon. Mr Justice Field (2010 Folio 824)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 17/02/2012

Before :

PRESIDENT OF THE QUEEN'S BENCH DIVISION

LORD JUSTICE LLOYD

and

LORD JUSTICE AIKENS

Between :

POLESTAR MARITIME LIMITED

Claimant

- and -

YHM Shipping Co Ltd & Anr

Defendant

Mr Michael Coburn QC (instructed by MFB Solicitors) for the Appellant (Defendant)

Mr Julian Kenny (instructed by Ince & Co Llp) for the Respondent (Claimant)

Hearing date: Monday 31st of January 2012

Judgment

Lord Justice Aikens :

Synopsis

1.

The principal question on this appeal is: under the terms of the sale contract on an amended Norwegian Saleform 1993 (known as the “NSF”) what certificates was the seller of the bulk carrier “Rewa”, (“the Vessel”), obliged to provide when the vessel was delivered to the buyer? The key provision in the Memorandum of Agreement for the sale of the Vessel dated 23 July 2008 (“the MOA”) between the appellant buyers (“the Buyers”) and the respondent sellers (“the Sellers”) was “…the vessel shall be delivered with…her National/International trading certificates, as well as all other certificates the Vessel had at the time of her inspection…”. The Vessel had been inspected by the Buyers in July 2008. Then on 27 September 2008 a new requirement under Annex IV of the International Convention on the Prevention of Pollution from Ships (“MARPOL”) came into force, requiring vessels such as Rewa to have an International Sewage Pollution Prevention (“ISPP”) certificate by 27 September 2008. Rewa did not have one at any stage. The vessel was tendered for delivery on 30 September 2008. The Buyers said the lack of an ISPP Certificate entitled them to cancel the sale contract. Were they right?

2.

There is a second issue between the parties. The MOA provided, in clause 14, that “…the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation as per Clause 8…”. Clause 8 and Addendum No 1 of the MOA refer to the original documents the Sellers have to provide to the Buyers upon delivery of the vessel in respect of the “…transfer of ownership, registration of the Vessel and change of flag to Buyer’s choice…”. One of these documents was a Bill of Sale, which the parties had agreed would contain a covenant by the Sellers (as “Transferors”) that the ship to be transferred to the Buyers (as “Transferees”) free from “…all charters, encumbrances, detentions, mortgages, maritime liens and any other debts whatsoever…”. On 30 September 2008 the vessel was detained by the port authorities in Hong Kong, where she was to be delivered under the MOA, because of her lack of an ISPP Certificate. In fact the detention was lifted within a day because the Sellers obtained an exemption from the authorities in respect of the ISPP Certificate. Meanwhile, on 1 October 2008 the Buyers cancelled the MOA, relying on both the lack of an ISPP Certificate and the fact that the Vessel was under detention and so was not free from detentions as the Sellers had covenanted in the Bill of Sale. The second question on this appeal is: did the Sellers have three banking days in which to make “…arrangements” so that the Vessel would comply with the covenant in the Bill of Sale that she be free of all “…detentions”?

3.

Clause 16 of the standard NSF wording provides for disputes to be resolved by Arbitration either in London, according to English law, or in New York in accordance with US and New York law, or by arbitration in some other venue of the parties’ choice. In this case the parties, who are, respectively, Indian and St Vincent and Grenadine companies, chose arbitration by a sole arbitrator in London. The whole arbitration and appeal process is, therefore, governed by the Arbitration Act 1996.

4.

In default of agreement between the parties, the Commercial Court appointed Mr Richard Rayfield as sole arbitrator. Ningyuan Shipping Company Co Ltd (the second respondents) did not take part in the arbitration and it has not done so on appeal. Mr Rayfield published his Award on 15 June 2010. He held that the Sellers were obliged to provide the ISPP Certificate upon delivery of the Vessel. He also held that the fact of the detention of the Vessel on 30 September 2008 did not require or entitle the Sellers to “…make arrangements for the documentation set out in clause 8”. There was nothing wrong with the Bill of Sale as tendered; it was just that the Sellers could not comply with their covenant in it that the Vessel be “free of detentions”. The arbitrator concluded that both the lack of an ISPP Certificate and the fact of detention contrary to the covenant in the Bill of Sale on completion entitled the Buyers to cancel the MOA and to have their deposit of US$1.9 million returned.

5.

By his order dated 30 March 2011, Field J allowed an appeal by the Sellers on three questions of law arising out of Mr Rayfield’s Award. Only the two questions outlined above are now relevant. Field J gave leave to appeal to this court pursuant to section 69(8) of the Arbitration Act 1996. In doing so he had to satisfy himself that a point of “general public importance” was involved or that there was some other “special reason” why the question should be considered by the Court of Appeal. As the judge pointed out, the NSF terms constitute a standard form of ship sale and purchase contract which is frequently used around the world. Although the relevant wording of the MOA which we have to consider was modified by the parties, the obligations of a Seller under an NSF form of MOA as to what certificates must be on board the vessel when she is delivered under the sale contract are obviously of general importance to the shipping world. So too, in my view, is the question of what constitutes “arrangements” for the purposes of clause 14 of the NSF.

6.

We heard concise oral argument from Mr Michael Coburn QC on behalf of the Buyers and Mr Julian Kenny on behalf of the Sellers on 31 January 2012 which further elucidated their written submissions. We reserved judgment.

Further Facts

7.

Rewa (which has now been sold for scrap) was a grain-fitted bulk/lumber carrier of 25,332 tons deadweight and built in 1984. She was registered under the Indian flag and classed by both Lloyd’s Register and the Indian Register of Shipping. She was put on the market for sale in early 2008 and was inspected by surveyors who reported on 2 April 2008 on her condition. There was then another pre-purchase survey and a further report was prepared. That report made it clear that the Vessel did not comply with Annex IV of MARPOL in that she did not have an ISPP Certificate nor the requisite modifications to her sewage plant so as to be able to comply with Annex IV. The second report also stated that the Vessel would require such a certificate by 27 September 2008, the date when Annex IV began to apply to Rewa.

8.

The Buyers had both reports before they signed the MOA of 23 July 2008. Attached to the MOA was a Lloyd’s Register printout which noted that ships over 400 gross tons carrying more than 15 crew had to comply with Annex IV of MARPOL from 27 September 2008. The agreed sale price for the Vessel was US$ 19 million. The Buyers paid a deposit of $ 1.9 million when they signed the MOA. Clause 1 of the MOA named YHM Shipping Co Ltd of St Vincent and the Grenadines as the Buyer. That state would therefore be the Buyer’s “flag state”. It is a signatory to MARPOL Annex IV, as is India and the People’s Republic of China. Clause 5(b) of the MOA provided that the “Expected time of delivery” of the Vessel would be between 20 August 2008 and 30 September 2008 at the Sellers’ option. It also stated that 30 September 2008 was the “Date of cancelling” in the Buyers’ option.

9.

The summer of 2008 saw the start of the world financial crisis. Lehmann Brothers defaulted on 15 September 2008. The world market in second hand ships (as well as freight rates) suffered a vertiginous decline. The arbitrator’s Award records, at [30], that the value of the Vessel on 1 October 2008 was US$ 9 million.

10.

On 19 August 2008 the parties executed Addendum No 1 to the MOA in which they listed the original “delivery documents” that the Sellers agreed to furnish to the Buyers. One of the documents stipulated in Part II of this Addendum was a Legal Bill of Sale in such form as to be registrable with the St Vincent and the Grenadines Ship Registry. Clause (4) of Part II of Addendum No 1 stipulated that the Sellers, as transferors of the Vessel, would covenant in the Bill of Sale that “…the Vessel is free from mortgages, encumbrances, maritime liens and any debts whatsoever….”. That wording therefore said nothing about being free of “detentions”. However, the arbitrator found, at [57.3] of his Award, that the Sellers sent a draft Bill of Sale to the Buyers on 27 August 2008 and this draft had contained the word “detentions” amongst the transferors’ covenants. The arbitrator found that the parties subsequently agreed that the agreed Bill of Sale wording (as set out in Addendum No 1) would be amended so as to add the word “detentions” to the covenants of the Sellers/transferors. That finding of fact has not been challenged. Thus the Sellers became obliged to deliver to the Buyers a Bill of Sale in which the Sellers covenanted, as transferors, that the ship to be transferred “is free from all charters, encumbrances, detentions, mortgages, maritime liens and any other debts whatsoever”.

11.

From 18 August 2008 the Sellers gave the Buyers four notices of estimated times of arrival of the Vessel at Hong Kong, which was nominated as the port of delivery under the MOA. The parties had proceeded on the basis that the vessel would be delivered before 27 September 2008 and so the Buyers would carry out the necessary work on the sewage plant of the Vessel and obtain an ISPP Certificate. However, there were delays due to bad weather and slow discharging at Kaohsiung, so the Sellers had to give a revised seven day approximate notice of delivery on 29 September 2008, that is two days after MARPOL Annex IV came into force. The lack of an ISPP Certificate and appropriate sewage plant on board would mean that, upon delivery, the Vessel would have to be made to comply with Annex IV before she could engage in international trading voyages.

12.

On 29 September 2008 the Sellers applied to the authorities of the Vessel’s flag state (ie. India) for a dispensation from the requirements of Annex IV. That dispensation was granted but not received until the morning of 1 October 2008. Meanwhile the Vessel arrived at Hong Kong anchorage on 30 September 2008, the last day within the delivery period under the MOA terms. At 14.06 hours local time Notice of Readiness for delivery under the MOA was tendered to the Buyers. Shortly after 14.00 hours Hong Kong and Singapore time a “completion meeting” was held at the offices of DnB NOR, as contemplated by clause 8 of the MOA. At this meeting the Buyers refused to take delivery of the Vessel because she did not have an ISPP Certificate.

13.

After the completion meeting broke up the Vessel was detained by the Hong Kong Port State Control Authority at 15.30 hours. The following morning, viz. 1 October 2008, the Buyers gave notice of cancellation of the contract under clause 14 of the MOA on the ground that the Vessel had no ISPP Certificate and also because she was detained contrary to the covenant in the Bill of Sale that she would be free of detentions. Later that morning the Vessel was released by the Hong Kong authorities once the dispensation letter from the Indian authorities was made available.

The MOA terms

14.

I have set out the relevant terms of the MOA in an Appendix to this judgment. I have already set out above the key terms that are the subject of the appeal.

The Award

15.

In [14] of his Award, the arbitrator found as a fact that at all material times the Sellers and the Buyers knew that the Vessel was not equipped with any sewage facilities as required by MARPOL Annex IV and that she did not possess an ISPP Certificate evidencing compliance with those regulations. He also found that both parties knew that the Vessel would have to comply with the MARPOL Annex IV regulations on or before 27 September 2008.

16.

On the first of the two issues with which this appeal is concerned, the arbitrator began his analysis of the proper construction of clause 11 of the MOA at [42] of the Award. He held that the amended clause 11 of the MOA dealt with two categories of document: (i) “National/International trading certificates” and (ii) “all other certificates the Vessel had at the time of inspection…”. He held that certificates in both categories had to be “..valid and unextended at the time of delivery”. At [43] he held that the effect of clause 11 was to define the required physical condition of the Vessel for the purposes of her delivery, by reference (amongst other documents) to “ …(c) the validity (without extension) of the Vessel’s national and international trading certificates…” and “…(d) the validity (without extension) of all the other certificates that the Vessel had at the time of the inspection”. He concluded that this was consistent with the stated subject-matter of clause 11, viz. the condition of the Vessel on delivery.

17.

At [45] and [46], the arbitrator explained that clause 11 ensured that:

“the certificates that she is required to have and which evidence her physical condition are of a certain quality and character – namely valid and unextended. In this case, by the time of the intended delivery on 30 September 2008, one of the certificates which the Vessel was legally required to possess was an ISPP certificate evidencing her compliance with MARPOL Annex IV. Therefore, on and after 27 September 2008, the Vessel should have been equipped with the necessary sewage facilities and inspected so to qualify for the issue of an ISPP certificate. That relates to her physical condition on delivery falling within the ambit of clause 11.

46. Therefore, in the event (as turned out to be the case) of the Vessel’s being delivered on or after 27 September 2008, in order for the Vessel to be in the condition required by clause 11, it was for the Sellers to ensure that the vessel complied physically with the requirements of MARPOL Annex IV and was in possession of the relevant valid international trading certificate (ie. the ISPP certificate) to evidence such compliance”.

18.

The arbitrator dealt with the second issue at [57.3]. He concluded:

…On 30 September 2008 there was nothing wrong with the bill of sale that the Sellers had prepared. It was, as I have found, in the agreed wording. What prevented them from being ready to complete a legal transfer of the Vessel on 30 September 2008 was that the Vessel was detained and that was contrary to the covenant in the bill of sale. I agree with Mr Coburn’s submission that the detention did to require the Sellers to “…make arrangements for the documentation set out in clause 8” for which the additional 3 days were intended. The detention was a state of affairs that was contrary to the terms of the bill of sale”.

The judgment of Field J

19.

The judge rejected the arbitrator’s construction of clause 11 for three reasons. First, at [15], he said that it would give rise to “considerable uncertainty” because there was no definition of which “National” or “International” certificates were said to be required. It was unclear whether the relevant “nation” was that of the Vessel’s flag, or those nations to which she had traded or might trade under the ownership of the Buyers. Secondly, at [16], he considered that the arbitrator’s construction was “unjustifiably inconsistent” with the emphasis placed by the NSF terms on the “as was” nature of the sale, ie. that the Vessel was being sold in the condition (and with the certificates) as she was at the time of her inspection. Lastly, at [17], Field J concluded that, as a matter of construction of the wording, the parties had agreed that the requirement was that the “Condition of the Vessel” with regard to her certificates was that she must have all her national and international certificates as well as other certificates that the Vessel had at the time of inspection. In so doing the draftsman “…was doing no more than highlighting two important categories of documents that one would expect to find among the certificates that had to be delivered…”.

20.

On the second question that arises on this appeal, the judge noted that the Buyers had relied on the fact that the Sellers could not tender a Bill of Sale with the agreed wording (in which the Sellers covenanted that the Vessel was free from all detentions) at a time when the Vessel was being detained. Field J concluded, at [24], that the words in clause 14 “…make arrangements for the documentation set out in clause 8…” were not confined to the execution or procurement of the necessary documentation. In his view the words extended to “…arrangements that have to be made to enable the Sellers to be able to tender the stipulated documents”. Therefore, the release of the Vessel from detention was an “…arrangement for the documentation required by clause 8”.

The arguments of the parties on this appeal

21.

For the appellant Buyers, Mr Coburn emphasised, first, the importance of MARPOL and the fact that many states are signatories to Annex IV to MARPOL and, secondly, the arbitrator’s finding of fact that both parties were aware of the fact that the Vessel did not have an ISPP Certificate upon inspection and that she would need one from 27 September 2008 if she was to trade internationally. Mr Coburn noted that shipowners had had five years to prepare for the introduction of the ISPP regime. In Mr Coburn’s submission it was important to keep in mind the object of clause 11, which was to define the condition in which the Vessel must be upon delivery. Having certain certificates was part of her “delivery condition”. Therefore “…her National/International trading certificates…” must mean those that the Vessel needed to trade internationally. The list of International Certificates needed could be easily ascertained from Annex 1 to the Convention for the Safety of Life at Sea 1960 (“SOLAS”), which sets out the certificates and documents required to be carried on board ships. That list has included the ISPP Certificate since 27 September 2008. So, contrary to the judge’s view, the arbitrator’s construction of clause 11 would not result in uncertainty.

22.

Mr Coburn submitted the Buyers’ construction was consistent with the grammar and syntax of the clause as it had been modified by the agreement of the parties. He further argued that the arbitrator’s construction was more consistent with commercial good sense because it would enable the Vessel to trade from the moment of delivery, even if (as the MOA permitted) she were to be delivered after the deadline of 27 September 2008.

23.

On the second question, Mr Coburn submitted that the judge’s construction of the words “…make arrangements for the documentation…” in clause 14 was unduly broad. The natural meaning of the words connoted the process of getting the requisite documents together. Some had to come from third parties and that is why a three day grace period was given. However, the wording did not embrace taking steps (such as lifting a detention) to ensure that the Sellers could comply with the covenants given in a document that had to be provided with the Vessel upon delivery, such as the Bill of Sale.

24.

For the Sellers, Mr Kenny submitted that the judge’s reasons and conclusions were correct on both questions. On the first issue he pointed out that the list of certificates set out in SOLAS Annex 1 was not exhaustive. The Buyers’ interpretation of clause 11 could only work if the parties knew precisely what was covered by “National/International trading certificates…”. He submitted that it was the judge’s construction which produced certainty because he defined the obligation as being only to deliver the Vessel in a condition in which she had the originals of all the “National/International trading certificates” that she had at inspection. Furthermore, that was consistent with the basic “as was” nature of the contract of sale. The amended wording in clause 11 had not, as he put it, been converted into a “warranty of eligibility to trade internationally upon delivery”. Lastly, the judge’s construction was the natural meaning of the words themselves, even accepting that there was a comma after “…National/International trading certificates” and one after the words “…at the time of her inspection”.

25.

Mr Kenny invited the court to consider the former version of the NSF form, which had been produced by the Baltic and International Maritime Council (BIMCO) drafting committee in 1987. He also invited us to consider the commentary and explanatory notes to both the 1987 and 1993 versions of the NSF which had been produced by the BIMCO drafting committee.

26.

On the second question Mr Kenny submitted that it was important to note the context of the wording in clause 14, which was concerned with a possible default by sellers “…to validly complete a legal transfer…” of the Vessel by the cancelling date, viz. 30 September 2008. This linked in with clause 8, which set out the documents that the Sellers had to deliver to the Buyers at the time of closing, which included a Bill of Sale with the covenants in it as agreed between the parties. The Sellers could not proffer a Bill of Sale when the Sellers did not conform with one of the covenants in it, viz. that the vessel was free from detentions. Therefore, in Mr Kenny’s submission, clause 14 gave the Sellers three banking days after the Notice of Readiness to deliver had been given in order to “…make arrangements…” to provide the documents required by clause 8 and Addendum No 1 so as to give a valid transfer.

Issue one: the construction of the words “The Vessel shall be delivered with…her National/International trading certificates, as well as all other certificates the vessel had at the time of inspection, all valid and unextended…” in clause 11 of the MOA.

27.

In my view the judge’s construction of this wording is the correct one. Clause 11 deals with the condition of the Vessel upon her delivery. The basic agreement between the parties is that the Vessel is to be delivered and taken over “…as she was at the time of inspection”. In short, this is an “as was” sale and purchase contract. The basic obligation on the Sellers with regard to documentation is set out in clause 8, which stipulates what documents are to be delivered to the Buyers at the time of closing. At the stage of closing the Sellers have to deliver the originals of all “trading/class, national and international certificates in accordance with the MOA” as stipulated in paragraph (12) of Addendum No 1. That same paragraph notes that copies of all such certificates will already have been passed to the Buyers. The MOA therefore contemplates that the Buyers will already have been given the national and international certificates existing at the time of the vessel’s inspection and that they will get the originals of those certificates at the closing.

28.

As it is contemplated that the Sellers will have given to the Buyers copies of all the trading, class, national and international certificates “…in accordance with the MOA” before closing and will deliver the originals to the Buyers at closing, the obligation on the Sellers in clause 11 concerning documentation on closing is clear. The Sellers must have the Vessel in a condition on delivery which is such that she will have on board the originals of her National and International certificates as well as all other certificates that the Vessel had at the time of her inspection. In the absence of any wording that imposes any duty to provide further certificates that the Vessel did not have at the time of her inspection by the Buyers, no obligation to provide such further certificates can be eked out of the actual wording of clause 11. Notwithstanding the way the two commas are placed (which was a point that Mr Coburn rightly did not press far), in my view the obvious sense of clause 11 is that the words “…the Vessel had at the time of inspection” qualifies both the Vessel’s National and International certificates and also “all other certificates”.

29.

I agree with the judge that this construction provides much greater certainty than the arbitrator’s construction. SOLAS Annex 1 may give a working list of the certificates and documents that are required to be carried on board ships, but it is not a definition of “National” or “International” trading certificates for the purposes of this clause 11. Those terms are not defined elsewhere in the MOA. If the reference to “National/International trading certificates” is not linked to the words “the Vessel had at the time of inspection” there is no means of deciding whether that phrase is a reference to certificates that the Vessel has needed for trading in the past or might need for trading in the future. Who could know where the Vessel might trade in future and what particular cargoes she might carry. In my view much clearer and more precise wording would be needed to create an additional obligation on the Sellers that the Vessel would have on board at closing all original certificates needed at that time to make her eligible to trade internationally – whatever that might mean. With great respect to the view of the experienced maritime arbitrator, I have concluded that the construction accepted by the judge produces greater certainty and is more in accordance with the commercial expectations of these parties to this contract.

30.

As already noted, Mr Kenny wished us to look at the previous version of the standard NSF terms and to look at the BIMCO drafting committee’s commentary as aids to construction. Whilst there may be occasions when this has to be done in order to assist in solving a problem of an ambiguous wording, I would generally discourage such exercises in “the archaeology of the forms”. In most cases it makes the task of interpretation of contractual wording unnecessarily over elaborate and it can add to the expense and time taken in litigating what should be short points of construction.

31.

On Issue One I would, therefore, dismiss the appeal.

Issue Two: does the wording in clause 14 of the MOA stipulating that “…the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in clause 8…” mean that the Sellers had 3 banking days from 30 September 2008 to lift the detention of the Vessel and deliver the Bill of Sale in which the Sellers covenanted that the Vessel would be free of “detentions”?

32.

On this issue too I prefer the construction given by the judge. It is important to note the context of the words; they are in clause 14 of the NSF, which is dealing with the possible action open to the Buyers if the Sellers fail to be ready validly to complete a legal transfer of the Vessel by the cancelling date stipulated in the MOA. Note that it is completion of a “legal transfer” which, of course, requires the production of documents by the Sellers that will enable that transfer to take place. The documents to be produced are identified in clause 8 and Addendum No 1 and include a Bill of Sale, whose terms the parties will have agreed. The Bill of Sale is the formal instrument by which the Sellers transfer the property of the Vessel to the Buyers, although it was not intended that the Seller would remain in possession of her. The effect of the Bill of Sale on the sale of a ship is similar to that of a conveyance in the case of land. If the Sellers were to give the Buyers a Bill of Sale containing the covenant that the Vessel would be free of detention upon transfer when she was not free of detentions, that would not prevent the valid legal transfer of property in the Vessel to the Buyers; but it would place the Sellers in breach of their covenant in the Bill of Sale and that, in my view, would also place them in breach of the contract of sale in the MOA, because the obligation to provide the Bill of Sale with that covenant arises out of clause 8, Addendum No 1 and the agreed modification of the wording to the Bill of Sale as found by the arbitrator.

33.

The arbitrator was correct to say that there was nothing wrong with the form of the Bill of Sale that was proffered. But, in my view, the phrase in clause 14 which begins “…provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness…” contemplates more than just giving the Sellers three banking days from the time of giving Notice of Readiness to provide the documentation set out in clause 8 to effect a legal transfer of the Vessel to the Buyers. The actual wording is not so narrowly phrased. In my view, the words “make arrangements for” contemplate the Sellers taking such steps as will enable them to provide documentation for the valid legal transfer of the Vessel in such a way that the Sellers will conform with their covenants set out in the transfer documentation and so, also, under the MOA.

34.

The proposition can be tested in this way: imagine the Sellers saying at the closing that they could not proffer a Bill of Sale at that point in the terms agreed because the Vessel was under detention. But, they said, they are confident that they can procure the Vessel’s release within three days of the time when Notice of Readiness was given. The Buyers could have no complaint because, on any view of the wording of clause 14, the Sellers have three days from the time Notice of Readiness is given to provide the Buyers with the documents relating to the legal transfer of the Vessel, including the Bill of Sale. Once the detention was lifted (within the three day period), if the Sellers then proffered the Bill of Sale in time, they will have complied with their obligations under clauses 8 and 14. What the Sellers did was to “make arrangements for” the documentation set out in clause 8.

35.

Again, with great respect to the arbitrator, I think that the construction he gave to the wording “make arrangements for” in clause 14 is too narrow and inconsistent with the commercial intent of that clause and the construction adopted by the judge is more in accord with the commercial expectations of the parties. Therefore, I would also dismiss the appeal on Issue Two.

Disposal.

36.

For the reasons given, I would dismiss this appeal and affirm the order of Field J.

Lord Justice Lloyd

37.

I agree.

President of the Queen’s Bench Division

38.

I also agree.

Appendix

Terms of the MOA dated 23 July 2008

3. Payment

The said Purchase Price including the value of remaining bunkers and lubricants shall be paid in full free of bank charges to Sellers’ order at DnB NOR Bank ASA, Singapore Branch on delivery of the Vessel, but not later than 3 banking days after the vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with Clause 5.

4. Inspections

a)

The Buyers have inspected and accepted the Vessel’s classification records. The Buyers have also inspected the Vessel at/in Inchon, S. Korea on 2nd April 2008 and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the terms and conditions of this Agreement.

b)

………..

4 a) and b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 4a) to apply.

5. Notices, time and place of delivery

a)

The sellers shall keep the Buyers well informed of the Vessel’s itinerary and shall provide the Buyers with 30/21/15/10/7/ 3 days approximate and 1 days definite notice of the estimated time of arrival at the intended place of drydocking/ underwater inspection/ delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written notice of Readiness for delivery.

b)

The Vessel shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at/in Singapore – Japan Range except Taiwan and North Korea, with intention to deliver in PRC, Singapore, South Korea, Hong Kong without guarantee in the Seller’s option.

Expected time of delivery: 20th August 2008-30th September 2008 in Sellers’ option.

………………

8. Documentation

The place of closing: DnB NOR Bank ASA, Singapore Branch

At the time of closing, Sellers to deliver to the Buyers all agreed documents reasonably required by the Buyers for the transfer of the ownership, registration of the Vessel and change of flag to Buyers’ choice. List of such documents to be mutually agreed immediately after this Memorandum of Agreement is signed by both parties and to be incorporated as an Addendum No.1.

……….

9. Encumbrances

The Sellers warrant that the Vessel, at the ime of delivery, is free from all charters, encumbrances, mortgages and maritime liens or any other debts whatsoever. The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.

……….

11. Condition on delivery

The vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this agreement she shall be delivered and taken over as she was at the time of inspection, fair wear and tear excepted. The burden of proof of any difference in the condition of the Vessel, if any, rests with the Buyers. However, the Vessel shall be delivered with her class maintained without condition/recommendation as described in LR Class Printout dated 22nd July 2008 – as attached.

free of average damage affecting the Vessels’ class, and with her classification certificates and National/International trading certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended without condition/recommendation by Class or the relevant authorities at the time of delivery.

“Inspection” in this Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or b), if applicable, or the Buyers’ inspection prior to the signing of this Agreement. If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.

……..

14. Seller’s Default

Should the Sellers fail to give Notice of Readiness in accordance with Clause 5a) or fail to be ready to validly deliver a legal transfer by the date stipulated in line 61 the Buyers shall have the option of cancelling the Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8…..

……….

16. Arbitration

…….

c)

Any dispute arising out of this Agreement shall be referred to arbitration at London, subject to the procedures applicable there. The laws of England shall govern this Agreement.

……….

ADDENDUM No 1

In exchange for the payment of the Purchase Price, the Sellers hearby agree to furnish the Buyers with the following delivery documents (“the Sellers’ Delivery Documents”):

…….

4) Legal Bill of Sale in three (3) originals in such form as to be registrable with the St Vincent and the Grenadines Ship registry, duly executed by the Sellers and duly notarized and legalized by the government authority of the State of Maharshtra of India, transferring all rights, title to and interest in the Vessel from the Sellers to the Buyers and stating that the Vessel is free from mortgages, encumbrances, maritime liens and any debts whatsoever….

…….

12) Copies of all trading/class, national and international certificates in accordance with the MOA have already been passed to Buyers, originals of which will be delivered to the Buyers on board the Vessel at the date of closing/delivery except those required to be returned to the Flag Administration for obtaining the Deletion Certificate. All plans and instruction books of vessel’s Hull and Machinery items existing on board will be delivered to the Buyers on board the Vessel at the date of closing/delivery.

………..

Polestar Maritime Ltd v YHM Shipping Co Ltd & Anor (Rev 1)

[2012] EWCA Civ 153

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