Thoresen & Co (Bangkok) Ltd v Fathom Marine Company Ltd & Ors

The Claimant (“Thoresen”) claims that “pursuant to a contract concluded on 27 November 2003” it agreed to buy three vessels, one vessel from each Respondent company, for “the en bloc price of US $ 42 million less one per cent commission”. The Respondent companies (“the Sellers”) are each managed by subsidiaries of Efshipping Company SA, a Greek company. The vessels are known as ELENI AR, THIA MATINA and THIA CHRYSSOULA. The Sellers deny that any contract of sale was concluded. To quote paragraph 2 of the Points of Defence: “the agreement reached on the 27^th November was not intended to and did not create a binding contract for the sale of the vessels”.

The Court expedited the hearing of this dispute as the ownership of the vessels needed to be resolved as a matter of urgency. The parties agreed to forgo any right of appeal from the decision of this court and the Sellers have agreed that should the court decide that a binding contract was concluded they will abide by its terms.

No witnesses were called to give evidence. Thoresen served a witness statement dated 15 January 2004 of Mr Einar Straume. Mr Straume is an experienced broker based in Oslo in the Sale and Purchase Department of Fearnleys who acted on behalf of Thoresen in the negotiations for the purchase of the vessels. The Sellers’ broker was Golden Destiny and the negotiations were conducted for them by Mr Michael Kokkinis. Mr Straume’s statement gave rise to some controversy. The Sellers submit it is uncontroversial and unnecessary insofar as it does no more than recount the course of written negotiations and inadmissible and irrelevant insofar as it purports to evidence Mr Straume’s subjective views about the negotiations and the meaning of expressions used in them. On that basis the Sellers did not require Mr Straume to attend to give evidence.

Thoresen’s case is that the contract was concluded between Mr Straume and Mr Kokkinis. There is no dispute that the brokers each had full authority to conclude an agreement. Paragraphs 4 and 5 of the Particulars of Claim state:

“4.

The Contract and its terms were confirmed and are evidenced by (i) an e-mail dated 27 November 2003 sent by Mr Straume to Mr Kokkinis (ii) an e-mail in response dated 27 November 2003 sent by Mr Kokkinis to Mr Straume (iii) a recap e-mail dated 27 November 2003 sent by Mr Straume to Mr Kokkinis … and (iv) an e-mail dated 28 November 2003 sent by Mr Kokkinis to Mr Straume in response ….

5.

It was a term of the Contract that the same would be on the Norwegian Saleform 1993 (NSF) terms save that the details of the NSF were to be suitably amended so as to reflect the specific terms agreed between Buyers and Sellers as set out in Mr Straume’s recap fax.”

The claim pleads that by an e-mail sent on 4 December and in repudiation of the contract Golden Destiny gave Thoresen until 1700 hrs (Greek time) that day to complete MOAs for the vessels and when that was not done maintained that “negotiations” had failed. The motivation is said to have been the rising market and the prospect for the Sellers of achieving higher prices or rates.

The Sellers’ case depends on clause 10 of Mr Straume’s recap e-mail which provided:

“Otherwise basis Saleform 93 sub details suitably amended to reflect also the above terms. Closing to take place in Piraeus.”

The words “sub details” are said to be short for “subject to details” and “as a matter of law and/or custom” to have the effect of requiring the details of the contract to be agreed before a binding contract is created.

The short issue is, therefore, one of the construction of Clause 10 of the recap e-mail. Do the words have the effect of making the exchanges “subject to contract” or do they only have the effect for which Thoresen contends in Paragraph 5 of the Particulars of Claim?

Despite the nature of the issue, both parties have referred me to some of the documents both preceding and following the exchanges on 27 and 28 November and I should therefore refer to them so far as I think necessary as well as referring to those exchanges in more detail.

Thoresen became interested in buying the vessels in about mid-October 2003. By 19 November Thoresen had inspected the vessels and an opening offer of US $35 million was made by Mr Straume.

Clause 10 of this offer (which included payment and delivery terms) stated: “Otherwise basis Saleform 93 suitably amended to reflect above terms. Closings to take place in London”. These words are similar in effect to the case Thoresen advances as the proper construction of the words in fact used in the recap e-mail.

On 21 November Sellers sent a counter-offer seeking $46.5m which also addressed payment, delivery, cancellation and delivery documents terms. Clause 10 of this counter-offer stated: “Otherwise basis Saleform 93 sub details suitably amended to reflect also the above terms. Closing to take place in Piraeus”. Those are the same words as the words in fact used in the recap e-mail.

Mr Straume responded on 24 November. The price offered was now $38.5m. Some of the other terms were changed in material respects and against Clause 10 it was stated: “Delete sub details Delete Piraeus insert instead London”. No explanation was put forward for these proposed deletions. I agree with Mr Goldstone for the Sellers that Mr Straume’s unexpressed thoughts and reasons for the deletions are of no relevance to the question I have to determine.

Mr Kokkinis responded with a further counter-offer at a price of $45.5m. In Clause 10 of this counter it was stated: “Repeat Sellers Last”. Although both made comments on the reasons for changes to other terms under debate no comment was made on the reason for this wording of Clause 10 by either broker. Nor was Clause 10 addressed again except for a continuing debate as to whether closing was to be in London or Piraeus, a debate which was resolved in favour of the Sellers and so Piraeus.

The objective reader would, I think, conclude that Mr Straume at least had some reason for putting forward the amendment to delete “sub details”, just as Mr Kokkinis had some reason for taking issue with Mr Straume’s proposed wording and insisting on his own. The court can therefore at least properly infer that the parties regarded the two words as having some effect.

Between 21 and 27 November various matters in dispute were debated and resolved and a price of $42m agreed.

At 1515 on 27 November, following a telephone conversation between them, Mr Kokkinis sent Mr Straume an e-mail saying “as per telcon this is the fixing. Pls do best to get it confirmed timely otherwise sellers may run away.” The e-mail set out the matters which had finally been resolved and stated “otherwise as already agreed”. Confirmation was given by telephone at about 1710 (Greek time) that day and repeated by Mr Straume in an e-mail sent a few minutes later (1612 Oslo time) adding “thus we have full agreement on price/terms, will also forward recap shortly”. Mr Kokkinis responded to that asking for the recap and adding “also pls keep this agreement P+C.” These are the first two e-mails on which Thoresen relies as confirmation of the contract.

Mr Straume sent the recap a few minutes after Mr Kokkinis’ e-mail. It was a long document purporting to set out the conclusions of the issues debated. It contained Clause 10 in the words on which the Issue depends and on which Mr Kokkinis had insisted.

The next day Mr Kokkinis responded to the recap correcting two matters in it but otherwise saying it was in order and asking for the names of the buying companies. This is the final document on which Thoresen relies for confirmation of the contract.

By 1 December, Mr Straume had prepared and sent to Mr Kokkinis a draft MOA for the ELENI AR dated 27 November. Mr Kokkinis referred to the date in his comments on the draft sent on 1 December, saying “date of the MOA is the date that all the details are fixed”. He also had a substantial number of other “comments” ending his e-mail “Pls confirm buyers agreement to the above amendments and proceed with drawing of the MOA for the other two vessels”.

Clause 11 of the recap e-mail stated that the sale of the THIA MATINA was conditional on two “subjects” one of which was that the charterers of the vessel had to approve the sale to Thoresen. In seeking that approval, in an e-mail sent on 2 December, the Sellers in-house broker (Mr Assilian) stated that “the … vessel has been sold subject to Charterers’ approval, to Thoresen ….” Mr Davies placed some reliance on this, and other exchanges to some of which I have referred in paragraph 15, as showing the Sellers’ “view” that a contract had been concluded. But I do not find that submission compelling in circumstances in which even if the Sellers are right that no binding contract had been made there is no real dispute that the key terms had been agreed and neither broker was expecting the details to cause a problem. It is a common use of language to describe an agreement or sale which is “subject to contract” as an agreement or a sale.

Mr Straume was having difficulty in getting instructions on the draft MOA because Mr Teigen from whom he received them was travelling. He sought on 3 December to assure Mr Kokkinis that there were no problems with the comments he had made on the draft despite, as he asserted, some of them seeking to introduce new terms.

There had been no further response by 14.14 (Greek time) on 4 December when Mr Kokkinis sent his formal e-mail. He stated “all other eventual subjects referred on the Recap are lifted and the only point to agree is the wording of the MOAs. Therefore please receive for Buyers the amendments required by Sellers on the above said draft MOA with Rider clauses, as below stated, which are firm for reply latest by 1700 hrs Greek time today.” There were then set out the same comments as had been made in Mr Kokkinis’ e-mail sent on 1 December.

The only reply from Thoresen sent before the deadline was from Mr Straume. It stated “our principal is still not contactable” and made two “preliminary comments” both of which took issue with the comments of Mr Kokkinis. A further e-mail (after the deadline) recorded some comments made by Thoresen’s lawyers to much the same effect.

At 1955 (Greek time) on 4 December Mr Kokkinis sent an e-mail to Mr Straume referring to the deadline and the above exchanges which concluded: “Under the above circumstances the negotiations are considered to have failed.”

It was no surprise that both parties relied albeit only to a limited extent on the exchanges after 28 November to support their case: Mr Davies to submit that they were acting on the basis a binding agreement existed, Mr Goldstone to submit the opposite. Suffice it to say that I am satisfied that what took place certainly went beyond mechanical tidying-up of NSF 93 and is at least consistent with the parties not thinking a binding contract had already been concluded.

Although the Issue is one of construction it is one which has received more than a little judicial attention in this court albeit not in the Court of Appeal. But the decisions and dicta are all to the same effect and I will refer only to a selection from them.

As long ago as 1981 in The Solholt [1981] 2 Lloyd’s Rep 574 at 576 Staughton J referred to the expression that a vessel had been “fixed subject to details” as meaning that “the main terms were agreed, but until the subsidiary terms and the details had also been agreed no contract existed”.

In the “Junior K” [1998] 2 Lloyd’s Rep 583 Steyn J had to consider the meaning to be given to the opening words of a telex “RECAP FIXTURE SUB DETAILS” and the concluding words “SUB DETS GENCON CP”.

At page 585 Steyn J said:

“The correct approach to that question is to ask how a reasonable man, versed in the chartering business, would have construed those words. There are judicial expressions of opinion on the point. But one is dealing with the meaning of words which have no technical or special meaning, and I propose to examine the question first without the aid of authority. The starting point seems to me to be the proposition that if there has been a complete and unqualified acceptance of an offer, prima facie a contract comes into existence even if the parties intend to reduce the agreement to writing. On the other hand, in negotiations parties are free to stipulate that no binding contract shall come into existence, despite agreement on all essentials, until agreement is reached on yet unmentioned and unconsidered detailed provisions. And the law should respect such a stipulation in commercial negotiations. That seems to me to be exactly what happened in this case. The Gencon charter-party is, of course, a detailed and well-known standard form. It is plain that the parties had in mind a contract on the Gencon form but that they had not yet considered the details of it. By the expression, “Subject to details of the Gencon charterparty” the owners made clear that they did not wish to commit themselves contractually until negotiations had taken place about the details of the charter-party. Such discussions might have covered a number of clauses. It does not follow that the owners were willing to accept all the detailed provisions of the standard form document. After all, it is a common occurrence for some of the detailed provisions of the Gencon form to be amended during the process of negotiation. In any event, the Gencon standard form contains within it alternative provisions which require a positive selection of the desired alternative.”

That approach in principle is, of course, entirely in accord with the general principles of construction to which Mr Davies referred me stated by Bingham J and endorsed by the Court of Appeal in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 that (page 610):

“The Court’s task is to review what the parties said and did and from that material to infer whether the parties’ objective intentions as expressed to each other were to enter into a mutually binding contract. The Court is not of course concerned with what the parties may subjectively have intended”.

and that (page 611):

“just as it is open to parties by their words and conduct to make clear that they do not intend to be bound until certain terms are agreed, even if those terms (objectively viewed) are of relatively minor significance, the converse is also true. The parties may by their words and conduct make it clear that they do intend to be bound, even though there are other terms yet to be agreed, even terms which may often or usually be agreed before a binding contract is made …. The parties are to be regarded as masters of their contractual fate.”

In The “Junior K” Steyn J, having considered authority both in England and the USA, stated at page 588:

“I would respectfully suggest that it is in the interests of the chartering business that the Courts should recognise the efficacy of the maritime variant of the well-known subject to contract. The expression “subject to details” enables owners and charterers to know where they are in negotiations and to regulate their business accordingly. It is a device which tends to avoid disputes and the assumption of those in the shipping trade that it is effective to make clear that there is no binding agreement at that stage ought to be respected.”

In Ignazio Messina & Co v Polskie Linie Oceaniczne [1995] 2 Lloyd’s Rep 566 Clarke J, at page 580, said:

“There are now a number of cases which support the conclusion that, subject of course to the circumstances of the particular case, where there are negotiations for a charterparty or the sale of a ship and terms are agreed which are expressed to be subject to details there is no binding agreement until the details have been agreed.”

The wording Clarke J was addressing was “subject to appropriate amendments” to the NSF “to be mutually agreed” but he clearly stated that such expressions including “subject details” applied equally to the sale of ships as to the fixing of charterparties. Indeed in principle I can think of no good reason to distinguish between the effect of such words in the two types of agreement. Nor could Mr Davies.

Thus, in my judgment, it has been established for many years that the words “subject details” have a recognised meaning when used in the context of the sale of ships: there is no binding agreement until all the details of the proposed formal agreement have been agreed. Indeed in The “CPC GALLIA”[1994] 1 Lloyd’s Rep 68 at page 74 Potter J said in relation to the negotiation of an agreement for the carriage of goods by sea in which the words used were “Conline booking note – Subject to details/logical amendments”, and it was submitted that the last two words cut down the effect of the previous three: “Again I echo the view expressed by Mr Justice Steyn that subject to details is a well known term used in a context such as this. I consider that if, by use of additional words, the parties are to be treated as restricting the customary effect of that term, the words of limitation relied on should be clear in their content and context. In my view it is more apt in the context of this case to construe the words as illustrative and/or supplemental than to read them as restrictive in intention”.

I accept Mr Davies’ submission that the precise wording and the context in which it is used are critical factors in the construction of Clause 10 as in any question of construction. The words used here were in the context of lengthy exchanges about the important aspects of the proposed sale which had resulted in an agreement upon them but also in a context in which not every matter of detail had been addressed or settled, as is apparent from the exchanges after the recap e-mail, and the wording of Clause 10 had been the subject of the exchanges to which I have referred. The relevant words, with my emphases, are:

“Otherwise basis Saleform 93 sub details suitably amended to reflect also the above terms ….”

“The above terms” were the important matters recorded in the recap telex which had been agreed. Mr Davies submitted that the words should be read to mean that the sales will be on the standard NSF 93 “subject to the details of that form being suitably amended to reflect also the terms expressly agreed and set out in the recap e-mail”.

In my judgment, in agreement with Mr Goldstone’s submissions, this submission by Mr Davies fails for two main reasons: (i) not only do the words “sub details” have a recognised meaning but if Mr Davies was right they would be superfluous: the construction for which Thoresen contends would be the same even had they been omitted; and (ii) the word “also” strongly suggests that there is more than one condition: the first “subject details” and the second amendment to reflect what had been agreed and recorded in the recap e-mail. Again the word is superfluous if Thoresen is right.

Clause 10 did contain the words “sub details”. The word “sub(ject)” alone is itself a word of condition in this context. To give the words their recognised meaning is consistent both with the exchanges before and after the recap e-mail. Indeed to give the words no effect as Thoresen in effect contend would not be consistent with the exchanges before the recap e-mail: paragraph 15. I agree with Mr Davies that in the cases to which I have referred different words were often at issue and it can fairly be said that the words themselves were given greater prominence or better punctuated. But greater clarity does not preclude clarity nor the construction which has long been recognised and acknowledged by the courts.

I informed the parties at the conclusion of the hearing that I had reached the decision that no binding contract for the sale of the vessels was made and therefore the claim must be dismissed. This judgment sets out my reasons for that decision.