SK Shipping (S) Pte Ltd v Petroexport Ltd

This case concerns the disputed termination of a voyage charterparty on the “Asbatankvoy” form dated 17 August 2008. The dispute is of a kind which would be familiar enough to maritime arbitrators but which rarely comes before this court other than on appeal. It does so because the parties deleted the usual arbitration clause and agreed a provision that all disputes involving more than US$50,000 should be submitted to the jurisdiction of the High Court in London.

The claimant is a Singapore company which is one of the companies in the SK Shipping Group, a substantial South Korean shipowning group. The defendant is an oil trading company registered in the Cayman Islands which was set up in about 2004, with an office in Athens and an associated company in New York.

The dispute concerns the purported termination of the charterparty by the claimant on 29 August 2008, for anticipatory repudiatory breach by the defendant. The claimant claims damages consisting of the difference between the profit it would have made on the fixture and the loss it made on an alternative fixture. Liability is in issue, but subject to one point concerning diversion of the vessel to Jamnagar in India, the quantum of the claim is agreed. The defendant contends that the termination by the claimant was itself a wrongful repudiation of the charterparty and counterclaims damages for loss suffered on sale of the proposed cargo. The claimant’s case is that the defendant did not in fact suffer any loss, even if the claimant was in repudiatory breach, but subject to that point of principle, the quantum of the counterclaim is also agreed.

It follows that although in opening the case, Miss Philippa Hopkins for the claimant identified five issues, since two of these were the quantum of respectively the claim and the counterclaim, by the end of the trial only three issues remained:

The relevant terms of the charterparty were as follows:

Part I

B Laydays: Commencing; 27^th August 2008 (0001 hours) Cancelling: 29^th August 2008 (2359 hours)

C Loading Port(s): One safe port Karachi, Pakistan

D Discharging Port(s): One safe port Taiwan

One safe port Korea, Yosu-Ulsan range

One safe port Japan, not North of but including Tokyo Bay range

E Cargo: Charterer’s option up to full cargo, one/two grades clean petroleum products, unleaded undarker than 2.5 NPA. Excluding casingheads/lubes/solvents/chemicals/pentanes/methyl tetra butyl ether/pentane plus and pygas, one/two grades within vessel’s natural segregation. No heat.

F Freight Rate: Basis one/one

United States Dollars One Million for Taiwan discharge

United States Dollars One Million and Fifty Thousand for Korea discharge

United states Dollars One Million and One Hundred Thousand for Japan discharge.

H. Total Laytime in Running Hours: Seventy Two hours, Sundays, holidays inclusive.

I. Demurrage per day pro rata United States Dollars Twenty Thousand.

Part II

Clause 6 NOTICE OF READINESS

Upon arrival at customary anchorage at each port of loading or discharge, the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the Vessel is ready to load or discharge cargo, berth or no berth and laytime...shall commence upon the expiration of six hours after the receipt of such notice....

Clause 12 DUES-TAXES-WHARFAGE

The Charterer shall pay all taxes, dues and other charges on the cargo... The Charterer shall also pay all taxes on freight at loading or discharging ports...

Clause 29 DIVERSION CLAUSE

Notwithstanding anything else to the contrary in this Charter Party, and notwithstanding what loading and/or discharging port(s)/range(s) may have been nominated and Bill(s) of Lading issued, the Charterer shall have the right to change its nomination of the loading and/or discharging ports in accordance with Part IC and D of the Charter. Any extra time and expenses incurred by Owner in complying with Charterer’s orders shall be for Charterer’s account and calculated in accordance with Part II Clause 4 of this Charter Party. The Charterer shall have the right to make as many changes as it deems necessary.

Clause 32 AGENTS CLAUSE

Owner to appoint their (Owner’s) ship agents in accordance with Charterer’s suggestion at load and discharge port(s), provided competitive.

This is a case in which, for reasons that will become apparent from the detailed factual chronology set out below, there is an acute conflict of fact about certain disputed conversations. This is not a matter of mistaken recollection on one side or the other, but of one of the parties not telling the truth. Accordingly, it is necessary to make an evaluation of the credibility of the various witnesses.

The principal witness for the claimant was Mr Yang Woo Mun, at the time employed by the claimant in its chartering department in Singapore, but now Manager of Insurance and Legal Affairs at SK Shipping, the parent company in Korea. He was the most senior witness to give evidence on behalf of the claimant. In so far as the subjective state of mind of the claimant as to the defendant’s intentions with regard to performance is relevant to renunciation (which the claimant disputes) it is Mr Yang’s state of mind which matters. He gave evidence as to his state of mind when the various emails from the defendant which are said to have been renunciatory were received. That evidence was open and frank and not always favourable to the claimant, although ultimately I concluded that, by the time the claimant terminated the charterparty, Mr Yang did consider that the defendant was not going to perform. Overall, I considered him a careful and truthful witness.

Mr Kim Woong Choel (“Sky Kim”) is employed by Hans Shipping Limited, the shipbrokers for the claimant on this fixture. He was the channel of communication between the claimant and the defendant’s brokers Clarkson Asia (Pte) Limited, where the individual with whom he dealt was Mr William Hermon. Sky Kim gave evidence by videolink from Korea. I considered him an honest witness.

Se Un Kim is the branch manager of SK Shipping Greece Ltd in Athens. He gave evidence about a meeting he had with Mr Karamanos of the defendant at the defendant’s Athens office on 26 August 2008 and about a disputed telephone conversation he had with Mr Karamanos on the evening of the following day, 27 August 2008, in which he said that Mr Karamanos told him that the defendant’s buyer had pulled out and the defendant had no further use for the vessel. In his oral evidence, Se Un Kim said for the first time that he had passed this information to Mr Yang the same evening. Mr Yang had not suggested in his evidence that he had such information from Se Un Kim, as opposed to Sky Kim. Although I considered Se Un Kim was telling the truth about the conversation with Mr Karamanos, I thought he was “gilding the lily” about having passed the information on to Mr Yang, and I do not accept that he did so.

Ms Sharon Tan is the Operations Executive with the claimant in Singapore. She gave evidence by videolink from Singapore. She was clearly an honest witness and I accept her evidence, including what was the only really controversial aspect of it, namely that she had been told by Mr James Kim of Hans Shipping on 26 August 2008, that the defendant did not want notice of readiness to be tendered to the sellers and the port terminal. That evidence was in any event confirmed by the witness statement of Mr James Kim himself, which was tendered by the claimant under the Civil Evidence Act.

The defendant called three witnesses. Mr Dimitrios Karamanos is the Refining and Marketing Director of the defendant, based in Athens. I did not consider him a satisfactory witness, in the sense that he was on occasions evasive and became very agitated during the course of his evidence. I agree with Miss Hopkins that he became particularly agitated when his evidence was at its most incredible: for example in his steadfast refusal to acknowledge that the reason why he was still offering the naphtha cargo to potential buyers, notwithstanding that it had ostensibly been sold to Delta Oil on about 18 August 2008, was not that the sale to Delta had fallen through, but that as a trader he would go on looking for the best deal (even if there was a binding contract of sale) until delivery took place. Equally incredible was his attempt to ascribe the problems which the defendant was clearly having in relation to the naphtha cargo, both in complying with the sellers’ conditions for delivery and in finding a buyer, to some conspiracy between Glencore (with whom he had in fact made a commitment to sell the cargo), Clarksons (the defendant’s own shipbrokers) and the claimant to injure the defendant’s business interests. This thesis, which he developed at length in his evidence, was as outrageous as it was incredible and did him no credit.

Overall, where the evidence of Mr Karamanos conflicted with that of the claimant’s witnesses, I preferred the evidence of the claimant’s witnesses. I should add that Miss Hopkins submitted that, in assessing the credibility of Mr Karamanos, it was relevant and admissible evidence that in 1998 he had been convicted in the United States of serious offences of dishonesty, including tax fraud and money laundering. Contrary to the submissions of Mr Stephen Phillips QC on behalf of the defendant, I consider that the evidence of that conviction is relevant and admissible: see Phipson on Evidence 16^th edition para 22-27. Nevertheless, in forming the view which I have that Mr Karamanos was not a truthful witness, I have not been influenced by those previous convictions, but by the inherent improbability of his evidence on contested matters, when assessed against the contemporaneous documents and the evidence of the claimant’s witnesses and also by the unfavourable view which I formed of his demeanour in the witness box.

Mr Eitan Misulovin is the Managing Director of the defendant. He was a more straightforward witness than Mr Karamanos, although at times I considered that he too was evasive in his evidence, particularly concerning (i) his dealings with Delta Oil, in relation to which there was a surprising paucity of documents which he could not explain satisfactorily and (ii) whether there was ever a concluded contract with Bosicor, who were to be the suppliers of one of the parcels of naphtha. He too espoused the same conspiracy theory as Mr Karamanos, conveniently blaming the problems the defendant had on the claimant and Glencore. This did nothing to enhance his credibility.

The defendant’s final witness was Captain Nicholas Skarvelis. He is now the Executive Director of Veritas Ship Agency Inc (“Veritas”) in New York, having spent fifty years in the shipping industry. Veritas performs what is described as “Representation and Consultant services” for the defendant pursuant to a consultancy agreement. In the Athens office of the defendant, Captain Skarvelis is head of marine operations. Essentially he was the defendant’s negotiator as regards charterparties and other shipping operations. As he put it tellingly at one point: “[Mr Karamanos] looks to me to formulate the best possible negotiating position”.

In many ways Captain Skarvelis was an impressive and engaging witness, but I approached his evidence with some caution. Miss Hopkins correctly described him as “wily”. It seemed to me that, just as the critical emails he sent were carefully crafted with the aim of achieving a mutual termination of the charterparty with no liability falling on the defendant (consistent with formulating the best possible negotiating position), so also some of his evidence was carefully crafted to avoid any suggestion that the defendant had been unwilling or unable to perform or had evinced an intention to that effect by its words and conduct. Thus his explanation for the emails he sent in response to the claimant’s questions as to whether the defendant intended to perform, that he found such questions from owners irritating and did not see why he should answer the questions, seemed to me to be a forensic explanation rather than a genuine one. The truth is that however irritated he was, if the defendant was ready willing and able to perform, nothing would have been simpler than to reply saying so. I also formed the view that on a number of occasions in cross-examination, Captain Skarvelis avoided what he considered to be awkward questions by suggesting, albeit with considerable charm, that Miss Hopkins’ questions were all founded on speculation.

Negotiations for the fixture of the vessel began on 12 August 2008. At that time the vessel was in Ho Chi Minh in Vietnam discharging her previous cargo. She then proceeded in ballast via Singapore bound for the load port of Karachi. The fact that there was a long ballast approach voyage was one of the reasons why the lump sum freight rate under the charterparty was quite high. The vessel sailed from Singapore at 1800 hours local time on 17 August 2008 and was estimated to arrive at Karachi at 0900 hours local time on 27 August 2008, all going well and weather permitting.

On 15 August 2008 Captain Skarvelis on behalf of the defendant nominated GAC Shipping Pakistan (Private) limited (“GAC”) as port agents “to be appointed by the owners of the “Pro Victor” who will be responsible for all port disbursements related to the vessel”.

The purchase of naphtha from Pakistan Refinery Limited (PRL) was undertaken by a tendering process. In July 2008 the defendant had successfully tendered for the purchase of 15,000 metric tons, 10% more or less in PRL’s option. The contract was entered on 21 July 2008 and was subject to PRL’s General Terms and Conditions of Naphtha Export, including requirements that the defendant post a US$50,000 bid bond or performance guarantee (which it did) and that the defendant establish a letter of credit (which it had not done by the time the charterparty was terminated).

The defendant made an offer to purchase a further 10,000 metric tons of naphtha from Bosicor Refinery Limited (“Bosicor”) in Pakistan, against tender for export and that offer was accepted by Bosicor on 28 July 2008. According to Mr Misulovin, it was subsequently ascertained that the cargo was off-specification in the sense that the colour was different from export quality and an offer was made to purchase at a reduced price, which was accepted by Bosicor in an email of 5 August 2008, from which it appears that the cargo was to be lifted in two parcels of 5,000 metric tons 15-30 days apart. That email also stated:

“Buyer has to submit US$50,000 as performance guarantee before signing contract (pls see page 5 of the contract)

Awaiting your final version of the contract with above changes incorporated.”

This was a reference to a draft contract to which the defendant made a number of proposed changes shown in a tracked changes version (including deletion of the provision for a US$50,000 performance guarantee or bid bond). It does not appear from the defendant’s disclosure that there was ever final agreement with Bosicor on the terms of the contract or a signed contract.

Mr Misulovin’s evidence was that the problem with the parcel being off-specification was to be solved by purchasing from Bosicor a further parcel of 3,500 metric tons of naphtha which was on specification and which was available FOB Karachi. This would be commingled with the off-specification cargo on board the vessel. On 6 August 2008 he sent an email to Bosicor offering to purchase this additional parcel. The following day he sent a chasing email to Bosicor asking them to confirm their final approval on this additional 3.500 metric tons. No written response giving this confirmation has been produced by the defendant. Mr Misulovin said it could have been discussed on the phone but he also accepted that any response would probably have been in writing.

One of the stumbling blocks with Bosicor appears to have been the requirement for a performance guarantee or bond. In his evidence, Mr Misulovin said that he took the line with Bosicor that the performance guarantee was irrelevant. He also said that it would have been quite a large endeavour for the defendant’s bank which would have had to deal with a bank in Pakistan. This is somewhat inconsistent with an email which Mr Karamanos sent to Bosicor on 17 August 2008 enclosing a copy of the performance bond issued by the defendant’s bank, PNB Paribas to PRL and stating that if the wording was acceptable, the same wording could be issued to Bosicor. However, for whatever reason, the performance bond was not put up.

On 22 August 2008, Bosicor sent the defendant’s local agent in Pakistan an email saying that they needed the performance bond, a memorandum of understanding and a letter of credit to commit to anything. This was forwarded to Mr Karamanos and Mr Misulovin with a request that they reply. There is no evidence of any reply. Mr Misulovin accepted that the performance bond was not provided and said he could not answer as to whether there was a signed contract.

It also appears that there were some difficulties for Bosicor with storage space at Karachi and Mr Misulovin did not know whether and if so when this problem would be resolved. Overall he accepted that the problems with Bosicor had not been resolved at the time of termination of the charterparty. In my judgment the absence of any written response in relation to the 3,500 metric tons, together with the absence of the performance guarantee and the fact that there was no signed agreement, demonstrate that there never was a binding agreement with Bosicor. It follows that they were never obliged to supply the cargo. Although Mr Misulovin asserted that the problems could have been resolved on 29 August 2008 in a matter of hours, by faxing over the documents which Bosicor required, that begs the question why, if it was so straightforward, the defendant had not already done so. In all probability, the problems with Bosicor, if they could have been resolved at all, could not have been resolved without substantial further delay.

At the time that the fixture was being finalised, the defendant was still negotiating contracts for a sale of the cargo of naphtha with potential buyers. There were two sets of negotiations going on, one by Mr Karamanos in Athens and the other by Mr Misulovin in the United States. So far as the former is concerned, on 12 August 2008, Mr Karamanos offered the PRL parcel of 16,000 metric tons to Mr Matai of Glencore on an FOB Karachi basis. He stated in his email that Petroexport could also deliver the cargo on a CFR basis to Korea or Japan if it could be co-mingled with someone else’s cargo. This was evidently a reference to carriage on the PRO VICTOR, as Mr Matai came back the following day saying that there would be problems with receivers accepting the vessel in both Japan and Korea because she was more than 15 years old. Glencore would need an alternative vessel.

Mr Karamanos said in evidence that when Glencore started creating problems about the vessel, he suggested that it purchase on FOB terms and charter the PRO VICTOR itself. In fact, as the initial approach from the defendant demonstrated, what was proposed from the outset was an FOB sale. At all accounts, it was this suggestion that Glencore should charter the vessel itself (rather than some conspiracy between Glencore, Clarksons and the claimant to injure the defendant’s interests) that explains why Glencore was in touch with Clarksons about the vessel. As Mr Matai said in a subsequent email to Mr Karamanos on 17 August 2008: “Would also like to put on record that it was you who asked the vessel brokers for “Pro Victor” to get in touch with me on the vessel matters and there was no undue effort on our side in any way to get any information on the subject vessel from vessel brokers”.

Negotiations with Glencore became sufficiently far advanced that Glencore evidently considered that a deal had been agreed. On 15 August 2008, Mr Matai sent Mr Karamanos a recap e-mail setting out the terms and conditions for the sale of both the PRL and Bosicor parcels CFR Korea, subject to the acceptance of the vessel by Glencore’s cargo receivers by 18.00 hours Singapore time on 18 August 2008. Mr Karamanos responded on 17 August 2008 by saying that the owners of the PRO VICTOR would not allow the defendant to keep the vessel on subs with Glencore until 18 August and no other vessel was available at the negotiated freight rate for discharge in Korea so that: “we regret that we must pass on this business quoted by Glencore”.

This provoked a furious response from Mr Matai also on 17 August 2008, saying that he had been advised by the vessel brokers that the vessel was still on subs with the defendant until the following day and that there was a deal agreed in full, not business in the process of being discussed. Glencore said it would hold the defendant liable for non-performance of that contract. Mr Karamanos’ riposte was that there was no concluded contract but said that in the spirit of cooperation the defendant would try to secure another similar cargo. Although Mr Karamanos denied this in evidence, it is fairly clear that the real reason for pulling out of the deal with Glencore was that Mr Misulovin had procured an alternative deal with Delta Oil, which was not subject to receivers accepting the vessel.

Mr Misulovin had offered to sell the two parcels of naphtha to Delta Oil CIF Korea in an email to Dr Jonathan Otamiri of Delta on 12 August 2008. On 16 August 2008, Dr Otamiri came back confirming “purchase interest” in the two parcels CIF main port Taiwan with laycans of 24-26 August 2008 loading from Keamari Oil Piers. This was evidently a deal which found favour with the defendant, as on 18 August 2008 Mr Misulovin sent a draft contract to Dr Otamiri. A sale contract in substantially those terms was signed by both the defendant and Delta Oil on 20 August 2008. Although the circumstances in which that document came to be signed remained somewhat obscure, Miss Hopkins eschewed any suggestion that it was not a genuine binding contract.

In circumstances where the defendant had a binding contract to sell both parcels to Delta Oil, there would seem to be no sensible commercial reason for seeking to sell the naphtha to an alternative purchaser. It is somewhat surprising therefore that from some time late on 20 August 2008, that is exactly what the defendant was trying to do. At 23.22 hours on that day Mr Karamanos sent what can only be described as a somewhat apologetic email to Mr Matai of Glencore stating: “I am sincerely sorry for our recent miscommunication and hope that we can move ahead on our business”. He then offered to sell the two parcels to Glencore on a CFR Taiwan basis, to be carried on the vessel.

Nothing came of this attempt at rapprochement with Glencore, but the fact that it was made at all is only consistent with there being some problem with Delta Oil. As I have already said in my assessment of Mr Karamanos as a witness, I reject his alternative explanations as to why this fresh approach was being made to Glencore. The first explanation was that the deal with Delta would not be finalised until the letter of credit was provided and, in the meantime, as a trader, he would go on dealing in the cargo until it was delivered at final destination. This was a view of contractual commitments which was incredible and which Mr Karamanos must have known was incredible, since immediately after giving that evidence, he switched to his second explanation, that he understood that there were already moves behind the scenes to make sure that the defendant never lifted the naphtha cargo. Given that later in his evidence he attributed this conspiracy in large part to Glencore’s desire to maintain a stranglehold on sales of naphtha ex Pakistan, that makes all the more inexplicable the fact that once there was a problem, he offered the cargo to Glencore again.

On 22 August 2008, Mr Misulovin was offering the two parcels to another possible buyer, El Shafak, on an FOB Karachi basis, alternatively on a CIF basis. On 25 August 2008, Mr Masalha of El Shafak came back and asked that if the product was still available, the defendant provide an offer CIF Aqaba, Jordan. There is no doubt that this was the genesis of what became Proposal 1, to which I return below. Mr Karamanos said in evidence that Mr Misulovin had approached El Shafak on his advice and that this was because, behind the scenes, Glencore was trying to maintain its monopoly on naphtha supplies ex Pakistan. Mr Karamanos suggested that, whereas the sale to Delta Oil for delivery in Taiwan or Korea would somehow offend that Glencore monopoly, a sale to someone like El Shafak for delivery west of the Glencore sphere of influence, in that instance at Aqaba, would not in some unexplained way offend Glencore. In my judgment, this evidence was incoherent. The reality is that if Glencore did not want the defendant “muscling in” on its arrangements with PRL and other suppliers in Pakistan, it mattered not, in terms of offending Glencore, where the cargo was ultimately to be delivered.

Apart from those potential buyers of the naphtha cargo, the defendant through Mr Karamanos also negotiated for a while with an entity in Dubai called ETA Star which was not interested in the purchase of the naphtha but apparently in obtaining a vessel to carry a different cargo from India to the west coast of Africa. It was this possible business which led to the defendant making Proposal 2 to the claimant, again something to which I return below. Ultimately the potential deal with ETA Star fell through. The cause of this failure is in issue and I address it below.

Mr Misulovin in cross-examination sought to support Mr Karamanos’ explanations, both in terms of allegedly continuing to work deals even when there was a committed buyer for a cargo, such as Delta Oil and in terms of what he described as the “influence of others”, a reference to the conspiracy which Mr Karamanos was alleging. This evidence was as incredible as that of Mr Karamanos.

I consider that their explanations were not true and that the real reason for offering the naphtha to other potential buyers from late on 20 August 2008 onwards was that the contract with Delta Oil had fallen through. In that context, I was not impressed by the recent letter which Mr Karamanos procured from Dr Otamiri dated 8 October 2009. Although that states that Delta Oil continued to be interested in the cargo until the claimant terminated on 29 August 2009, it is striking that it does not say that there was a contract of sale binding the defendant to supply the cargo. Equally, if, as a consequence of termination of the charterparty on 29 August 2008, the defendant was unable to deliver the cargo to Delta Oil pursuant to a binding contract, it is inconceivable that there would not be some documentary evidence of a complaint by Delta Oil or an explanation by the defendant. The absence of any such documentation suggests very strongly that the contract with Delta Oil had fallen through at an earlier stage, specifically by the time that the defendant was seeking alternative buyers. As I have said, no other explanation of that search for alternative buyers is credible.

As I have indicated above, it was after El Shafak asked the defendant on 25 August 2008 to quote for delivery of the naphtha CIF Aqaba that, on the same day, Captain Skarvelis asked Mr Hermon of Clarksons to discuss a proposal (“Proposal 1”) with the claimant for what was described in his email as a “change of itinerary”. This was to load the naphtha at Karachi and discharge at Aqaba, followed by a time charter trip from Aqaba with redelivery in the Singapore/South Korea range with an estimated duration of 45 days without guarantee. The rationale for this time charter element was to reposition the vessel in a range which would be favourable to the claimant, in circumstances where redelivery at Aqaba was not attractive in terms of arranging the next fixture. In his email, Captain Skarvelis requested that if the claimant was in agreement it should quote a freight rate for the voyage charter element and a daily rate of hire for the time charter element.

Although this was carefully couched by Captain Skarvelis as a change of itinerary, it would have necessitated agreement by the claimant to a substantial variation to the existing charterparty, to which the claimant was not obliged to agree, as was essentially accepted by the defendant’s witnesses. Although by the end of the trial, the potential application of the Diversion Clause in the charterparty was not an argument which was still being actively pursued by the defendant, for what it is worth, I consider the clause could have no application here. Its application is limited to changes of loading or discharging ports within the ranges set out in Part I clauses C and D and does not permit a change to Aqaba, which was not within the original range of discharge ports. The other point to be made about Proposal 1 is that there is no question of this being a renunciation at this stage. As Mr Yang accepted, if the proposal came to nothing, the parties would simply revert to the existing charterparty.

From the response through the brokers, it is apparent that the claimant was not averse to this proposal although it wanted further information about the defendant before agreeing to the proposal. A visit to the defendant’s office in Greece by SK Shipping’s representative in Greece was proposed, and it was this which led to Se Un Kim visiting Mr Karamanos on 26 August 2008. In the meantime the claimant gave an indication of rates of $900,000 lump sum freight for the voyage Karachi to Aqaba and a time charter rate of “low 20s” per day. These rates were passed to Mr Karamanos. However, the defendant did not take Proposal 1 any further, evidently because, for whatever reason, El Shafak dropped out of the picture. Instead the defendant put forward Proposal 2, which was for a three month time charter with a further three months in charterer’s option. Before considering this in more detail, it is necessary to set out what had been happening with the vessel and various other matters.

At the time that the charterparty was concluded, on 17 August 2008, Captain Skarvelis passed to the claimant, via Mr Hermon, instructions to proceed with maximum safe speed to Karachi to load two parcels of naphtha, 16,000 metric tons from PRL and 5,000 metric tons from Bosicor. The discharge port was said to be Mailiao in Taiwan. The claimant was asked to appoint GAC as port agent in Karachi. These instructions were passed by the claimant to the Master of the vessel, who was also asked to send 72, 48, 24, 12 and 4 hour notices of estimated time of arrival to GAC with copies to Veritas Shipping and the defendant. Such notices were sent thereafter.

On 26 August 2008, Se Un Kim had a meeting with Mr Karamanos at the defendant’s Athens offices. Mr Karamanos evidently sought to “talk up” the defendant company but Se Un Kim was unimpressed. He found considerable disparity between what he was told by Mr Karamanos about the company and what he saw in terms of premises and organisation and had gleaned from internet researches.

Also on 26 August 2008, PRL informed GAC and the defendant that the letter of credit for the PRL parcel had not yet been established and, accordingly, the vessel would have to wait at the outer anchorage until the letter of credit was established and the other documents were in order. Soon after receipt of this information, also on 26 August 2008, the defendant gave instructions to the claimant through the broking channel that the Master should reduce speed to the minimum safe speed in the direction of Karachi and should not enter Karachi at that time. Early on 27 August 2008 the Master gave a 12 hour notice of estimated time of arrival at Karachi at 1400 hours local time. In response to the information that the letter of credit had not been established, Sharon Tan sent a message through the broking channel asking the defendant to expedite the documentation to ensure that there were no berthing delays to the vessel.

Later on 27 August 2008 Captain Skarvelis sent an email confirming that notice of readiness would be accepted and time would count from anchoring of the vessel outside port limits at Karachi. The vessel did arrive at Karachi at 14.00 hours local time on 27 August 2008 and anchored at the outer harbour at 15.00 hours local time. The Master sent an arrival report by email to the defendant. He then sent notice of readiness by email to the claimant, GAC and Hans Shipping. At one stage of the proceedings there was an issue as to whether formal notice of readiness had been tendered to the defendant or its agent and therefore whether time started to run, but it is not necessary to decide that point, as it is accepted on behalf of the defendant that whether or not formal notice of readiness was tendered, it had been agreed that time was to count from anchoring outside port limits at Karachi.

On the evening of 27 August 2008, Sharon Tan informed Captain Ali of GAC over the telephone that the notice of readiness should not be sent to the port authorities and cargo suppliers i.e. PRL and Bosicor. This instruction was reflected in an email from Captain Ali to Sharon Tan. Her evidence was that this instruction had come from the defendant through the broking channel. Although this was denied by the defendant’s witnesses and Mr Phillips suggested that she had made this up and the instruction had come from the claimant itself, as I have said, she struck me as a truthful witness and her evidence was supported by the statement of Mr James Kim of Hans Shipping (who said he had been given this instruction by Clarksons), albeit he was not called to give evidence.

Furthermore, it seems to me inherently improbable that the claimant as disponent owner of the vessel would instruct the Master not to send the notice of readiness to particular parties. An owner usually wishes to ensure that notice of readiness goes to everyone in sight to avoid any argument that time has not started to run and I cannot see why the position should be any different in the present case. The defendant’s suggestion that the claimant may not have wanted to tender notice of readiness because of machinations behind the scenes with Glencore is incredible. On the other hand, the defendant may not have wanted the notice to be sent lest it precipitate matters with PRL and Bosicor with both of whom it is evident there were problems for the defendant. An instruction not to send notice of readiness seems to me to be of a piece with the previous instruction to slow steam.

Under clause 12 of the charterparty, freight tax at Karachi was payable by the defendant. A freight tax exemption would have been available from the Pakistan authorities because the claimant was a Singaporean company, but in order to obtain this, it was necessary to provide those authorities with an attested certificate of incorporation of the claimant and a copy of the charterparty signed by both parties. There was some delay in the claimant providing an attested certificate of incorporation, but a copy of the charterparty signed by the claimant was provided to the defendant through the broking channel on 22 August 2008. The defendant was asked to sign the charterparty and return it as soon as possible. Despite a number of chasers thereafter, for some reason the defendant never sent a signed copy of the charterparty back to the claimant in order to procure the freight tax exemption, although the charterparty was in fact signed on behalf of the defendant at some stage.

As I have said, the defendant did not come back in response to the claimant’s proposed rates for the voyage to Aqaba, followed by a time charter trip, but instead proposed a three month time charter, with an option for a further three months, with delivery Karachi and redelivery Singapore-Japan range. This proposal reached the stage of a fixture recap sent through the brokers at 00.28 hours Singapore time on 27 August 2008, with the vessel on “subjects” i.e. subject to the defendant’s management approval, until 16.00 hours Singapore time (which was subsequently extended by an hour to 1700 hours). The hire rate was stated as US$20,500 per day. Mr Yang accepted that at this stage he would have been very happy to enter such a charter and indeed would have preferred a three to six month time charter to the existing voyage charter. He also accepted that, as with Proposal 1, this was only a proposal and that if it came to nothing, the parties would go back to the original voyage charter.

Soon after that recap email was sent, Se Un Kim sent Mr Yang an email report of his visit to the defendant’s Athens office the previous day, which highlighted the discrepancies between what Mr Karamanos had told him about the defendant company and what he had observed and found on the internet. Mr Yang accepted that after he read this email he was a little worried about letting the vessel on time charter to the defendant.

Because the defendant wanted the vessel on time charter in order to fulfil the proposed agreement with ETA Star, it was essential to obtain the claimant’s agreement to sublet the vessel. However, the claimant indicated through the brokers that the defendant would not be granted an option to sublet the vessel. Mr Phillips taxed Mr Yang in cross-examination that this was because, following the email from Se Un Kim, the claimant did not really want to do business with the defendant. Mr Yang maintained that it was common for an owner to refuse subletting on a short term time charter because of the loss of control over the vessel and prospects of late redelivery. I was not entirely convinced by that point, since it might be said to be a risk in any time charter situation and owners routinely permit subletting. I suspect that there was some force in Mr Phillips’ point that by this stage, following the rather critical report from Se Un Kim, the claimant was disinclined to put itself out to assist the defendant by agreeing to the subletting of the vessel. Having said that, it was under no obligation to do so.

At all events, according to Sky Kim, what happened shortly before the deadline for the lifting of subjects expired on 27 August 2008, was that the defendant via Mr Hermon countered on the hire rate with an offer of US$13,000-14,000 a day. He conveyed that to Mr Yang, who considered it unacceptable. The defendant’s witnesses denied that they had ever made this counter-offer. Mr Phillips suggested to Sky Kim and Mr Yang that they had made this up, but they insisted that they had not. Whilst Mr Phillips was able to point to the fact that Mr Yang had not mentioned this counter-offer in the draft email he prepared on 1 September 2008 and sent for approval to Mr Min the claims handler at the claimant, that email was clearly not intended to be a detailed exposition of every point. I accept the evidence of Mr Yang and Sky Kim that this counter-offer was made and was unacceptable.

I propose to set out the detail of the communications between the parties from 27 to 29 August 2008 which are relied upon by the claimant as renunciatory, before dealing in the next section of the judgment with whether the defendant’s words and conduct amounted to a renunciation of the charterparty. At one stage of the trial there was some confusion as to the precise sequence in which events occurred or emails were sent, but ultimately a chronology was agreed between counsel save in relation to one email.

After the time for lifting of subjects on Proposal 2 expired, at 17.42 hours Greek time (22.42 hours in Singapore), Mr Karamanos spoke on his mobile telephone to Se Un Kim. It is not disputed that this conversation took place, but its contents are disputed. Se Un Kim’s evidence was that Mr Karamanos told him that the defendant’s buyer had pulled out, that the defendant would not therefore be stemming cargo for the vessel and that the defendant had no further use for the vessel. He wanted to discuss the situation, but Mr Kim told Mr Karamanos that he did not have authority to discuss the fixture and that Mr Karamanos should approach the brokers or the claimant direct. In cross-examination Mr Kim insisted that this conversation did take place, but went further, alleging that soon after it took place he had relayed the substance of it to Mr Yang. This was not something he had previously said, nor had Mr Yang given evidence of such a conversation with Mr Kim. I reject that part of his evidence, since it seems to me that given that he had no authority to discuss the fixture and had told Mr Karamanos to deal with the claimant through the brokers or direct, there would have been no reason for him to relay the conversation to Mr Yang. Mr Karamanos could be relied upon to do that himself.

Given that I am rejecting that part of his evidence as made up, there is an obvious question as to whether it is appropriate to accept the central part of his evidence about the conversation with Mr Karamanos. However, for a number of reasons I do accept his evidence about the conversation, even though he gilded the lily in going on to suggest he had then spoken to Mr Yang.

First, Mr Karamanos’ explanation of the phone conversation was not convincing. Whilst he accepted that a conversation with Mr Kim had taken place at that time, he denied that its subject was as alleged by Mr Kim. He said that the conversation had been about proposed new business between SK Shipping and the defendant generally. However, it is difficult to see why Mr Karamanos should have wanted to ring Mr Kim that evening on his mobile phone to discuss new business generally, given that there had been a meeting between them the previous day at which there had been every opportunity to discuss such new business. It is much more likely that there was something else which prompted the conversation.

Furthermore, the mobile phone records of Mr Karamanos recently disclosed show that, either side of the call to Se Un Kim, he made calls to Captain Skarvelis in New York. The first was short, less than a minute and a half, but the second longer, almost seven and a half minutes. Mr Karamanos sought to explain the latter conversation by saying that Mr Kim had told him that he had no authority to discuss matters and that Mr Karamanos should speak to Captain Skarvelis, but that simply does not make sense. Despite the denials of Mr Karamanos and Captain Skarvelis, I consider it much more likely that their conversations either side of the call to Mr Kim were about what tactics to adopt in approaching the claimant, in circumstances where it appeared to them increasingly likely that they did not have a viable buyer for the cargo.

Second, that the conversation was as described by Mr Kim is consistent with the other evidence, to which I return below, that Mr Karamanos must in fact have spoken to Mr Hermon of Clarksons as Mr Kim had suggested, because according to Sky Kim of Hans Shipping Mr Hermon spoke to him in the evening of 28 August 2008 and told him that the defendant had lost its buyer and would be unable to proceed with the charterparty, information which Sky Kim then relayed to Mr Yang. Of course, the defendant contests that this occurred, but for reasons I will elaborate below, the only sensible explanation for Mr Hermon’s subsequent conduct in seeking to broke a fixture with Glencore as charterers, is that he thought that the defendant wanted to get out of the charterparty, information he can only really have got from Mr Karamanos.

Third, the evidence of Se Un Kim about his telephone conversation with Mr Karamanos is not recent invention. He referred to it in the Declaration dated 1 October 2008 (only just over a month after the conversation) which he made in Rule B Attachment proceedings taken by the claimant against the defendant in New York. Whilst it is possible that, as Mr Karamanos asserted more than once in his evidence, Mr Kim and all the other witnesses for the claimant perjured themselves, that seems to me inherently unlikely. Accordingly, I find that the conversation did take place, although its content was not relayed to Mr Yang.

At about noon Singapore time on 28 August 2008, Captain Ali of GAC sent an email to Sharon Tan saying he had spoken to PRL and the defendant’s local representative and they did not have any news about the letter of credit or about the readiness of relevant documents. This prompted Sharon Tan to send an email to James Kim of Hans Shipping at 13.09 hours Singapore time asking him to get an answer from the defendant as to when it expected the cargo documents to be ready and whether it was interested in obtaining the freight tax exemption, in which case could it revert with the signed charterparty as soon as possible.

Less than an hour later at 13.53 hours Singapore time (01.53 in the morning in New York) Mr Hermon sent Captain Skarvelis an email setting out various questions from the claimant:

“1.

Pls confirm if chrs will load cargo at Karachi as per our CP or not”

2.

Pls confirm if chrs already bought cargo at Karachi at the moment or not

3.

Pls advise why chrs couldn’t clear freight tax matter at Karachi till now?”

As Captain Skarvelis said in his evidence and, indeed on some of his emails, he was available “24/7/365” (or as he pointed out 365.25 because 2008 was a leap year). It is no doubt for that reason that he was able to reply about an hour and a half later, even though it was the middle of the night in New York, sending an email at 03.29 hours New York time (15.29 hours Singapore time) in these terms:

“Due to circumstances beyond charterers control, it may become necessary to declare force major [sic].

Charterers have offered owner two possible alternatives in order to assist owners to mitigate the situation.

Charterers will consider releasing the vessel from its current charter in order to permit owner to seek other business with owner and charterer agreeing to a mutual cancellation.

Please discuss with owners and obtain their agreement for a mutual cancellation of reference charter.”

The claimant responded to that email about an hour later at 16.26 hours Singapore time (04.26 in New York) in these terms:

“With reference to the message from the charterer, we would like to clear the matter as follows:

1.

The message from the charterer shall be considered as a declaration of non performance of the charter.

2.

To mitigate our loss we, SK Shipping (s) Pte Ltd, have to / will find cargo in the market from right now.

3.

Huge loss (roughly more than $0.5 mil) has incurred from the ballast voyage from Hochiminh to Karachi to comply with the charter party made on 17^th Aug. 2008 and the loss may increase further as it is very difficult to find a prompt cargo in this area.

4.

We reserve our right to claim against the charterer for any loss, damage and/or expense incurred / to be incurred...”

That provoked a response from Captain Skarvelis sent to Mr Hermon at 05.24 hours New York time (17.24 in Singapore) as follows:

“… Charterers reject owners declaration of non-performance.

Owners have been advised that Charterers have the means to mitigate any alleged losses of Owners by taking the vessel on time charter from Karachi at $18.000 per day for trip via port or ports with redelivery Singapore/S. Korea range with estimated duration of 45/60 days wog.

Charterers have cargo to load promptly from west coast India to east cost [sic] Africa hence from AG going east.

If Owners really interested in mitigating losses, they will agree to charterers proposal above.

On completion of time charter, owners and charterers will be able to calculate Owner’s position of alleged losses.

Charterers sincerely regret current circumstances and are doing everything possible to maintain a good relationship with Owners for ongoing business as discussed with your Mr. Se Un Kim in Athens.

Urgent for owners to agree to charterers proposal of time charter in order not to loose the cargo from west coast India and AG…”

At 17.47 hours Singapore time (so after that email from Captain Skarvelis was sent) Sharon Tan sent an email to Captain Ali at GAC informing him that the subject voyage had been cancelled. This was the only email the timing of which was in dispute since the copy in the trial bundles bore the time 2.47 pm (i.e. 14.47, placing it before Captain Skarvelis’ email) but having been shown the original, I am quite satisfied it was not sent until 17.47 hours Singapore time.

The email from Captain Skarvelis was passed by Mr Hermon to Sky Kim at 18.32 hours Singapore time and then promptly forwarded by Hans Shipping to Mr Yang at 18.51 hours. It was Sky Kim’s evidence that just after receipt of the email, he received a telephone call from Mr Hermon who explained that the defendant had lost its buyer and would be unable to proceed with the charterparty. Sky Kim said that he passed this information to Mr Yang by telephone the same day. This was confirmed by Mr Yang in his evidence.

Once again Mr Phillips put to both Sky Kim and Mr Yang that they had made up this evidence, which they both strenuously denied. The defendant’s witnesses also denied that they had ever said anything of the kind to Mr Hermon to be passed on to the claimant. However, I am satisfied that this conversation did take place for a number of reasons.

First, as I have said in my assessment of the witnesses, I found both Sky Kim and Mr Yang to be honest witnesses. There would be no obvious reason for Sky Kim, who is not employed by the claimant, to invent this evidence and Mr Phillips accepted at least in the context of his evidence about his state of mind that Mr Yang was an honest witness. It is true that Mr Yang did not refer to the conversation in contemporaneous correspondence and that is a point which has to be weighed in the balance the other way, but as I have said, his draft email of 1 September 2008 in particular was not intended to be an exhaustive exposition of what had occurred.

Second, that there was such a conversation, with Mr Hermon passing on what he had been told by Mr Karamanos, is consistent with Se Un Kim’s evidence about his conversation with Mr Karamanos the previous day, which I have accepted, in which he told Mr Karamanos that he had no authority to discuss the fixture and that Mr Karamanos should take the matter up with the claimant directly or through the brokers.

Third, given that very soon after this conversation Mr Hermon approached Sky Kim again with an offer on behalf of Glencore to charter the vessel (a matter to which I return below) it seems to me that a reputable broker like Clarksons would never have done that unless the individual involved, Mr Hermon, considered that his initial principal, the defendant, was indeed not going to perform the charterparty. To have negotiated a charter with another charterer at a time when the defendant was still interested in performing would have been a serious breach of duty by Clarksons and, potentially, commercial suicide if it emerged. I do not consider that Clarksons would ever have taken such a course had Mr Hermon not thought that the defendant did not intend to perform the charterparty.

Of course, Mr Hermon did not give evidence and although Miss Hopkins described this as rather like Hamlet without the prince, one can understand that the defendant may well not have been in a position to call him. He is not its employee and is abroad, so not compellable and it may well be that Clarksons or more likely its legal department did not want him embroiled in this trial. However, on 30 September 2009, Captain Skarvelis sent Mr Hermon an email referring to the claimant’s evidence about the conversation between Mr Hermon and Sky Kim on 28 August 2008 and asking for his comment. It is striking that in his email reply of 5 October 2009, Mr Hermon does not say that he did not have the conversation but that he doesn’t recall all the conversations with Hans Shipping or SK Shipping and “I certainly cannot comment on the conversations relating to Petroexport losing their buyer for the cargo and being unable to perform the charterparty”, on any view a somewhat guarded response.

At 19.11 hours Singapore time Sky Kim passed to Mr Hermon an email from the claimant asking for confirmation as to whether the defendant could arrange loading at Karachi by the following day or not as per the original charterparty. The email asked for a timely reply as soon as possible. Mr Phillips put to Sky Kim that this email would not have been sent if he had had the conversation he alleged with Mr Hermon, but he was insistent that the conversation had taken place and that this email was sent to make sure that the defendant could not perform the charterparty. I accept that evidence. In my judgment, the conversation between Mr Hermon and Sky Kim did take place as described by Sky Kim in his evidence.

Sky Kim’s evidence was that on the evening of 28 August 2008, between 6 and 9 pm Seoul time, Mr Hermon had approached him with a proposal on behalf of Glencore to take the vessel on voyage charter. This was after the conversation where Mr Hermon had said that the defendant had lost its buyer and was unable to perform the charterparty. Then at 19.53 hours Singapore time, Mr Hermon sent a fixture recap to Hans Shipping and the claimant in respect of a proposed voyage charter to Glencore’s shipping arm, ST Shipping, subject to suppliers/stems/receivers/charterers management approval declarable by 17.00 hours Singapore time on 29 August 2008.

Mr Phillips put to Sky Kim that, in accordance with normal practice, this fixture must have been under negotiation between the brokers for 1-2 days beforehand. This was all part of a suggestion that the claimant had gone into the market looking for an alternative charterer after Se Un Kim’s gloomy report following his meeting at the defendant’s offices. Sky Kim said that it had not been under negotiation for some days and repeated his evidence that it was Mr Hermon who had approached him that evening, knowing that the defendant could not perform the voyage. Mr Yang was also very clear in his evidence that the claimant had not started any negotiations with Glencore for the charter of the vessel until after the two emails from Captain Skarvelis on 28 August 2008 and after Sky Kim’s conversation that evening with Mr Hermon, in other words at a time when the defendant was in obvious difficulty and the claimant was looking at other options for employment of the vessel. As Mr Yang said, until then, there was no reason for the claimant to look for another charterer. I accept the evidence of Mr Yang and Sky Kim as to when negotiations with Glencore started.

In fact, as Sky Kim pointed out, the proposed fixture with Glencore was only on the table for a short time. By about midnight Singapore time on the same day, 28 August 2008, it had failed. This was confirmed by an email the following day from Sky Kim to Mr Hermon stating as follows:

“As you know, vessel already released from sub chrs last night and pls make sure with Petroexport what is true right now.

Follows from owners:-

…..

Pls note that vessel is not on subs at the moment and owners already dropped other business yesterday until clearing with current charterer as Petroexport.”

Mr Phillips also put to Mr Yang and Sky Kim that they must have appreciated that the proposed cargo under the Glencore fixture was the same two parcels of naphtha as the defendant had been proposing to ship. In other words, this was all part of the conspiracy theory advanced by the defendant’s witnesses. I am not convinced that either of them either knew or suspected that it was the same cargo. Certainly the fact that the proposed fixture to Glencore included a 1.25% address commission to Veritas Shipping was not, as Mr Phillips suggested to them, an indication that it was the same cargo. As Sky Kim pointed out Mr Hermon had simply copied over the fixture recap with the defendant and mistakenly included the reference to address commission being payable to Veritas. It should have been payable to Glencore. Of course that would be the case even if it was the same cargo.

Ultimately however, it does not seem to me that it matters whether or not it was the same cargo or whether the claimant knew or suspected that it was. The proposed fixture came to nothing after a very short period of time and, if the claimant is correct that the defendant repudiated the charterparty, once it was terminated, the claimant was free to contract with whomever it chose, even if that involved carrying the same cargo as would have been carried under the charterparty. The critical question is whether there was a repudiation.

It is evident that after receipt of Captain Skarvelis’ emails on 28 August 2008, the claimant sought legal advice from Mr David Hoyes of Hill Dickinson. This emerged because, by mistake, the claimant sent the defendant an email late on 28 August 2008 (sent by Clarksons at 23.51 hours Singapore time) which included not only the text of an email Mr Hoyes suggested that the claimant send the defendant, but Mr Hoyes’ covering advice:

“In the time available I have reviewed the various messages.

In view of the ambiguity of Charterers’ messages (and in particular their most recent rejection of “Owners’ declaration of non-performance”) I would recommend sending one final message along the following lines.

This may help avoid a future argument by Charterers that they could in fact have performed the charterparty.

QUOTE

We refer to Charterers’ message earlier.

It is clear from Charterers’ last message and their previous message that they do not intend to perform the charterparty…

Charterers are now saying that they wish to carry an alternative cargo ..from India to East Coast Africa on a time charter basis. They are not entitled to do so under the charterparty which has been agreed.

As we say, it is clear to us that Charterers do not intend to perform their obligations under the charterparty. Therefore, unless Charterers confirm unequivocally and unconditionally by [0900 Singapore time] tomorrow, 29 August 2008 that they will provide a full cargo for loading and discharging in accordance with their obligation in the charterparty, then we will (1) assume that Charterers do not intend to perform the charterparty and (2) treat Charterers’ conduct as repudiating the charterparty.

Owners’ rights are fully reserved in the meantime.

UNQUOTE”

It is accepted by the claimant that its mistake in including the covering advice was confusing. Mr Hermon seems to have appreciated the mistake, since he resent just the text of the message Mr Hoyes had suggested sending to the defendant, to Captain Skarvelis a little later at 02.10 hours Singapore time on 29 August 2008. Captain Skarvelis responded that the messages were confusing and asked the claimant to identify Mr Hoyes and state what was his mandate.

In a further email sent by Captain Skarvelis to Mr Hermon at 10.35 hours Singapore time on 29 August 2008 (22.35 the previous day in New York) Captain Skarvelis refers to the fact that there had been no response to his email sent at 05.24 hours New York time on 28 August 2008 and that Mr Hermon had advised that the claimant had placed the vessel on subs and therefore could not respond to the defendant’s proposal. Captain Skarvelis asked for details of this fixture. He then went on to say that if the claimant wished to cancel the charterparty without any further claim on the defendant in order to pursue other business, such a proposal would be considered by the defendant.

Soon after this, at 10.36 hours Singapore time, Hans Shipping asked Clarksons to resend just the text of the suggested message drafted by Mr Hoyes but with an extension of time for reply until 15.00 hours Singapore time that day. This was passed to Captain Skarvelis a few minutes later. A further email was sent by Captain Skarvelis at 12.50 hours Singapore time (00.50 in New York) in these terms:

“It appears that the Owner is trying to intimidate the Charterer by fixing the “pro Victor” on other business without the knowledge of the Charterer, and issuing ultimatums with self-serving emails.

…..

Please ask owners to confirm that [details were then sought of the fixture on which the vessel was said to be on subs]

If the owner refuses to answer the above now, they risk being implicated in a conspiracy to commit tortuous [sic] interference.

Charterers have been dealing in good faith. Charterers wish to maintain a good relationship with Owners for future business as stated in Charterers email to Mr Yang Woo-Mun.”

That email provoked the response from Hans Shipping which I have already quoted at paragraph 72 above to the effect that the vessel had been released from the fixture on subjects the night before. This was forwarded by Mr Hermon to Captain Skarvelis, saying: “Have following confirming the vessel is no longer on subs”. There was no further response from Captain Skarvelis to the email which Mr Hoyes had drafted and, at 15.31 hours Singapore time (03.31 hours in New York), the claimant sent a further email stating:

“Pls note that owners didn’t received [sic] any reply from charterer until time bar as 1500LT spore 29 Aug, 2008 against owners’ last.”

There was no response from the defendant stating that it would perform the charterparty and at 18.25 hours on 29 August 2008, the claimant sent the following email terminating the charterparty:

“We refer to our emails timed at 22.51 yesterday and 10.35 today (Singapore time) initially giving Charterers until 9am Singapore time today and then until 3pm Singapore time today to confirm their intention to perform their obligations under this charterparty.

In the absence of any response whatsoever, Charterers have unequivocally re-confirmed their intention (as evidence by their messages yesterday) not to perform this charterparty and we have now treated Charterers’ conduct as repudiating the charterparty.

In order to mitigate our losses at the earliest opportunity and to protect our position, we have therefore re-fixed the vessel.”

A revised version of the email was sent slightly later correcting that last sentence to read: “In order to mitigate our losses at the earliest opportunity and to protect our position, therefore we will try to fix the vessel with other business”. This was because at that stage, the vessel had not been fixed and any proposed fixture with Glencore had fallen through. In the meantime, Captain Skarvelis sent an email asserting that the termination was wrongful and accusing the claimant of participation in a conspiracy of tortious interference with the defendant’s transaction with the suppliers of cargo in Karachi. The current dispute thus crystallised.

Following termination, the claimant sought an alternative fixture in the market. The vessel proceeded to Jamnagar in India to take fresh water on board, which she had not been able to do as intended at Karachi. The vessel waited there for a fixture and in the meantime, the annual class survey was undertaken. Eventually, on 10 September 2008, a charter was concluded with Vitol SA for the carriage of a cargo from Bahrain to Salalah.

In the present case, both the grounds upon which the claimant seeks to justify its termination, renunciation and impossibility, are examples of anticipatory breach of contract, since at the time when the claimant purported to accept the defendant’s repudiation as terminating the charterparty, the time for performance by the defendant had not yet expired. In particular, the laydays had not expired.

The contrast between these two modes of anticipatory breach and the principles of law applicable in determining whether there has been a renunciation by one party to the contract, entitling the other party to treat the contract as at an end, are discussed in the judgment of Devlin J in Universal Cargo Carriers v Citati [1957] 2 QB 401 at 436-7:

“The law on the right to rescind is succinctly stated by Lord Porter in Heyman v. Darwins Ltd. [1942] AC 356, 397 as follows: "The three sets of circumstances giving rise to a discharge of contract are tabulated by Anson as: (1) renunciation by a party of his liabilities under it; (2) impossibility created by his own act; and (3) total or partial failure of performance. In the case of the first two, the renunciation may occur or impossibility be created either before or at the time for performance. In the case of the third, it can occur only at the time or during the course of performance."

The third of these is the ordinary case of actual breach, and the first two state the two modes of anticipatory breach. In order that the arguments which I have heard from either side can be rightly considered, it is necessary that I should develop rather more fully what is meant by each of these two modes.

A renunciation can be made either by words or by conduct, provided it is clearly made. It is often put that the party renunciating must "evince an intention" not to go on with the contract. The intention can be evinced either by words or by conduct. The test of whether an intention is sufficiently evinced by conduct is whether the party renunciating has acted in such a way as to lead a reasonable person to the conclusion that he does not intend to fulfil his part of the contract. This application is fully discussed in Forslind v. Bechely-Crundall 1922 SC (HL) 173 and forms the basis for the arbitrator's findings.

Of the two modes, renunciation has since the decision in Hochster v. De la Tour (1853) 2 E&B 678 established itself as the favourite. The disadvantage of the other is that the party who elects to treat impossibility as an anticipatory breach may be running a serious risk. Suppose, for example, that a man promises to marry a woman on a future date, or to execute a lease or to deliver goods; and that before the day arrives he marries another, or executes the lease in favour of another, or delivers the goods to a third party. The aggrieved party may sue at once. "One reason alleged in support of such an action," Campbell C.J. observed in Hochster v. De la Tour [at 688] "is, that the defendant has, before the day, rendered it impossible for him to perform the contract at the day: but this does not necessarily follow; for, prior to the day fixed for doing the act, the first wife may have died, a surrender of the lease executed might be obtained, and the defendant might have repurchased the goods so as to be in a situation to sell and deliver them to the plaintiff." But if the plaintiff treats the defendant's conduct as amounting to renunciation and justifies his rescission on that ground, the defendant could not avail himself of this defence.

I said that it was after Hochster v. De la Tour that renunciation established itself as the favourite, because until then it was not certain that a man who said "I will not perform" would be held to his word. In Hochster v. De la Tour it was argued that he could change his mind, and that the fact that at one time he said he was not ready and willing did not necessarily mean that he would be unwilling when the time for performance came. Hochster v. De la Tour established that a renunciation, when acted upon, became final. Thus, if a man proclaimed by words or conduct an inability to perform, the other party could safely act upon it without having to prove that when the time for performance came the inability was still effective.”

In The Hermosa [1982] 1 Lloyd’s Rep 570 at 572-3, Donaldson LJ, giving the judgment of the Court of Appeal, summarised the law on renunciation as follows:

“The learned Judge formulated the test to be applied as being "whether M.T.C. and the owners acted in such a way as to lead a reasonable person to conclude that they did not intend to fulfil their part of the contract", and referred to the judgment of Mr. Justice Devlin in Universal Cargo Carriers Corporation v. Citati [1957] 1 Lloyd's Rep. 174; [1957] 2 Q.B. 401 at pp 193 and 436, and Maple Flock Co. v. Universal Furniture Products (Wembley) Ltd. [1934] 1 K.B. 148 at p. 157 . Since Mr. Justice Mustill gave judgment, the House of Lords has given judgment in Woodar Investment Ltd. v. Wimpey Construction U.K. Ltd. [1980] 1 WLR 277. While that decision is not directly in point it is useful for its review of the authorities. For present purposes we take from it the following propositions:

(a)

Dissolution of a contract upon the basis of renunciation is a drastic conclusion which should only be held to arise in clear cases of a refusal to perform contractual obligations in a respect or respects going to the root of the contract.

(b)

The refusal must not only be clear, but must be absolute. Where a party declares his intention to act or refrain from acting in a particular way on the basis of a particular appreciation of his obligations, either as a matter of fact or of law, the declaration gives rise to a right of dissolution only if in all the circumstances it is clear that it is not conditional upon his present appreciation of his obligations proving correct when the time for performance arrives.

(c)

What does or does not amount to a sufficient refusal is to be judged in the light of whether a reasonable person in the position of the party claiming to be freed from the contract would regard the refusal as being clear and absolute?

One further proposition must be added, although it is not gleaned from or confirmed by the decision in Woodar's case, namely, that (d) the conduct relied upon is to be considered as at the time when it is treated as terminating the contract, in the light of the then existing circumstances. These circumstances will include the history of the transaction or relationship. Later events are irrelevant, save to the extent that they may point to matters which the parties should have considered as hypothetical possibilities at the relevant time.”

The critical question is thus whether, by its words or conduct, a party has evinced an intention not to perform the contract, which a reasonable person in the position of the other, innocent, party would regard as clear and absolute. As that last proposition in The Hermosa demonstrates, that question is to be judged at the time of termination of the contract, having regard to all the circumstances, including the history of the contractual relationship.

In the present case, the claimant focuses primarily on the e-mail correspondence and alleged telephone conversations in the period from 27 August until termination on 29 August 2008. The claimant contends that whether taken individually or collectively, by those words and conduct, viewed in the context of what had preceded them, the defendant evinced an intention not to perform the charterparty. Before considering that case in more detail, I should deal with two issues of law which arise in relation to renunciation.

First, Mr Phillips submits that if, as he says is the case (for reasons I will elaborate below), the claimant cannot establish that individual e-mails or pieces of conduct were renunciatory, the claimant cannot add those words and conduct together to make a renunciation. As he put it, if the individual bricks are not renunciatory, Miss Hopkins cannot use them to build a wall of renunciation. In the light of the test set out in the authorities to which I have referred, it seems to me this is wrong in principle. The court has to look at the totality of the relevant words and conduct relied upon, in the light of all the circumstances, including the history of the contractual relationship, to determine whether at the time that the claimant purports to accept the words and conduct as renunciatory, the defendant has evinced an intention not to perform, as at that time. Furthermore, particular words or conduct taken in isolation may appear equivocal, but taken with other words and conduct may become unequivocal in terms of amounting to a renunciation. That proposition is of some application in the present case, as will appear.

The second issue is whether the claimant can treat words and conduct of the defendant as renunciatory in circumstances where, although objectively it would appear to a reasonable person in the position of the claimant that the defendant had evinced a clear and absolute intention not to perform the contract, subjectively the claimant did not consider that the words and conduct did amount to such an intention. This point arises because at various points in his cross-examination of the claimant’s witnesses, specifically Mr Yang, Mr Phillips elicited in relation to particular words and conduct of the defendant that the claimant did not consider at the time that they evinced an intention not to perform, only that they indicated that it was unlikely that the defendant would be able to perform the charterparty.

Mr Phillips submitted that, where the claimant’s subjective state of mind was that it did not consider that the defendant’s words and conduct evinced an intention not to perform, but only that it was unlikely that the defendant would be able to perform, the claimant could not rely upon the defendant’s words and conduct as amounting to renunciation entitling the claimant to terminate the contract, even if objectively the words and conduct were renunciatory. Mr Phillips candidly accepted that there was no authority which bore directly upon this point, although he drew my attention to passages in the speeches of the House of Lords in Forslind v Bechely-Crundell 1922 SC (HL) 173 which he submitted supported his analysis.

In particular at 184 Viscount Finlay (dissenting on the facts but not on the principle of law applicable to them) said:

“If one of the parties to a contract, either in express terms or by conduct, leads the other party to the reasonable conclusion that he does not mean to carry out the contract, this amounts to a repudiation which will justify the other in treating the contract as at an end..”

Again, at 191 Lord Shaw of Dunfermline said this:

“If, in short, A, a party to a contract, acts in such a fashion of ignoring or not complying with his obligations under it, B, the other party, is entitled to say: “My rights under this contract are being completely ignored and my interests may suffer by non-performance by A of his obligations, and that to such a fundamental and essential extent that I declare he is treating me as if no contract exists which bound him”. The accent of the psychology is not upon the mind of the person who is defiant or heedless of his obligation, but as Lord Herschell put it, upon the mind of the person who is suffering from the defiance.”

This passage in particular seems to support the proposition that the innocent party must have subjectively considered that the other party was renouncing the contract. However other passages from the speeches of their Lordships (specifically Viscount Haldane at 179 and Lord Dunedin at 190) seem to support the objective approach to renunciation. It is also fair to say that the reference in Lord Shaw’s speech to Lord Herschell is to a speech in an earlier case in the House of Lords, Carswell v Collard (1893) 20 R (HL) 47, another passage from which Lord Shaw quotes earlier in his speech:

“Of course the question was not what actually influenced [the innocent party], but what effect the conduct of the [other party] would be reasonably calculated to have upon a reasonable person.”

At first blush that might suggest that only the objective question of whether the words or conduct evince an intention not to perform is relevant, but in my judgment taking that short judgment in Carswell v Collard as a whole, what Lord Herschell was actually saying supports Mr Phillips’ proposition that not only must the words and conduct be objectively evincing an intention not to perform but the innocent party must subjectively believe that to be the case.

Miss Hopkins submitted that to make an entitlement to accept a renunciation as terminating the contract depend upon the subjective intention of the innocent party was not only contrary to the objective theory of the English law of contract, but would present practical difficulties, specifically, in the case of a corporate claimant, which individual’s state of mind was relevant for the purpose of determining whether, subjectively, the claimant considered the defendant’s words and conduct evinced an intention not to perform the contract.

I do not accept Miss Hopkins’ submission that the conclusion that for an entitlement to rescind a contract for renunciation to arise the words or conduct should not only be objectively renunciatory, but the claimant should subjectively consider the words and conduct renunciatory, would somehow subvert the objective approach which English law adopts to contract. It seems to me that there is an analogy to be drawn between renunciation and (non-fraudulent) misrepresentation. Just as a claimant must show both actual reliance on or inducement by a misrepresentation as well as that such reliance or inducement was objectively reasonable, so it seems to me a claimant who contends that the defendant has renounced the contract should have to show not only that the words or conduct were objectively evincing an intention not to perform but that the claimant subjectively believed that to be the case. The passages which Mr Phillips highlighted from Viscount Finlay and Lord Shaw in Forslind and Lord Herschell’s speech in Carswell v Collard seem to me to support the analogy.

Furthermore, the practical difficulties to which Miss Hopkins alluded are no more difficult to solve than in any other case in which the court is concerned with the knowledge or state of mind of a corporate entity. The relevant knowledge or state of mind is that of whoever is an “agent to know” on behalf of the company. In the present case, the relevant state of mind is that of Mr Yang.

However, it is not necessary to decide this point finally, since, for reasons I will come to, I have concluded that, at the time on 29 August 2008 when the claimant accepted the defendant’s words and conduct as a renunciation entitling the claimant to terminate the charterparty, the relevant person at the claimant, Mr Yang, did consider that the defendant’s words and conduct evinced an intention not to perform the charterparty, whatever his doubts may previously have been as to whether the defendant did or did not intend to perform.

Turning to the detail of the case on renunciation, as I have said the allegedly renunciatory words and conduct are said to begin with the email from Captain Skarvelis sent at 15.29 Singapore time on 28 August 2008. Miss Hopkins submits that this email and the subsequent communications have to be seen in the context of a number of matters which had preceded the email and which whilst not in themselves renunciatory were, when taken together, sufficient to give rise to a legitimate concern on the part of the claimant as to whether the defendant was going to perform the charterparty. That concern had led the claimant to send the email through the broking channel asking if the charterers would load cargo at Karachi, to which Captain Skarvelis’ email was a response.

The “context” to which Miss Hopkins refers is as follows:

I consider that these were indeed all legitimate matters of context or background, against which the email exchanges of 28 and 29 August 2008, which are relied upon as renunciatory words or conduct, are to be judged. Whilst not in themselves renunciatory, the combined effect of those matters was enough, both subjectively in terms of Mr Yang’s state of mind and objectively in terms of what a reasonable person in the position of the claimant would have thought, to give rise to a concern as to whether the defendant would be able to perform the charterparty, notwithstanding that the laydays had not yet expired.

In those circumstances, I consider that it was perfectly legitimate for the claimant to send the email which it did asking for confirmation that the defendant would load cargo in Karachi. This was a natural reaction on the part of the claimant to what was undoubtedly an uncertain situation as regards the defendant’s precise intention.

I was unimpressed by the evidence of Captain Skarvelis to the effect that he did not consider that the claimant had any right to seek such confirmation, which was somehow “uncontractual” and that he found this sort of email “irritating”. Whatever the strict contractual position (namely, as I have said, that the laydays had not yet expired) I am quite satisfied that the claimant was justified in asking the question given the uncertainty as at the time that the email was sent. If Captain Skarvelis really found the email irritating, I suspect it was not for the reasons he gave, but because the claimant was putting the defendant on the spot at a time when it was increasingly unlikely that the defendant had a buyer for the cargo or could load at least the Bosicor portion of the cargo without a period of delay (during which demurrage at US$20,000 per day would be payable). Even if the irritation was genuine, if the defendant did still intend to load the cargo in Karachi, it would have been the simplest thing in the world for Captain Skarvelis to have vented his spleen by responding to the effect that of course the defendant intended to load the cargo in Karachi but that the claimant should otherwise mind its own business.

He did not respond in that manner and again I found his explanation for not having done so unconvincing. I consider that the truth is that the response he did send was carefully crafted, deliberately avoiding any express reference one way or the other to whether the defendant would load cargo in Karachi. In my judgment, the email he sent was designed, as were his subsequent emails, to engineer a “mutual termination” of the charter on a “drop hands” basis. In commercial terms there is nothing wrong with that goal; the question is whether the words and conduct of the defendant in seeking to achieve that goal amounted to a renunciation of the charterparty.

So far as his first email is concerned, his evidence in his witness statement was that the reference to circumstances beyond the charterers’ control and the possibility of having to declare force majeure was a veiled reference to his suspicion that Glencore was seeking to exploit the defendant’s delay in putting up the letter of credit by securing the cargo itself. Whether this is true or not (and it is fair to say he was not challenged on this in cross-examination) that was not something which was appreciated by Mr Yang or anyone else at the claimant.

Taken overall, I accept Mr Phillips’ submission that this email is equivocal in the sense that it does not state clearly and unequivocally that the defendant cannot or will not perform the charterparty. Furthermore, Mr Yang did not see it as such. In cross-examination he said that he saw this email as the defendant saying that it would probably not be able to perform, which is insufficient to amount to renunciation.

However, in my judgment the second email from Captain Skarvelis sent at 1724 hours Singapore time on 28 August 2008 is a different matter. In circumstances where the claimant had stated that it regarded the first email as a declaration of non-performance, the situation had become very serious, as Captain Skarvelis accepted in evidence. The situation cried out for a clear statement from the defendant that it was ready, willing and able to perform the charterparty. Again, as before, if it had been ready, willing and able to perform, it would have been very easy to state that in terms. Captain Skarvelis’ assertion in cross-examination that it was not necessary to do so because that was the effect of the opening words: “charterers reject owners declaration of non-performance” was unconvincing.

The rest of the email seems to me to be saying not that the defendant will perform the charter but that to mitigate their loss the claimant should agree to the defendant’s proposal for a 45-60 day time charter at US$18,000 a day. This seems to have been a variant of Proposal 2, but unlike when that proposal was made, the defendant was not saying “if we cannot agree this proposal, we will revert to the original charter, which I will then perform”. The statement in the email “if owners really interested in mitigating losses, they will agree to charterers’ proposal” is inconsistent with an intention to perform the charterparty if the proposal was not agreed. Mr Yang said he saw this email as a threat and, in my judgment, he was right to do so.

Furthermore, the statement: “charterers sincerely regret current circumstances” looks like and is an apology for not being able to perform. Captain Skarvelis’ attempt to explain this away as a reference to the claimant trying to put the vessel on subs to Glencore was pure invention which was completely incredible.

Viewed in the overall context of where matters stood on 28 August 2008, to which I have already referred, I consider that this email was renunciatory. Mr Phillips argued that in view of the opening words it could not be viewed as anything other than equivocal, but I do not accept that submission. I consider that those words were hollow words. Captain Skarvelis was not saying “we will perform our obligations under this charter”, but, at best, “we will only perform something different”. A statement that a party will only perform something different from the contract is as capable of amounting to a renunciation as an express statement that a party will not perform the contract: see The Nanfri [1979] AC 757.

To the extent that Mr Yang’s subjective state of mind about the email is relevant, I consider that, contrary to Mr Phillips’ submission, Mr Yang did see the email as a renunciation. On the first day of his evidence, when it was put to him that the email was an indication that the defendant was still intent on performing the fixture, he said it was a totally different proposal, that he didn’t think that the defendant was saying it would perform the charterparty if the parties couldn’t agree something else and that he had lost confidence in the defendant. When he resumed his evidence on the second day, he repeated that he had lost confidence in the defendant and then said, very clearly, that when he received this email, he thought the defendant was not going to perform. When taxed further by Mr Phillips, he said again that this was a message that the defendant was not going to perform. It was offering totally different contracts.

Thus in my judgment, whether viewed objectively from the position of a reasonable person in the position of the claimant or subjectively from what Mr Yang thought, the email at 17.24 hours on 28 August 2008 was a renunciation of the charterparty entitling the claimant to terminate. However, even if that conclusion were wrong, matters did not rest there. In particular, soon after this email was received, Sky Kim received the phone call from Mr Hermon (clearly passing on what he had been told by Mr Karamanos) saying that the defendant had lost its buyer and would be unable to proceed with the charterparty, a message which Mr Kim relayed to Mr Yang. In my judgment that was a clear express renunciation of the charterparty.

Mr Phillips sought to make much of the covering advice from Mr Hoyes when he sent the claimant the draft of the message to send to the defendant, in which Mr Hoyes refers to the defendant’s emails as ambiguous (specifically by virtue of the rejection of the declaration of non-performance). It was argued that this demonstrated how a reasonable person in the position of the claimant would have regarded the defendant’s words and conduct as ambiguous or equivocal, fatal to any case of renunciation. This was an obvious forensic point, but in my judgment does not take matters very far. As one would expect from a solicitor experienced in this field, Mr Hoyes was no doubt being cautious, anxious that his client should not “jump too soon” and find that any termination was wrongful. Also, he had clearly had limited time to review the matter and may not have been aware of all the circumstances, specifically the telephone conversation between Mr Hermon and Sky Kim. In any event, ultimately, Mr Hoyes’ subjective opinion, however reasonably held, is not the test. The test is how the court considers, objectively, a reasonable person in the position of the claimant would have viewed the defendant’s words and conduct.

Furthermore, the evidence which Mr Yang gave about his reaction to Mr Hoyes’ email was telling, since it too demonstrated that before seeing it, he had believed that the defendant had renounced the charterparty. When Mr Phillips put to him again, in the context of the email from Mr Hoyes, that at best he was unsure whether the defendant was saying it would or would not perform, contrary to Mr Phillips’ submission in his written closing note, Mr Yang did not accept that proposition in relation to his state of mind. Rather, whilst accepting that Mr Hoyes’ message said what it said, he then continued: “but I was informed by telephone what was going on on charterers’ side and I believed that the charterer will not be able to perform the contract after the message” (clearly a reference to the telephone conversation between Mr Hermon and Sky Kim on the evening of 28 August 2008 and to the second email from Captain Skarvelis which preceded it).

Mr Yang went on to say that he had put the vessel on subs with Glencore with the belief that the defendant was not going to perform, but when he saw the message from the lawyer he worried about his decision. Mr Phillips submitted that the decision being referred to was a decision that he did not want to be in a contract with the defendant or would prefer to be in a contract with Glencore. I do not accept that. It seems to me that the correct sense of what Mr Yang was saying was that after the second Skarvelis email and the telephone conversation, he believed the defendant was not going to perform and accordingly put the vessel on subs with Glencore. However, when Mr Yang saw Mr Hoyes’ view in his email that the defendant’s messages were ambiguous, Mr Yang worried about whether his view that the defendant had indicated it was not going to perform was right or not. None of that affects the fact that, at the time of the second email and when informed of the telephone conversation between Mr Hermon and Sky Kim, he had thought that the defendant was saying it was not going to perform.

Once the confusion had been cleared up about Mr Hoyes and his email and Captain Skarvelis had received the emails, which gave the defendant initially until 09.00 hours and then until 15.00 hours Singapore time on 29 August 2008, (which he received from Mr Hermon without Mr Hoyes’ advice at 02.10 hours Singapore time and then again with the extended time for response soon after 10.36 hours Singapore time), it was perfectly obvious that the claimant was giving the defendant a last chance to state clearly and unequivocally that it would perform the charterparty. Although the timescale was tight and it was the middle of the night in New York, Captain Skarvelis was aware of the message and was sending emails. As with the earlier messages from the claimant asking for confirmation that the defendant intended to perform, if the defendant had been ready, willing and able to perform, it would have been a very straightforward thing to confirm this, however irritating Captain Skarvelis found the claimant’s emails.

However there was in effect a refusal on the part of the defendant to provide that confirmation. Mr Phillips submitted that silence would not suffice for renunciation, because it is equivocal. I do not accept that submission, as it seems to me it must depend on the context. Renunciation may be by words or conduct and where one party is seeking confirmation that the other will perform, a failure to give the confirmation may be renunciatory, especially if, as in the present case, it is preceded by other conduct which is renunciatory.

In any event, in truth this was not a case of silence, since in fact Captain Skarvelis sent his email at 10.35 hours Singapore time in full knowledge of the confirmation the claimant was seeking and his further email at 12.50 hours Singapore time in purported response to the claimant’s email seeking confirmation. Although he would not accept this in cross-examination, it is perfectly clear what he was seeking to achieve by those emails. Rather than provide the confirmation sought (because by this stage the defendant would have had difficulties performing the charter, a matter to which I return below), by referring to the claimant having put the vessel on subs and to tortious interference obviously a reference to Glencore, he was trying to embarrass the claimant into agreeing a mutual termination of the charterparty, with no liability on the defendant for damages. This was what he had been seeking to achieve consistently since the first email at 15.29 hours Singapore time the previous day. However, in my judgment the tactic backfired, because the failure to provide the confirmation the claimant was seeking was further renunciatory conduct on the part of the defendant.

I also accept Miss Hopkins’ submission that the claimant’s case on renunciation is supported by evidence that by 28 August 2008, the defendant did not in fact want to perform the charterparty. For whatever reason it had not put up the letter of credit for the PRL parcel, so that the vessel was still at the outer anchorage. There were unresolved problems with Bosicor, to such an extent that there was no binding obligation on Bosicor to supply cargo and those problems could probably not be resolved without a substantial delay, during which time the defendant would be incurring demurrage at US$20,000 a day. Although Mr Misulovin was not prepared to accept this, I suspect that shipping the PRL cargo alone on the vessel would not have been attractive to the defendant economically, which is presumably why it had sought the Bosicor parcel as top up cargo in the first place.

In addition to problems at the supply end, as at 28 August 2008, the defendant did not have a buyer for the naphtha. For whatever reason, the contract with Delta had fallen through which is why the defendant had been seeking another buyer, but although there were some expressions of interest, they seem to have come to nothing. The possible agreement with ETA Star was not definite and, in any event, that was not for the carriage of this cargo of naphtha from Karachi. It related to the carriage of completely different cargo from India to Africa. To use this vessel to fulfil such a deal would have involved a completely different charterparty. The defendant had been looking for a time charter, but that would necessitate the agreement of the claimant to sub-letting, which had not been forthcoming. All in all, it seems the defendant was running out of options in terms of performing this charter.

Accordingly, I have concluded that, having regard to all the circumstances and the communications between the parties, at the time that the claimant terminated the charterparty on 29 August 2008, the defendant by its words and conduct had evinced an intention not to perform the charterparty, in a manner which a reasonable person in the position of the claimant would have regarded as clear, unequivocal and absolute. The claimant was entitled to accept that renunciation as a repudiatory breach and terminate the charterparty.

Since I have concluded that there was a renunciation, I can deal with the alternative case of impossibility quite shortly. The difficulty with treating impossibility as an anticipatory breach before the time for performance has arrived was identified by Devlin J in Citati at 436-7 in the passage I have quoted above. What the claimant would have to show to establish an anticipatory breach through impossibility of performance was made clear by Devlin J later in the judgment at 446:

“if the owner can establish that in the words of Lord Sumner [in British & Beningtons Ltd v NW Cachar Tea Co [1923] AC 48 at 70] the charterer had on July 18 [the date when the owner purported to terminate] become “wholly and finally disabled” from finding a cargo and loading it before delay frustrated the venture, he is entitled to succeed.”

I agree with Mr Phillips that the claimant can come nowhere near showing anything of the kind. Quite apart from the fact that the freight was a lump sum freight and the defendant had an option under Part I clause E of the charterparty to load up to full cargo, so that technically, the defendant was not obliged to load any cargo at all, there is nothing in the materials before the court to suggest that the defendant could not have loaded at least the PRL cargo within a non-frustrating time. The only problem seems to have been that the defendant had been slow in putting up the letter of credit, but once it had done so, there is no reason to suppose that PRL would not have called the vessel into berth and loaded the cargo. There might have been some delay (during which time the claimant would have earned demurrage) but there is nothing to suggest such delay would have been so long as to frustrate the venture. That is a complete answer to the impossibility case.

The submission advanced on behalf of the defendant that the claimant had failed to mitigate its loss by not agreeing either Proposal 1 or Proposal 2 was not pursued in closing, in my judgment quite rightly, since the duty to mitigate a loss suffered as a consequence of a breach of contract cannot arise until the breach has occurred.

Rather, what was submitted on behalf of the defendant in closing was that the claimant had failed to mitigate its loss by not approaching the defendant after termination and seeking to agree either Proposal 1 or Proposal 2, rather than doing what it in fact did, which was to await a prompt cargo, in the form of the fixture with Vitol in fact entered. There are two answers to this point. First, as Mr Yang said, the claimant had lost confidence in the defendant, understandably in the circumstances. The suggestion that the claimant failed to mitigate by not re-approaching someone who had just renounced their original contract with a view to entering a new contract is a surprising one. In mitigating its loss the claimant only has to act reasonably and in my judgment, there was nothing unreasonable in not re-approaching the defendant.

Second, there is no evidence that if the claimant had re-approached the defendant, the defendant would have been able to perform Proposal 1 or Proposal 2, any more than it had performed the original charterparty. Proposal 1 seems to have vanished into thin air after the claimant offered indicative rates of freight and hire and the defendant was unwilling to accept the claimant’s hire rate of US$20,500 per day for Proposal 2, which was in any event pretty speculative. In this context, it is striking that the defendant itself did not approach the claimant after termination and suggest the revival of either proposal.

In the circumstances, there is no question of the claimant having failed to mitigate its loss.

As stated above, the only issue on the quantum of the claim concerns the costs of the vessel’s diversion to Jamnagar in India where she took on fresh water and undertook her annual class survey. According to Mr Yang, the claimant had originally intended to take on fresh water on berthing at Karachi. Of course with the termination of the charterparty, she did not berth. She proceeded to Jamnagar which was the nearest port at which she could take on fresh water. The defendant alleges that the vessel should have taken on water by barge at the outer anchorage at Karachi or used the vessel’s freshwater generator to generate fresh water whilst she was steaming.

So far as the first point is concerned, the claimant asked the agent GAC on 1 September 2008 whether the vessel could take on fresh water around the area of the pilot station. Captain Ali of GAC replied that unfortunately barges did not go outside the breakwater to supply bunkers or fresh water. After the defendant had obtained some documentary evidence that it was possible to take on bunkers at the outer anchorage, the claimant recently obtained clarification from GAC that between 15 May and 15 September, the monsoon season, barges are prohibited by the port authority from supplying fresh water at the outer anchorage. Information to the same effect was obtained from Wilhelmsen Ships Service (Pvt) Limited in Karachi.

So far as using the fresh water generator is concerned, Mr Yang said it could not be used unless the vessel was steaming. In cross-examination he said that the vessel could only generate fresh water when proceeding at full speed. I rather doubt that it would have been prudent to leave all supplies to the fresh water generator when she was at full speed and in all the circumstances, it seems to me that the call at Jamnagar to take on fresh water was a reasonable one and the costs of doing so are recoverable as damages. It follows that the claim succeeds in the amount of US$702,297.

It necessarily follows that the counterclaim must fail. However even if the termination of the charterparty by the claimant had been wrongful, I am far from satisfied that, apart from the forfeiture by PRL of the US$50,000 performance bond, the defendant has suffered any loss. The counterclaim is otherwise based on loss of profit from the sale to Delta. Since, as I have found, that sale had fallen through before the charterparty was terminated, any counterclaim on that basis is unsustainable. The defendant has not advanced the counterclaim on the basis of an onwards sale to some other buyer, not surprisingly since no such sale had been effected when the charterparty was terminated.