Kingsway Shipping Co Ltd v Stx Gulf Shipping DMCCO, Re YONG JIN

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

“Dear Captain

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

I shall refer to this email as the Guarantee.

The charterparty chain was as follows:

The Claimant’s case is that the Guarantee contained a contract of indemnity whereby STX agreed for valuable consideration to indemnify Kingsway against any damage caused by the Vessel loading a cargo quantity commensurate with arrival drafts of 13.3m. STX’s case is that the Guarantee, as with all other communications by STX with the Master, was sent to the Master in his capacity as representative and agent of Victory, who were STX’s contractual counterparty as the disponent owners under the sub-charter. STX say not only that the Guarantee was given to Victory, not to Kingsway, but also that the Guarantee did no more than confirm or repeat to Victory, through the Master, that STX would comply with the safe port warranty already contained in the sub-charter.

These are the issues which Kingsway seeks to have determined by way of summary judgment on this application. STX also contends, in the alternative, that on its true construction the Guarantee did not involve STX assuming responsibility for (a) the negligence of the Vessel, her Master, crew and/or pilot and/or (b) any loss or damage which could have been avoided by good navigation and seamanship. That is not an issue which arises on the present application.

The principles to be applied in determining whether or not to give summary judgment under CPR Part 24 are not controversial. They were summarised in paragraph 10 of the judgment of the Chancellor in Ardagh Group SA v Pillar Property Limited [2012] EWHC3649 (Ch). Those which are pertinent on the present application are the following:

“(1)

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

(2)

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

…

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

(6)

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

Initially Mr Sarll on behalf of Kingsway put the application for summary judgment on two bases. The first was that as a matter of objective construction of what he identified as the critical 27 email exchanges, the Guarantee purported to be given by STX to the Master, and accepted by him, in his capacity as representative and agent of Kingsway. The second was that the Master had authority to do so for Kingsway, but not for Victory. At the hearing he accepted for the purposes of the present application that there was a triable issue as to whether the Master had the relevant authority on behalf of Victory. This was realistic, not least because although some documents emanating from Victory were obtained by Kingsway and put in evidence, the full extent of the exchanges between Kingsway, the Master and Victory were not before me.

Although there were some telephone conversations directly between STX and the Master, nothing is said to turn on the content of those conversations and the important communications were all conducted by email. The court is therefore as well placed now as it will be at trial to reach a conclusion on the basis of that written correspondence as to whether the Guarantee was given to, and accepted by, the Master purporting to act as representative or agent of Kingsway. Although there was no formal cross application for summary judgment from STX, Mr Thomas QC submitted on behalf of STX that if the issue was capable of being determined solely upon a construction of the written communications, it should be determined in STX’s favour with the result that the claim should be dismissed. Mr Thomas QC further submitted that if this issue were resolved in Kingsway’s favour, there were additional triable issues:

The first and main issue on the application for summary judgment is therefore one of construction of the email exchanges.

By an email at 1546 on 17 November 2011 from Mr Kumar of STX to the Master of the vessel, Mr Kumar welcomed the Master to “our time charter” and said that “we [STX] will operate your good vessel during the currency of this charterarty”. The email gave brief details of the sub-charter between Victory and STX and notified details of the sub-sub charter. It then set out at length the standard operational instructions which STX required in relation to the giving of notices etc. It was copied via brokers to Victory. In communicating in this way directly with the Master, STX would not have been understood as intending to conflate the contractual chain of charterparties. As Mr Kumar explains, such direct communications with the Master by a sub-charterer are common industry practice when a chain of charterparties is involved and provide a simple short cut to save time. Mr Thomas QC submitted that these instructions were to be understood as being given to the Master in his capacity as a representative of Victory, and Mr Sarll accepted that that was so (notwithstanding that under clause 8 of the NYPE form the owner confers a right on the charterer to give employment instructions to the Master rather than the owner). The text of the instructions to the Master was copied by STX in a separate email to the sub charter brokers, Merit Maritime, with a request that it be forwarded to “owners” (i.e. Victory) for their reference.

On 18 November 2011 the Master emailed STX, with a copy to Victory and to Kingsway, with a stowage plan for a total of 64,945 mt of cargo as the maximum loadable quantity consistent with a safe draft at the discharge port of 12.6m. Again the direct communication was for operational reasons without intending to conflate the charterparty relationships. It would operate as a notification by Kingsway to Victory and by Victory to STX. To that extent the Master purported to be acting as representative or agent for Victory vis a vis STX.

On the evening of 19 November 2011 Mr Kumar emailed the Master asking him to advise the maximum loadable quantity with a pre-stowage plan on the basis of a 13.3m maximum draft at discharge port at high water. This direct communication was again an operational shortcut of what the parties understood to be a communication having effect under the dual legal relationships of the head charter and sub charter. STX was requesting the Master to provide the loadable quantity on behalf of Victory under the sub-charter.

It is against this background that the critical exchanges fall to be interpreted. In doing so I keep in mind that what is legitimately available to assist in the process of interpretation is only that which was reasonably available to the parties. It is therefore necessary to exclude communications which were not known to, or available to, one or other of STX and Kingsway. For this reason a number of the communications between Kingsway and Victory upon which Mr Sarll placed reliance are irrelevant. STX did not know the extent or content of communications between Victory, Kingsway and the Master, save when STX was copied in. In any event it would be inappropriate to place reliance on such communications on this summary judgment application when the full extent of those communications may not be before the court.

I will set out the critical exchanges in numbered sub paragraphs for ease of subsequent reference.

Email (1) came against the background of a dialogue between the Master and STX about the quantity of cargo to be loaded. It was common ground between the parties that in that dialogue the Master was communicating with STX in the capacity of a representative of Victory. In email (1) the Master sought a guarantee to be given to “us” as the quid pro quo for complying with STX’s instructions to load a larger quantity of cargo. If, as is accepted, those instructions were given by STX to the Master in his capacity as representative of Victory, the natural interpretation of email (1) is that the Master was seeking the guarantee in the same capacity and that the reference to “us” is to Victory so far as the request was addressed to STX. Mr Sarll argued that the Master must have been purporting to act for Kingsway, not Victory, for essentially two reasons. First he submitted that owners are not ordinarily entitled to ask for such an indemnity from their charterers. I disagree. There was a dispute as to whether STX were entitled to give the loading instructions to Victory and there would be nothing unusual in the parties to a charterparty resolving such dispute by a letter of guarantee. Parties to a charterparty not uncommonly use separate guarantees or indemnities to vary or clarify their rights and obligations. Letters of indemnity from charterers to owners to enable cargo to be released without production of bills of lading are an obvious example. Secondly Mr Sarll submitted that the Master would be expected to be seeking to protect his employers, the head owners, and there was no automatic back to back arrangement implicit in the Master’s request. I agree that email (1) would be interpreted as the Master seeking protection for his employers, the head owners, but it is implicit that he was doing so on Kingsway’s behalf under the head charter, as well as on Victory’s behalf under the sub-charter. Victory was copied in to the request. It was made directly to STX because Victory as an intermediate time charterer had no commercial interest in the quantity of cargo loaded; but that did not alter the charterparty chain of rights and obligations of which all were aware. STX might expect Victory to adopt, vis a vis head owners, whatever guarantee it, STX, was prepared to give to Victory (absent any concern over credit risk), but was not privy to all the communications between the Master/Kingsway and Victory.

I am therefore unable to treat email (1) as changing the agreed capacity in which the Master had been communicating with STX on the subject of the quantity of cargo to be loaded. The request from the Master came against the background of a conversation on the subject in which the accepted position of the parties is that the Master was purporting to act as a representative of Victory vis a vis STX. There is nothing in email (1) to suggest a change in such capacity. On the contrary, the natural inference is that his capacity was the same in this continued dialogue on the same subject.

The subsequent emails are all consistent with the Master communicating and being addressed in that same capacity, and in some respects reinforce that analysis. Email (2) has STX threatening a claim against “owners” if the Vessel refuses to load the greater quantity instructed by STX, which can only be the threat of a claim against Victory, not Kingsway.

Email (3) refers to email (2) coming from sub-charterers. It asks Victory for its opinion, thereby recognising the legal relationships in the charterparty chain whilst addressing the substance of the issue directly with STX for operational convenience.

The first version of the guarantee at email (4) was addressed to the Master, but copied to Victory and Kingsway. Had the debate become one solely between Kingsway and STX, as Kingsway contends, there would have been no need to copy in Victory.

Emails (5) and (6) dealing with the NOR were communications from the Master in his capacity as representative of STX under the sub-sub-charter. They emphasize that the Master was acting in a number of different capacities in his exchanges about how much cargo was to be loaded, all of them prima facie to be interpreted by reference to the contractual chain of charterparties.

Email (7) was sent through the broking chain, suggesting that STX were looking to Victory to treat the first guarantee as sufficient and expecting Victory to adopt that position vis a vis Kingsway. Again the threat to claim losses from owners can only be a reference to a claim by STX against Victory. It is in the context of such a claim that the first form of guarantee is said to be sufficient. The natural inference is that the guarantee is in Victory’s favour.

Email (9), containing the second form of guarantee proffered by STX was sent to the Master but copied to the brokers Merit Maritime for onward delivery to “Owners”. This was a formal communication through the broking chain addressing the guarantee to Victory. Again it suggests that the guarantee is being treated as being given in accordance with the legal relationships in the charterparty chain.

Emails (10), (11) and (12), in which the final form of the Guarantee was sought by the Master, given to the Master, and accepted by the Master were each copied to Victory. Again this recognises the legal relationships in the charterparty chain and would have been unnecessary if Kingsway were correct in its contention that the guarantee was a matter directly between STX and head owners. STX was not concerned with the rights and obligations between Victory and head owners, which it would not know, and STX could assume that so far as Kingsway and Victory were concerned they had communicated so that such rights and obligations were regulated to their mutual satisfaction. STX was concerned with its own right to have a larger quantity of cargo loaded, and that was a right which lay solely against Victory, not against the head owners. By giving the Guarantee STX had resolved a dispute with Victory, not with head owners.

For these reasons I conclude that the Guarantee purported to be given to, and accepted by, Victory, not Kingsway or whichever head owners Mr Kumar thought were involved. STX sent the Guarantee to the Master in that capacity, and the Master was purporting to act in that capacity when he communicated to STX his acceptance of it.

Accordingly the application for summary judgment is dismissed and Kingsway’s claim in this action must fail.