Rolls Building
7 Rolls Building
Fetter Lane
London, EC4A 1NL
Before:
THE HONOURABLE MR JUSTICE FLAUX
Between:
HELLENIC PETROLEUM CYPRUS LIMITED | Claimant |
(Respondent in the Arbitration) | |
- and - | |
PREMIER MARITIME LIMITED | Defendant |
(Claimant in the Arbitration)
Mr Ben Valentin (instructed by Hogan Lovells International LLP) for the Claimant
Mr Matthew Weiniger QC (instructed by Herbert Smith Freehills) for the Defendant
Hearing dates: 9th-11th and 15th June 2015
Judgment
The Honourable Mr Justice Flaux:
Introduction and background
By an arbitration claim form dated 15 July 2014, the claimant (to which I will refer as “Hellenic”) applies pursuant to section 67 of the Arbitration Act 1996 to set aside the Award of the sole arbitrator Mr Mark Hamsher dated 4 June 2014 in favour of the defendant (to which I will refer as “Premier”). The ground for the application is that the arbitrator had no substantive jurisdiction to make the Award.
The arbitration concerned a claim by Premier for damages for alleged repudiation by Hellenic of a long-term charterparty allegedly agreed in September 2010. Between March and September 2010, Hellenic had chartered Premier’s LPG tanker NAVIGAS 1 (“the vessel”). Hellenic’s case was that this was a hybrid arrangement on an interim basis which was not a time charter as such because it was of no defined duration, albeit that a daily hire rate of U.S. $3,711 was agreed. Premier’s case (at least as put forward by its witnesses before me) was that the charter was a time charter for a year, alternatively for an indefinite duration. It will be necessary to make findings about the nature of that original arrangement between the parties but, for the present, all that needs to be noted is that it is common ground that its terms did not include any form of arbitration clause.
The central dispute before the arbitrator (and indeed before the Court) was whether, as Premier contended: (i) by a meeting and subsequent telephone call on 24 September 2010, the parties had reached agreement on a new two and a half year time charter; (ii) by subsequent words and conduct, Hellenic had agreed the terms of that charter, as set out in a draft sent by Premier to Hellenic on 28 September 2010, including a London arbitration clause. Hellenic’s case was that there was no such agreement (either to the two and a half year charter or to the arbitration clause) either at the meeting or subsequently, but that the previous interim arrangement continued until redelivery of the vessel in April 2011. After redelivery, Premier initiated arbitration against Hellenic relying on the London arbitration clause and alleging repudiatory breach by Hellenic of the two and a half year time charter.
The arbitrator found that he had jurisdiction to determine Premier’s claim on the basis that the parties had agreed the London arbitration clause. Although it was (and is) common ground that the arbitration clause was not mentioned, let alone agreed at the meeting or in the telephone call on 24 September 2010, the arbitrator found that Hellenic had agreed it, not having expressly rejected it or put forward any alternative jurisdiction or arbitration clause. Hellenic had reserved its position as to jurisdiction before the arbitrator, but he went on to determine the dispute on the merits and awarded Premier U.S. $672,685 plus interest and costs.
By the current application, Hellenic challenges the Award on the grounds that it never agreed the terms of the draft time charter, including the London arbitration clause, and so the arbitrator lacked substantive jurisdiction.
Principles applicable on section 67 application
It is common ground that a challenge under section 67 of the Arbitration Act involves a complete re-hearing: see per Rix J in Azov v Baltic Shipping [1999] 1 Lloyd’s Rep 68 at 70 and per Gross J in Electrosteel Castings Ltd v Scan-Trans Shipping [2003] 1 Lloyd’s Rep 190 at [22]-[23], where the learned judge also held that on the re-hearing the Court is not limited to the evidence which was adduced before the arbitrator.
Given that it is a re-hearing at which the Court hears the evidence afresh and reaches its own decision as to whether the arbitrator had jurisdiction, the Court is not in any sense bound by what the arbitrator has decided, either on the facts or as to the law. As Lord Mance JSC said at [30] of his judgment in Dallah Real Estate v Ministry of Religious Affairs of Pakistan [2010] UKSC 46; [2011] 1 AC 763 in relation to an analogous application challenging enforcement of an arbitration Award on the grounds that: “the arbitration agreement was not valid…under the laws of the country where the award was made” within section 103(2)(b) of the Arbitration Act:
“The nature of the present exercise is, in my opinion, also unaffected where an arbitral tribunal has either assumed or, after full deliberation, concluded that it had jurisdiction. There is in law no distinction between these situations. The tribunal's own view of its jurisdiction has no legal or evidential value, when the issue is whether the tribunal had any legitimate authority in relation to the Government at all. This is so however full was the evidence before it and however carefully deliberated was its conclusion.”
Lord Mance went on at [31] to add:
“This is not to say that a court seised of an issue under Article V(1)(a) and s.103(2)(b) will not examine, both carefully and with interest, the reasoning and conclusion of an arbitral tribunal which has undertaken a similar examination. Courts welcome useful assistance. The correct position is well-summarised by the following paragraph which I quote from the Government's written case:
‘233. Under s.103(2)(b) of the 1996 Act / Art V.1(a) NYC, when the issue is initial consent to arbitration, the Court must determine for itself whether or not the objecting party actually consented. The objecting party has the burden of proof, which it may seek to discharge as it sees fit. In making its determination, the Court may have regard to the reasoning and findings of the alleged arbitral tribunal, if they are helpful, but it is neither bound nor restricted by them.’”
Mr Matthew Weiniger QC on behalf of Premier urged me to adopt the same approach to the witnesses who gave evidence before both the arbitrator and the Court as I adopted in the recent decision of OMV Petrom v Glencore International [2015] EWHC 666 (Comm) at [42]. However, that case concerned the evidence of a witness who had died since the arbitration and how to approach his credibility where another witness had given evidence before both the tribunal and the Court and I had formed the same favourable view of that witness as had the arbitrators. In those circumstances, I held:
“Unfortunately, since the arbitration, Mr Bacila has died. In the circumstances, Petrom served a Civil Evidence Act notice in respect of his two witness statements in the arbitration and the transcript of his oral evidence on 6 May 2005. Although I have not been able to assess his veracity for myself, I consider that the fact that the arbitrators accepted his evidence (together with the fact that I found Mr Iancu, whom I was able to assess, a truthful witness) means that I too should accept Mr Bacila’s evidence…”
In my judgment, the position is different here, both because I have been able to assess for myself the credibility of all the witnesses who gave evidence before the arbitrator, as they have also given evidence before me and because, as appears in the next section of the judgment, in a number of critical respects, I have formed a different view as to the credibility of certain witnesses than the view which the arbitrator evidently formed. It is also apparent that the cross-examination, particularly of Premier’s witnesses, was much more searching before the Court than it had been before the arbitrator. Neither counsel in the hearing before me acted before the arbitrator. In those circumstances, I have not found the arbitrator’s assessment of the witnesses of any real assistance and have formed my own view of their demeanour and credibility.
The witness evidence
Before making my detailed findings of fact, I propose to set out the view I formed of each of the witnesses. Hellenic called two witnesses. Its principal witness was Mr Antonis Semelides, who at the time was the Supply and Logistics Manager of Hellenic. I formed a favourable view of Mr Semelides, whom I considered an honest and fair witness. His evidence before me was consistent with his evidence in the arbitration, both in his witness statements and in cross-examination and was consistent both with most of the contemporaneous documents and with the commercial common sense of the situation, which I describe in more detail below. He was evidently endeavouring to assist the Court and did not seek to speculate or to embellish his evidence. Where his evidence differed from that of Premier’s witnesses, principally in this context, Mr Zakos, I preferred the evidence of Mr Semelides.
The other witness called by Hellenic was Mr Akis Pegasiou, the Chairman and Managing Director. He attended the meeting on 24 September 2010 and confirmed Mr Semelides’ evidence about the meeting. In the event, his evidence was not seriously challenged in cross-examination. I formed the view that he too was an honest witness, trying his best to assist the Court and his evidence was both consistent with what he had said in his evidence in the arbitration and accorded with commercial common sense.
The principal witness for Premier was Mr Zacharias Zakos. In contrast to Mr Semelides and Mr Pegasiou, he was not a satisfactory witness. He did not answer a number of questions asked and had a tendency to repeat points he wanted to make which were sometimes not responsive to the question asked. Some of his evidence, for example as to the reasons for sending the BPVoy 4 form recaps, was thoroughly implausible. He also gave evidence which was on occasions inconsistent with evidence he had given in the arbitration. For example whilst he had accepted in the arbitration that the original interim arrangement was of indefinite duration, in cross-examination before me he sought to maintain that what had been agreed was a one year time charter, a piece of evidence which on analysis was unsustainable. In relation to some of his evidence, regrettably I formed the view that he was inventing the evidence. Two particularly striking examples were (i) his suggestion for the first time in cross-examination that it was Mr Semelides who had drafted the recaps in every case and sent them to him and that he, Mr Zakos, had just sent them back and (ii) his suggestion that Premier’s lawyer, Mr Elias Imad, had made a mistake in his draft of the email for Mr Zakos to send Mr Semelides on 5 November 2010. In the circumstances, I had considerable doubts as to his credibility and, where his evidence differed in critical respects from that of Mr Semelides and Mr Pegasiou, I preferred their evidence.
The other main witness for Premier was Mr Adamos Seraphides, a director and shareholder of Premier and of AS & GG Partners Limited (“AS & GG”). Whilst his evidence was more impressive than that of Mr Zakos, there were a number of respects in which I considered it implausible and unreliable, specifically: (i) his attempt, like Mr Zakos, to row back from the evidence given by the Premier witnesses at the arbitration that the interim arrangement was of indefinite duration by suggesting that it was a one year rolling contract; and (ii) his suggestion, supporting the evidence given by Mr Zakos, that Mr Imad had made a mistake in the draft email of 5 November 2010 and that he had not discussed the email with Mr Zakos before it was sent out. Where his evidence (for example as to what occurred at the 24 September 2010 meeting) differed from the evidence of Mr Semelides and Mr Pegasiou, I preferred their evidence.
The other witness for Premier was Mr Gregoris Gregoriou, the “GG” of AS & GG. He was not at the critical meeting of 24 September 2010, so that his evidence was of limited importance. In one respect I found his oral evidence unconvincing, that is his attempt to explain away his negotiations to sell the vessel in April 2010. As with the other Premier witnesses, where his evidence differed from that of Mr Semelides and Mr Pegasiou, I preferred their evidence.
Detailed chronology of events
Initial discussions between the parties
On 25 February 2009 a joint venture agreement was entered between AS & GG, Soboh Petroleum Cyprus Limited (“Soboh”) and Demetra Oil & Gas Investments Limited (“Demetra”). Its purpose was to conduct the business of physical supply of bunkers in Cyprus and the trade in and transport of liquid petroleum gas (“LPG”) for which there was perceived as being an increasing market in Cyprus and neighbouring countries, including potentially Syria. Premier was incorporated in Malta in July 2009 with a view to purchasing a LPG carrier and on 18 August 2009, Premier purchased the vessel. She was a 1983 built vessel of 2,252 gross registered tons and so fairly elderly at the time of her purchase. At that time she was on time charter to Ineos Vinyl UK in use transporting vinyl chloride, but that charter was due to come to an end in January 2010. It is clear that the joint venture and Premier were actively looking from towards the end of 2009 onwards at potential options for the vessel. Despite the reluctance of Premier’s witnesses to accept this, it is quite clear from contemporaneous documents, to which I will refer below, that one option being considered was the sale of the vessel for scrap.
In fact Mr Semelides had first been approached by Navigas Limited (“Navigas”, a company related to entities in the joint venture and of which Mr Zakos was the general manager) in late 2008 before the joint venture was set up, with a proposal to supply Hellenic and Synergas Cooperative Society Limited (“Synergas”) with LPG on a CIF basis. Synergas is a company in the Cooperative Movement group of companies in Cyprus, as is Demetra. Synergas is involved in the supply of LPG in Cyprus. It had annual requirements for 5,500 metric tons of LPG, as against Hellenic’s annual requirement for 18,500 metric tons. Following that initial approach, Mr Semelides met representatives of Navigas Limited, Demetra and Soboh several times during the course of 2009 to discuss this possible agreement.
On 15 December 2009 Mr Zakos sent Mr Semelides a draft contract between Navigas and Hellenic for the supply of 7,000 metric tons of LPG over the next six months. It is interesting that, although it has not been suggested that any agreement had been made, Mr Zakos proceeds in his email on the basis that it is just a question of signature, stating: “Please find attached the final contract as per our previous discussion today. Please advise Nicholas when to proceed with production of the original contracts for signing.” This is indicative perhaps of an over-optimistic or overstated approach to whether a contract has been or is going to be made which is of some significance when one comes to consider the email of 27 September 2010 referred to at [90] below, of which Premier made much in its submissions.
However, this proposed contract did not go ahead, since on 21 December 2009, Mr Dinos Panas, the director of Supply and International Trading for the Hellenic Group, informed Mr Semelides that Hellenic would have a significant surplus of LPG during 2010, so that the contract was not of interest. After that proposal was rejected, in the second half of January 2010, Mr Zakos came up with another proposal, for Hellenic to charter the vessel. Mr Semelides’ evidence was that the proposal was for a one year charter to use the vessel to transport LPG from Greece to Cyprus for the needs of both Hellenic and Synergas. Although Mr Zakos denied in evidence that any long term charter of the vessel by Hellenic was always conditional on Hellenic securing a supply contract with Synergas, I prefer Mr Semelides’ evidence on this point which was that he always made it clear that Hellenic would not enter into any long term commitment unless it had a supply agreement with Synergas and that what was being proposed by Mr Zakos was a deal involving carriage of LPG for the annual needs of both Hellenic and Synergas.
The evidence of Mr Semelides on this point is borne out by his contemporaneous email of 26 January 2010, explaining the proposal to Mr Panas:
“…please note that Navigas is ready to bring their vessel down to the area (so far chartered in the UK) and start deliveries of LPG from Aspropyrgos [the Hellenic terminal in Greece] to Larnaca for HPC and Synergas. The total annual quantities to be transported are about 18,500mt for HPC and 5,500mt for Synergas, a total of 24,000mt. The buyer of the product will still be HPC. The vessel has a capacity of 1,400mt and will be permanently based in Cyprus.
At the initial stages the vessel will not have any other business, but despite that they can offer a freight of about $90/mt, which is nevertheless $20/mt less than M/T Veroniki (750mt). HPC also gets the benefit of additional storage at Synergas LPG terminal. With added business (in Cyprus or elsewhere) the freight will drop even further.”
The VERONIKI was, as the email says, a smaller vessel which Hellenic had previously chartered and, with a supply contract with Synergas the freight rate for the NAVIGAS 1 would be much lower than for that vessel. Mr Semelides said in evidence that, without any Synergas deal, the freight rates would be about the same and that NAVIGAS 1 was marginally faster in steaming time from Greece to Cyprus (48 hours as against 52 hours for VERONIKI), although he accepted that VERONIKI was prone to problems in bad weather. Mr Semelides also accepted that (as he said in an internal email later the same day) the reference to additional storage at Synergas was to additional storage space which Hellenic needed “dearly”. The storage capacity for LPG at Hellenic’s Larnaca terminal was only 900 metric tons.
Mr Panas replied to Mr Semelides the same day:
“This is an interesting number for freight to Cyprus.
I think you should discuss with Mr Kaloritis [also at Hellenic] the possibility of an annual contract with them.
A note of caution though-We need to make sure that we do not commit our companies to anything until (and if) we reach a final contract with them.”
Despite Mr Weiniger QC’s submissions to the contrary, the last paragraph of that email is clearly an instruction not to commit to any long term contract with Premier unless and until Hellenic had a final contract agreed with Synergas and that is certainly how Mr Semelides understood it. I am satisfied that he was always careful in his dealings with Mr Zakos not to commit Hellenic to any long term deal until there was a corresponding supply contract with Synergas.
The vessel was redelivered by Ineos UK on 29 January 2010 and Mr Zakos emailed the managers asking them to instruct the vessel to proceed to Zeebrugge for purging and gassing up of the cargo tanks. This was in anticipation of the vessel being used to carry LPG, but was not indicative of any long term arrangement having already been agreed between Premier and Hellenic. No doubt at the time both parties were optimistic that a deal could be made with Synergas. In fact, on 2 February 2010 Mr Zakos provided Mr Semelides with the name of a person to contact at Synergas, Mr Nicolaides, for the purposes of any agreement between Hellenic and Synergas.
During February and March 2010, Mr Semelides was negotiating with Synergas, principally with the general manager, Mr Soutzis. Mr Semelides’ evidence was that he asked Mr Zakos to help him formulate an attractive proposal for Synergas, that Mr Zakos was facilitating such an agreement and that Mr Zakos was helpful. Although Premier sought to downplay the extent to which Mr Zakos was involved, I consider that Mr Semelides’ evidence summarised fairly Mr Zakos’ involvement. For example on 4 February 2010, Mr Semelides sent Mr Zakos a spreadsheet with an evaluation of the vessel cost. That included a highlighted sentence: “Currently HPC and Synergas have 24,000mt to 25,000mt yearly together”. The spreadsheet then showed how freight rates would come down as the annual quantity transported went up to 26,000, 28,000, 30,000 and 40,000 metric tons respectively. Since Mr Zakos was the general manager of the owners of the vessel, it is scarcely surprising that Mr Semelides should want his input on the vessel running costs and freight rates before finalising a proposal to Synergas. In fact Mr Zakos does not seem to have replied in writing (until he sent the spreadsheet back to Mr Semelides in an unchanged form on 14 May 2010), although there was a meeting between the two of them on 10 February 2010.
Following that meeting, Mr Zakos obtained details of the prices which Synergas had paid for LPG over the previous six months from Mr Soutzis and forwarded them to Mr Semelides under cover of an email dated 11 February 2010 which stated: “Assuming the pricing formula is based on Westmed, please work out what premium was charged”. Mr Semelides responded that they should discuss this over the phone. Then on 13 February 2010 Mr Soutzis provided Mr Zakos with a “full price analysis” for their gas purchases which Mr Zakos forwarded to Mr Semelides on 15 February 2010, saying it included all costs. On 22 February 2010, Mr Semelides forwarded to Mr Zakos a draft contract between Hellenic and Synergas for discussion. I return to that draft later in this judgment, but for the present simply note that the discussion and cooperation during February 2010 between Mr Semelides and Mr Zakos bears out Mr Semelides’ evidence about Mr Zakos’ involvement in the negotiations with Synergas.
The interim arrangement
Both Hellenic and Premier were optimistic that a supply contract with Synergas would be agreed and it was against that background that, during the course of January or February 2010, the parties agreed an interim arrangement under which Hellenic would charter the vessel to transport LPG from its parent company’s refinery in Greece to its own terminal at Larnaca and to act as additional floating storage of LPG at Larnaca. Contrary to the evidence of the Premier witnesses, I am quite satisfied that there was no commitment by Hellenic to charter the vessel for one year or any other period. Rather, as Mr Semelides said, it was a “trip by trip” arrangement, of indefinite duration. Because he had worked at BP in the past and was familiar with the BPVoy 4 form of charterparty, he suggested that that form of charter be used to govern the arrangement.
In fact, what happened was that for each trip when the vessel carried LPG to Larnaca (or occasionally elsewhere) and was then used for storage, Premier/Navigas sent Hellenic a fixture recap incorporating the BPVoy 4 form with amendments. Mr Semelides explained in his evidence that he had originally worked out a lump sum freight of U.S. $125,000 for a trip which he envisaged would be 18 to 20 days (much of which would be spent at Larnaca since the steaming time in each direction was only two days), but because it was not possible to say in advance how many times the vessel would be required to berth and unberth to discharge LPG into the terminal (being used as storage in the meantime), this figure could only be approximate and so Premier would not agree it.
Instead, he and Mr Zakos agreed orally that the payment terms of the BPVoy 4 form (which is obviously a voyage charter form) would be amended to suit the particular circumstances in which Hellenic were going to use the vessel, which were undoubtedly better suited to a time charter arrangement. Thus a daily hire rate of U.S. $3,711 was agreed, and Hellenic was to supply and pay for the bunkers used and all port expenses at loading and discharge ports and agents’ fees. On 22 February 2010, Mr Zakos forwarded bunker prices for the vessel being offered by Bunkernet and asked for Mr Semelides’ urgent approval before ordering. Mr Semelides replied the same day asking Mr Zakos to proceed. The way that the payment terms operated was that at the beginning of each month a hire invoice for hire for that month, stated to be “Charter hire for [the calendar month] (USD 3,711 per day)” was sent by Premier to Hellenic and paid by Hellenic. To that extent, as Mr Semelides essentially accepted in evidence, the arrangement resembled a time charter.
The fixture recap for the first trip was sent by Mr Zakos to Mr Semelides on 5 March 2010. It set out details of the charterers, the owners and the vessel and gave the last three cargoes as vinyl chloride. The itinerary was stated as “eta Aspropyrgos 8 Mar 2010 approx, eta Larnaca 11 Mar 2010 approx.” It gave the cargo as 1,400mt of LPG. It then stated “Laydays 7-8 April 2010” The load range was stated as “One port Aspropyrgos or one port Eleusis” and the discharge range as “One port Larnaca”. There was then a section headed “Financial” which read:
“Freight rate: USD 125,000 Lumpsum
Demurrage: USD 3,711 PDPR
Laytime: 54 hrs SHINC + 6 hours notice per port”
Details were then given of the owners’ bank account for payment and also of the agents at load and discharge ports.
The next section of the recap stated “Charterparty: BPVoy 4 as revised. Various clauses from the standard form were then stated to be deleted as “non applicable”. These were clause 8 (Cargo transfers), clause 12 (Inert Gas System), clause 19B (Crude Oil Washing and Stripping), clause 24 (Maintenance of Cargo Temperature), clause 25 (Cargo Heating), clause 28 (Ice), clause 32 (Address Commission), clause 36 (BP Unique Identifier), clause 37 (USCG Certificate of Financial Responsibility) and clause 42 (New Jason). In relation to clause 15 Agency, the recap stated owners’ agents loadport and charterers’ agents discharge port.
The recap then continued:
“With following additional clauses-mandatory and voyage specific valid where applicable
In addition:
Quay Dues and Charges levied on cargo are to be for charterers’ account.
Owners warrant that the vessel’s closed loading system is in full working order and will be fully operational throughout the duration of this charterparty
Owners warrant that the vessel has full ITF approval
Cleaning to Charterers’ Inspectors’ satisfaction
Owners confirm vessel will comply to IMO/SOLAS/MARPOL/OCIMF/ISGOTT regulations.
Berthing, unberthing and standby tugs for Owners’ account.
Weather Clause
Time lost by the ship due to bad weather including sea conditions to count at 50% as laytime or demurrage if vessel is on demurrage. All unberthing/reberthing time and expenses due to above reasons to be for charterers’ account.”
The attachments to the recap email included the BPVoy 4 form, the BPVoy 4 additional clauses referred to and Gas Form C for the vessel, the Ship Information Questionnaire. Although Mr Zakos said in evidence that Gas Form C was prepared by the shipyard which built the vessel, it cannot have been since the form is a version dated 2002 so it was presumably prepared by the vessel’s previous owners. It is an important document setting out all the technical specifications of the vessel and seems to have taken the place of the Q88 form of standard tanker questionnaire referred to at various places in the BPVoy 4 form, for example on page 3.
The BPVoy 4 form also includes a number of clauses which are clearly pertinent to the safety and seaworthiness of the vessel and the proper care and carriage of the cargo, for example:
“1 CONDITION OF THE VESSEL
Owners shall, before, at the commencement of, and throughout the voyage carried out hereunder, exercise due diligence to make and maintain the Vessel, her tanks, pumps, valves and pipelines tight, staunch, strong, in good order and condition, in every way fit for the voyage and fit to carry the cargo stated in Sections C and D of PART 1, with the Vessel’s machinery, boilers and hull in a fully efficient state, and with a full complement of Master, officers and crew who are fully qualified (as evidenced by internationally recognised certification and, where applicable, endorsements), and are experienced and competent to serve in the capacity for which they are hired. Owners undertake that the Vessel shall be operated in accordance with the recommendations set out in the 1996 Edition of ISGOTT, as amended from time to time.
11 CLEANING OF VESSEL’S TANKS, PUMPS AND PIPELINES
Without prejudice to Clause 1, Owners shall exercise due diligence to ensure that the Vessel presents for loading with her tanks, pumps and pipelines properly cleaned to the satisfaction of any inspector appointed by or on behalf of Charterers and ready for loading the cargo described in Sections C and D of PART 1. Any time used to clean tanks, pumps and pipelines to Charterers’ inspector’s satisfaction shall not count as laytime or, if the Vessel is on demurrage, as demurrage and shall, together with any costs incurred in the foregoing operations, be for Owners’ account.
38 EXCEPTIONS
38.1 The provisions of Articles III (other than Rule 8), IV, IV bis and VIII of the Schedule to the Carriage of Goods by Sea Act, 1971 of the United Kingdom shall apply to this Charter and shall be deemed to be inserted in extenso herein. This Charter shall be deemed to be a contract for the carriage of goods by sea to which the said Articles apply, and Owners shall be entitled to the protection of the said Articles in respect of any claim made hereunder.
38.2 Charterers shall not, unless expressly provided otherwise in this Charter, be responsible for any loss, damage, cost, expense, delay or failure in performance hereunder arising or resulting from Act of God, act of war, hostilities, seizure under legal process, quarantine restrictions, labour disputes or strikes threatened or actual, riots, civil commotions, arrest or restraint of princes, rulers or people.”
The BPVoy 4 form also includes an English law and jurisdiction clause at clause 49:
“49 LAW
The construction, validity and performance of this Charter shall be governed by English law. The High Court in London shall have exclusive jurisdiction over any dispute which may arise out of this charter.”
It can be said with some force that a number of clauses have been left in the BPVoy 4 form which are inapposite to the arrangement between the parties. As I have said, with the payment terms and obligations agreed between the parties, the arrangement had many characteristics of a time charter. The inapposite clauses included, for example, all the clauses about Laytime, Demurrage and Freight (clauses 3 to 7 and 31). Equally, the “Financial” section of the recap (with its reference to Freight, Demurrage and Laytime, although it did include the critical daily rate of U.S. $3,711), the Weather Clause and the reference elsewhere to laydays, make little sense (although in some of the later recaps, such as that of 27 May 2010 the laydays appear to correspond to the time for loading and the time at sea until arrival at Larnaca). On the other hand, in however inadequate a way, the reference to a number of clauses being deleted as non-applicable means that Mr Zakos or someone else within Premier turned his or her mind to the question of what clauses would not be pertinent to the arrangement.
The arbitrator found in [32] of the Award that the recaps:
“had no bearing on and did not govern the relations between the parties [as] was shown by the fact that the recap was a fiction and was known by both parties to be a fiction prepared by the Owners; it was not complied with and was clearly never intended to be complied with.”
His reasons for reaching that conclusion were that (a) he accepted Mr Zakos’ evidence that Mr Semelides had asked for the recaps to be sent because of issues of safety of the cargo and difficulties the charterers would face at loading and discharge ports without evidence of ownership and (b) that in his own extensive experience of more than 25 years in the shipping industry in one capacity or another he had never encountered this sort of “hybrid arrangement”.
In my judgment, that reasoning is defective for a number of reasons. First, although I have tremendous respect for this arbitrator and his experience, hybrid arrangements which have some of the characteristics of a time charter and some of the characteristics of a voyage charter are not unknown and, even if they were, that is not a good reason for the Court or arbitrator not giving effect to the contract which the parties have made. This was a point made by Hobhouse J in The World Symphony [1991] 2 Lloyd’s Rep 251 at 257-8:
“It is also trite to say that any Court should be very careful before it chooses to characterize the bargain of two commercial parties as being unbusinesslike. It will frequently be the case that that epithet is appropriately applied to the arguments of those representing one or other side to a dispute; arguments are sometimes advanced which defy both commercial and legal commonsense. But if on the natural meaning of a given commercial contract the words lead to a certain result it is not for the Court to remake the parties’ bargain to make it conform to what the Court considers to be business commonsense.
It is easy to assume that the categories of contracts that may be made are more limited than in truth they are. In the field of charter-parties it is commonplace that this Court has to consider a whole range of different contractual schemes, not only the classic straight voyage and time charters. Thus there is the time charter trip, being a charter which has the structure of a time charter but the period of which is not defined by reference to the calendar but by reference to the completion of one or more voyages which may be defined precisely or more usually very loosely. The commercial parties are not there deterred, any more than they are under a voyage charter, by the fact that the precise time at which the vessel may become free of the charter is only a matter of estimation and may depend critically on how the charterer chooses to exercise the various rights that he is given under the charter. Another illustration is the consecutive voyage charter where the obligation and right to perform voyages are related in some way to a period of time; such a period of time may be applied to the moment of the commencement of the last voyage or to its completion; the voyages may be round voyages or they may be single voyages.
The variety of contractual structures that can be adopted by charterers and shipowners for any given transaction are as various as the ingenuity of chartering brokers and the ever changing demands of the market may determine. It is not for Courts to fit the parties’ transactions within a strict and limited frame-work which the parties themselves may have not chosen to adopt. Once it has been demonstrated that the parties have chosen to adopt a particular frame-work, then the Court can point out its legal consequences, as did Lord Justice Bingham in the passage that I have quoted from the Hyundai case, where the parties had expressly chosen to reiterate that their contract was a period “time charter”. But to state the consequence first and then argue from that to the nature of the bargain is to put the cart before the horse. (cf the quotation from the arbitrators in The Black Falcon.)”
That decision was upheld in the Court of Appeal ([1992] 2 Lloyd’s Rep 115 where at 117 Lord Donaldson MR said:
“… Mr Justice Hobhouse pointed to the fact that owners and charterers were free to make, and did make, contracts which might not be classic voyage or time charter-parties, but were hybrids and cautioned against Judges attaching too much importance to what they might think was or was not a businesslike contract … . I accept unreservedly that owners and charterers are free to make any contract which in their view meets their commercial needs.”
Second, in my judgment the suggestion made by Mr Zakos in his evidence before the arbitrator, which he repeated before me, that Mr Semelides had required the recaps as proof of ownership or to assist with discharge or with the safety of the cargo, was nonsensical. If Hellenic had needed proof of ownership of its own cargo shipped from its own refinery, that was to be found in the bill of lading in each case. The recaps and the BPVoy 4 form of charter are silent as to ownership of the cargo. The bill of lading was amongst the shipping documents required to accompany the vessel according to the voyage instructions given to Premier, but unsurprisingly, the recap and charter form were not. As for the safety of the cargo, Hellenic might well require the fixture recap and the BPVoy 4 terms, not as some empty formality as the arbitrator concluded, but in order to ensure that there were contractual obligations (such as the clauses quoted at [34] above) imposed on Premier to maintain the vessel and to care for the cargo. The difficulty with the arbitrator’s analysis, which accepted Mr Zakos’ evidence that there was some form of informal oral time charterparty, is that no terms of any such time charterparty, other than as to payment, were ever put forward or agreed. Whilst, on 21 March 2010, Premier’s lawyer Mr Imad sent Mr Zakos a draft time charterparty he had prepared, this was never sent to Hellenic, let alone agreed by it. Accordingly, on this hypothesis, there was a time charter with no agreed terms, other than what was agreed orally about daily hire and other expenses to be borne by Hellenic, which seems inherently unlikely.
Third, the arbitrator does not define what he means by a “fiction”, although his reference to the recap never having been intended to be complied with suggests that he had in mind the concept of a “sham”. The classic definition of a “sham” is that of Diplock LJ in Snook v London and West Riding Investments Limited [1967] 2 QB 786 at 802C-E:
“As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a "sham," it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the "sham" which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co. v. Maclure (1882) 21 Ch. D 309 and Stoneleigh Finance Ltd. v. Phillips, [1965] 2 QB 537) that for acts or documents to be a "sham," with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a "shammer" affect the rights of a party whom he deceived.”
In other words, the concept of a sham has an element of deception which is completely absent here and, in my judgment, there is no basis for the conclusion that the sending of the recaps and BPVoy 4 forms was a fiction or a sham given that (i) as I have said, however inappropriate the recaps and BPVoy 4 form may have been, for what was more akin to a time charter than a voyage charter, there were a number of provisions in those documents which would be needed in any charterparty between the parties; (ii) Mr Zakos or someone else within Premier went to the trouble of deciding which provisions in the BPVoy 4 form to delete. However inadequate that thought process in deleting inappropriate clauses, it is wholly inconsistent with the real intention being that the recap and BPVoy 4 form would have no contractual effect.
It may well be that it was because he appreciated that this exercise of deleting inappropriate clauses was inconsistent with Premier’s case that this was all a sham or fiction that Mr Zakos asserted for the first time in cross-examination that it was Mr Semelides who drafted the recaps in each case and sent them to him and Mr Zakos just sent them back. That evidence was a complete invention. Apart from anything else, if it were true, there would be copies of the recaps passing from Mr Semelides to Mr Zakos, but there are no such documents. All the recaps pass only one way, from Mr Zakos to Mr Semelides.
Mr Semelides’ evidence in cross-examination (which I accept) was that the recaps and the BPVoy 4 terms set out in them and attached to them did set out the terms of the contract between the parties in each case and there was no other contract. Two passages from his evidence make that very clear:
“Okay, what I can confirm is that the payment terms, the payment method has indeed been revised. What I can also confirm is that there are probably 40 other clauses in this document dealing with very important matters of safety of the cargo, of condition of the vessel, compliance with regulations, pollution, oil spill response, compliance with regulations and legislation, all other -- many other important clauses, which govern the contact between Hellenic and Premier. The payment methods and clauses which refer to payment methods were revised, yes.”
“It did set out the contract between us. The only thing we had revised were the financial terms, because of the circumstances, and the circumstances were very particular. It is not common for a vessel to go to a port and not unload at once and wait for a number of days and come back and berth again and then unberth. This was very particular. So given these particularities we had to devise, let's say, to come up with different payment terms. Under a BpVoy4 this is not excluded. If the parties believe that it suits their purposes, they can do it. But of course all the other terms which do not have to do with payment, but they are concerned with the safety of the vessel, the regulations, compliance, personnel, whatever, they are governed by BpVoy4. We cannot load a vessel, we cannot use a vessel without a reference to a contract. There was no other contract in place in front of us rather than this, and we had to make reference to a contract.”
That evidence that the recaps were intended to have contractual effect is borne out by an internal email from Mr Semelides to Mr Tryfonos dated 28 March 2010, sending him the recap for the first trip and stating: “George, please keep the fixture for each trip”. It seems to me that Hellenic would have hardly kept copies of the recaps on file if this was also some fiction or sham required to prove ownership or facilitate discharge.
In all the circumstances, although the use of the recap and BPVoy 4 form might be described as something of a “dog’s breakfast”, I am quite satisfied that they were intended to have contractual effect between the parties and that the recaps and attached form, as amended by the oral agreement as to payment terms, did evidence the contract between the parties for each of the trips carried out from March to September 2010 (and, indeed for reasons I will come to, from September 2010 to March 2011). I am also satisfied that the arrangement was of indefinite duration. At various points in their evidence, Premier’s witnesses sought to suggest that it had been agreed that the contract was for a year or that it was terminable on three months notice, but whilst provisions to that effect were in the draft charterparty prepared by Mr Imad, they were never sent to, let alone agreed by Hellenic. Hellenic had in any event indicated that it would not enter into any long term charter unless and until there was a supply contract with Synergas.
As already noted above, on 22 February 2010, Mr Semelides sent Mr Zakos a copy of a draft agreement with Synergas to be discussed. The draft agreement in the section on “Cost of freight” stated: “As described in clause 5 [which identified Synergas as receiving 500mt of each cargo of 1,400mt carried by the vessel, the balance being for Hellenic’s account] the vessel to be used for the delivery of the LPG mixture to Cyprus will be the M/T Navigas 1. The “seller” has come into a certain type of a time charter agreement with the Ship Owners with duration of one year”. Mr Weiniger QC alighted on that last sentence in support of Premier’s case that the “interim arrangement” was for a one year term and cross-examined Mr Semelides on that basis. However, Mr Semelides’ evidence was that the supply contract would be describing the charterparty that would be entered into once there was a supply contract, not the interim arrangement. I accept that evidence, which is consistent with the other evidence that Hellenic was not prepared to commit to a long term charter unless there was a supply agreement with Synergas.
A further indication that the interim arrangement was of indefinite duration and not a one year time charter, is that one of the options which Premier continued to investigate, even after the interim arrangement was in place, was sale of the vessel. At the time that the charterparty with Ineos UK came to an end, on 27 January 2010, Mr Zakos emailed Mr Ranjan of V Ships Limited, the vessel’s managers saying: “We need to work out the option of chartering out this ship for LPG trade, parallel to the negotiations for the sale of the ship”. Whilst this may have been sent at a time when the interim arrangement had yet to be finalised, it is an indication that Premier did not think it was about to enter a long term time charter and was keeping the option of selling the vessel open. Mr Zakos essentially accepted this in cross-examination. I did not find Mr Seraphides’ evidence, when confronted with this email in cross-examination, that they were not looking to sell the vessel, but Mr Zakos had sent this email in effect to sooth Mr Ranjan because they were about to change managers, at all convincing.
Further evidence that selling the vessel remained an option even after the interim arrangement had been entered appears from some negotiations with a potential buyer of the vessel in April 2010. Not all the negotiations seem to have been disclosed but, on 19 April 2010, through the broker Mr Lygnos, Mr Gregoriou countered firm to an offer buyers had made with a price of U.S. $510 [it is unclear whether this is per gross registered ton or U.S.$510,000] and laycans of 15 May to 15 June 2010, which would have tied in with the end of the second trip under the interim arrangement which was about to be fixed. The buyers then countered firm with U.S. $501 and a cancelling date of 31 May 2010. The brokers told Mr Gregoriou that the price was: “very very attractive here and don’t think buyers can revise even by one dollar”. The buyers granted an extension for reply until 20 April 2010 at 16.00 Greek time, but on 20 April 2010 Mr Gregoriou asked for a further extension until 16.00 the following day: “as one of the shareholders could not attend today’s meeting. An additional meeting is scheduled to take place tomorrow…” The market then fell and the brokers could not obtain more than U.S. $470 so there was no sale.
In cross-examination, Mr Gregoriou sought to explain all this away as him simply testing the market, and said that the reference to one of the shareholders not being able to attend the meeting was not true, but just a way of getting out of further negotiations. I found this attempt to explain away these negotiations unimpressive and unconvincing, and see no reason not to take this email exchange at face value, as genuine negotiations to sell the vessel. However, even if Mr Gregoriou was doing no more than testing the market to see what price the vessel might achieve, the fact that he was doing so is an indication that Premier was interested in selling the vessel at that time. It could hardly have done so if it was committed to a one year charter to Hellenic. I also consider that Mr Seraphides’ attempt to distance himself in cross-examination from any knowledge of a proposed sale, notwithstanding that, as he put it he and Mr Gregoriou were “more than partners”, worked in the same office and spoke every day, was profoundly unconvincing. In my judgment, as businessmen in business together, they would inevitably have discussed any proposal to buy the vessel. Ultimately, for businessmen (especially given that they had not owned a share in a vessel before) the question would be whether a sale of the vessel was financially attractive.
Furthermore, although Mr Seraphides was reluctant to accept this, it seems to me that the thrust of his evidence to the arbitrator was that, at the time the interim arrangement was made, Premier was hopeful that one of its joint venture partners, Soboh Petroleum, would produce business for the vessel transporting LPG to Syria and was content to have the arrangement with Hellenic in the meantime, although the daily rate was low, because it provided employment for the vessel. The fact that Premier was hopeful of business from Syria is a further indication that, at that stage in January/February 2010, there was no commitment to a long term charter with Hellenic.
Since the contract was of indefinite duration, although it had many characteristics of a time charter, it was not a classic time charter for the reason given by Bingham LJ in the passage in Hyundai Merchant Marine v Gesuri Chartering (“The Peonia”) [1991] 1 Lloyd’s 100 at 107 quoted with approval by Hobhouse J in The World Symphony:
“It would seem to me (although challenged by the charterers) that every time charter must have a final terminal date, that is a date by which (in the absence of an exonerating cause) the charterer is contractually obliged to redeliver the vessel. Where the law implies a margin or tolerance beyond an expiry date stipulated in the charter-party, the final terminal date comes at the end of such implied extension. When the parties have agreed in the charter-party on the margin or tolerance to be allowed, the final terminal date comes at the end of such agreed period. But the nature of a time charter is that the charter is for a finite period of time and when the final terminal date arrives the charterer is contractually bound (in the absence of an exonerating cause) to redeliver the vessel to the owner. I shall hereafter use the expression “final terminal date” to mean the final contractual date for redelivery, after the expiry of any margin or tolerance which the parties may agree or the law imply.”
The vessel was scheduled to drydock in December 2010 for her next special survey and for repairs, but it was agreed to advance the drydocking to July 2010. Mr Semelides said this made sense because the winter months were busy given the increased demand for LPG as heating oil in Cyprus in the winter. Hellenic continued to pay the daily rate whilst the vessel was in drydock. Mr Weiniger QC relied upon this as demonstrating that the interim arrangement was a time charter, but whilst there is some force in this submission, it does not seem to me that it changes the hybrid nature of the interim arrangement.
Events between February and September 2010
After Mr Semelides sent the draft supply agreement to Mr Zakos for discussion on 22 February 2010, he then sent him a draft letter to be sent to Synergas, also evidently for discussion. Thereafter, on 23 February 2010, Mr Semelides sent the letter and the draft agreement to Mr Soutzis of Synergas. He followed that up with a further email on 10 March 2010 saying that insurance costs would be borne by Hellenic and also saying the vessel was due to arrive in Larnaca later that week with 1,400mt on board. of which if Synergas wished, they could have 400-500mt. The following day, 11 March 2010, Mr Zakos emailed Mr Semelides to say he had finally managed to speak to Mr Soutzis who would let them know the following morning if he needed any quantity from the vessel. In the event, he did not.
On 18 March 2010, Mr Soutzis replied saying they had examined the agreement thoroughly and concluded that the cooperation could only be established if it met certain criteria which included that the freight and premium should not be more than U.S. $86/mt and that they needed credit terms of 30 days after the end of the invoice month. They were willing to meet to discuss the issues. There was then a meeting between Mr Semelides and Mr Soutzis on 7 April 2010, at which a number of matters were agreed as regards freight and premium, but Mr Soutzis was adamant about the credit terms, (which were the same as the existing terms they had with Petrolina), without which he said the proposal would not pass his board. Later that day, Mr Livadiotis of Hellenic had a phone call from Mr Michaelas of Synergas, who said that Synergas were ready to sign the agreement, but wanted the credit terms they had asked for. Mr Livadiotis said that they would have to pay for the extra credit, which Mr Michaelas said they would most likely accept. Mr Livadiotis pointed out that within a one month plus 30 days credit facility the product they were buying would be at least twice as much compared to one month’s purchases, so Hellenic would require security because it was exposed. Mr Michaelas was not negative and suggested security over Synergas’ land. Internally within Hellenic it was agreed to ask for security of 75% of the credit being granted.
On 21 March 2010, Mr Imad sent to Mr Zakos a draft time charter for a one year period, automatically renewable if the hire rate for the extended period was agreed, with a provision for three months notice of termination after the initial one year period. In his covering email, he apologised for the inordinate delay in getting the draft to Mr Zakos which was due to his being waylaid on other urgent work. This suggests that instructions to draft the charter had been given in February. In evidence, Mr Zakos said this draft was considered by himself and Mr Gregoriou and there was a meeting with Mr Imad to discuss it, with a view to it being sent thereafter to Hellenic for any amendments they had. He accepted that it had never been sent to Hellenic, he claimed because they had been busy.
In my judgment, the existence of this draft does not support Premier’s case. Mr Semelides’ evidence, which I accept, was that Hellenic was not prepared to commit to a long term charter without a corresponding supply agreement with Synergas and that Premier was aware of this. The draft may have represented what Premier wanted, but it was never even sent to Hellenic, let alone agreed by them. The fact that it was not sent seems to me an indication that Premier was indeed aware that Hellenic would not agree a long term charter without having a supply agreement in place. Furthermore, if as the arbitrator found, the recaps were a fiction, it is surprising, to say the least, that Premier did not send the draft time charter to Hellenic, on the basis that on his analysis, no terms other than payment had in fact been agreed. The fact that Premier did not send out the draft, but continued to send recaps in respect of all the trips, points to those recaps and attached BPVoy 4 form as amended representing the terms of the interim arrangement between the parties.
The recap and attachments for the second trip were sent by Mr Zakos to Mr Semelides on 29 April 2010. The itinerary gave etd Larnaca 29 April 2010, eta Aspropyrgos 2 May 2010 to load a full cargo of LPG and eta Larnaca 6 May 2010. The laydays were given as 2-4 April 2010 which makes absolutely no sense, but the terms were otherwise as for the first recap.
There were evidently further discussions between Mr Semelides and Mr Zakos about the Synergas proposal, as on 14 May 2010, Mr Zakos sent back to Mr Semelides, under cover of an email headed “Cost of Freight LPG Cargo for HPC & Synergas”, a copy of the spreadsheet Mr Semelides had sent him in February, albeit Mr Zakos does not seem to have made any changes. On 17 May 2010, Mr Semelides sent Mr Soutzis the latest draft of the supply contract for further discussion at a meeting on 20 May 2010. These contained the credit terms Synergas was asking for, but at a cost to them of $2.75/mt. On 19 May 2010, Mr Semelides emailed Mr Soutzis to say that there was no import duty on LPG imported from European countries, which was evidently a point which had arisen. He also told Mr Soutzis that Hellenic had: “about 750mt of cargo on the vessel right now so let us know how much you need”. He attached a bill of lading and gave some price indications.
The recap and attachments for the third trip were sent by Mr Zakos to Mr Semelides on 27 May 2010, with an itinerary etd Larnaca 27 May 2010, eta Eleusis 30 May 2010 to load a full cargo of LPG and eta Larnaca 4 June 2010. At this time Hellenic was evidently hopeful that Synergas would sign the term supply agreement within weeks, as reflected in an internal email of 27 May 2010 from Mr Semelides. In the meantime, Hellenic had agreed to deliver 200mt of LPG to Synergas on a spot basis via the Petrolina berth and pipeline in Cyprus, with the price as per the draft agreement. Instructions were given to the Master to leave 200mt on board when he departed from the Hellenic terminal and to proceed to Petrolina to discharge that quantity the following day.
In the event, as Mr Semelides recorded in an internal email on 1 June 2010, only 110mt of the 200mt was delivered, because of technical problems with the Petrolina pipeline. Since Mr Semelides did not see those problems being solved in a satisfactory way, he had proposed to Synergas that the LPG to be supplied to them under the supply agreement be delivered by truck from the Hellenic terminal, which would in fact prove cheaper for them, which they were happy to agree. In relation to the draft contract, he said that Synergas were insisting on their credit terms but were not prepared to be charged with the cost of the extra credit. Mr Semelides recommended agreeing this, saying: “I believe this dispute is not very important compared to our urgent need to conclude this Contract”. In response, Mr Pegasiou asked him to make one last effort to split the difference in the credit cost and ask for an extra dollar per metric ton. He pointed out that if Synergas was saving on getting supplies from Hellenic rather than Petrolina, they should not insist on the credit terms without accepting any further charge.
Mr Semelides accepted in evidence that the last proposal he made to Synergas which was for delivery by truck was in about July 2010. It is not clear whether this was a reference to the proposal he went back with following this exchange with Mr Pegasiou, since there do not appear to be any further email exchanges with Synergas. However, Mr Semelides was firm in his evidence that negotiations had not broken down and that Hellenic was still seeking to persuade Synergas to agree a term supply agreement. He said that August in Cyprus was a holiday month and that thereafter they were still in contact with Synergas starting in September, but there was no progress. There was a meeting with the Commissioner (that is the ultimate head) of the Cooperative Movement group of companies in October 2010, to which I will return.
In the meantime, the vessel was drydocked in July. The recap and attachments for the third trip were sent by Mr Zakos to Mr Semelides on 19 July 2010, with an itinerary eta Eleusis 18 July 2010 to load a full cargo of LPG and eta Larnaca 20 July 2010. The laydays were stated to be 18-20 July 2010, which corresponded with the steaming time. On 22 July 2010, Mr Zakos emailed the Master to say that they had been told that the Hellenic terminal in Thessaloniki was running out of LPG, so that Hellenic was considering sending the vessel to Thessaloniki the following day, with the remainder of the cargo on board to be discharged there, then proceeding to Aspropyrgos to load another full cargo for discharge at Larnaca.
Hellenic did take that course and, on 28 July 2010, Mr Zakos sent Mr Semelides a recap and attachments in respect of that trip. That gave the etd Larnaca of 23 July 2010, eta Thessaloniki 26 July 2010 to discharge 589mt, eta Aspropyrgos 28 July 2010 to load a full cargo, with eta Larnaca 30 July 2010. The laydays were given as 23-30 July 2010, corresponding with the steaming, discharging and loading time. In cross-examination of Mr Semelides, Mr Weiniger QC suggested that an arrangement where the vessel sailed empty between ports, but the charterer continued to pay would be unusual in the case of a voyage charter. Mr Semelides accepted it might not be usual but that it might be a possibility. I was not particularly impressed by this point, since in the case of a consecutive voyage charter, the vessel will often be sailing in ballast between the discharge port on one voyage and the load port on the next and yet charterers will continue to pay for the ballast voyage by virtue of whatever mechanism as to payment of freight is agreed.
Furthermore, if this point was designed to demonstrate that the interim arrangement was a time charter and the recaps and attachments were, as the arbitrator found, a fiction, the obvious question is why a recap was sent for this trip. The fact that Mr Zakos or someone in his department consciously set out the itinerary in a recap belies the suggestion that the recaps were a fiction and points strongly to their containing the terms of the contract so far as the interim arrangement is concerned.
The recap and attachments for the next trip were on 1 September 2010, with an itinerary etd Larnaca 30 August 2010, eta Aspropyrgos 1 September 2010 to load a full cargo of LPG and eta Larnaca 5 September 2010. After the vessel had arrived at Larnaca, on 15 September 2010, instructions were given to discharge the following day. Then on 17 September 2010, the recap and attachments for the final trip before the meeting on 24 September 2010 were sent by Mr Zakos to Mr Semelides with an itinerary etd Larnaca 17 September 2010, eta Aspropyrgos 19 September 2010 to load a full cargo of LPG and eta Larnaca 22 September 2010. In fact the itinerary seems to have gone back a few days, as on 21 September 2010 Mr Zakos informed the Master that the vessel was to load about 1,000/1,100mt at Aspropyrgos on 24 September, with the balance loaded at Eleusis on 24/25 September 2010.
The meeting of 24 September 2010 and subsequent phone call
Mr Seraphides’ evidence was that, at the time that the Ineos charter came to an end, AS & GG had expected Soboh to come up with shipments of LPG for the vessel not only to Cyprus, but to Syria and neighbouring countries, but that did not happen. He accepted in cross-examination that, as a consequence, by September 2010, it was apparent that buying the vessel had not been a good commercial decision. There were disputes between the joint venture shareholders in Premier which led to a decision to terminate the joint venture. A shareholders’ meeting was arranged for the evening of 24 September 2010 to discuss the terms of the termination and settlement of any disputes. Since this would involve a decision about the future of the vessel, a meeting needed to be arranged urgently with Hellenic before that shareholders’ meeting.
Mr Zakos telephoned Mr Semelides on the morning of 24 September 2010 to arrange an urgent meeting, which was fixed for that afternoon at Hellenic’s headquarters in Nicosia. At the meeting were Mr Semelides, Mr Pegasiou and Mr Livadiotis from Hellenic and Mr Zakos and Mr Seraphides from Premier. Mr Seraphides explained that the joint venture was going to terminate and that in those circumstances, since Demetra had provided the finance, the vessel would have been sold by them to discharge their loan. That much is essentially common ground, but there is an acute conflict of evidence as to what was said thereafter.
Mr Seraphides’ evidence was that Hellenic proposed that “we”, by which he presumably meant AS & GG, should buy the vessel, to which his response was that if the vessel was so important to Hellenic, it should buy the vessel, but he was told that would be against Hellenic’s corporate policy. He claimed that after a lot of pleading from Hellenic, he said that they would be willing to help out, but only on the basis that Hellenic committed to the long term two and a half year charter with increased rates. I found this evidence that the suggestion that AS & GG should buy the vessel came from Hellenic implausible. It seems to me far more likely that the suggestion came from Mr Seraphides himself. He was clearly a shrewd businessman and no doubt saw a potentially lucrative business opportunity, as Mr Valentin suggested to him in cross-examination, although he was reluctant to accept that, save on the basis that, as he asserted, Hellenic was committing to a long term charter.
Mr Seraphides’ evidence was that the long term charter was agreed by Hellenic in principle by the end of the meeting, it being stated by Hellenic that “99% there is an agreement”, but that Hellenic would confirm the position by telephone before the shareholders’ meeting, which was due to take place that evening. In cross-examination, Mr Seraphides said that he had not gone to the meeting intending to buy the vessel (or rather the shares in Premier) but rather to say he no longer wanted to continue with the joint venture so that Hellenic would have to deal with Demetra. It follows that, prior to the meeting, no-one had suggested to Hellenic that AS &GG would buy the shares in Premier or that they would only do so if Hellenic committed to a long term time charter. The evidence of both Mr Seraphides and Mr Gregoriou was that Mr Seraphides had not discussed the proposal to buy the vessel (or rather the shares) with Mr Gregoriou prior to making the proposal at the meeting with Hellenic.
It also follows that, prior to the shareholders’ meeting at 6 pm on 24 September 2010, no-one had suggested to the other shareholders, Demetra and Soboh, that AS & GG might buy the shares in Premier, nor had a price been discussed. Mr Seraphides accepted this in cross-examination in answer to me. He also accepted in cross-examination that, when Mr Zakos spoke to Mr Semelides on the telephone on the evening of 24 September, he did not know the outcome of the shareholders’ meeting. Mr Seraphides said the price of U.S. $400,000 was agreed at the meeting but AS & GG also agreed to take over the liabilities of Premier which were some U.S. $200,000 to 250,000. The minutes were signed, but the actual legal dissolution of the joint venture and transfer of the shares did not take place until some time in November 2010. Mr Gregoriou was not at the shareholders meeting and, although he said in evidence that Mr Seraphides had called him on the way back from Nicosia to tell him about the proposal to buy the vessel, on the basis of a new time charter agreement, neither of them can have known whether that would be acceptable to the other shareholders, nor what price they might demand.
Mr Seraphides said several times in cross-examination that what he described as the “commercial terms” of the long term charter were agreed at the meeting on 24 September 2010, but the legal terms were drawn up by the lawyers in the form of a draft agreement, on which he expected Hellenic to come back with any comments. He also said that his company’s practice in more than 25 years in business was to ask for the document to be signed. He always wanted a signature to avoid any misunderstandings. He also accepted (and indeed it was common ground) that there was no discussion of the arbitration clause at the meeting.
In cross-examination Mr Zakos accepted that he and Mr Seraphides had not gone to the meeting with Hellenic with any plan or proposal. Eventually, after I had asked him to focus on the question he was being asked, he confirmed that before the meeting he had not known Mr Seraphides was going to make an offer to purchase the vessel. He denied that Mr Semelides had said that Hellenic could not enter into a long term time charter without a supply agreement with Synergas or that he said that, if Premier wanted Hellenic to enter such a long term charter, they would have to approach Demetra to persuade Synergas to enter the supply agreement. Mr Zakos confirmed Mr Seraphides’ evidence as to what was agreed at the meeting and also said that there was agreement by Hellenic in principle to the long term time charter. They had said that 99 per cent there was an agreement and that they would confirm this on the phone that evening, which Mr Seraphides requested should be before the shareholders’ meeting.
Mr Zakos’ evidence about the phone call in cross-examination was as follows:
“A. Mr Semelides phoned me 6 o'clock in the afternoon, he asked me -- when he phoned me I was in the car, a few minutes earlier I left Adamos outside the building where the joint venture meeting was -- took place, and Mr Semelides asked me first whether Mr Adamos Seraphides is still with me. I said to him no, he entered the meeting a few minutes ago, and then he said to me, "Further to our discussion a few hours ago I confirm the agreement which we reached a few hours ago, we want to keep the ship for a long time and based on the terms we agreed", and that then he said that irrespective of what we are -- irrespective of any co-operation, future co-operation with Synergas or with any other distributor, we want to go ahead with a new time charter agreement.
Q. Your belief was that that was something that Hellenic was able to do because he had authority to enter into a deal on those terms with you?
A. The impression they gave us up to that point it was that they had the authority. We realise about the authority limit and the decision from the mother company at a later stage, five weeks later.”
He denied that Mr Semelides had said Hellenic needed more time to consider the proposal or that it was unlikely to be acceptable to his superiors in Greece or that the only thing that was agreed at the meeting was the increased daily rate of U.S. $4,200 per day. He did accept though, that at the time of the call, he did not know whether the other shareholders would accept the proposal by Mr Seraphides to purchase the vessel. He could not recall when after the shareholders meeting he was informed that they had accepted the proposal.
Mr Semelides’ evidence was that Mr Seraphides explained that Demetra and Soboh no longer wanted to proceed with the joint venture and made a proposal that he and Mr Gregoriou would assume the ownership of the vessel, provided that Hellenic would agree a long term two and a half year charter, at an increased daily rate of U.S. $4,200 for the first year, increasing to U.S. $4,300 in the second year and U.S. $4,400 in the last six months. Mr Semelides said that he explained that Hellenic could not commit to such a long term charter, because Synergas had not yet agreed the supply agreement. He suggested that if Mr Seraphides wanted a long term charter, he should talk to Demetra to persuade Synergas to enter the supply agreement (a reference to Demetra and Synergas being in the same group of companies). Mr Seraphides said that Hellenic had until 6 pm, which is when the shareholders’ meeting was to take place, to accept the offer, but Mr Semelides and Mr Pegasiou said that they could not make a decision in two hours and that Premier had put Hellenic in a difficult position. The meeting then ended.
In cross-examination, Mr Semelides was very firm in maintaining his position as to what had happened at the meeting. When the evidence of Mr Zakos and Mr Seraphides, that by the end of the meeting there was an agreement in principle for the two and a half year time charter, was put to him, he refuted that suggestion, saying:
“That was the proposal which was never accepted, as I said before. We expressed again -- first of all we made it known that the Synergas deal was not concluded and so we could not proceed with any time charter for that matter. We said that the two and a half year proposal was too long and we explained the reasons why and we were not happy obviously with the increased daily rate. So we didn't commit into anything at that time.”
Mr Semelides said that there was then an internal discussion within Hellenic and they decided that the offer could not be accepted, but that, in order to give themselves time to consider their options and communicate with Synergas about finalising the supply agreement, they would agree reluctantly to increase the daily rate to U.S. $4,200, with the other terms of the interim arrangement remaining in place. Mr Semelides’ evidence was that when he spoke to Mr Zakos on the phone at about 6pm that evening, he repeated Hellenic’s objection to the tight deadline being imposed, and said that the proposed charter was too long and unlikely to be acceptable to Hellenic senior management, unless they had an agreement with Synergas. He indicated to Mr Zakos that Hellenic would agree to an increase in the daily rate to U.S. $4,200 with the other terms of the existing arrangement remaining in force, to give Hellenic time to consider its options.
In cross-examination, Mr Semelides said that their options were to communicate with Synergas and with the General Commissioner of the Cooperative Society to see if they could finally get a supply agreement. Although they did not meet with Synergas, a few days later they arranged a meeting with the Commissioner which took place in October. This was in effect to see if he could bring about a final agreement with Synergas. Mr Semelides again denied in cross-examination in emphatic terms that he had told Mr Zakos on the phone call that Hellenic agreed the two and a half year charter. Rather, he had told Mr Zakos that Hellenic could not commit to the charter for the reasons he had given at the meeting.
Later in cross-examination, when Mr Weiniger QC put to Mr Semelides that the fact that Mr Zakos’ email of 27 September 2010 enclosing the draft time charter had referred to a previous “verbal agreement” showed that Mr Semelides had agreed the time charter at the meeting, Mr Semelides again emphatically rejected that suggestion:
“We could never possibly agree to a time charter. For seven months it was known to them, and to us as well, we were pursuing Synergas to conclude a deal. A deal was not concluded. This was a very important factor. We have been talking for a one year time charterparty and suddenly they come with two and a half years. We have been talking of a daily rate of 3,700 then they come, they came at the meeting with much higher daily rate. How could we possibly have agreed to these terms since for seven months we couldn't agree on the much better terms?”
Mr Pegasiou confirmed the evidence of Mr Semelides about the meeting on 24 September 2010. He denied that Hellenic had made a proposal for a long term charter or that they had agreed this at the meeting. In cross-examination he said:
“No, this is wrong, no, we didn't make any proposal. It was out of the question for us to make proposals for two and a half years. For such deals in supplies in marine you never do an agreement more than one year, even our supplies with Greece are for one year. How could I commit the company for longer than one year even if I want to get into an agreement, but things were not clear at that time whether or not we could get into a longer term agreement because we had the two pending issues of Synergas and a former proposal to the group, to my boss in international activities, about the ship. I mean even if we cleared with Synergas I had to make a board proposal with financial justification to my boss in Greece, to the international activities and supplies manager as well, to get approval before committing the company even for one year, not I mean to say for two and a half years.”
Despite the contrary conclusion reached by the arbitrator, I am very firmly of the view that there was no agreement in principle to a two and a half year time charter by Hellenic, either at the meeting on 24 September 2010 or in the phone call later that day. I prefer the evidence of Hellenic’s witnesses to that of Premier’s witnesses in this regard. I have reached that conclusion, not just because I consider that Mr Semelides and Mr Pegasiou were truthful witnesses whereas, regrettably, I had doubts about the credibility of both Mr Zakos and Mr Seraphides, but because I consider that it is inherently improbable that Hellenic would have agreed the long term time charter, even in principle, on 24 September 2010, for a number of reasons.
First, as I have already held, Hellenic’s position from the outset of the discussions with Premier in January 2010 had been that it was only prepared to agree to a long term time charter of the vessel, if there was a corresponding supply agreement with Synergas. Hellenic had never said anything to suggest that it had changed its position, and it seems to me more probable than not that Mr Semelides and Mr Pegasiou maintained that position in the discussions on 24 September 2010. Mr Weiniger QC sought to suggest that negotiations with Synergas had broken down by the time of the meeting, but I do not accept that submission. It is clear from the meeting with the Commissioner of the Cooperative Society which took place in October, to which I have already referred, that Hellenic remained hopeful of reaching agreement with Synergas. It may be that in hindsight that hope proved unrealistic, but that is no reason to conclude that the Hellenic representatives would suddenly have changed their minds and committed to an unconditional long term time charter.
Second, as Premier’s witnesses accepted in cross-examination, this proposed time charter represented a different level of financial commitment for Hellenic from the existing arrangement. Not only was the hire rate in the first year U.S. $500 per day more than the existing daily rate, but over the full two and a half years, it represented a financial commitment of some U.S. $4 million. The evidence of both Mr Semelides and Mr Pegasiou, which I accept, was that that level of financial commitment would have required board approval by the parent company in Greece. This makes it inherently unlikely that either of them made any binding commitment of any kind on 24 September 2010.
Even if they had done, that would clearly have been outside their authority. Although Premier’s witnesses, particularly Mr Zakos sought to suggest that they believed that agreement to this long term time charter was within the authority of Mr Semelides and Mr Pegasiou, I simply do not accept that evidence. It seems to me that, if they had thought about it for one minute, they must have appreciated that board approval was required for a long term contractual commitment of this kind. In this context there was some telling evidence from Mr Gregoriou, albeit in the context of cross-examination about the negotiations to sell the vessel in April 2010: “Usually when we negotiate we put that it is subject to board of directors’ approval.” If board approval was required, unless and until it was forthcoming, which it never was, there could be no binding contract. Of course, the fact that neither Mr Semelides nor Mr Pegasiou ever sought the approval of their superiors in Greece, let alone board approval, to this long term charter, is a further strong indication that it was never agreed.
Third, given that the proposal that AS & GG should buy the shares in Premier had not been raised before the meeting with Hellenic and that, at the time of the meeting, Mr Seraphides had not discussed the proposal with his more than partner Mr Gregoriou, let alone ascertained whether the other shareholders would agree the proposal or if they would, whether they would do so at a price which was acceptable to AS & GG, it seems to me inherently unlikely that Mr Seraphides would have put forward the proposal in a way which would give rise to any contractual commitment on his part, even to an agreement in principle.
Premier sought to make much of the point that, as he said in evidence, Mr Seraphides, who had not previously owned vessels and who might alienate existing customers by taking on the vessel, would not have made the proposal to purchase the shares without the commitment by Hellenic to the time charter. However, although Mr Seraphides would not accept the financial analysis put forward by Mr Valentin in cross-examination, it seemed to me that Mr Valentin demonstrated fairly convincingly that, even without the long term charter, continuation of the existing interim arrangement with Hellenic at the increased daily rate of U.S. $4,200, was potentially financially lucrative to AS & GG if the shares in Premier could be purchased at an appropriately low price. Mr Seraphides and Mr Gregoriou were shrewd businessmen who were not averse to speculation if they thought a profit could be made, as was demonstrated by the fact that they entered the joint venture the previous year, despite not having owned a vessel before or traded in the LPG market. As Mr Seraphides put it in cross-examination: “I am a businessman. I try to make profit and I have to find always new opportunities.” This all supports Hellenic’s case that the proposal to buy the shares was raised by Mr Seraphides, albeit without any contractual commitment, even though Hellenic would not commit to a long term charter, provided that Hellenic agreed to the increased daily rate.
Allied to this third reason for rejecting Premier’s case is the fact that, on Mr Zakos’ own evidence, at the time of the phone call with Mr Semelides on the evening of 24 September 2010, Mr Zakos did not know whether the other shareholders had accepted Mr Seraphides’ proposal to take over the vessel by buying the shares in Premier or, if they had done so, this was at a price acceptable to Mr Seraphides. This makes it inherently unlikely that Mr Zakos would have been pressing Mr Semelides in the call to make any binding commitment to a long term charter, lest it transpire that Premier could not commit itself, because the other shareholders would not agree to the purchase proposal or would not do so at a price acceptable to Mr Seraphides, so that Demetra sold the vessel. It is much more likely that all that was agreed in the phone call was that the interim arrangement would continue on the basis that Hellenic would agree to the increased daily rate of U.S. $4,200. That was Mr Semelides’ evidence about the phone call, which I accept. It follows that, as at 24 September 2010, there was no agreement in principle to a long term charter or to the “commercial terms” of such a charter.
Events from 24 September to 9 November 2010
On 27 September 2010, Mr Zakos sent Mr Semelides a draft charterparty which Mr Imad had prepared and stated in the covering email: “Attached is a draft agreement for the time charter of M/T Navigas 1 as per our previous negotiations and verbal agreement. Please advise in case of any amendments and/or additions from your end.” On 28 September 2010, Mr Zakos sent another draft under cover of an email saying: “Please disregard the draft agreement which was sent yesterday. Attached is a slightly amended one.” The changes consisted of (a) an addition to clause 1.2 of the words: “shall be in compliance with all applicable maritime rules including but not limited to safety seaworthiness” between the words: “The Vessel on her delivery” and “shall be ready to receive cargo and in every way fitted for the intended cargo service”; (b) an addition in clause 1.4 that the vessel should be redelivered: “in the same good order as when delivered to Charterers (fair wear and tear accepted); and (c) an addition to clause 2 Redelivery Notice to add a second sentence: “On redelivery, in case of overlap a margin of tolerance of 15 days shall be applicable the fees for excess days shall be at the same daily rate…” Although the second email sought to characterise these as “slight” amendments, it seems to me that they were of some significance.
However, both the drafts sent provided that the charter would be for two and a half years and included at clause 16.2 the London arbitration clause which Mr Hamsher found conferred jurisdiction upon him. It is fair to say that the sending of the draft charters and the reference in the first email to this being: “as per our…verbal agreement” do provide support for Premier’s case that there had been an agreement in principle or on commercial terms at the meeting or in the phone call on 24 September 2010. However, in my judgment, this statement has to be approached with considerable caution. I have already referred at [18] above in the context of the emailed agreement of 15 December 2009 to the over-optimistic and overstated approach of Mr Zakos. The same tendency manifested itself in the later email of 5 November 2010 from Mr Zakos to Mr Imad referred to at [100] below which stated that, although the agreement had not been signed: “all terms were discussed and agreed during a meeting…end of September.” On any view, however high Premier’s case is put, the terms of any contract had not been discussed, let alone agreed at the meeting.
Thus, it seems to me that the best explanation for sending the draft long term charter and the reference to this being “as per our…verbal agreement” is not that there was an agreement in principle, but that Mr Zakos was proceeding on an over-optimistic or overstated basis or was seeking to place commercial pressure upon Hellenic to agree the charter or (not for the only time in this case) was simply not setting out a truthful position. However, whatever the explanation for sending the emails, it does not seem to me that they alter the conclusion I have already reached that there was no agreement in principle or on commercial terms on 24 September 2010.
Mr Semelides’ evidence was that shortly after those emails, on 28 or 29 September 2010, he telephoned Mr Zakos and repeated that Hellenic would need to have a commitment from Synergas to a supply agreement before Hellenic would proceed any further, and even if Hellenic did proceed further, that would mean the draft charterparty being looked at by Hellenic’s legal advisers. Mr Semelides made the point that the draft was not one used by the oil majors but drafted by a local lawyer and was a short document so it would have to be looked at closely and seriously by Hellenic’s legal team. In contrast, Mr Zakos’ evidence was that he had telephoned Mr Semelides on 28 September and asked if he had any comments on the draft. Mr Semelides said that he went through it quickly and it included the parameters agreed during the meeting.
Although Mr Weiniger QC pointed out that Mr Semelides’ version of what was discussed was not reflected in any document, the inference being that this version was not correct, I see no reason not to accept Mr Semelides’ evidence. It is inherently more plausible that, even if there had been some sort of agreement in principle, contrary to the findings I have made, Mr Semelides would have wanted Hellenic’s lawyers to look at any draft of a long term contractual commitment very closely. It is not clear in what respect it could be said that the draft charter included the parameters alleged by Premier to have been agreed at the meeting, save as regards the period of the charter and the hire rates. In any event, apart from this disputed conversation on 28 or 29 September, it is accepted by Premier that Hellenic never responded with any comments on the draft charterparty or its terms, let alone the arbitration clause. It must follow that acceptance of those terms could only be established through the subsequent conduct of Hellenic, even if, contrary to the findings I have already made, there had been an agreement in principle or on commercial terms on 24 September 2010.
Mr Zakos’ evidence (confirming the evidence given by Mr Seraphides at the arbitration) was that Mr Seraphides was chasing him during October 2010 for a signed agreement. On 4 October 2010, Mr Seraphides’ personal assistant Ms Avraamides emailed Mr Zakos asking if the contract had been sent to Hellenic and if he had received any feedback. Mr Zakos’ response the same day was that: “the draft contract has been sent to Semelides last week, I spoke to him today and he promised to revert with his comments (if any) soon so that we sign the final time-charter agreement end of this week/beg of next week.” Even if it is correct that Mr Semelides had said he would revert with his comments soon, he did not do so, a further indication that there was no binding contract.
In fact, on 14 October 2010, Mr Zakos sent Mr Semelides the recap and attachments for the latest trip which gave an itinerary of etd Larnaca 13 October 2010, eta Aspropyrgos 15 October 2010 and eta Larnaca 21 October 2010. The recap was otherwise on the same terms as before, except that in the payment terms the “freight rate” was U.S. $130,000 lumpsum and the “demurrage” was U.S. $4,200 per day, the new daily rate which on any view had been agreed on 24 September 2010. There is no mention anywhere in the recap of a long term time charter having been agreed. On the contrary, it seems to me that this continued sending of the recap and attached BPVoy 4 form, in accordance with what I have found was the interim hybrid arrangement and not a one year time charter, is wholly inconsistent with there being any binding agreement to a long term charter in place or with the conduct of Hellenic, in continuing to contract on the basis of the interim arrangement, amounting to an acceptance of the terms of a long term charter, whether as set out in the draft sent on 28 September 2010 or otherwise.
As already mentioned, during the course of October 2010, in an effort to bring the negotiations for a term supply agreement with Synergas to a successful conclusion, Mr Semelides, Mr Pegasiou and Mr Livadiotis had a meeting with the Commissioner of the Cooperative Movement group of companies, who was the most senior man in that group, which included Synergas and Demetra. During the meeting, the Commissioner informed them that he would use his influence to convince Synergas to enter the supply agreement. However, in early November 2010, Hellenic heard, either from Synergas direct or from the Commissioner, that Synergas did not want to enter into the supply agreement.
Mr Semelides’ evidence is that once it was clear that Synergas would not enter the supply agreement, he had a telephone conversation with Mr Zakos on 5 November 2010, in which he told him that Synergas did not want to enter the supply agreement, so that the vessel was no longer commercially attractive to Hellenic and that Hellenic no longer wished to use the vessel. It was suggested to him in cross-examination that, either in that call or at a later meeting on 9 November 2010, when he mentioned that Hellenic had chartered the VERONIKI again, he had explained that the reason for terminating any arrangement with Premier was that Hellenic had received pressure from its parent company in Greece to re-charter the VERONIKI because Petrogas, the owner of that vessel, was no longer buying LPG from the Hellenic group. Mr Semelides denied mentioning this and maintained that it was the “Synergas factor” which he had mentioned. As he put it: “That was the important factor, the Synergas, it was not the volumes of Petrogas. Those volumes were a factor but certainly not the deciding factor.”
The evidence of Mr Zakos was that in the telephone call on 5 November 2010, Mr Semelides had told him that the reason for not proceeding with the long term charter with Premier was that Hellenic had come under pressure from its parent company in Greece to re-charter the VERONIKI. He had not mentioned that the reason for termination was Synergas. Mr Seraphides supported this version of what Mr Zakos had been told. He said Mr Zakos had telephoned him on the morning of 5 November after his call with Mr Semelides and told him that Mr Semelides had said that Hellenic was cancelling because they wanted to use the VERONIKI again.
The problem with this account of both Mr Zakos and Mr Seraphides is that it is inconsistent with their own contemporaneous documents. The sequence is as follows. After Mr Semelides spoke to Mr Zakos on the morning of 5 November and Mr Zakos spoke to Mr Seraphides, Mr Zakos sent an email to the lawyer Mr Imad in these terms:
“Further to your telephone conversation with Adamos this morning, please find attached the time charter agreement between Premier and Hellenic Petroleum.
This agreement has not been signed yet but all terms were discussed and agreed during a meeting which Adamos and I had with Mr Pegasiou, Mr Livadiotis and Mr Semelides of Hellenic Petroleum at their [headquarters] in Nicosia end of September.
At the above meeting it was made clear from Adamos that this agreement is not in any way related to the outcome of the negotiations between Hellenic and Synergas and generally to the actual volumes of LPG that Hellenic Petroleum would import.
The attached agreement was sent to Mr Semelides who went through and advised that only minor changes would have to be done before signing.
Attached is a copy of the payment notification from our bank showing the payment of the monthly charter hire for October 10 as per new agreement.
I will call you to discuss what other you may need for the drafting of the letter which we have to send to Hellenic Petroleum today.”
Two things are immediately striking about this email. First, the reference in the third paragraph to Mr Seraphides having made clear at the meeting on 24 September 2010 that the agreement was not conditional on the outcome of negotiations with Synergas, only really makes sense if it was the breakdown of those negotiations which Mr Semelides had given to Mr Zakos that morning as the reason for the termination and that was what Mr Zakos passed on to Mr Seraphides and Mr Seraphides passed on in turn to Mr Imad. There is no mention anywhere in the email of commercial pressure to use the VERONIKI, which is inexplicable if that was the reason Mr Semelides had given Mr Zakos for termination.
Second, whatever else happened at the meeting on 24 September 2010, all the terms of the time charter agreement had not been “discussed and agreed” at the meeting so that Mr Zakos’ statement to that effect in the second paragraph was clearly an over-statement, a further example of his propensity to overstate the position, to which I have already referred. Thus, whilst it can be said that the email supports Premier’s case that there was agreement in principle at the meeting to the long term charter, in my judgment considerable caution has to be exercised in placing much reliance on what is best regarded as a somewhat self-serving email sent to Premier’s own lawyer.
There was then some further discussion between Mr Zakos and Mr Imad and Mr Imad drafted a carefully crafted email for Mr Zakos to send to Mr Semelides. Mr Zakos then sent that email to Mr Semelides, copied to Mr Seraphides and Mr Gregoriou, at 18.22 on 5 November 2010. It read:
“We refer to your time charter of the above vessel pursuant to which the vessel is presently discharging her cargo at Larnaca. We understand from our telephone conversation with you earlier today that Charterers intend not to keep the vessel on charter to them after completion of this voyage in the light of some changes in the arrangements which exist between Charterers and Synergas.
We would like to put it on record that the time charter agreed with you is for a period of 2.5 years and may not be unilaterally terminated by either of the parties. Consequently, Owners hereby invite you to confirm that you will indeed honour your obligations and will perform the charter for the whole period agreed and will proceed to effect payment of the November hire invoice already sent you on 29 Oct 2010 and that you will otherwise perform the charter agreement in full compliance with the terms agreed.
We await your urgent confirmation. Owners’ rights are fully reserved.”
The first paragraph of that email is only consistent with Mr Semelides having given the fact that Synergas did not want a term supply agreement as the reason why Hellenic wanted to terminate the arrangement with Premier. The attempts by Mr Zakos and Mr Seraphides to explain away these emails in their evidence were, to say the least, unconvincing and did them little credit. Mr Zakos sought to say that he had sent a message to Mr Imad saying that the termination had nothing to do with Synergas but the actual reason given by Mr Semelides was the parent company pressure to charter the VERONIKI. The problem with that evidence, as Mr Valentin pointed out in cross-examining Mr Zakos, is that his email to Mr Imad makes no mention of either the phone call from Mr Semelides or the pressure about the VERONIKI. The information which Mr Imad put in the first paragraph of the email he drafted for Mr Zakos to send, about the telephone conversation with Mr Semelides, is information Mr Imad can only have got from telephone discussions with Mr Seraphides and Mr Zakos and that paragraph clearly points to the problem with Synergas having been given by Mr Semelides as the reason for the termination.
Mr Zakos claimed that, in the email Mr Imad had drafted for him to send, Mr Imad had made a mistake about the reason given by Mr Semelides for the termination. He had not spotted the mistake when he sent out the message Mr Imad had drafted, because given the urgency, he had simply sent out what was drafted and had not reviewed it. They had not spotted the mistake until later, after the message had been sent, when it was too late to withdraw it. Mr Seraphides’ evidence was to similar effect. He said he had spoken to Mr Imad and said somebody was going to send him some information to draft a letter and send it back to Mr Zakos. He claimed that he had not seen what Mr Imad drafted or discussed it with Mr Zakos before it was sent out. He was out of the office. He said that he did not remember reading the email when he was copied in on it. He said Mr Imad had made a mistake. He had used Mr Imad as his lawyer for fifteen years but sometimes he makes mistakes.
I simply do not accept their evidence on this point. It is inconceivable that Mr Zakos would not have discussed with Mr Seraphides such an important email before it was sent out and equally inconceivable that both of them did not review it carefully. If there had been a mistake by Mr Imad (which there clearly was not, since what he drafted was based on information which only Mr Zakos and Mr Seraphides can have provided), they would surely have picked it up and rectified the mistake before the email was sent out. On this issue as to the reason given by Mr Semelides for the termination, I accept his evidence that what he told Mr Zakos in the telephone call was that because Synergas had said they did not want a supply agreement, Hellenic no longer wanted to use the vessel.
There was then a meeting at Mr Seraphides’ office on 9 November 2010 at Mr Semelides’ request, attended by him and Mr Seraphides, Mr Zakos and Mr Gregoriou. Mr Semelides wanted to explain to them that Hellenic was terminating the interim arrangement because Synergas had failed to sign a supply agreement and Mr Semelides wanted to see if there could be an amicable solution. His evidence was that at the meeting he explained again, as he had in the telephone call on 5 November 2010, that the reason for termination was that Synergas had failed to sign a supply agreement. He also said that Hellenic had decided to charter the VERONIKI . His evidence in his second witness statement was that without the supply agreement it was more cost effective for Hellenic to charter the VERONIKI but that if Synergas had signed a supply agreement, using the NAVIGAS 1 would have been more cost effective. I have already set out at [98] above reference to his evidence in cross-examination, denying that he had ever said that the reason for termination was pressure from Hellenic’s parent company to re-charter the VERONIKI because of falling sales to her owners, Petrogas.
The evidence of all three of Mr Seraphides, Mr Zakos and Mr Gregoriou was that Mr Semelides had said at the meeting that the reason for the termination was that Hellenic had come under pressure from its parent company to re-charter the VERONIKI. Given the unreliability of their evidence on other issues (and in the case of Mr Seraphides and Mr Zakos on the very issue about the 5 November 2010 email for which this meeting was the follow up) I prefer Mr Semelides’ evidence about what he said at the meeting. In any event, even if he had given commercial pressure to re-charter the VERONIKI as the reason for termination, that does not seem to me to alter the position that the most compelling reason commercially for Hellenic not wanting to carry on using the vessel was that Synergas would not sign a term supply agreement.
Events after November 2010
In fact, Hellenic continued to charter the vessel pursuant to the interim arrangement for another three months after the 9 November 2010 meeting. Thus Hellenic used the vessel in addition to the VERONIKI. Mr Weiniger QC suggested in cross-examination that this was because Hellenic needed both vessels. Mr Semelides denied this and said that following discussions with Hellenic headquarters as well as to give a gesture of goodwill to Premier they decided to continue using the vessel, to give Premier some time to pursue alternative employment for the vessel.
On 13 December 2010, Mr Zakos sent Mr Semelides the recap and attachments for the latest trip which gave an itinerary of etd Larnaca 13 December 2010, eta Piraeus 15 December 2010 and eta Larnaca 21 December 2010. Under “Freight Rate” it now said: “USD 4,200/Day as per new Time Charter agreed between premier Maritime Ltd and Hellenic Petroleum Cyprus in September 2010, obviously an attempt by Mr Zakos to reflect Premier’s case as to what had occurred at the meeting on 24 September 2010. However the recap was otherwise as before, including the reference to USD 4,200 PDPR demurrage. Consistently with the position Mr Zakos was taking in that recap, the hire invoices now contained similar wording. It does not seem to me that anything can be made of this recap and the invoices, in terms of the legal position between the parties, since the dispute had already crystallised by this stage. In fact in the very last recap of all on 17 February 2011, Mr Zakos appears to have thought better of the position he had taken and that says simply: “Freight Rate USD4,200/day”.
On 21 January 2011, Mr Semelides wrote to Mr Zakos stating:
“Despite the fact that we do not acknowledge any formal agreement for the chartering of the [vessel], we would like to inform you, as a matter of courtesy, that the vessel will not be required as from 1st April 2011 by our Company.”
Mr Zakos’ response was an email of 26 January 2011, asserting that there was “a valid albeit not formally executed charterparty agreement negotiated and entered…The final terms of the agreement were reviewed, finalised and agreed to by the parties as it can be evidenced from their written communication.” This email appears to have been drafted by Premier’s lawyers. As I have found, there was in fact no charterparty agreed.
The vessel was redelivered by Hellenic at the beginning of April 2011 and, thereafter, was sold by premier to Paspandou Company Limited for scrap on 19 May 2011 at a price of U.S. $620,000.
Analysis
Since I have concluded that there was no agreement in principle or on commercial terms at the meeting on 24 September 2010 or in telephone calls later that day and on 28/29 September 2010 and have preferred the evidence of Mr Semelides on this critical issue, it must follow that Premier’s case that there was a binding long term charter and that it was subject to an arbitration clause must fail and the arbitrator had no jurisdiction.
Accordingly, many of the ingenious alternative legal analyses put forward by both counsel of whether there was a binding contract by virtue of subsequent events or whether there was an agreement to arbitrate disputes simply do not arise and I do not propose to deal with them.
I suppose it is theoretically possible that, even though, as I have found, there was no agreement of any kind at the meeting on 24 September 2010 or in the phone call later that day, there could have been acceptance by Hellenic of the offer by Premier to contract on the terms of the draft charterparty sent on 27 and 28 September 2010. There clearly was no express acceptance by words, since, as I have found, Mr Semelides never said at any stage that Hellenic agreed to those terms, let alone to the arbitration clause. That leaves only implicit acceptance by conduct. However, conduct will only amount to acceptance where it is clear that the offeree has done the act of alleged acceptance with the intention (ascertained objectively) of accepting the offer: see Chitty on Contracts 31st edition [2-030].
In my judgment, it is impossible for Premier to establish acceptance of the draft charterparty terms sent on 27 and 28 September 2010, since Hellenic’s conduct thereafter was inconsistent with any such acceptance or, at best, equivocal. In particular:
I have accepted Mr Semelides’ evidence that, in response to the emails sending the draft charterparty, he telephoned Mr Zakos on 28 or 29 September 2010 and reiterated that Hellenic could only consider a long term charter if Synergas was prepared to enter a supply agreement and that even if that happened, the draft would need to be carefully considered by Hellenic’s lawyers since it was not a standard form of tanker charter. That evidence is wholly inconsistent with acceptance of the draft charterparty. At best it was an indication that Hellenic would consider it with its lawyers in the event it procured a supply agreement with Synergas, which never in fact occurred.
In the light of what was said by Mr Semelides in that telephone call, the continued use of the vessel on the terms of the recaps and BPVoy 4 form was only consistent with continued performance of the existing interim hybrid arrangement, albeit at an increased daily rate of U.S $4,200 per day. As I have held, the recaps and BPVoy 4 form as amended set out the terms of that interim arrangement and were of contractual effect. Performance of further trips on the same terms save as to the daily rate is incapable of constituting acceptance of some other contract on different terms (in other words the draft time charter).
The telephone call on 5 November 2011 in which Mr Semelides informed Mr Zakos that Synergas were not prepared to enter a supply agreement, so that Hellenic no longer wished to use the vessel would, in any event, have amounted to a rejection of any offer to contract on the terms of the draft charterparty.
The subsequent use of the vessel for two further trips pursuant to recaps and on the BPVoy 4 form as amended was only consistent with continued performance of the existing interim arrangement albeit at the increased daily rate. That is unaffected by the fact that in the first of those recaps Mr Zakos inserted a reference to the long term charter in the freight rate provision: Hellenic had already rejected the offer to contract on those terms and the dispute between the parties had already crystallised. Any suggestion that by performing that trip pursuant to the recap, Hellenic was accepting that it was contracting on the terms of the long term charter, is unarguable.
Conclusion
In all the circumstances, Hellenic is entitled to an Order under section 67 of the Arbitration Act (i) that the Award of Mr Hamsher of 4 June 2014 is of no effect because he did not have substantive jurisdiction and (ii) that the Award should be set aside. Accordingly, it is not necessary to consider Hellenic’s application for permission to appeal on a point of law arising out of the Award under section 69 of the Act, since that application would only have become relevant if the section 67 application had not succeeded.