Tonzip Maritime Ltd v Coral Energy Pte Ltd

By an Application Notice dated 24 May 2024 (the “Application”), the Defendant, Coral Energy Pte Ltd (the “Charterers”), seeks specific disclosure of the following documents:

The Application was made pursuant to paragraphs 17.1 and /or 18.1 of CPR Practice Direction 57AD (“PD57AD”) and was supported by the Third Witness Statement of Florian Matthias Schacker dated 24 May 2024 and an exhibit thereto. He is a solicitor and Senior Associate employed by Holman Fenwick Willan Middle East LLP, solicitors instructed by the Charterers in this matter. Subsequently the following evidence was served: on 12 June 2024 the First Witness Statement of Matt James Illingworth, a solicitor and a partner in the firm of Wikborg Rein LLP, solicitors instructed by the Claimant, Tonzip Maritime Ltd (“the Owners”) and an accompanying exhibit and on 19 June 2024 the Fourth Witness Statement of Mr Schacker and an accompanying exhibit.

On 19 June 2024 the Charterers made a further application for permission to adduce expert evidence from Mr. Pat Cannie, a marine engineer at ABL Group, in relation to the damaged purifier and the related technical issues experienced by “M.T. CATALAN SEA” (the Vessel”), as set out in the third and fourth witness statements of Mr Schacker. I indicated at the hearing that I would consider that evidence de bene esse. Having done so, I am prepared to permit that evidence, but for the reasons set out below, I found it of little assistance in the determination of the Application.

At the hearing, the Owners were represented by Emmet Coldrick of Counsel and the Charterer by James Shirley of Counsel. I am grateful to them both for their helpful written and oral submissions.

The Owners' claim is for damages for repudiatory breach of a voyage charterparty between the parties dated 5 November 2021 (the “Charterparty"). The key issue is whether the Owners were entitled under the Charterparty to refuse the Charterers' orders to load and carry aboard the Vessel a cargo of oil to be shipped by Joint-stock company Neftyanaya kompaniya Neftisa ("Neftisa") (the “Neftisa Cargo"). The Owners refused to load the Neftisa Cargo on the basis that Neftisa was owned and/or controlled by a sanctioned Russian oligarch, Mikhail Gutseriev, or that there were reasonable grounds to believe that that was the case, and that as such carrying the Neftisa Cargo would expose the Owners to EU and/or UK sanctions laws.

The Charterers continued to insist that the Neftisa Cargo be loaded and refused to give alternative voyage orders. Both parties purported to terminate the Charterparty for repudiatory breach. After an interval, the Owners obtained alternative business for the Vessel on the spot market for a period during which the Vessel would otherwise have been performing the Charterparty. In these proceedings, both parties seek to recover the losses they allege they suffered a result of the non-performance of the Charterparty. The Owners claim US$1,020,104.53 in damages. The Charterers deny the claim and counterclaim US$233,600.

The Owners oppose the Application on two principal grounds:

The claim was issued in the Commercial Court on 25 January 2023. The last of the statements of case – the Charterers’ Rejoinder and Reply to Defence to Counterclaim – was served on 4 May 2023. Pursuant to an order of Foxton J dated 30 May 2023, the claim was transferred to the London Circuit Commercial Court on 8 June 2023.

The parties agreed directions and an oral CMC was dispensed with. On 20 October 2023, HHJ Pelling KC made an order setting out the agreed directions (the “CMC Order"). The matter was listed for a 4 day trial commencing on 21 October 2024, with a day’s judicial pre-reading on 17 October 2024.

The CMC Order provided for disclosure by 1 December 2023. The parties agreed to treat the matter as a Less Complex Claim for disclosure purposes. In the CMC Order, the Court approved a Disclosure Review Document providing for extended disclosure only in respect of ownership/control of Neftisa, exposure to sanctions and quantum. The model for quantum disclosure was Model D.

The Charterers were not ready to give disclosure by the agreed date of 1 December 2023. The Owners consented to two extensions of time, to 22 December 2023, but the Charterers were still not ready to give disclosure. Having served notice of change of solicitors the day before, on 22 December 2023 the Charterers applied for a further extension of time for disclosure.

HHJ Pelling KC granted the application on paper on 5 January 2024, but on a costs reserved basis, noting that:

The Court directed a short oral hearing to deal with the recalibration of directions, but this was ultimately dealt with by consent without an oral hearing. When approving the consent order on 24 January 2024, the Court sought, and obtained, confirmation from both parties that the revised directions would not adversely affect the trial date. It can be seen from this that keeping the trial date was regarded as of paramount importance.

Disclosure was given on 12 January 2024. The Owners’ disclosure contained a series of emails dated between 23 November 2021 (after the Notice of Readiness had been served) and 6 December 2021, passing between various employees of EPS Tanker Ops, the Owners’ agents. They are to be found at pp 158-162 of the Hearing Bundle. I was told by Mr Coldrick on instruction that these were contained in a Claims File that was disclosed in its entirety. They included a statement to the effect that “…we need to respond to Oil majors and it is important to get the second Purifier operational as soon as possible” [23 November 2021] and in response to a query as to how long it would take to get the spare parts to Tallinn “We need to do this and move the spares as all Oil majors are not approving the ship basis the other purifier not being operational.” [25 November 2021] and there was a potential cost of USD 50,000 in transferring the spare costs, but the cost could be avoided if “we pick up items after loading while en route to disport (Vessel is on subs for Ust Luga loading (Declarable Monday NN LDN.)” [4 December 2021].

On 2 February 2024, the Charterers’ solicitors wrote to the Owners’ solicitors making specific disclosure requests in relation to the Vessel’s engine, which were stated to be made pursuant to CPR 31.12. On 23 February 2024, the Owners’ solicitors replied that disclosure was governed by PD57AD, which disapplies CPR Part 31. They said that if the Charterers wished to obtain further disclosure, they would need to make an application to vary the current disclosure order. They also stated that the Owners’ position was that there was no good reason to vary the disclosure order and that any application would accordingly fail. On the same day, the Owners responded to a Request for Further Information, which made no admission about the condition of the Vessel and stated that the Charterers were not entitled to the information sought.

On 4 March 2024, the Charterers’ solicitors wrote again, this time asserting that the documents they sought were encompassed within Disclosure Issue 1 (quantum) or Disclosure Issue 4 (all other issues). On 6 March 2024, the Owners’ solicitors replied, making clear that a reasonable and proportionate search had been carried out for relevant documents within Disclosure Issue 1 and that as regards Disclosure Issue 4, no search was required (as Model B disclosure had been agreed) and the documents sought were not “known adverse documents”.

Following that response, no application for disclosure was issued. Instead, the parties proceeded to exchange witness statements, on 22 March 2024.

Thereafter nothing happened in open correspondence, until 3 May 2024, when the Charterers’ solicitors sent a copy of the disclosure application (and a draft of Mr Schacker’s third witness statement) to the Owners’ solicitors. On 9 May 2024, the Owners’ solicitors replied, making clear that the disclosure application was without merit and that if the Charterers wished to advance a case relating to the Vessel’s condition that would need to be pleaded.

Expert reports were exchanged on 24 May 2024. It was not until then, 24 May 2024, that the Charterers issued the Application, more than two months after the Owners’ solicitors had set out their position on 6 March 2024. Initially, no attempt was made by the Charterers to list their application, still less seek expedition.

On 7 June 2024, the experts met and produced their Joint Memorandum.

Supplementary expert reports were due to be exchanged on 21 June 2024, but the Charterers were not ready to exchange. The Charterers did not apply for an extension of time until 4 July 2024.

On 24 June 2024, the parties filed and served their Progress Monitoring Information Sheets.

On 3 July 2024, the Charterers’ solicitors wrote to the Court seeking expedition, giving a 2 hour estimate. It was listed by HHJ Pelling KC for 26 July 2024, with an estimate of 2 hours. In the event the hearing ran into the afternoon.

Supplementary expert reports were exchanged on 5 July 2024.

As earlier stated, the Application is made “pursuant to paragraph 17.1 and/or 18.1 of CPR PD57AD”.

Paragraph 17.1 of Practice Direction 57AD states:

Paragraph 17.2 of PD57AD goes on to state that:

Paragraph 6.4, referred to in the above, states:

I accept Mr Coldrick’s submission (which was not seriously challenged by Mr Shirley) that at a high level, the issues arising as regards the first basis for the application are:

Turning to the second basis for the Application, paragraph 18.1 of PD57AD states:

Paragraph 18.2 goes on to state that:

Again, I accept Mr Coldrick’s submission (which was not seriously challenged by Mr Shirley), that, at a high level, the issues arising as regards the second basis for the application are:

In his submissions, Mr Coldrick emphasised the importance of pleadings in defining the factual issues to which disclosure relates. He relied upon a number of authorities in this regard. In particular, a decision of the Court of Appeal in Harrods Ltd v Times Newspapers Ltd [2006] EWCA Civ 294, where Chadwick LJ (with whom Moore-Bick LJ and Lawrence Collins J (as he then was) agreed) stated at [12]:

He also relied upon two more recent cases at first instance in support of his submission that the dictum of Chadwick LJ remained the position insofar as PD57AD is concerned. Those cases were a decision of Peter MacDonald Eggers KC, sitting as Deputy Judge of the High Court, in Lonestar Communications Corporation LLC v Kaye [2020] EWHC 1890 (Comm) at [32] and [43]-[44], whose approach was followed by HHJ Keyser KC in Curtiss v Zurich Insurance Plc [2021] EWHC 1999 (TCC), where he said at [18]:

Mr Shirley relied upon a decision of James Pickering KC, sitting as a Deputy Judge of the High Court in The Commissioners for Her Majesty's Revenue and Customs v IGE USA Investments Limited [2020] EWHC 1716 (Ch) at [58]-[59]. The circumstances surrounding the application were that almost a year after bringing the claim against the defendant, HMRC wished to add a claim in fraud. In order to advance such a claim, there must a proper factual foundation on which to do so. The Defendant there sought an order requiring HMRC to disclose certain material in advance of the determination of the application to amend so as to plead fraud. As the Deputy Judge said at [16] “The basis for the request was that, in broad terms, the test which would be applied on the Amendment Application was whether the proposed claim of fraud has a real prospect of success and the FIS Documents [the documents sought] would be relevant to that determination.” It was therefore not a pleaded issue in the case as it stood. At [57] the learned Judge acceded to the application on the basis that looking at the term “Issues for Disclosure” - now contained in paragraph 7.3 of PD57AD - “it is not necessary for the issue to be identifiable of the face of the statements of case – instead, it is enough for that issue to be something which will need to be determined by the court in order for there to be a fair resolution of the proceedings as a whole.”

In my view, the nature of the application in the IGE USA Investments case is wholly different from the present case. There a party facing an amendment alleging fraud a year into a claim was entitled to see the material relating to the amendment in order properly to make submissions that there is no real prospect of success. Here, when dealing with a request for further disclosure, when a trial is in prospect, after the majority of the trial preparation has been carried out, I agree with both the judges in the Lonestar Communications and the Curtiss cases that when considering the adequacy of compliance with Extended Disclosure or whether to vary the Extended Disclosure Order or order specific disclosure, such disclosure must be directed to the issues in dispute on the statements of case.

Mr Shirley candidly accepted that neither of the condition of the Vessel nor the validity of the Notice of Readiness formed part of the pleaded issues. He submitted nonetheless that, given the unwillingness of the Owners to disclose the documents requested, and the unhelpful answers in the Further Information they provided on 23 February 2024, there was a legitimate serious cause for concern, and it was appropriate to make the Order sought, relying on the approach of Mr Pickering KC in the IGE USA Investments case. He further relied upon the summary of the expert evidence of Mr Pat Cannie that the issues identified concerning the oil purifiers, the need for spare parts and the fact that the Vessel was not able to obtain oil major approval were “potentially very serious”. He accepted that the Charterers had proceeded on the basis that there was insufficient material to justify an amendment being made now. Instead, the Application was being made as a possible prelude to applying substantially to amend the Defence in relation to liability at a time when the majority of the trial preparation was complete, the long vacation was imminent, and the trial was due to start on 17 October 2024. Were that amendment to be made, he acknowledged that there would have to be further factual and expert evidence. Although initially he contended in his skeleton that the trial date could be kept, in oral argument he was driven to accept that this was impractical. It would have to be vacated and a new date fixed.

In relation to quantum, he submitted that the condition of the Vessel when the Owners were seeking alternative business is relevant because the Owners are only entitled to recover losses that were caused by the Charterers and not losses that were caused by something else, for example the Owners’ own breach of the seaworthiness obligation. In this regard, therefore there was no need for an amendment to be made to the Defence in order for the Application to succeed. Mr Coldrick’s response to this was that none of the documents requested went to the quantum claim as pleaded and that the Owners had fully complied with their obligations under Extended Disclosure Order.

I have carefully considered the parties’ written and oral submissions. Most, but not all, have been summarised above. Suffice it to say that I have taken them all into account.

I am firmly of the view that this Application should be dismissed for the following reasons:

In the course of argument, I asked Mr Coldrick why the emails at pp158-162 of the Hearing Bundle had been disclosed, given the pleaded issues. He pointed to the potential claim for USD50,000 relating to the loading of the spare parts, which in the event was not incurred and not claimed by the Owners. He said that these documents were located in a Claim File, the entire contents of which had been disclosed. Mr Shirley drew my attention to the Owners’ Disclosure Certificate dated 10 January 2024, which makes no reference to the Claim File within it. He sought an explanation as to why this was the case. Mr Coldrick was unable to explain this, given he had not come to the hearing prepared to deal with this matter, which had only just surfaced. He pointed out, however, that no complaint had been made by the Charterers as to the adequacy of the searches.

In these circumstances, I am therefore going to order that by 4pm on Monday 12 August, a witness statement is made on behalf of the Owners:

I am prepared to hear further submissions from Counsel as to the precise wording of this order.

I will now hear Counsel in relation to the costs of this application and any other consequential matters.