Suek AG v Glencore International AG [2011] EWHC 1361 (Comm)

[2011] EWHC 1361 (Comm)Case No 2010 Folio 1434
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 27 May 2011
Before
MR JUSTICE BURTON
Between
SUEK AGClaimantGLENCORE INTERNATIONAL AGDefendant
MR PHILIP EDEY QC (instructed by Messrs Thomas Cooper) for ClaimantMR DAVID FOXTON QC (instructed by Messrs Holman Fenwick Willan) for DefendantHearing Hearing dates: 19 May 2011
Judgment
[1]This has been the hearing of a Part 8 claim, by which the parties have submitted to the jurisdiction of this Court a dispute as to construction arising out of a contract dated 1 December 2009 for the sale by the Claimant to the Defendant of 390,000 Metric Tons +/- 10% at the Claimant’s option of unclean coal in six shipments across the four quarters of 2010 on a cif basis. The claim is brought by Suek AG as Seller, against Glencore International AG as Buyer, to determine on agreed facts the issue of construction relating to the running of laytime and demurrage under the sale contract. Mr Philip Edey QC for the Claimant/Seller submits that the issue of construction is straightforward, because the contract means what it says. Mr David Foxton QC for the Defendant/Buyer submits that his construction can and should be arrived at by reference to the contract as a whole, and is what he calls the “most businesslike construction”, and, although both sides agree that there is no decided authority on point, he submits that his construction is more consistent with such authority as there is.[2]The factual scenario is that when the HANG TA, the vessel in which one of the shipments under the contract was carried, arrived at the discharge port, Amsterdam, at 00.30 hours on 19 February 2010, the berth at which the vessel was to discharge was occupied by another vessel, and the HANG TA was therefore unable to reach the berth and the tidal conditions were such that the vessel was unable to reach the berth, and the Master of the vessel gave Notice of Readiness (“NoR”) at the usual waiting place.[3]Such are the agreed facts. I shall set out the material terms of the contract, of which Clause 7.13 is the primary provision to be considered and construed. A number of abbreviations or acronyms are commonly used. Some of them are used in the contract by the parties and some are not. I shall, for the avoidance of any doubt, set them out here: i) ATDN SSHINC means “At any time during the day or night, Saturdays, Sundays and holidays included”. ii) “Whether in berth or not” is often abbreviated, and will regularly be so in the course of my judgment, as Wibon, “whether in port or not” can similarly be abbreviated to Wipon, “whether in free Pratique or not” (misspelt in the third but not the first sentence of Clause 7.13) is Wifpon and “Whether customs cleared or not” is Wccon. 4. The Relevant Terms “7.1 The shipment of the Coal from the Loading Port to the Discharging Port shall be the responsibility of the Seller. The Seller shall arrange a shipment of the Coal to be delivered under a Cleanon Board Bill of Lading … … 7.7 The Buyer shall notify the Seller by fax or e-mail of the final Discharge Port and name of the Port Agent there at least 14 (fourteen) calendar days prior to the first day of the agreed laycan, together with the confirmation of vessel’s acceptance. … 7.8 The Seller shall nominate the actual Carrying Vessel to the Buyer by fax or e-mail at the latest 7 (seven) calendar days prior to the start of the Laycan at the Loading Port … … Discharge Port and Notice of Readiness 7.11 The Buyer shall provide a safe berth for the Carrying Vessel at the Discharge Port … 7.12 The Seller shall instruct the Master of the Carrying Vessel to give the Port Agent 5 days, 3 days, 48 hours and 24 hours notice of the Carrying Vessel’s expected time and date of arrival (“ETA”) at the Discharge Port and any variation of more than 12 hours in the ETA. 7.13 Upon arrival at the Discharge Berth the Master of the Carrying Vessel shall give a Notice of Readiness to discharge at any time during the day or night SSHINC whether in Free Pratique or not, and whether customs cleared or not, by telex, radio or e-mail. Except for Wilhelmhaven where notice of readiness to be tendered within office hours Mon-Fri 8am - 5pm and Sat 8am - Noon. In case the berth is occupied on arrival, vessel can tender NOR at the usual waiting place ATDN SSHINC, whether in berth or not, whether in port or not, whether in free praticque or not, whether customs cleared or not. Discharge Provisions 7.14 The Buyer shall procure the discharging of each Carrying Vessel at the following rates … 7.15 Laytime shall commence 12 hours after Notice of Readiness for discharging has been tendered in accordance with the Clause 7.13, herein or upon commencement of discharging whichever is sooner … … 7.20 Time taken waiting for first available tide after the Carrying Vessel’s arrival and/or to shift from pilot station or anchorage to berth, and opening of the Carrying Vessel’s hatch covers shall not count as Laytime or time for Demurrage. 7.21 Periods of bad weather shall not count as laytime subject to such bad weather conditions being duly recorded in the SOF and signed for by all parties. … Demurrage and Dispatch 7.25 If the time taken for discharging exceeds the Laytime allowed in accordance with the Clause 7.14 herein, the Buyer shall pay to the Seller Demurrage …” Discharge Port and Notice of Readiness Discharge Provisions

Demurrage and Dispatch

[4]As Mr Edey emphasises, the contract was a contract of sale, in which the Seller was not the carrier, but arranged for shipment. It was not a port charterparty or a berth charterparty. It was for delivery CIF Amsterdam/ Rotterdam/Antwerp (ARA). Mr Edey draws attention to paragraph 19-010 of Benjamin’s Sale of Goods (8th Ed) which emphasises that the duties of a c.i.f. seller are “first to ship (or procure a shipment of) goods in accordance with the contract and, where necessary, to appropriate such goods to the contract; secondly to procure or prepare the proper shipping documents, and thirdly to tender these documents to the buyer, or as the buyer directs. He is not under any duty to ensure the actual physical delivery of the goods at the c.i.f. destination, though he is under a duty not to take active steps to prevent such delivery.”[5]Mr Edey points to Clause 7.1 above, which provides that the shipment “from the Loading Port to the Discharging Portshall be the responsibility of the Seller”, while by Clause 7.11 it is the responsibility of the Buyer to provide a safe berth for the carrying vessel at the Discharge Port. As to Clause 7.13, except when the last sentence applies (the “7.13 Exception”), NoR is given by the Master of the carrying vessel when the vessel arrives at the berth. By Clause 7.20, time taken waiting for tides etc after the carrying vessel’s arrival at the port, and after the giving of an NoR does not count as laytime or time for demurrage, and Clause 7.21 provides that periods of bad weather (if duly recorded etc) shall not count as laytime.[6]Mr Foxton points to The Kyzikos, particularly as decided in the House of Lords [1989] 1 Lloyd’s Law Rep 1, though he accepts that there are substantial differences, in that(i) that case concerned a charterparty:(ii) the clause in question read “5. … Time lost in waiting for berth to count as loading time … time to count Wipon/Wibon/Wifpon/Wccon”:(iii) the facts were that fog prevented the vessel proceeding to the berth which was otherwise available, and the owners contended that even though there was a berth available the Wibon clause entitled them to ascribe the delay to the charterers as demurrage. Lord Brandon interpreted the use of the acronym of Wibon as importing or conveying a need for causation, i.e. that it is the absence of the berth which causes the delay:
“[T]he phrase has been treated as shorthand for what, if set out in longhand, would be “whether in berth (a berth being available) or not in berth (a berth not being available)”
. The phrase has been interpreted and applied in that way for so long that I think that it should continue to be so interpreted and applied.”(p7 RHC). The conclusion was consequently that:
“the phrase “whether in berth or not” should be interpreted as applying only to cases where a berth is not available and not also to cases where a berth is available but is unreachable by reason of bad weather”
(at p8 LHC).[7]In this (sale contract) case, causation is not in issue, because it is an agreed fact that the vessel could not enter the berth both by virtue of the unavailability of the berth and by virtue of the tidal conditions. The issue is whether the 7.13 Exception, allowing for the NoR to be given at the usual waiting place, leaves the responsibility for delay with the buyer who did not have the berth available or on the seller whose vessel could not access the berth. Both causes applied. The obvious option of sharing the responsibility for delay 50/50 is not available to this Court.

The List of Issues

[8]The material parts of the List of Issues read as follows:
“4. At the time of arrival (a) the berth at which the vessel was to discharge (“the berth”) was occupied by another vessel and the HANG TA was therefore unable to reach the berth; (b) the tidal conditions were also such that the vessel was unable to reach the berth; and (c) the Master of the vessel (in this respect acting on behalf of the Claimant) gave Notice of Readiness at the usual waiting place. 5. The dispute between the parties is as to whether, in the circumstances set out in paragraphs 4a and 4b above, the Claimant was entitled to give Notice of Readiness at the usual waiting place, such that the Notice of Readiness was one tendered in accordance with Clause 7.13 of the Contract (for the purposes of Clause 7.15 of the Contract).”

The Rival Versions

[9]Both sides accept that Clause 7.13 must be read as a whole (and that the Wilhemhaven sentence is to be ignored for this purpose). On that basis the third sentence is an exception to the first sentence. Mr Edey for the Claimant submits that the governing part of the 7.13 Exception, contained in the third sentence, is the simple phrase “In case the berth is occupied on arrival, vessel can tender NoR at the usual waiting place”, which is clear. The last part of the sentence does not add anything. The vessel can give NoR at the waiting place, regardless of the fact that the vessel is not in berth (“whether in berth or not”) regardless of whether it is in port (“whether in port or not”) etc. Mr Foxton, for the Defendant, submits however that the second part of the sentence governs the first. Wibon imports (by reference inter alia to the words of Lord Brandon) causation, so that the whole sentence is to be construed such that the exception applies if the vessel has arrived and the unavailability of the berth is the sole reason why the vessel cannot proceed to the berth.[10]Neither party contends that the phrase at the outset of the sentence “In case the berth is occupied on arrival”) means “on arrival at (or adjoining to) the berth”. Both accept that it must mean arrival at the port (and indeed at the usual waiting place, where the NoR can and must then be given): and Mr Edey thus submits that it has the same meaning as ‘arrival’ in Clause 7.20. Mr Foxton submits that the proper interpretation of the phrase is that the vessel has completed the carrying voyage to the maximum possible extent.[11]Mr Foxton’s able submissions can be summarised as follows: i) Primary Obligation. He submits that the primary obligation is on the Seller, the Claimant, to carry the cargo to the berth. He uses these words by reference to similar phraseology by Webster J at first instance in The Kyzikos [1987] 1 Lloyd’s Law Rep 48 at 50 RHC. On that basis the 7.13 Exception should be read restrictively (see e.g. in a different context, relating to the ousting of a ‘fundamental’ or ‘overriding’ obligation, per Auld LJ in The Kapitan Sakharov [2002] Lloyd’s Law Rep 255 at 270 LHC). ii) Causation. The causation which the express use of Wibon in the 7.13 Exception imports imposes (and alone imposes) the risk of delay caused by congestion on the defendant buyer: see Lord Brandon at 5 RHC, and at 6 RHC, where he concluded that Wibon was “directed at the problem of congestion in the loading or discharging port, rather than the problem of delay to the ship due to bad weather”. So too in Northfield Steamship Company v Compagnie L’Union des Gaz [1912] 1 KB 434 Farwell LJ opined at 440 that the words “whether in berth or not” were inserted to meet the very case that there was no berth vacant. iii) Consequences. Mr Foxton submits that if he is right, then the 7.13Exception can only be operated if the only cause of delay is the unavailability of a berth. If there is a weather problem, then the vessel must wait until the condition clears, and only if the berth is then unavailable can the Master give NoR, whereafter the Buyer will have the twelve hours permitted by Clause 7.15. If, however, the 7.13Exception applies when both causes are operative, and the Master gives NoR, and shortly thereafter the berth becomes available, then when the weather conditions lift, the Buyer will have been prejudiced by the loss of some or all of his twelve hours preparation time.[12]Mr Edey’s equally able submission are as follows: i) This is not a berth charterparty to which the words of Webster J in The Kyzikos (insofar as they survived the further appeals) would apply. The Seller’s obligation is not to deliver to berth – see paragraphs 4 and 5 above – and there is no such ‘primary obligation’. The Claimant’s obligation is to nominate a carrying vessel and ship the coal to port (Clauses 7.1 and 7.8) and not to take active steps to impede delivery. If anyone, it is the Defendant, whose obligation is to provide a safe berth (Clause 7.11) and to whom notice is to be given under Clause 7.12, who can take steps to make the berth available, which would on any basis render inapplicable the operation of the 7.13 Exception, while the Seller can do nothing about the tides or weather. There is no foundation for any assumption underlying the construction of the contract that the Seller bears the heavier responsibility for ensuring arrival at the berth: unless such an obligation can be drawn from the terms of the contract, there is no room, particularly in a sale contract rather than a charterparty, for any ‘traditional’ assignment of risk: he relies upon the words of Saville J in The “Sea Queen” [1988] 1 Lloyd’s Law Rep 500 at 502 RHC: “It is not a permissible method of construction to propound a general or generally accepted principle for sharing the risk of delay between owners and charterers or seeking in the abstract to determine a reasonable allocation of risk of delay and then … to seek to force the provisions of the charter into the straitjacket of that principle or into that concept of reasonableness.” ii) There is no doubt that Lord Brandon emphasised the need for causation, and that causation is essential, but, upon the agreed facts of this case, there are concurrent causes. The 7.13 Exception is intended to be, and is, straightforward of interpretation, and there is no room (nor need) for consideration of competing or dominant causes. iii) Mr Edey submits that no material detriment is caused to the Defendant by reference to the 12 hours, certainly none such as to determine the construction of the Clause. If there is only a weather or tide problem, the NoR cannot be given until arrival at the berth under Clause 7.13. If there is both weather and unavailability of berth, the NoR can be given, and, if the weather lifts before the berth is available, the Defendant is no worse off. If the berth becomes available before the weather lifts, the Defendant can still be making use of the time provided by the 12 hours to prepare for the arrival of the vessel.

Conclusion

[13]I am not persuaded by Mr Foxton’s submissions, and prefer those of Mr Edey set out above. For the reasons he gives, I conclude that it is not correct to interpret the 7.13 Exception as interfering with an overriding or otherwise primary obligation of the Claimant. As to the words of Lord Brandon, they are in my judgment taken by Mr Foxton out of context. In The Kyzikos it was important that the presence (and presence alone in that case, there being no equivalent to the first part of our third sentence) of the acronym Wibon established the significance of the requirement for causation in that case, so that the Court should decide by reference to the delay which was causative, as opposed to that which was not causative, there being in that case an available berth.[14]I can see that there may be some inconvenience to the Buyer if an NoR is given at a time when both causes are in place at the time of the vessel’s arrival at the port and the berth becomes available before the weather conditions lift, but, as Mr Edey points out, it is for the Buyer to provide a berth, and if a berth was available when, as previously notified in accordance with the Clause 7.12, the vessel arrived at the port, then, irrespective of weather or tide, The Kyzikos would protect the Buyer and prevent the service of an NoR.[15]I am in the end convinced by Mr Edey’s argument as to simplicity. Mr Foxton’s case would require a rewriting of the clause so that the 7.13 Exception should only apply if the unavailability of a berth were the only reason why the vessel cannot access it, and I see no need for such rewriting, nor for spelling it out of the second part of the sentence. Notwithstanding the presence in the second part of the sentence of Wibon and Wipon, I do not conclude that the suggested ‘shorthand’ to be derived from them overrides the ‘longhand’ in the first part of the sentence, which is entirely clear, and I conclude that, notwithstanding the presence of tidal conditions also preventing access to the berth, the unavailability of that berth entitled the Master of the HANG TA to give NoR.[16]I consequently answer the issue set out in paragraph 8 above in the affirmative.