Hyundai Merchant Marine Company Ltd v Trafigura Beheer BV [2011] EWHC 3108 (Comm)

[2011] EWHC 3108 (Comm)Case No 2010 Folio 1209
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 29/11/2011
Before
THE HONOURABLE MR JUSTICE FLAUX
Between
HYUNDAI MERCHANT MARINE COMPANY LIMITEDClaimantTRAFIGURA BEHEER B.V.Defendant“THE GAZ ENERGY”
Stephen Kenny QC (instructed by MFB Solicitors) for ClaimantDavid Semark (instructed by Reed Smith LLP) for DefendantHearing Hearing date: 18 November 2011
Judgment

Introduction and factual background

[1]This is the judgment on a preliminary issue ordered by Gloster J at a Case Management Conference on 12 May 2011. The preliminary issue was as follows:
“Whether the head charterparty and the sub charterparty, on a proper construction of all the documents in which the contractual terms may be found, entered into between the respective parties on 21 November 2005 contained an all weather warranty or a weather warranty applying only in weather conditions up to a maximum of Force 4 on the Beaufort Scale.”
[2]For the purposes of the preliminary issue, the following factual background applies (most of which constitutes agreed facts as set out in paragraph 11 (a) to (e) of the First Witness Statement of the claimant’s solicitor, Mr Naqvi, as contemplated by the Order of Gloster J): (1) By a time charter dated 21 November 2005 on an amended Shelltime 3 form with various additional clauses and with Gas Form C, Trafigura let the vessel “Gaz Energy” to Daelim Corporation (“Daelim”), for a period that was in effect 18 months, on the terms and conditions set out therein (“the head charter”). (2) By a further time charter also dated 21 November 2005 again on an amended Shelltime 3 form with various additional clauses and with Gas Form C, on materially identical terms to the head charter save for hire, Daelim sub-let the vessel to Hyundai Merchant Marine (“HMM”) on the terms and conditions set out therein (“the sub-charter”). (3) The terms of both charters are contained in (i) an amended Shelltime 3 form; (ii) additional clauses and (iii) Gas Form C. (4) The vessel was delivered under both charters on 14 January 2006, at 10.45 local time (08.45 GMT) at Khor Fakkan. HMM then traded the vessel in accordance with the terms of the charters. (5) Disputes subsequently arose between the parties under both charters as to whether the vessel had failed to perform in accordance with the speed and consumption provisions in the charters and as to how those provisions are to be construed. It is those disputes which are sought to be resolved in principle by the preliminary issue.[3]The Order of Gloster J provided that Trafigura, the Part 20 defendant, was to be substituted as defendant in place of Daelim and the action was to continue between HMM as claimant and Trafigura as defendant. Throughout this judgment, I will refer to HMM as “the charterers” and Trafigura as “the owners”, although Trafigura was in fact the disponent owner, having the vessel on time charter from her registered owners, Sure Gas Shipping SA of Panama, on terms which are not before the court.[4]Both parties filed witness statements pursuant to the Order of Gloster J, which also provided that there was to be no oral evidence at the trial of the preliminary issue. In the event, the evidence in the witness statements filed was either inadmissible or of marginal assistance to the court in what is an exercise of construction of the contract. I have had no regard to it in reaching my decision. The trial of the preliminary issue took place on one day, 18 November 2011. The charterers were represented by Mr Stephen Kenny QC and the owners by Mr David Semark.

The terms of the charterparty

[5]The Court is principally concerned with three provisions in the charterparty, Clause 24 as amended, Additional Clause 42 and Gas Form C. These provided, so far as relevant, as follows: Clause 24. Detailed Description and Performance Owners warrant that at the date of delivery under this charter the vessel shall be of the description set out in Gas Form C attached hereto and signed by them and undertake to use their best endeavours so to maintain the vessel during the period of her service hereunder. Further but otherwise [without] prejudice to the generality of this clause Owners guarantee that the average speed of the vessel will be not less than knots in ballast and knots fully laden, with a maximum bunker consumption of tons diesel oil/ tons fuel oil per day for all purposes excluding cargo heating and tank cleaning. See Additional Clause 42 attached which also overrides any references to over performance herein. [lines 201-216] The aforesaid average speeds shall be calculated in each yearly or other less period, as defined hereinafter by reference to the observed distance from pilot station to pilot station on all sea passages and over the whole of the time the vessel is on hire during such period [lines 217-219]… … In the event of any conflict between the particulars set out in the aforesaid Form and any other provision (including this clause) of this charter, such other provision shall prevail. [lines 241-242] Clause 42: Speed/Consumption. Speed about 15 knots average Consumption about 40 mts IFO 380 CST at sea plus about 0.2 mts GO and about 10 mt IFO 380CST at port plus about 0.2 mt GO. Otherwise as per Gas Form C. Gas Form C A.1 General Description Owners Sure Gas Shipping SA, Panama A.5 Speed Guaranteed average speed on a year’s period and max wind force 4 in Beaufort scale: Loaded about 14.5 knots, Ballast about 15.5 knots A.6 Consumption in metric tons per day: At sea In port Main engine/HFO 35 mt - Aux. engine/HFO/GO 6/0.2 mt 9/0.2 mt Boiler/HFO 2.5 mt Inert gas generator/gasoil 285 kg/h[6]Other provisions of the charterparty of some relevance to the issue I have to decide are as follows: Clause 21 Off-hire . In the event of loss of time (whether arising from interruption in the performance of the vessel’s service or from reduction in the speed of the performance thereof or in any other manner) (i) due to deficiency of personnel or stores, repairs, breakdown (whether partial or otherwise) of machinery or boilers, collision or stranding or accidental damage to the vessel or any other cause preventing the efficient working of the vessel; or …. hire shall cease to be due or payable from the commencement of such loss of time until the vessel is again ready and in an efficient state to resume her service from a position not less favourable to Charterers than that at which such loss of time commenced. Any such loss of time which arises wholly or partly from a reduction in the vessel’s guaranteed average speed provided in clause 24 hereof shall be taken to be the difference between the time the vessel would require to perform the relevant service at the said speed and the time actually taken to perform the same and such loss of time shall be added to any loss of time arising from interruption in the performance of the vessel’s service. [Immediately after Clause 40] Additional Clauses Nos. 41-74, Gasform C and revised Paramount Clause, as attached, are deemed to be fully incorporated into this Charter Party.

Parties’ submissions

[7]I propose to set out in summary the rival submissions of the parties. To the extent that this summary does not deal with points of detail, so far as relevant, those are set out during the course of my analysis and conclusions later in the judgment.[8]The submissions of Mr Stephen Kenny QC on behalf of the charterers can be summarised as follows:(1) Clause 24 creates an “all weather warranty”, a guarantee of performance as regards average speed and maximum daily bunker consumption, measured over the whole period that the vessel is on hire under the charter, regardless of weather conditions. Although the words “in all weather conditions” are not used expressly, the clear meaning of the words in lines 217-8: “on all sea passages and over the whole of the time the vessel is on hire during such period” is that the average speed and consumption under clause 24 is calculated in all weather conditions.(2) The second paragraph of the Off-Hire Clause, clause 21, is predicated upon the speed warranty in clause 24 being an all weathers warranty.(3) Additional Clause 42 makes no sense unless it is read into and as part of clause 24. Accordingly any suggestion that the speed and consumption warranty in clause 24 had been left blank is misconceived.(4) The words “Otherwise as per Gas Form C” mean that only those matters set out in Gas Form C not expressly dealt with in Additional Clause 42, namely the consumption of the inert gas generator, “otherwise” apply. Accordingly, the speed warranty in Additional Clause 42 is an all weathers warranty not qualified by reference to Beaufort Force 4.(5) If, contrary to those submissions, the owners are correct that, by virtue of Gas Form C, the speed warranty is qualified by reference to Beaufort Force 4, then there is a conflict between that provision and the all weathers performance calculation at lines 217 to 220 of clause 24. By reason of the final sentence of clause 24, that clause prevails over the conflicting provision in Gas Form C. In those circumstances, there is an all weathers warranty in the charter.[9]The submissions advanced on behalf of the owners by Mr David Semark can be summarised as follows:(1) The words “Otherwise as per Gas Form C” mean that everything in Clauses A5 and A6 of that Form was incorporated into clause 42 and, thus clause 24, other than the actual speed and consumption figures set out in Additional Clause 42. It follows that the speed warranty of about 15 knots average was qualified and only applicable in weather conditions of Beaufort Force 4 or less.(2) Although clause 24 of the standard form Shelltime 3 charter provides for an all weather warranty, the warranty was left blank in the present case, so clause 24 did not contain an all weathers warranty. There was, accordingly, no conflict between clause 24 and Gas Form C. This case was on all fours with the decision of HHJ Diamond QC and the Court of Appeal in The Gas Enterprise [1993] 2 Lloyd’s Rep 352.(3) If, contrary to that submission, there was any such conflict, notwithstanding the last sentence of clause 24, the terms of Gas Form C should take precedence and, accordingly, the speed warranty was one which only applied in weather conditions of Beaufort Force 4 or less.(4) Clause 21 did not provide an answer as to the nature of the warranty in clause 24 and to the extent that, because the speed warranty only applied in good weather, there was a gap in the remedy provided by clause 21 that could be filled by the exercise of the right of set-off.

Applicable principles of construction

[10]In Rainy Sky SA v Kookmin Bank [2011] UKSC 50 the Supreme Court has very recently reiterated in clear and helpful terms the applicable principles which the courts should adopt in the construction of contracts. For present purposes, it is only necessary to refer to a few paragraphs in the judgment of Lord Clarke (with whom Lords Phillips, Mance, Kerr and Wilson agreed): “14. For the most part, the correct approach to construction of the Bonds, as in the case of any contract, was not in dispute. The principles have been discussed in many cases, notably of course, as Lord Neuberger MR said in Pink Floyd Music Ltd v EMI Records Ltd[2010] EWCA Civ 1429; [2011] 1 WLR 770 at para 17, by Lord Hoffmann in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, passim, in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912F-913G and in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, paras 21-26. I agree with Lord Neuberger (also at para 17) that those cases show that the ultimate aim of interpreting a provision in a contract, especially a commercial contract, is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. As Lord Hoffmann made clear in the first of the principles he summarised in the Investors Compensation Scheme case at page 912H, the relevant reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. … 23. Where the parties have used unambiguous language, the court must apply it. This can be seen from the decision of the Court of Appeal in Co-operative Wholesale Society Ltd v. National Westminster Bank plc [1995] 1 EGLR 97. The court was considering the true construction of rent review clauses in a number of different cases. The underlying result which the landlords sought in each case was the same. The court regarded it as a most improbable commercial result. Where the result, though improbable, flowed from the unambiguous language of the clause, the landlords succeeded, whereas where it did not, they failed. The court held that ordinary principles of construction applied to rent review clauses and applied the principles in The Antaios(Antaios Compania Naviera SA v Salen Rederierna AB) [1985] AC 191. After quoting the passage from the speech of Lord Diplock cited above, Hoffmann LJ said, at p 98: "This robust declaration does not, however, mean that one can rewrite the language which the parties have used in order to make the contract conform to business common sense. But language is a very flexible instrument and, if it is capable of more than one construction, one chooses that which seems most likely to give effect to the commercial purpose of the agreement." 24. The court also comprised Leggatt and Simon Brown LJJ. Simon Brown LJ at p 101 said that, having regard to the improbable result for which the landlords contended, only the most unambiguous of such clauses could properly be found to bear the landlords construction and that in the case of only one of the leases did the clause "unambiguously …achieve the improbable result for which the landlords contend". The case is of interest because Simon Brown LJ considered that, of the other three cases, one unambiguously failed to achieve the result sought by the landlords, whereas, of the other two, he said this at p 102: "For my part, I would accept that the more obvious reading of both favours the landlord's construction. I am persuaded, however, that they are capable of being, and therefore, for the reasons already given, should be, construed differently." That case is therefore an example of the adoption and application of the principle endorsed by the Judge and by Sir Simon Tuckey. See also International Fina Services AG v Katrina Shipping Ltd, The Fina Samco [1995] 2 Lloyd's Rep. 344, where Neill LJ said at page 350 it was necessary when construing a commercial document to strive to attribute to it a meaning which accords with business common sense.” "This robust declaration does not, however, mean that one can rewrite the language which the parties have used in order to make the contract conform to business common sense. But language is a very flexible instrument and, if it is capable of more than one construction, one chooses that which seems most likely to give effect to the commercial purpose of the agreement." "For my part, I would accept that the more obvious reading of both favours the landlord's construction. I am persuaded, however, that they are capable of being, and therefore, for the reasons already given, should be, construed differently."[11]Mr Semark also referred me to the judgment of Bingham LJ in Pagnan v Tradax [1987] 2 Lloyd’s Rep 342 in relation to the importance of not approaching a question of construction with any predisposition to find inconsistency and as to how narrowly inconsistency is to be defined. The relevant passages are at 349-350:
“It would in my judgment be quite wrong to approach this question of construction with any predisposition to find inconsistency between the special condition and clause 19. They are all part of the same contract, and the parties expressly chose to make their contract subject to the terms of G.A.F.T.A. form 119. Moreover, the same contractual document which contains the inconsistency clause also contains this provision: “This contract is made upon the terms, conditions and rules, including the Arbitration Clause. and Rules, in Contract Form No. 119/125 of G.A.F.T.A. in force at date of contract, of which the parties admit that they have knowledge and notice, and the details above given shall be taken as having been written into such Contract Form in their appropriate place.”
On the other hand, it is wrong to approach the contract on the assumption that there is no inconsistency. By including the inconsistency clause, the parties have acknowledged that there may be. One should, therefore, approach the documents in a cool and objective spirit to see whether there is inconsistency or not. ….. These cases are only of significance as helping to define inconsistency and illustrating how courts have approached that question in the past. It is not enough if one term qualifies or modifies the effect of another; to be inconsistent a term must contradict another term or be in conflict with it, such that effect cannot fairly be given to both clauses.”[12]Before turning to the application of those principles to the present case, I should deal with one aspect of the evidence before the court which is not a permissible aid to construction. In support of the owners’ construction of the charter, Mr Semark sought to rely upon the so-called continuation charter. The day after the present charter was concluded, on 22 November 2005, Daelim and HMM entered into a further charter also on the Shelltime 3 form as amended, which was for a period of eight years in direct continuation from the time of redelivery under the present charter. That contained a different wording in Additional clause 42 to that in the present charter, which Mr Semark sought to pray in aid of his construction of the present charter.[13]As I pointed out in argument, reliance on a subsequent contract to construe a written contract is, to say the least, a heretical approach to construction. Although Mr Semark did not press the point, I consider it should be addressed, if only to dismiss it. The inadmissibility of a subsequent contract as an aid to construction of a written contract is merely one aspect of the general principle of English contract law that (save in exceptional circumstances not applicable in the present case) the subsequent conduct of the parties cannot be looked at to interpret a written contract: see James Miller & Partners v Whitworth Street Estates [1970] AC 583 per Lord Reid at 603D-E; Schuler AG v Wickman Machine Tool [1974] AC 235 per Lord Reid at 252C-F; Lewison: The Interpretation of Contracts 4th edition para 3.15. It seems to me that the principle that the subsequent contract is inadmissible is equally applicable whether it is made the following day or long after.

Analysis and conclusions

[14]Applying the relevant principles of construction to the present case and seeking to construe the charterparty as a whole and to determine what a reasonable person would have meant by the terms used, I have concluded that the charterers’ construction of the charter is to be preferred for the reasons which follow.[15]The starting point is that Additional Clause 42 makes no sense unless it is read with clause 24. In effect, it fills in the gaps in lines 214-215, as is clear from the added text after line 216:
“See Additional Clause 42 attached which also overrides any references to overperformance herein”
. Those concluding words mean that clause 42 overrides the references to exceeding performance elsewhere in clause 24. The parties could in fact have inserted the words in clause 42 into the standard text of clause 24, with some deletions, for example deletion of the reference to different average speeds laden and in ballast. They evidently found it more convenient to incorporate the speed and consumption figures in clause 42 by reference. However, what is clear is that, contrary to Mr Semark’s submission, the parties did not leave the speed and consumption warranty in the standard form in clause 24 “blank”. Rather they filled it by incorporating Additional Clause 42 by reference.[16]So far as clause 24 itself is concerned, it seems to me that the first sentence is more naturally to be construed as an adjunct to the description, condition and maintenance obligations in clauses 1 and 2, containing as it does a warranty as to the detailed description of the vessel in Gas Form C and an undertaking to use best endeavours to maintain the vessel in accordance with that description during the service. The remainder of clause 24 then deals with speed and consumption. In reality, it may not matter precisely how the first sentence fits in, as it has no impact, as I see it, on the rest of the clause, which clearly contains a warranty or “guarantee” as to average speed and consumption on the basis of the figures incorporated by reference, as I have said, from Additional Clause 42.[17]Clause 24 then provides in lines 217 to 220:
“The aforesaid average speeds [i.e. those incorporated by reference from Clause 42] shall be calculated in each yearly or other less period…on all sea passages and over the whole of the time the vessel is on hire during such period”
. It is clear from those words that the warranty as to average speed applies in all sea conditions and whatever the weather. In this context, Clause 24 of the Shelltime 3 form is to be contrasted with Clause 24 of the Shelltime 4 form, which provides for the exclusion from the performance calculations of “Adverse Weather Periods”, defined so far as relevant for present purposes as periods where the winds exceed Beaufort Scale 8 for more than 12 hours: see the discussion of the difference between the two forms in Wilford on Time Charters: 6th edition para 38.119.[18]In his submissions, Mr Semark sought to challenge the conclusion that, viewing the charterparty as a whole, clause 24 constituted an all-weather speed warranty, by asserting not only that in this case the warranty had been left blank (a submission which I have already rejected) but that, “for obvious reasons”, such provisions are “the exception rather than the norm”. I agree with Mr Kenny that there is simply no evidential basis for this assertion. If it is intended to draw sustenance from the availability to owners and charterers generally of the Shelltime 4 form, there are two obvious answers. First, if the parties in this case had wanted to use Shelltime 4 (which has been around since 1984) and thereby avoid having an all weather speed warranty, they could easily have done so. Second, as Mr Kenny pointed out, what might be described as the carve out for adverse weather in Clause 24 of Shelltime 4 is only for what are essentially strong gale conditions and worse. Accordingly, the owners would still be assuming a significant part of the overall weather risk.[19]Given my conclusion that lines 217 to 220 of clause 24 clearly and unambiguously does constitute an all weathers speed warranty, it is not necessary to speculate why the parties might have chosen to include such a provision in their charterparty or to determine whether that is a particularly commercial result. However, I agree with Mr Kenny that one possible explanation is that the parties wanted to avoid disputes over which periods of weather fall to be excluded, when a speed warranty only applies when the winds are Force 4 and below, and over possible differences between logbook entries and independent weather reports. Whilst those sorts of disputes have kept junior counsel and solicitors gainfully employed in maritime arbitrations of speed and consumption disputes for many years, one can quite see the commercial sense of a much simpler approach, which takes an average annual speed on all sea passages, whatever the weather conditions. That is what clause 24 of this charterparty does.[20]Turning to Additional Clause 42 itself, it seems to me that the words “Otherwise as per Gas Form C” are capable of more than one construction. They could mean, as Mr Semark contends that you read into Additional Clause 42 everything in Clauses A5 and A6 of Gas Form C, other than the actual speed and consumption figures, including the words “and max wind force 4 in Beaufort Scale”. Equally, they could mean, as Mr Kenny contends, that only those matters set out in Clauses A5 and A6 of Gas Form C which have not been expressly dealt with in Clause 42, namely the consumption of the inert gas generator, “otherwise” apply.[21]Overall, I prefer Mr Kenny’s construction of those words “Otherwise as per Gas Form C” which seems to me more in accord with the overall commercial purpose of the charter and the construction which (for reasons I will elaborate below) does not lead to any internal conflict between the speed and consumption provisions and the all weathers warranty in clause 24.[22]Accordingly, in my judgment, so far as speed and fuel oil/ gas oil consumption of the main and auxiliary engines and boiler, are concerned, those are as stated in Clause 42 and override any contrary provision in Gas Form C. The “otherwise” refers to those matters set out in Clause A5 of the Gas Form C which have not been expressly dealt with in Clause 42, namely the consumption of the inert gas generator. I agree with Mr Kenny that the use of the word “otherwise” as a matter of language more naturally conveys something which is supplementing clauses 42 and 24, not replacing or contradicting them, which is one of the problems which Mr Semark’s construction faces. It seems to me Mr Semark’s construction elevates clauses A5 and A6 of Gas Form C into clauses which become paramount over clauses 24 and 42, which gives the word “otherwise” a strained and extended meaning it will not bear.[23]The other difficulty which Mr Semark’s construction faces is that it leads to the internal inconsistency, that, leaving the words “and max wind force 4 in Beaufort Scale” to one side for a moment, the court is presented with inconsistent speed and consumption figures in the two provisions. For example, in relation to speed, Clause A5 of Gas Form C provides about 14.5 knots laden and about 15.5 knots in ballast as against “about 15 knots average” in Additional Clause 42.[24]Mr Semark seeks to explain this inconsistency by submitting that the figure in Additional Clause 42 was intended to be the average between the laden speed and the ballast speed in Gas Form C. Of course that is mathematically correct, but seems to me to involve the somewhat implausible assumption that throughout the charterparty, which was effectively for 18 months and permitted worldwide trading within Institute Warranties Limits, the vessel would steam half the time in ballast.[25]There is a similar inconsistency in the consumption figures, for example in relation to fuel oil consumption at sea, Clause A6 of Gas Form C provides for a total of 41 metric tons per day in both main and auxiliary engines, whereas Additional Clause 42 provides for 40 metric tons per day. In his oral submissions, Mr Semark sought to explain this inconsistency away by suggesting that because, in the speed figure in Additional Clause 42, the owners had agreed to eliminate the difference between the laden and ballast speeds in Gas Form C, thereby committing themselves to a slightly higher overall average speed, it may be they were recognising that they would consume more bunkers.[26]Quite apart from the fact this submission implicitly recognises that the vessel would spend more time laden than in ballast, hence the higher overall average speed (itself somewhat inconsistent with Mr Semark’s earlier suggestion that 15 knots average was simply the mid point between the laden and ballast speeds in Gas Form C), the argument does not work. That is because the average fuel oil consumption at sea in Additional Clause 42 (which on Mr Semark’s hypothesis involves a slightly higher overall average speed) is actually less than in Gas Form C, not more.[27]In the circumstances, I was not convinced by Mr Semark’s explanations of the inconsistencies between the figures in the two provisions which his construction undoubtedly involves. It seems to me much more likely, as I have said, that so far as speed and consumption are concerned (except for gas oil consumption in the inert gas generator which was “otherwise” dealt with in Gas Form C) the intention was that the wording in Additional Clause 42, which in turn is to read into clause 24 would prevail over the provisions of Clauses A5 and A6 of Gas Form C.[28]It is true that in one sense Mr Kenny’s construction renders the words “and max wind force 4 in Beaufort Scale” in Gas Form C redundant, but as he pointed out, the presumption against surplusage is of little value when construing charterparties and other shipping contracts: see for example per Lord Hoffmann in The Starsin [2004] 1AC 715; [2003] UKHL 12 at [112].[29]Mr Semark contended that the charterers’ construction of clause 42 was uncommercial because it would involve the owners having chosen to warrant an all weather average speed more onerous than that contained in Gas Form C. In the absence of any admissible evidence (or indeed any evidence at all) as to why the owners, on any view, inserted different figures in clause 42 to those in Clause A5 of Gas Form C, one would only be speculating as to the reason, but it does not seem to me it need necessarily be uncommercial to have done so.[30]Although Gas Form C is not dated, it seems likely, from the terms of clause A1, that it emanates from the registered owners and had been prepared by them. One possible explanation for Trafigura as disponent owners being prepared to warrant the slightly more onerous “all weather” figure in Additional Clause 42 is that it may have accorded with their experience of the vessel in actual service, whereas the figures in Gas Form C may have been put forward by conservative head owners. As I say, it is speculation, but the explanation does not have to be an uncommercial one. Viewed overall, I still consider that the construction for which Mr Kenny contends is more in accord with the language of Additional Clause 42 and the commercial purpose of the charter.[31]However, even if Mr Semark were right in his submissions about Additional Clause 42 and Clause A5 of Gas Form C and the speed figure in Additional Clause 42 of about 15 knots average is to be qualified, so that it only applies in weather conditions of maximum Beaufort Force 4, I do not consider that ultimately those submissions assist him, because in my judgment, such a qualified provision, imported from Gas Form C, is inconsistent with the words of lines 217-220 in clause 24.[32]In reaching that conclusion, I have borne well in mind the principles set out in the judgment of Bingham LJ in Pagnan v Tradax [1987] 2 Lloyd’s Rep 342, 349-350 to which Mr Semark referred me, both as regards the importance of not approaching a question of construction with any predisposition to find inconsistency and as to how narrowly inconsistency is to be defined.[33]However, even applying those principles, what one ends up with, if Gas Form C qualifies the speed figures in Additional Clause 42, so that they only apply in good weather (Beaufort Force 4 or less), is a guarantee of speed in lines 213 to 216 of clause 24 which only applies in good weather, but a provision in lines 217 to 220 which, as I have held, requires the average speed to be calculated in all weather conditions (because it applies on all sea passages and over the whole period the vessel is on hire, not just in periods of good weather). On any view, those two provisions would contradict or be in conflict with one another.[34]Given that conflict on the owners’ case between the provisions of Clause A5 of Gas Form C as incorporated into Additional Clause 42 and thus Clause 24 and lines 217 to 220 of clause 24, in my judgment that conflict is resolved by the closing words of clause 24 at lines 241-2:
“In event of any conflict between the particulars set out in the aforesaid Form [Gas Form C] and any other provision (including this clause) of this charter such other provision shall prevail”
. Given that there is, as I have found, a conflict between the all weathers performance calculation in clause 24 and any qualification to the speed guarantee by reference to the words “and max wind force 4 in Beaufort Scale” derived from Gas Form C, the all weathers performance calculation must prevail, and the calculation must be made by reference to an average speed on all sea passages throughout the charter period of 15 knots.[35]Mr Semark sought to avoid this conclusion by two arguments. First, he contended that there was, on analysis, no conflict between Clause 24 and a qualified speed guarantee imported from Gas Form C. The basis for this submission was that, on the owners’ construction, this case was no different from the decision of HHJ Diamond QC and the Court of Appeal in Exmar NV v BP Shipping Ltd (“The Gas Enterprise”) [1993] 2 Lloyd’s Rep 352.[36]He submitted that, as in that case and in Didymi Corporation v Atlantic Lines and Navigation Inc [1987] 2 Lloyd’s Rep 166 which it followed, the first stage was to calculate the vessel’s performance by reference to the “contractual yardstick”, namely performance in good weather conditions, which would be done by reference to the guarantee of speed in Additional Clause 42 qualified by Gas Form C. Having calculated that contractual yardstick, the second stage was to apply it to the whole period of the charter pursuant to lines 217 to 220. What you would end up with was precisely the same position as in The Gas Enterprise.[37]The fallacy in that submission is that, in The Gas Enterprise, the relevant contractual provisions were the obverse of those in the present case. Thus, the clause which provided for how the performance of the vessel was to be assessed (Clause 5(4)) was qualified, in the sense that it provided that the calculation was inclusive only of passages in weather of Beaufort Force 4 or less. The clause read:
“For the purpose of assessing the performance of the vessel, the average speed and bunker consumption of the vessel shall be calculated upon the distance made, the time taken and the quantity of bunkers consumed by the vessel on each sea passage as ordered to be performed by the Charterers… from Pilot Station to Pilot Station up to and including Beaufort Force 4 wind and wave.”
[38]However, the actual speed warranty in Clauses 5(1) to (3) was unqualified and applied in all weather conditions. Those provisions read:
“(1) Owners undertake that at the date of delivery under this Charter the vessel shall be of the description set out in the gas form “C”
October 1983 attached hereto and undertake so to maintain the vessel during the period of service under this Charter. Owners similarly undertake that the date of delivery under the Charter this vessel … shall be capable of performing in accordance with the provisions below and undertake so to maintain the vessel during the period of service under this Charter. (2) Owners undertake that: The maximum average speed of the vessel during the period of this Charter shall be 16.0 knots in respect of laden and ballast passages and at such speed the maximum average bunker consumption shall be 62 tonnes of fuel oil/8 tonnes of diesel oil. (3) The vessel is capable of steaming at a minimum average speed of 13.5 knots in a laden condition and at such speeds the average bunker consumption shall be 41 tonnes of fuel oil/8 tonnes of diesel oil. Should Charterer instruct the vessel to proceed at an average speed or average bunker consumption between those set out in (1) and (2) above the vessel shall be capable of achieving, on sea passages, the average speeds and average bunkering consumptions set out in the table hereunder:”[which it is not necessary to set out][39]It was because the warranty in Clause 5(1) to (3) was expressed to apply generally in respect of all sea passages, that the courts in that case concluded that the contractual yardstick was to be applied to all sea passages throughout the period of the charterparty: see for example per Lloyd LJ (with whom Butler-Sloss LJ agreed) at 365-6:
“It is common ground that sub-cl. (4) provides what the Judge called a contractual yardstick for measuring the extent of the vessel’s capacity to perform. That being so I can see no reason for confining the application of the yardstick to periods when the weather was force 4 or less. The warranty set out in sub-cll. (1) – (3) is expressed to apply generally in respect of all sea passages, whether laden or in ballast. Prima facie the charterers are entitled to be compensated for any breach of that warranty. A vessel which cannot comply with her contract speed or consumption in good weather, is unlikely to be able to comply with the contract when the weather is bad. I would therefore expect sub-cll. (4) and (5) to provide the machinery for assessing compensation for any breach of warranty irrespective of the weather. I can think of no sensible business reason why the parties should have intended charterers to be compensated for under-performance in periods of good weather, but not in periods of bad weather. The absolute nature of the warranty does not, as Mr Cooke suggested, provide a sufficient explanation. Of course allowance would have to be made for the effect of bad weather on the vessel’s performance. But that, as the Judge pointed out in the present case, and as Mr Justice Hobhouse pointed out in Didymi Corporation v Atlantic Lines & Navigation Co., [1987] 2 Lloyd’s Rep. 166 at pp. 170-171, is a matter of every day occurrence in claims for breach of speed and consumption warranties, and presents no practical difficulty.”
[40]However, as I have said, on the owners’ case, the provisions in the present charterparty are effectively the other way round: the provision dealing with assessment of performance and financial consequences (lines 217-220 in clause 24) is unqualified and applies to all sea passages, so that on that hypothesis, the contractual yardstick would be unqualified. In contrast to the clauses in The Gas Enterprise, on the owners’ case here, it is the speed warranty which is qualified and only applicable in good weather. In those circumstances, the reasoning of Lloyd LJ cannot be made to apply to the clauses in this case. Rather what one is left with is not, as Mr Semark submitted, precisely the same position as in The Gas Enterprise, but the very conflict between Clause 24 and Gas Form C which I have identified.[41]The second argument which Mr Semark advanced was the somewhat bold argument that, if there was a conflict between Gas Form C and clause 24, Gas Form C should prevail, notwithstanding the provision at the end of clause 24 (lines 241-2):
“In event of any conflict between the particulars set out in the aforesaid Form [Gas Form C] and any other provision (including this clause) of this charter such other provision shall prevail”
. The basis for this contention was reliance on what Mr Semark categorised as the “post-amble” immediately following clause 40 of the charter, which provided: “Additional Clauses 41-74, Gasform C and revised Paramount Clause, as attached, are deemed to be fully incorporated into this Charter Party”.[42]Mr Semark submitted that, because this provided that Gas Form C was “fully incorporated” and thus a term or terms of the contract, the provision at the end of clause 24 could not be used to make clause 24 prevail in the event of a conflict, rather Gas Form C should prevail. This submission seems to me to elevate Gas Form C to some status of paramountcy which the terms of the contract do not accord it.[43]In my judgment, the correct analysis is that, once it is accepted that Gas Form C is a term of or part of the contract (which it would be anyway by virtue of Additional Clause 42, on the owners’ case, irrespective of the provision following clause 40), if there is a conflict between one term of the contract and another, the court has to see if there are any internal provisions which assist as to what the court should do to resolve such a conflict. Provisions that one set of terms should prevail over another (historically, often that typed additional clauses should prevail over the printed form) are not uncommon in commercial contracts. The so-called inconsistency clause in Pagnan v Tradax,set out by Bingham LJ at 344, is an example of such a clause. The provision at the end of clause 24 in the present case is another.[44]In my judgment, that provision at lines 241-2 is quite clear in its terms and effect: in the event of a conflict between Gas Form C and any other provision of the contract, that other provision shall prevail. The provision at lines 241-2 is silent as to the contractual status of Gas Form C, although the use of the word “other” before “provision” suggests the draftsman assumed Gas Form C would be a “provision” of the contract. Certainly, there is nothing in lines 241-2 which could even begin to justify the owners’ approach of saying that because Gas Form C was “fully incorporated”, somehow lines 241-2 not only cease to have any effect, but are reversed, so that Gas Form C now prevails.[45]Accordingly, even if the owners’ construction of the provisions in Additional Clause 42 and Gas Form C were correct, which in my judgment it is not, all that leads to is an inevitable conflict between Gas Form C and clause 24 which, by virtue of lines 241-2 is resolved by clause 24, with its all weathers warranty, prevailing.[46]In oral argument, Mr Kenny took some time analysing the Off-Hire clause, clause 21, seeking to demonstrate that it is predicated upon there being an “all weathers speed warranty” in clause 24. Interesting though the submissions were, in view of my firm conclusions as to the correct construction of the provisions with which I am primarily concerned, it is not necessary to look at that clause in detail. In any event, Mr Kenny accepted that his points about clause 21 were only supportive of his submissions as to the correct construction of the other clauses and would not carry the day if he is wrong about clauses 24, 42 and Gas Form C.[47]The principal point he advanced was that the second paragraph of clause 21 is a net loss of time provision, entitling the charterer to make deductions from hire in advance of the annual performance assessment under clause 24, in the event that there is a cause preventing the efficient working of the vessel within the first paragraph which has led to a reduction in speed, such as a broken cylinder ring.[48]Mr Kenny submitted that if there were no guaranteed speed under clause 24 where the weather exceeded Beaufort Force 4, it is difficult to see how you could calculate the appropriate deduction from hire under clause 21. In other words, on the owners’ construction of clause 24, there would be no entitlement to deduct hire under clause 21 if the weather were above Force 4, because there is no guaranteed speed in those weather conditions, even if it were objectively possible to demonstrate that there had been a reduction in speed in those weather conditions caused in the example by a broken cylinder ring.[49]There is a lot of force in this point and I do not consider that Mr Semark’s response that, in the event of there being a gap in the remedy provided by clause 21, it could be filled by the exercise by the charterer of the right of set-off recognised by the Court of Appeal in The Nanfri [1978] 2 Lloyd’s Rep 132, is a particularly satisfactory one. That right of self help has its potential perils (see the discussion in Wilford at para 16.51) and is no substitute for a clear contractual entitlement to make a deduction from hire. Whilst it is not necessary finally to decide the point, I agree with Mr Kenny that the wording and structure of the second paragraph of clause 21 is more consistent with the warranty in clause 24 being an “all weathers speed warranty” than qualified in the manner for which the owners contend.

Conclusion

[50]It follows that the answer to the preliminary issue is that, upon its proper construction, the charter did contain the all weather warranty for which the charterers contend.

Cited in 1 later judgment