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Court determines identity of disponent owner under charterparty

News / / Court determines identity of disponent owner under charterparty, Court determines identity of disponent owner under charterparty

Americas Bulk Transport Limited (Liberia) v. COSCO Bulker Carrier Limited (China) (Grand Fortune) [2020] EWHC 147 (Comm)

In an interesting reminder of the applicable principles when a contract does not clearly identify the parties to it, the Commercial Court has recently dismissed a challenge to a tribunal’s substantive jurisdiction brought pursuant to s.67 of the Arbitration Act 1996.

The background facts

The Defendants, Cosco Bulk Carrier Limited (China) (“COSCO”), were the disponent owners of the MV Grand Fortune (the “Vessel”) which they chartered to Britannia Bulkers A/S (“Bulkers”) by a time charter dated 15 November 2007 (“Head Charter”).

Bulkers were a wholly owned subsidiary of Britannia Bulk Plc (“Bulk”), which guaranteed Bulkers’ performance obligations under the Head Charter.

The Vessel was sub-chartered to the Claimants, Americas Bulk Transport Limited (Liberia) (“ABT”), pursuant to a charterparty negotiated by ABT’s exclusive broker (“ABT Broker”) and a freight trader employed by Bulk (“Bulk Trader”) in around May 2008 (“Charterparty”). In an email recap sent by the ABT Broker dated 16 May 2008 (“Recap”), the Charterparty was expressly stated to be “Otherwise as per [the Head Charter] with logical alterations”. The Recap did not identify the disponent owner.

In late 2008, Bulk and Bulkers entered into administration and insolvent liquidation respectively. A dispute arose between Bulkers and COSCO concerning hire claimed to be due from Bulkers to COSCO under the Head Charter. That dispute was settled on terms that included COSCO taking an assignment of Bulkers’ rights against ABT under the Charterparty.

COSCO commenced arbitration against ABT, relying on the assignment in order to claim hire due from ABT to Bulkers under the Charterparty.

ABT asserted that there was no contract between ABT and Bulkers (they argued that their counterparty was Bulk) and that there was therefore no arbitration agreement. The majority of the Tribunal disagreed, concluding that Bulkers was the correct counterparty and, therefore, that the Tribunal did have jurisdiction over the dispute between COSCO and ABT.

ABT appealed to the Court under s.67 of the Arbitration Act 1996, challenging the Tribunal’s substantive jurisdiction to hear the dispute.

The Commercial Court decision

The competing positions

ABT relied, in part, on a draft charterparty (“Draft CP”) sent by the Bulk Trader to the ABT Broker four months after the date of the Recap in September 2008, which named Bulk as the disponent owner.  ABT argued that this was the best evidence that Bulk was the correct disponent owner.

COSCO argued that it was clear from the Recap, either considered in isolation or if read together with all of the admissible extrinsic evidence, that the parties had contracted on the basis that Bulkers were the disponent owners.

Applicable legal principles

The Court summarised the applicable legal principles as follows:

  1. Where the contract is contained in a document, the first question is whether that document sufficiently unequivocally identifies the parties to that contract.
  2. Where the contract is evidenced in writing, but the documents evidencing the agreement do not identify the parties, recourse is permissible to extrinsic evidence regarding the parties’ conduct up to the point when the contract was concluded.
  3. The Court should adopt an objective approach where (2) is applicable and must ask what a reasonable person furnished with the relevant information would conclude.

Parties identified in the Recap?

The Court found that there was no reason to suppose that the Recap was anything other than an accurate summary of what had been agreed, not least because no objection had been taken to its terms by the Bulk Trader.

 

The Recap described the Vessel as:

          “mv Grand Fortune

          (as described in CP dated Nov. 15 2007)”

The Court rejected ABT’s argument that the reference to the “CP dated Nov. 15 2007” had the effect of incorporating by reference into the Charterparty the identification of Bulkers as disponent owner in the Head Charter. All that was incorporated were the essential characteristics of the Vessel in the Head Charter and the name of Bulkers did not form part of this description.

Further, the inclusion in the Recap of the phrase “Otherwise as per CP dated Nov. 15 2008, with logical alterations” did not assist ABT. This wording only incorporated the terms of the Head Charter into the Charterparty, save to the extent that they were inconsistent with the Charterparty as set out in the Recap.

The Court, therefore, found that the Recap did not sufficiently identify the disponent owner.

Parties identified in extrinsic evidence?

The Court, therefore, had to consider points (2) and (3) of the applicable legal principles identified above in order to determine the identity of the disponent owner under the Charterparty.

Based on the available evidence, the Court concluded that:

  • ABT and its counterparty, by their respective agents, were aware of the existence of the Head Charter prior to the date of the Recap and, therefore, knew which parties were identified in it. It was, therefore, known that Bulkers had the power to sub-charter the Vessel.
  • A reasonable person in the position of ABT’s Broker would have known from the Head Charter that Bulk had elected to guarantee Bulkers’ obligations rather than to be identified itself as the charterer under the Head Charter. The reference to Bulk’s guarantee also highlighted the probability that Bulk and Bulkers were related companies.
  • The identity of the disponent owner for the purpose of the Charterparty was not discussed at any time before the charter was fixed and the Recap was sent.

The Court concluded that a reasonable person, furnished with the relevant information, would have concluded that Bulkers was the disponent owner. The Tribunal’s ruling that Bulkers was the correct counterparty and that it had jurisdiction to hear the dispute was, therefore, upheld.

Comment

The Court’s decision highlights the potential pitfalls when parties are not clearly identified in a charter or any contractual relationship. It is important that parties on both sides of the contract take care to ensure that they correctly identify (i) the legal entity who they are contracting on behalf of and (ii) the legal entity they are contracting with. A failure to identify the correct party can have serious repercussions further down the line, particularly when it comes to the commencement of formal legal proceedings and enforcement against assets of a counterpart.

James Rose

James Rose Managing Associate

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