AI Georgis Oil Trading Ltd v AG Shipping & Energy Pte Ltd (The “Marquessa”) – QBD (Comm Ct) (Henshaw J) [2021] EWHC 2319 (Comm) – 17 August 2021

SHELLTIME 4 – NON-PAYMENT OF DAILY HIRE – REPUDIATORY BREACH –DAMAGES – MITIGATION OF HIRE VS DAMAGES 

AI Georgis Oil Trading Ltd v AG Shipping & Energy Pte Ltd (The “Marquessa”) – QBD (Comm Ct) (Henshaw J) [2021] EWHC 2319 (Comm) – 17 August 2021

On October 16, 2020, cargo was loaded to the vessel, and the charterers paid $528K on the same day, leaving US$2.8mm outstanding. Due to the outstanding amount owed, the owners halted the charterparty’s performance while deliberations took place, leading to the parties agreeing to an Addendum stated October 27, 2020, which allowed the charterers more time to comply. Thereafter, the charterers proceeded to default on their responsibilities.

On November 25, 2020, the owners deemed the charterers’ violations a repudiatory breach with charter party subsequently coming to an end. The charterers alleged unlawful termination by the owners and pretended to accept it as a repudiatory violation in response to the owners’ letter of claim dated December 2, 2020.

The balance of overdue hiring payments after giving credit for address commission, charterers’ fees to date, and the necessary funds received from the voyage charterers as mitigation, were claimed by the owners as liquidated sums.

In correspondence, the charterers claimed that the owners failed to account for off-hire periods or times when the ship is not in use.

Pertinent to this award was Clause 6.1 which reads in relevant party:  

“… lacking the punctual and regular payment of hire… [the owners] shall be at liberty to refuse the performance of any of their duties hereunder… [the owners] shall be at liberty to withhold the performance of all of their obligations hereunder… and the cost of hiring will continue to rise…”

The owners now actively sought summary judgment on:

  1. Unpaid hire due before the charterparty’s termination (the Pre-Termination Claim)
  2. Damages resulting from the charterparty’s termination based on the charterers’ repudiation or renunciation (the Post-Termination Claim) but excluding damages for the period following the discharge of the charterers’ cargo from the vessel.

First, the owners’ power to halt performance was not a punishment as alleged by charterers; instead, it was a standard clause that had been proclaimed in earlier cases (see, for example, The Greatship Dhriti [2013] 2 Lloyd’s Rep 359). Second, the charterers’ defaults were substantial and continuous. Furthermore, any need to mitigate did not obligate the owners to refrain from using their right to discontinue performance.

 Owners were deemed by the Court to not be obligated to mitigate as their claim was for liquidated sums as defined by the contract.

The court agreed with the owners’ assessment of US$873K as the net balance owed after credit for the previously mentioned goods. The charterers had no realistic chance of contesting the claim for that amount, and there was no other compelling cause for the case to be decided at trial.

Regarding the Post-Termination Claim, a reasonable owner would have deduced from the charterers’ conduct that they would not pay hire punctually as required by the charterparty when they viewed the charterparty as having come to an end due to the charterers’ infringements. The charterers were both in repudiatory breach of the charterparty and had repudiated it (The Spar Capella [2016] 2 Lloyd’s Rep 447).

Last, owners were deemed by the Court to not be obligated to mitigate as their claim was for liquidated sums as defined by the contract.

The charterers had recommended that the compensation for the bunkers left on board be determined as of the termination date rather than the conclusion of the voyage. However, as the owners successfully argued:

  1. Clause 15 of the Shelltime 4 form (as revised) stated: “Owners shall accept and pay for any bunkers on board on redelivery (whether at the end of the charter or on the earlier termination of this charter).”
  2. Even if article 15 were not understood in this way, the owners would still be entitled to recover the bunkers used to complete the charterers’ journey on a different basis, such as damages or bailment basis the ruling in The Kos [2012] 2 Lloyd’s Rep 292.

The owners were entitled to summary judgment on the claims for unpaid pre-termination worth a total of US$873K  and damage incurred due to time lost after post-termination which equaled US$41K.