Difference between revisions of "MUR Shipping v Louis Dreyfus Company Suisse - The Tiger Shanghai"
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MUR Shipping B.V. v Louis Dreyfus Company Suisse S.A. (The “Tiger Shanghai”)
English Commercial Court: Cockerill J:  EWHC 3240 (Comm): 13 November 2019
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2019/3240.html
Timothy Young QC (instructed by Lax & Co) for MUR Shipping (“Charterers”)
Nicholas Vineall QC (instructed by Holman Fenwick Willan LLP) for Louis Dreyfus Suisse (“LDC”) (“Owners”)
TIME CHARTERPARTY: ALL CLAIMS PRESENTATION TIME BAR CLAUSE: OWNERS REFUSED TO ALLOW CEMENT FEEDER HOLES TO BE DRILLED IN HATCH COVERS: CHARTERERS’ CONTEMPORANEOUS SURVEY REPORT CONCLUDED OWNERS HAD NO GOOD REASONS FOR REFUSAL: REPORT RELIED ON BY CHARTERERS IN ARBITRATION BUT NOT PRESENTED WITHIN THE 12 MONTHS’ TIME BAR: WHETHER CLAIM TIME BARRED FOR WANT OF PRESENTATION OF “ALL AVAILABLE SUPPORTING DOCUMENTS (WHETHER RELATING TO LIABILITY OR QUANTUM OR BOTH)”: ARBITRATION ACT 1996 SECTION 69 APPEAL ON POINTS OF LAW
In dismissing Charterers’ appeal, on a point of law against a final arbitration award, the High Court held that Charterers failed to present “all available supporting documents” to Owners within the 12 months required by the claims presentation clause. This was because a contemporaneous survey report made at the loading port for Charterers, which had not been presented in time but was later relied on to support Charterers’ claim in arbitration, was a relevant supporting document. The survey report itself was not privileged and went to the heart of the issue as to whether Owners had unreasonably refused to allow feeder holes to be cut into the vessel’s hatch covers to enable the loading of cement clinker cargo. That refusal had prompted Charterers to terminate the charter by accepting Owners’ conduct as a repudiatory breach and to pursue a claim for the consequences. As a result the High Court agreed with the majority of the Tribunal that Charterers’ claim was thereby time barred and totally extinguished.
Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor of England & Wales, LMAA Supporting Member and International Contributor to DMC’s Case Notes
MUR time chartered-in the bulker “Tiger Shanghai” from LDC (who were her disponents owners) for two laden legs, the first of which involved loading cement clinker at Carbenaros, Spain. The charter was on an amended NYPE 1946 form and included, amongst others, the following two additional clauses:
“46. The Charterers, subject to the Owners’ and Master’s approval which is not to be unreasonably withheld, shall be at liberty to fit/weld any additional equipment and fittings for loading ... cargo. Such work shall be done at the Charterer’s expense and time, and the Charterers shall remove such equipment and fittings at their expense and time prior to redelivery, if so required by the Owners ...”
"119. [Owners] shall be discharged and released from all liability in respect of any claim or claims which [Charterers] may have under Charter Party and such claims shall be totally extinguished unless such claims have been notified in detail to [Owners] in writing accompanied by all available supporting documents (whether relating to liability or quantum or both) and appointed within 12 months from completion of charter.”
The feeder holes in the vessel’s hatch covers were so positioned that the loading crane at Carbenaros was not quite long enough to reach those on the starboard side. In order to load the cargo safely and practically, the only solution was to cut new cement feeder holes into the hatch covers. On 11 August 2016, the Master advised MUR that permission to cut new holes would have to be sought from Head Owners.
On the following day, 12 August, MUR made the request to cut the new holes in the hatch covers. The vessel was delivered into MUR’s service on 14 August 2016, at which time advance hire and delivery bunkers were paid, and was dispatched to Carbenaros. However, on 13 August, LDC (in adopting Head Owners’ position) refused to approve the required work and later maintained that refusal when the vessel arrived at Carbenaros on 15 August.
A surveyor for MUR attended on board the vessel on 18 August and prepared a report to MUR on 19 August on the need to cut new cement holes in the hatch covers. On the same day, after LDC (adopting Head owners’ position) had stated that their refusal was “final and non-negotiable”, MUR terminated the charter on the basis that the cutting of additional feeder holes fell within the ambit of clause 46 and refusal for permission to cut them had been unreasonably withheld, so that LDC were in repudiatory breach and MUR were entitled to terminate. On 22 August, LDC themselves purported to accept MUR’s termination itself as repudiatory.
Thereafter, a claim letter was sent by MUR to LDC, claiming the return of hire paid in advance. Later, on 8 August 2017, MUR appointed their arbitrator and gave notice to LDC accordingly. The appointment was made in respect of all disputes under the charter, including (a) return of advance hire and the cost of delivery bunkers, (b) costs incurred on LDC’s behalf, (c) damages for sub-charterers’ claim for termination of the charter, and (d) LDC’s failure to obey instructions/breach of clause 46 of the charter. MUR also attached their final hire statement. LDC appointed their arbitrator in turn.
When MUR served claim submissions, on 2 July 2018, they attached the survey report (which had not been presented before expiry of the clause 119 time bar). This prompted LDC to raise the time bar point, on the basis that the survey report went to the heart of the issue of liability and, if presented in time, could have resolved the dispute without the need for arbitration. MUR argued that the survey report was a document compiled for the purposes of the arbitration in the light of the dispute and that expert reports and other arbitration documents fell outside the category of “supporting documents” that were to be provided, clause 119, they said, being concerned only with the submission of primary claim supports and not secondary supports (that is, those compiled once it is clear there is a dispute between the parties which would need to be arbitrated).
The Tribunal noted that the survey report described in detail the difficulty and possible solutions; it did not contain a statement of truth of the opinions expressed (as one would expect of an expert’s report); it was produced a year before arbitration was commenced and the survey itself took place at a time when MUR still entertained the hope of persuading LDC to allow new cement feeder holes to be cut.
The Tribunal decided – by a majority – that the survey report was not subject to privilege and was pertinent to MUR’s claim, in that it addressed the issue of whether LDC was reasonable in refusing to allow new cement feeder holes to be cut. As a result, a majority of the Tribunal decided MUR’s claim was time barred. MUR appealed to the High Court.
The judge first summarised the material facts (above), referred to the relevant time charter clauses (above), and stated that the essence of the appeal effectively subdivided into two questions, for the purposes of clause 119: (i) Is a document which would otherwise be a supporting document one which should not be counted as such if it was “arguably privileged”? (ii) Is a document which is not – at least at the time of commencement of the arbitration – of relevance to either the identification of or support for a relevant claim as referred to arbitration, a “supporting document”?
The judge began by considering the survey report (which was characterised as that of a surveyor who had attended the vessel to assess the problem which had arisen and find the best pragmatic solution, rather than that of an expert witness to be used in future proceedings), the background authorities on claims presentation time bars, and the parties’ respective submissions.
The judge was of the view that the wording of clause 119 must be respected. That wording was clear and cast in terms not simply of “supporting documents” but “all supporting documents” – the word “all”, to the judge, indicated a fairly expansive approach, though, of course, it was qualified by the requirement for documents to be supporting.
That view, said the judge, was reinforced by the next section of the wording of clause 119, which referred both to liability and to quantum. The need to take a fairly expansive approach in the light of the words of clause 119 was given some support, thought the judge, by the background authorities. All in all, in the judge’s view, clause 119 was expressing a broad approach to the production of supporting documents, whatever supporting documents might be said to be.
In the judge’s opinion, it could not be the case that simply because a document emerged later it could not give rise to a time bar. If, for example, there was an “all supporting documents” clause in a demurrage claim and the statement of facts supporting the calculation was appended but a hold cleaning survey also supporting a particularly contentious day’s starting time was not, the judge saw no reason why that could not give rise to a time bar if the relevant clause were appropriately drafted.
The judge considered the authorities made clear that there could be more than one sort of supporting documentation. An "all documents" clause was, thought the judge, naturally geared to the provision of more than the bare essentials. That was not to say, in the judge’s view, that this required a “cards on the table” approach, such that all documents available to MUR would have to be presented within the time bar.
Turning to the question to be answered, the judge observed it must be borne in mind that MUR’s claim was predicated on LDC’s refusal having been wrongful, because it was unreasonable. Without that, the termination was not valid, so that by the time of the arbitration it was clear that the reasonableness or otherwise of the refusal was a point in issue. Unless it were unreasonable, there was no valid termination – and if that was the case, the claim would be not just for a shorter period but also subject to a cross-claim for damages for wrongful repudiation.
The judge considered the material in the survey report went to the question of reasonableness. Therefore, said the judge, it was properly to be regarded as being, at least in broad terms, supportive of the claim of MUR as it appeared in the arbitration. Thus, if the reasonableness of the refusal was in play at the time when the claim was made, the judge considered the survey report was relevant and supportive.
In that regard, the judge noted that, at common law, the burden of proving that consent was unreasonably withheld falls on the party contending that the other was unreasonable. Looking to the context of this case, the judge stated that the issue was whether the reasonableness of LDC’s refusal was in play at the time the claim was made. The judge considered that the problem for MUR was twofold:
(1) Clause 119 combined both specific reference to “all” and to “liability and quantum”, while not confining itself to any particular sort of claim. Thus, it was wider than the clauses in the authorities, which tended either to omit the “all” or to arise in the context of a simple accounting claim such as demurrage, where issues such as termination do not usually come into the equation; and
(2) While the case had not refined itself so far as it had done at the time of the hearing, the claim (at least as to quantum) in fact depended on the date of termination and the date of termination depended on being entitled to terminate, which itself depended on unreasonable refusal on the part of LDC.
As such, in the judge’s view, the survey report was on its face within the ambit of the claim that MUR advanced and supportive of it. By the time of drafting the claim submissions, the judge considered that one could readily see that in advancing the building blocks of the case, as to liability and quantum, it would be natural to plead or otherwise set out the termination as a foundation for the calculation; hence it was natural to append the document supporting the position taken on termination, as was actually done.
In this context the parties had, noted the judge, intended the clause to cover all disputes under the charter, including – by inference – claims arising out of wrongful termination. The clause was not just to enable an early closure of the books but also, given the provision of details, to enable the claim to be evaluated to facilitate early settlement.
On the above basis, the judge concluded that the survey report fell within clause 119, subject to the question whether that report being arguably priviliged meant the document did not need to be presented before the time bar expired.
The judge noted that MUR now accepted that the survey report was not in fact privileged, that LDC were prepared to presume clause 119 did not require privileged documents to be provided, and that the parties agreed the document was reasonably arguably privileged.
Owners argued that where there was scope for a reasonable difference of opinion as to whether or not a document was privileged, a party should not be required to produce it. But the judge agreed with the view of LDC that MUR’s approach was “profoundly uncommercial”. It did not meet the requirements of certainty for such a clause.
The judge was also of the view that rarely would such clauses be designed to require the provision of the kinds of documents which are or may be privileged. As such, the judge considered this to be an unusual case. However, the judge did not consider that to be a reason to bend the construction of the clause or to otherwise render the clause unworkable.
Accordingly, the judge dismissed MUR’s appeal, such that, as the majority of the Tribunal had held, their claim was time barred and totally extinguished.
The judgment highlights the potential risks faced with wide “all claims” presentation time bars, if such clauses require presentation of “all available supporting documents (whether relating to liability or quantum or both)”.
The difficulty, in part, arises because such expansive clauses are not confined to any particular sort of claim, so can stretch far beyond the familiar accounting type documents commonly required to support typical demurrage claims.
The judgement identified the further difficulty that each clause turns on its own particular wording. This means that existing authorities on the topic may be of limited assistance due to differences in the wordings used.
Additionally, what is “supporting” is dictated by the nature of the claim being advanced. As such, what is required to support the claim is identified by the process of setting out the limbs of the claim, on both liability and quantum, and evaluating all the documents available to the party when presenting its claim.
That process could be further complicated where there is a reasonable basis to consider that one or more documents that are supportive of the claim are privileged. In such a case, legal advice may be required; particularly if potentially prejudicial material is included in an otherwise supportive document. While the prejudicial material could simply be redacted in the first instance prior to presentation, this may raise suspicion; what is redacted may not (ultimately) be subject to legal privilege, and so could be subject to an obligation to disclose in full in arbitration later.
However, whether privilege applies is not always clear-cut, as the present case illustrates. So, while an “all cards on the table” approach is not required, there is a real risk in not disclosing a document of a supportive nature that is thought to be privileged but which a tribunal or court might later rule to be otherwise.
As the judge pointed out, the survey report in question was both supportive and a document such that it was required to be presented by clause 119, although “this case may well be one towards the limits of what would be caught by a clause such as the present one”. However, this is not the first reported instance of a “close call” document not having been presented in time yet later having been deemed to be necessary.
In The “Adventure” (fn.1), failure to present a print out of an emailed notice of readiness, on which the owner’s shore-based operator hand wrote the time at which the master told him by telephone that free pratique was granted via VHF, led to that demurrage claim being time barred. Therein lies the problem: where can commercial people draw a clear line, if at all, on what documents must be presented to comply with expansive “all claims” time bar clauses?
The desirability to achieve certainty in commercial dealings is of course a two way street (as both parties to the contract should know where they stand and what is required of them to comply with their obligations). The present state of the law arguably appears not yet to have achieved that balance for claims presentation time bar clauses for the party that must comply with the presentation obligation.
Footnote 1:  1 Lloyd's Rep 473