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Bunge SA v Kyla Shipping Company - The Kyla

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The “Kyla” suffered a casualty whilst on a time charter. Repairs would have cost more than its sound market value but less than its insured value, a fixed figure which had been agreed in the charter . Owners contended that the time charter was frustrated because the cost of repairs exceeded the sound market value (but not the agreed insured value) and suggested that there was a principle of law to that effect. Owners’ claim succeeded in arbitration.
Charterers appealed on a question of law and were successful before Flaux J, who rejected the principle contended for by Owners and, applying general principles of frustration, decided that the charter had not been frustrated, because it provided for H&M insurance in an amount greater than the cost of repairs. Where the cost of repairs did not exceed the agreed insured value, Owners were obliged to repair the ship and ocntinue with the charter.
This case note has been contributed by Justin Gan Boon Eng, LLB (Hons) (NUS), an advocate and solicitor of the Singapore Bar
Finally, Bunge v Kyla emphasizes the link between clauses related to insurance and the allocation of contractual risks (see [79]). However, although an insurance clause is an important indication of the risk allocation arrangements in a contract, care should nonetheless be taken to consider the contract’s full provisions in detail before concluding that the risk of a particular event falls one way or another.
Kyla Shipping Shipping Company Limited v Bunge S.A.
[2013] EWCA Civ 734 (Longmore and Gloster LJJ, Sir Robin Jacob)
Arbitration Act 1996 - Procedure - permission to appeal decision of Judge
Flaux J denied Owners permission to appeal his decision above, finding, amongst other matters, that it involved no question of general importance. Owners then applied to the Court of Appeal, challenging Flaux J's decision to refuse permission. Owners highlighted that when Hamblen J had initially granted Charterers leave to appeal the underlying award on a point of law, Hamblen J had found a question of general importance.
The Court of Appeal clarified that it had no jurisdiction to entertain such an application under Section 69(8) of the 1996 Act. However, it retained residual jurisdiction to set aside the Judge's refusal of permission if the refusal was not a 'decision' at all, that is, if the refusal of permission was tainted by bias, personal interest, or any substantial defect in the fairness of the proceedings. Significantly, an unreasoned decision can also be set aside (para.13).
The threshold for setting aside the Judge's refusal of permission is very high, and it does not appear that such an application has ever succeeded.
Owners' application was rejected. In doing so, the Court of Appeal emphasised that, when invoking the residual jurisdiction, it is "impermissible" to enter into the merits of the underlying decision. It also rejected Owners' submission that Flaux J had no jurisdiction to depart from Hamblen J's decision (which had in any case been made without the benefit of oral argument).

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