Suek v Glencore International

DMC/SandT/11/22

England

Suek AG v Glencore International AG

Queen’s Bench Division (Commercial Court): Burton J: [2011] EWHC 1361 (Comm): 27 May 2011

Mr Philip Edey QC, instructed by Messrs Thomas Cooper, for the Claimant seller

Mr David Foxton QC, instructed by Messrs Holman Fenwick Willan, for the Defendant buyer

CARRIAGE OF GOODS: CIF CONTRACT: CONSTRUCTION: ENTITLEMENT TO GIVE NOTICE OF READINESS: CONCURRENT CAUSES LEADING TO DELAY IN BERTHING: COMMENCEMENT OF LAYTIME

Summary

The Commercial Court held that, in general, a CIF seller’s obligation was only to nominate a carrying vessel, ship the goods, and not to take any active steps to impede delivery. It had no obligation to deliver to berth. It was for the Buyer to provide a safe berth and take steps to make the berth available. By construing the CIF contract in question in this way, the court held that, so long as the vessel could not reach the berth because of its unavailability, the master was entitled to give notice of readiness. This was so even if the tidal conditions were a concurrent cause preventing the vessel from reaching the berth.

This note has been contributed by Ken To-ching Lee, LLB(Hons), PCLL (University of Hong Kong), BCL(Oxon) and barrister-at-law in Hong Kong.

Background

Under a CIF contract, the Seller, Suek AG, agreed to sell to the Buyer, Glencore International AG, 390,000 metric tons of unclean coal +/- 10% at Seller’s option, in six shipments across the four quarters of 2010. The contract provided that the Seller was responsible for nominating the carrying vessel and arranging shipment from the loading port to the discharging port. The Buyer was responsible for providing a safe berth for the carrying vessel.

Clause 7.13 provided that:

“Upon arrival at the Discharge Berth the Master of the Carrying Vessel shall give a Notice of Readiness to discharge at any time during the day or night SSHINC whether in Free Pratique or not, and whether customs cleared or not, by telex, radio or e-mail… In case the berth is occupied on arrival, vessel can tender NOR at the usual waiting place ATDN SSHINC [i.e. at any time during the day or night, Saturdays, Sundays and holidays included], whether in berth or not, whether in port or not, whether in free pratique or not, whether customs cleared or not.”

Clause 7.20 provided that:

“Time taken waiting for first available tide after the Carrying Vessel’s arrival and/or to shift from pilot station or anchorage to berth, and opening of the Carrying Vessel’s hatch covers shall not count as Laytime or time for Demurrage.”

It was further provided in the contract that laytime would commence 12 hours after Notice of Readiness was tendered and, if the time taken for discharge exceeded the laytime allowed under the contract, the Buyer should pay the Seller demurrage. The contract also provided that periods of bad weather were not to count as laytime.

It was agreed by the parties that in one of the shipments, when the Vessel carrying the goods arrived at the discharging port, it was unable to reach the berth at which it was to discharge because the berth was occupied by another vessel and the tidal conditions were also such as to prevent the vessel from reaching the berth.

The Master of the Vessel, on behalf of the Seller, gave Notice of Readiness at the usual waiting place.

The parties had no dispute on these facts and the only dispute was the legal issue whether the Master was actually entitled in the circumstances to give Notice of Readiness such that it constituted a valid notice under Clause 7.13. Thus, the parties submitted the case to the court for decision under Part 8 of the English Civil Procedure Rules, which contained a set of procedures designed for cases of this kind.

Judgment

Burton J held that a valid Notice of Readiness had been given.

Under Clause 7.13, the Master should give a Notice of Readiness when the Vessel arrived at the berth. An exception was provided for in the last sentence, in case the berth was occupied (“the 7.13 Exception”).

The Buyer argued that the 7.13 Exception should be read restrictively and that, applying The "Kyzikos" [1987] 1 Lloyd’s Rep 48, the words “whether in berth or not” in the 7.13 Exception should be read in such a way that the Exception only operated when the sole cause of delay was the unavailability of a berth. In the present case, the master should have waited until the tide conditions were clear before issuing the Notice of Readiness.

However, the Court rejected the Buyer’s argument. The "Kyzikos" case was distinguished on the basis that it concerned a charterparty. Burton J was of the view that unless the contract suggested otherwise (which was not the case here), the claimant Seller’s obligation under a CIF contract was only to nominate a carrying vessel, ship the coal, and not to take any active steps to impede delivery: see Benjamin’s Sale of Goods, 8th edn, para.19-010. The Seller had no obligation to deliver to berth. On the other hand, it was for the Buyer to provide a safe berth, and take steps to make the berth available.

Further, there was no room to read into Clause 7.13 that the Exception would apply where the unavailability of berth was the only reason why the Vessel could not access it. The Buyer’s argument would involve an impermissible re-writing of the contract. Thus, as agreed by the parties, as the Vessel could not access the berth because of its unavailability (albeit this was one of two concurrent causes), Burton J was of the view that the 7.13 Exception applied. The Master was entitled to give the Notice of Readiness as he did.