344. Hyundai Merchant Marine Company Limited v Trafigura Beheer B.V. (the “Gaz Energy ” 1) [2011] EWHC 3108 (Comm)

Shelltime 3 form incorporating Gas Form C – conflict between additional clauses and Gas Form C – effect given to inconsistency provision

The facts

Both the head and sub time charterparties were on the Shelltime 3 form with various additional clauses incorporating Gas Form C.  Aside from hire, both contracts were in identical terms.

The relevant provisions were as follows:

“Clause 24.  Detailed description and performance

Owners warrant that at the date of delivery under this charter, the vessel shall be of the description set out in Gas Form C attached hereto and signed by them and undertake to use their best endeavours so to maintain the vessel during the period of her service hereunder.

  Further but otherwise, without prejudice to the generality of this clause, owners guarantee the average speed of the vessel will be not less than [  ] knots in ballast and [  ] knots fully laden, with a maximum bunker consumption of [  ] tons diesel oil / [  ] tons fuel oil per day for all purposes excluding cargo heating and tank cleaning.  See additional clause 42 attached which also overrides any references to over performance herein. 

The aforesaid average speed shall be calculated in each yearly or other less period, as defined hereinafter by reference to the observed distance from pilot station to pilot station on all sea passages and over the whole of the time the vessel is on hire during such period…

If during any year from the commencement of the charter period the vessel falls below or exceeds the performance guaranteed in this clause then

(b) If such shortfall or excess results respectively from an increase or a decrease in the vessel’s average daily bunker consumption, as herein defined, in relation to the average daily consumption guaranteed hereunder, hire shall be reduced or increased as may be appropriate by an amount equivalent to the value of the excess or saving in bunkers involved based on the average price paid by Charterers for the vessel’s bunkers in this period.” [emphasis per original]

In the event of any conflict between the particulars set out in the aforesaid form [i.e. Gas Form C] and any other provision (including this clause) of this charter, such other provision shall prevail.

  Clause 42:  Speed/Consumption.

Speed about 15 knots average

Consumption about 40mts IFO 380 CST at sea plus 0.2 mts GO and about 10 mt IFO 380 CST at port plus 0.2 mt GO.

Otherwise as per Gas Form C

Charterers will not be liable for any over performance of the vessel during the course of this charter party. However, any overperformance will be credited against any underperformance due charterers for the purposes of calculation.

Gas Form C

A.5 Speed

Guaranteed average speed on a year’s period and max wind force 4 in Beaufort Scale:  loaded about 14.5 knots, ballast about 15.5 knots.

A.6 Consumption in metric tons per day

At sea              In port

                        Main engine/HFO                   35mt                –

                        Aux. engine/HFO/GO             6/0.2mt            9/0.2mt

                        Boiler/HFO                                                      2.5mt

                        Insert gas generator/gasoil      285 kg/h

Additional clauses nos. 41-74, Gas Form C and revised paramount clause, as attached, are deemed to be fully incorporated into this charterparty.”

A preliminary issue was tried between the parties as to whether an all weather warranty was intended by the parties or whether the warranty was limited to weather conditions up to a maximum of 4 on the Beaufort Scale.

Findings

Flaux J found that there was a conflict between speed guaranteed as per A5 in Gas Form C and the all weather guarantee as set out in clause 24 read with clause 42.

Insofar as there was a conflict, the inconsistency provision provided the answer and so the all weather guarantee prevailed over the limited guarantee set out in Gas Form C.

Commentary

The outcome was fairly obvious.

An argument by the owners that recourse should be had to a subsequent contract between the parties was rejected on the authority of James Miller and Partners v Whitworth Street Estates (1970 AC) and Schuler AG v Wickman Machine Tool (1974 AC).  The clear principle extracted in these cases was that subsequent conduct of the parties cannot be looked at to interpret a written contract.

Following recent UK Supreme Court authority (Rainy Sky SA v Kookmin Bank), an objective test was applied: “those cases [inter alia Investors Compensation Scheme] show that the ultimate aim of interpreting a provision in a contract, especially a commercial contract, is to determine what the parties meant by the language used which involves ascertaining what a reasonable person would have understood the parties to have m

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