585. Silverburn Shipping v Ark Shipping Company (the “Arctic”) [2019] EWHC 376 (Comm); [2019] EWCA Civ 1161

Clause 9A BARECON ’89 – obligation to maintain vessel in class an innominate term and not a condition

The facts

The vessel was classed by Bureau Veritas.

On 17 October 2012 the vessel was let for 15 years .

Her class certificates expired on 6 November 2017 while the vessel was in dry dock for repairs which would make the vessel eligible for restoration of class.

On 7 December 2017 owners terminated for breach of clause 9A.

Findings

Two arbitrators found that the obligation to maintain class was not absolute. Reasonable notice should have been given to rectify. They likened this obligation to that of owners in time charters.

Phillips J gave permission to appeal on two points of law: was the obligation absolute? and, was the obligation an innominate term or a condition?

Carr J found that the obligation was both absolute and a condition, and set aside the partial interim award.

She accepted the argument that a shipowner’s obligation to maintain class in a time charter was fundamentally different to the same obligation imposed on a bareboat charterer.

Failure to maintain class gave rise to grave consequences such as loss of insurance cover.

Properly construed, in context, the obligation was both an absolute obligation and a condition, breach of which entitled owners to cancel.

Gross LJ, in a judgment supported by McCombe and Leggatt LJJ, thought differently. In context, clause 9A was not a condition. In the absence of express definition, the intention of the parties was not to create an absolute obligation.

It was significant that the obligation to maintain class was closely connected to the obligation to maintain physical condition which was accepted not to be a condition.

Possible loss of insurance, though grave, was not determinative. In this contract, temporary loss of cover was itself not regarded as a breach of a condition.

Class, being a matter of status, as a requirement at the commencement of the charter could be a condition but to require 100% maintenance of class over an extended period was uncommercial.

Charterers’ appeal allowed.

Discussion

Parties have the freedom to make an objectively trivial term a condition provided they do so expressly. The purpose of the label is to trigger the right to cancel.

Where there is no express identification of a term as condition, it will only be considered  such if it is material. This enquiry, based on inference,  is no different to the question whether an obligation is absolute.

 

 

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