Grand China Logistics Holding (Group) Co. Ltd v Spar Shipping AS (Rev 1), Court of Appeal - Civil Division, October 07, 2016, [2016] WLR(D) 510,[2016] EWCA Civ 982

Issuing Organization:Civil Division
Actores:Grand China Logistics Holding (Group) Co. Ltd v Spar Shipping AS (Rev 1)
Resolution Date:October 07, 2016

Neutral Citation Number: [2016] EWCA Civ 982

Case No: A3/2015/1482



Mr Justice Popplewell

[2015] EWHC 718 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 07/10/2016

Before :





- - - - - - - - - - - - - - - - - - - - -

Between :

- - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - -

Michael Coburn QC and Josephine Davies (instructed by Holman Fenwick Willan LLP) for the Appellant

Simon Rainey QC, Nevil Phillips and Natalie Moore (instructed by Thomas Cooper LLP) for the Respondent

Hearing dates : 15 and 16 June, 2016

- - - - - - - - - - - - - - - - - - - - -

Approved Judgment

Lord Justice Gross : INTRODUCTION

  1. Is charterers' failure to pay an instalment of hire punctually under a time charterparty a breach of condition, strictly so called? Or, without more, does such a failure ``merely'' entitle shipowners to withdraw the vessel from service under the charterparty in accordance with the express provisions of a withdrawal clause? In The Astra [2013] EWHC 865 (Comm); [2013] 2 All ER (Comm) 689, Flaux J held that it was a breach of condition, so not only entitling shipowners to withdraw the vessel but also to claim damages for breach of contract, extending (subject to mitigation) to loss of profit over the remaining period of the charterparty. In the present case, [2015] EWHC 718 (Comm); [2015] 1 All ER (Comm) 879, Popplewell J felt unable to follow Flaux J and came instead to the conclusion that it was not a breach of condition. The first issue on this appeal (``Issue I: The Condition Issue'') raises starkly for decision the question whether Flaux J or Popplewell J was right - an issue which has, understandably, attracted much market interest and long generated conflicting observations from Judges of the highest standing.

  2. There is a second principal issue on this appeal, namely whether Popplewell J was right to conclude that charterers were in renunciatory breach of the three charterparties in question (``Issue II: The Renunciation Issue'').

  3. Various other issues which were live before the Judge are no longer pursued and nothing need be said of them.

  4. The factual history can be relatively shortly summarised and is (essentially) taken from the judgment of Popplewell J, dated 18th March, 2015 (``the judgment'').

  5. The Respondent, Spar Shipping AS (``Spar'') was the registered owner of three supramax bulk carriers, SPAR CAPELLA, SPAR VEGA AND SPAR DRACO (collectively, ``the vessels'').

  6. By three charterparties (collectively, ``the charterparties'') dated 5th March, 2010 on amended NYPE 1993 forms, Spar agreed to let and Grand China Shipping (Hong Kong) Co. Ltd (``GCS''), as charterers, agreed to hire, the vessels on the terms there set out.

  7. The charterparties provided for guarantees to be issued by the Appellant, Grand China Logistics Holding (Group) Co Ltd (``GCL''), the parent company of GCS. Three letters of guarantee were issued on behalf of GCL, dated 25th March, 2010 (``the Guarantees'').

  8. The charterparties were on identical terms, save as to the rate of hire, period, delivery laycan and vessel details.

    i) The SPAR DRACO was chartered for minimum 35 maximum 37 months in charterers' option, with hire of US$16,500 per day payable semi-monthly in advance. The vessel was delivered into service under the charterparty on 31st May, 2010.

    ii) The SPAR CAPELLA and SPAR VEGA were newbuildings at a Chinese yard and were delivered into service under their charterparties from the yard on 6th and 12th January, 2011 respectively. Those charterparties were for minimum 59 maximum 62 months in charterers' option, with hire of US$16,750 per day payable semi-monthly in advance.

  9. The withdrawal clause, including an anti-technicality clause, was in the same terms in each of the charterparties and provided insofar as material as follows:

    ``11. Hire Payment

    (a) Payment

    Payment of Hire shall be made so as to be received by the Owners or their designated United States currency, in funds available to the Owners on the due date, 15 days in advance........ Failing the punctual and regular payment of the hire, or on any fundamental breach whatsoever of this Charter Party, the Owners shall be at liberty to withdraw the Vessel from the service of the Charterers without prejudice to any claims they (the Owners) may otherwise have on the Charterers.

    At any time after the expiry of the grace period provided in Sub-clause 11(b) hereunder and while the hire is outstanding, the Owners shall, without prejudice to the liberty to withdraw, be entitled to withhold the performance of any and all of their obligations hereunder and shall have no responsibility whatsoever for any consequences thereof, in respect of which the Charterers hereby indemnify the Owners, and hire shall continue to accrue and any extra expenses resulting from such withholding shall be for the Charterers' account.

    (b) Grace Period

    Where there is failure to make punctual and regular payment of hire due to oversight, negligence, errors or omissions on the part of the Charterers or their bankers, the Charterers shall be given by the Owners 3 clear banking days .....written notice to rectify the failure, and when so rectified within those 3 days following the Owners' notice, the payment shall stand as regular and punctual.

    Failure by the Charterers to pay the hire within 3 days of their receiving the Owners' notice as provided herein, shall entitle the Owners to withdraw as set forth in Sub-Clause 11(a) above.


  10. Though it will be necessary to return to the question of arrears in the payment of hire when dealing with the Renunciation Issue, for the moment it suffices to adopt the Judge's summary as to arrears and the withdrawal of the vessels (judgment, at [3]):

    `` From April 2011 GCS was in arrears in payment of hire. Spar recouped some of the arrears by exercising its lien on sub freights, but there remained substantial arrears of hire on all three vessels throughout the summer of 2011 and a chronology of missed or delayed payments. Spar called on GCL for payment under the Guarantees on 16 September 2011. On 23 September 2011 Spar withdrew the SPAR CAPELLA and terminated that charterparty. On 30 September 2011 Spar withdrew the SPAR VEGA and SPAR DRACO and terminated those charterparties.''

  11. Spar commenced arbitration proceedings against GCS, claiming the balance of hire due under the charterparties and damages for loss of bargain in respect of the unexpired term of the charterparties. As the Judge recounted it (at [4]), shortly prior to the hearing of the arbitration GCS went into liquidation in Hong Kong and the proceedings were stayed.

  12. Thereafter, the Respondent commenced these proceedings against GCL under the Guarantees. As already foreshadowed, in the judgment, Popplewell J held (at [207]) that payment of hire by GCS in accordance with cl. 11 of the charterparties was not a condition. He went on (at [215]) to conclude that GCS had renounced the charterparties:

    `` the date of the termination notices, which are to be treated as an election to terminate the charters preserving Spar's common law right to damages for loss of bargain arising out of such termination.''

  13. In the event, the Judge gave judgment on the Spar claim under the Guarantees against GCL for (1) the balance due under the charterparties prior to termination; and (2) damages for loss of bargain in respect of the unexpired term of the charterparties. The total amount came to some US$25,308,320.35, plus interest. The Judge further ordered that Spar was entitled to recover from GCL its costs of the arbitration proceedings against GCS, stayed when GCS went into liquidation, in the amount of £165,000, plus interest.

  14. GCL appeals to this Court, contending that the Judge erred in holding that GCS had renounced the charterparties. Spar submits that the Judge was right on the Renunciation Issue. By way of Respondent's Notice, Spar argues that judgment should have been given in its favour on the additional ground that payment of hire by GCS in accordance with cl. 11 of the charterparties was a condition - and that the Judge had erred in failing so to hold. For its part, GCL seeks to uphold the judgment on the Condition Issue. The quantum of damages (as such) is not in dispute before us.

  15. Before proceeding further, I would, with respect, wish to pay tribute to both the judgment of Popplewell J in this case and that of Flaux J in The Astra. The thoroughness of their judgments makes it unnecessary to review the authorities at similar length or anything like it. In similar vein, I was most grateful to both Mr Coburn QC, for GCL and Mr Rainey QC, for Spar, together with their respective teams for the quality of the assistance provided to this Court, in writing and orally. Without more ado, I turn to the principal Issues.


  16. (A) Introduction: This Issue is concerned with the controversy as to whether the obligation to make punctual payment of hire is or is not a condition in standard form time charterparties (subject of course to any specific express wording not found in the charterparties). A ``condition'' (see further below) is a term any breach of which is sufficient to entitle the innocent party to terminate the contract - and claim damages for loss of bargain (or, where appropriate, reliance loss, to which further reference need not be made).

  17. If, as Popplewell J held, the obligation in question was not a condition, then GCS's failure to make punctual payments of hire entitled Spar to terminate the charterparties pursuant to the express provisions of the withdrawal clause in cl. 11 thereof - so putting to an end future performance obligations and also to claim the balances due under the charterparties at the date of termination. However, mere breach of this obligation did not entitle Spar to claim damages for loss...

To continue reading