O v C
[2024] EWHC 2838 (Comm)
Gravelor Shipping Limited v GTLK Asia M5 Limited & Anor
27 January 2023
[2023] EWHC 131 (Comm)
High Court
Two companies had a deal for ships, but sanctions made it hard to pay. The court said the buyer could still get the ships, but had to follow the rules, pay in a different way, and also get a lawyer's opinion about if the payment might get taken back.
Key Facts
- •Gravelor Shipping Limited (Claimant) chartered two vessels from GTLK Asia M5 Limited and GTLK Asia M6 Limited (Defendants) under bareboat charterparties.
- •The charterparties were essentially finance leases with an option for Gravelor to purchase the vessels.
- •Following Russia's invasion of Ukraine, sanctions were imposed on the Owners, impacting Gravelor's ability to pay.
- •Gravelor claimed to have exercised purchase options, while the Owners asserted Gravelor was in default and terminated the charterparties.
- •A dispute arose regarding the method and legality of payment under sanctions, and whether Gravelor could obtain specific performance of the Owners' obligation to transfer title.
- •The Owners claimed a change of beneficial ownership removed them from sanctions, but this was disputed by Gravelor.
Legal Principles
Summary judgment principles
Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch)
Contractual construction principles
Alghussein Establishment v Eton College [1988] 1 WLR 587
Waiver principles
Mackay v Dick (1881) 6 App Cas 251
Specific performance principles; adequacy of damages
Evans Marshall & Co Limited v Bertola SA [1973] 1 WLR 349
Specific performance; vagueness of order
Co-operative Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1
Payment; unconditional right to immediate use of funds
Tenax Steamship Co Ltd v The Brimnes [1973] 1 WLR 386 and A/S Awilco v Fulvia SpA Di Navigazione [1981] 1 Lloyd’s Rep 371
Force Majeure; ability to overcome adverse consequences
MUR Shipping BV v RTI Ltd [2022] Bus LR 473
Specific performance of obligations relating to chattels
Section 52 of the Sale of Goods Act 1979
Arbitration Act 1996, Section 9
Arbitration Act 1996
Outcomes
The Owners' stay application was dismissed.
The Owners' argument about a stay under Section 9 of the Arbitration Act 1996 was only relevant if Gravelor sought an order requiring steps to be taken to discharge the Alfa Bank mortgages, but this was no longer the case.
Gravelor was entitled to an order for specific performance, requiring the Owners to transfer the vessels.
The court found that damages were not an adequate remedy due to uncertainties surrounding the Owners' financial situation and enforcement under sanctions. The court also held that the Owners were required to nominate a euro account for payment and that payment in Euros would constitute a good discharge of Gravelor’s obligations under the Charterparties.
Clause 19.3 was found to be engaged.
Because Gravelor's breach in failing to pay hire was ongoing, clause 19.3's requirement of a legal opinion regarding clawback risk was applicable.
Clause 8.10 was interpreted to allow payment in Euros into a sanctions-compliant account.
The court considered that the impossibility of payment in USD due to sanctions triggered clause 8.10, requiring the Owners to cooperate and enable payment resumption, which included nominating a suitable account and accepting payment in Euros.
Gravelor could seek summary judgment on its clause 18.3 right while reserving the right to argue its clause 19.1 claim at trial.
The court found that payment under clause 18.3 would be irrevocable, and the issue of res judicata in relation to two alternative rights to delivery would be addressed later.