Ince & Co Chinese Shipping E-brief August 2010 English Version

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of validity of three years until 20November 2009 and that as a result of suchbreach, the charterers were unable to subcharterthe vessel, which led to theirinability to pay the hire. In effect, thecharterers alleged that any failure to payhire by them was the result of the owners’own breach of the charter.The charterers also counterclaimeddamages arising from their inability tosecure a sub‐charter due to the owners’failure to provide an IOPP Certificate inaccordance with the charterparty.Following the exchange of pleadingsbetween the parties, the charterers took nofurther part in the proceedings. Thisultimately resulted in a court orderdismissing their counterclaim andultimately in judgment being entered infavour of the owners for the sum of US$3,034,970.75 plus interest.This judgment prompted the charterersinto action and they applied to set aside thecourt order dismissing their counterclaimand for setting aside the judgment enteredagainst them. Mr Justice Cookecommented that the charterers brought thissituation on their own heads by their ownactions and that they were “reckless inallowing judgment to be entered against them.”Whilst he refused to set aside the orderdismissing the counterclaim on the basisthat it had no prospect of success, heagreed to set aside the judgment enteredagainst the charterers on condition thatpart of the claim relating to unpaid hire(about US$136,000), costs to date andfuture costs of the action be paid by thecharterers. The charterers failed to complywith these conditions, but applied for andobtained permission to appeal the decisionof Mr Justice Cooke setting aside theircounterclaim and laying down conditionsfor setting aside the judgment.The Court of Appeal decisionIn the Court of Appeal, the charterers hadto persuade the Court that they had areasonable prospect of success indemonstrating their entitlement todamages arising from the alleged breachby the owners of the express warranty toprovide a valid IOPP certificate. Thecharterers accepted that the correctmeasure of damages for such a claimwould be the loss of profit that they wouldhave made if they had been able to subcharterthe vessel.The Court of Appeal found that the SIREform was not incorporated into thecharterparty by mere reference toparagraph 2.6 in Q88. That was found to bea reference to a standard SIRE form andnot the form as completed for thisparticular vessel. Therefore, the owners didnot warrant that there would be a singleIOPP Certificate valid for 3 years from 20November 2006 to 20 November 2009.The only warranty given by the ownerswas a clause in the charterparty that statedthat certificates confirmed by the owners inQ88 “shall be maintained in force during thecurrency of the Charter.” The “currency of thecharterparty” means the time from deliveryof the vessel under the charter until itsexpiry. The above wording of the clausedoes not require a valid IOPP certificate inadvance of delivery of the vessel or thatthere must be one single IOPP certificatethat is valid from start to finish of thecharter period as long as the ownersmaintain the certificate in force throughoutthe charter period.The Court of Appeal proceeded to statethat even if there was such a warranty asalleged by the charterers and the ownersbreached it, then the charterers still failedto prove that this breach meant that they9
were unable to conclude a sub‐charter forthe vessel for this very reason. Inparticular, there was no recap exchangedbetween charterers and potential subcharterersindicating that agreement wasreached between them and was subject tosatisfactory production of the vessel’s IOPPcertificate.Furthermore, the Court of Appeal foundthat even if the charterers coulddemonstrate that sub‐charterers wouldhave sub‐chartered the vessel, they stillfailed to demonstrate that the failure tosub‐charter the vessel resulted in a loss, i.e.that the sub‐charter rate of hire would havebeen higher than the charter rate of hire.In light of this, the Court of Appealconfirmed that Mr Justice Cooke was rightto conclude that the charterers’counterclaim had no prospect of success.The Court of Appeal also held that thejudge had been correct in setting downconditions that charterers had to complywith before being able to argue theirdefences. The appeal was thereforedismissed.graham.crane@incelaw.comanna.fomina@incelaw.com10
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Page 9: Express warranty in the charterpart

Ince & Co Chinese Shipping E-brief August 2010 English Version

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