Mansel Oil v. Troon Storage (CofA)

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Mansel Oil Ltd and Vitol SA v Troon Storage Tankers SA (The "Ailsa Craig") [2009] EWCA Civ 425
English Court of Appeal: Waller, Longmore and Richards LJJ: [2009] EWCA Civ 531: 20 May 2009
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Timothy Young QC and Jeremy Brier (instructed by Clyde & Co LLP) for the Appellant Owner, Troon
Luke Parsons QC and Poonam Melwani (instructed by Stephenson Harwood) for the Respondent Charterers, Mansel and Vitol

It was not a condition precedent to the exercise by the charterer of an option to cancel the time charter that the charterer should have first nominated a port where delivery of the vessel was to be made within the delivery range where:
(a) there was no express requirement to do so; and
(b) the implication into or construction of the charter for such a requirement would have been entirely
      pointless/futile, because the vessel would have been unable to make the delivery range by the expiry of
      the cancelling date, on the expiry of which the charterer had exercised its option to cancel.

DMC Category Rating: Confirmed

Case note contributed by Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), Trainee Solicitor of Hill Dickinson LLP and International Contributor to DMC’s CaseNotes

The charter was agreed in the context of discussions between the owner and the charterer that the vessel would be modified by and at the expense of the owner to provide floating
storage for the charterer off West Africa. The vessel had to be delivered by the owner at a port in WAF – Ghana/Nigeria range in the charterer’s option. The vessel was not to be delivered to the charterer before 25th September 2007 and the charterer had the option of cancelling the charter if the vessel was not ready and at the charterer’s disposal on or before 15th November 2007. Delivery notices were to be given by the owner to the charterer 30-25-15 days (estimated) before delivery then 10-7-5-3-2-1 days (definite) before delivery.

There were delays in the modification of the vessel at Piraeus, Greece which meant that it would be unable to make the delivery range before the cancelling date. The charterer exercised its option to cancel the charter by sending a notice to the owner on 16th November 2007, because the vessel was still in Piraeus. The owner argued that the charterer had no right to do so. It was common ground between the parties that (a) the charterer did not at any point nominate a delivery port within the delivery range, and (b) a voyage from Piraeus to West Africa would take at least 25-28 days. The owner argued that the charterer was obliged to nominate a port in the delivery range and that no notice of cancellation could be given until that had been done.

In finding for the charterer, the Court of Appeal unanimously held that it was not a condition precedent to the exercise of the option to cancel the charter that the charterer should have nominated a port where delivery was to be made within the delivery range.

There was no such express provision in the charter and the owner had not submitted that there was any implied term to that effect. It was insufficient for the owner to argue instead that the provisions as to estimated and definite days of notice of arrival to be given by the owner to the charterer pre-supposed that the charterer had a duty to nominate a port within the delivery range so as to enable such notices to be given in a timely sequence and that, in the absence of such nomination, no right to cancel could arise.

This could not be done on any of the accepted tests for implications of terms into a contract. Any such implication into or construction of the charter would also be entirely pointless. It would only be when the vessel was at or near Cape Palmas off Liberia (at what would be the "the deviation point") that the owner would, at earliest, need to take into account the port at which actual delivery was to be made. This point was never reached. Equally, charters, on the whole, do not require the parties to make nominations pointlessly early and certainly do not provide that pointless requirements should be conditions precedent to the exercise of any other rights arising under the charter. Further, the cases on which the owner sought to rely – in particular Georgia Maritime Corporation v Sealand Industries (Bermuda) Ltd (The "North Sea") [1997] 2 Lloyd's Rep. 324 - did not support it case.

Given the circumstances, it was almost inevitable that the Court of Appeal would come to the decision it did. In particular, the owner had struggled to define a time by which the charterer would at the latest, as a condition precedent, have had to give notice of its chosen port of delivery within the delivery range. Whatever that date might have been, it would have been entirely futile under the circumstances to require notice to be given to the owner in order for the charterer to acquire the right to exercise its option to cancel the charter. This would have defeated the purpose of having a cancelling clause in the charter.

In the absence of a cancelling clause, an owner would be in breach of charter for failure to deliver on the contractual delivery date but a charterer would not be able to treat the owner as being in repudiatory breach of contract until the delay was such as to frustrate the commercial purpose of the adventure. The time at which this point is reached is a difficult question to answer, as it is dependent on the facts in each case. Having a cancelling clause avoids, therefore, all arguments about whether delay in delivery is such as to frustrate the adventure. There would be no commercial sense in depriving a charterer of this option without good reason to do so, and there was no such reason in this case.

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