PT Berlian Laju Tanker TBK & Anor v Nuse Shipping Ltd

In a ship sale contract, the place of documentary closing does not necessarily determine where the purchase price must be paid. Payment is governed by the contractual payment clause, and a deposit is not automatically part payment of the price. Where a later signed memorandum supersedes an earlier recap, rectification is unavailable unless the parties intended the later document to reproduce, rather than vary, the earlier agreement. Rectification depends on an objectively manifested prior agreement, not on the parties’ subjective understanding of its meaning. Where payment and delivery are concurrent conditions, payment must comply with the contractual requirements as to amount, method and place. A settled refusal to make a valid contractual tender may therefore amount to an anticipatory repudiatory breach.

The Buyers appealed under the statutory scheme governing appeals from arbitration awards against an award concerning the sale of the vessel Aktor on the Norwegian Sale Form 1993. The arbitrators held that the Buyers had repudiated the contract by refusing to pay the whole purchase price at the Sellers’ nominated bank in Piraeus and that the Sellers could forfeit the deposit.

The Buyers argued that payment could be made in Singapore, that the 10 per cent deposit formed part of the price and could be released there, and that the memorandum of agreement should be rectified by reference to an earlier recap. They also argued that the place of payment was not a condition of the contract. The central issues were the construction of the payment and closing clauses, rectification, the effect of supersession, and the contractual classification of the payment obligation.

1. The appeal was dismissed. The memorandum required the purchase price to be paid in full to the Sellers’ nominated bank under clause 3. Clause 8, which specified Singapore as the place of closing and exchange of documents, concerned documentary closing and did not require payment to be made at or from Singapore. Completion of a vessel sale may involve activities in several jurisdictions.

2. The deposit and the purchase price were conceptually distinct. A deposit was security and earnest for performance, not automatically part payment. The memorandum did not provide that 10 per cent of the price was to be paid by releasing the deposit. The Sellers were therefore entitled to nominate a different bank for payment of the price.

3. The arbitrators had erred in treating rectification as dependent on the parties’ continuing common subjective intention. Rectification corrects an erroneous expression of an objectively established agreement. The relevant question is what the parties said and did, not what either party thought the agreement meant. A continuing objectively manifested agreement must exist up to execution of the document.

4. Nevertheless, the arbitrators had found as a matter of fact that the signed memorandum superseded the recap and was intended to record the parties’ final agreement. That finding was binding on an appeal on a question of law. Since the parties intended the later memorandum to replace the earlier contract, rectification could not be granted.

5. Payment and delivery were concurrent conditions. The obligation to tender payment in accordance with the contract, including the stipulated place and method of payment, was itself a condition. A transfer to, or release through, a non-contractual bank was neither payment nor a valid tender. The Buyers’ settled intention to make only such an invalid tender entitled the Sellers to accept the anticipatory repudiation and terminate under clause 13.

The appeal was brought from an award of an arbitral tribunal. Permission to appeal was granted by Andrew Smith J on 2 November 2007 on three questions of general public importance. The High Court dismissed the appeal and upheld the arbitrators’ conclusions.