BG Gas AS v JAS Shipping Ltd

A promise in a newbuilding bareboat charter that a vessel will be constructed in accordance with a building contract and its specifications is satisfied if the vessel is validly constructed and delivered under that building contract. Where the building contract permits construction and delivery without unprovided buyer’s-supply items, the charter does not impose a separate obligation on the disponent owner to supply them.

Language allocating buyer’s supplies to the buyer is not necessarily a strict obligation to procure every listed item. It may instead allocate responsibility, cost and choice if the buyer elects to require an item. A specific owner’s-supply provision prevails over a general requirement to comply with rules and regulations where an apparent overlap arises.

The claimant was the sub-charterer of a new LPG carrier under a bareboat charter with the defendant, the head charterer. Both charters required the vessel to be constructed in accordance with the shipbuilding contract and its specifications.

The shipbuilding specifications listed owner’s-supply items. The sub-charterer supplied a number of those items after delivery and sought to recover their cost from the head charterer. Burton J rejected the claim, except for a potential exception where an item was also required by the specifications’ rules-and-regulations provision.

The sub-charterer appealed. The head charterer cross-appealed against that exception. The central question was whether the charter imposed an obligation to provide the listed buyer’s-supply items, including items said to be required for seaworthiness or regulatory compliance.

1. Appeal dismissed and cross-appeal allowed unanimously. Lord Justice Rix, with whom Lord Justice Wilson and Sir Scott Baker agreed, held that the head charterer was not obliged under the sub-charter to provide the buyer’s-supply items alleged.

2. The charter promise that the vessel be constructed in accordance with the building contract and specifications had to be read by reference to the building contract as a whole. Article XVII expressly permitted the builder, if the buyer did not deliver buyer’s supplies, to complete the vessel without installing them and required the buyer to accept delivery of the vessel so constructed. A vessel validly delivered on those terms was also a vessel constructed and delivered in accordance with the building contract for the purposes of both bareboat charters.

3. The charters tied acceptance of delivery to construction in accordance with the building contract. After acceptance, they remitted charterers to assigned remedies against the builder and excluded claims against their contractual owners concerning the vessel’s condition. It would therefore be extraordinary for a charterer to have a claim against its owner where the building contract gave no claim against the builder for the same alleged deficiency.

4. The apparently mandatory language concerning buyer’s supplies did not create a strict duty to supply every listed item. In context, it allocated to the buyer the cost and responsibility of items which it required and chose to provide. The list’s vague, optional and operator-specific items reinforced that construction. No implied term identifying normal or standard equipment was necessary or justified on the preliminary issue and without evidence.

5. The judge’s exception for items that might also fall within the general rules-and-regulations provision was wrong. Owner’s-supply items were specifically allocated to the buyer. The specification expressly excluded them from the builder’s responsibility for otherwise unmentioned items required by paragraph 5. The specific provision therefore prevailed over the general one.

6. The court substituted answers confirming that the defendant was not in breach by failing to provide the alleged buyer’s supplies. It also removed the qualification based on paragraph 5.

• Court of Appeal (Civil Division): Dismissed the sub-charterer’s appeal and allowed the head charterer’s cross-appeal, removing the paragraph 5 exception: [2010] EWCA Civ 68.
• Queen’s Bench Division, Commercial Court: Burton J rejected the buyer’s-supply claim, save for a potential exception for items also required under paragraph 5 of the specifications.