Polestar Maritime Ltd v YHM Shipping Co Ltd & Anor (Rev 1)

In an “as was” ship-sale contract, a requirement to deliver national, international and other certificates which the vessel had at the time of inspection does not oblige the seller to obtain a new certificate which became necessary only after that inspection. Clear wording is required to impose a warranty that the vessel will be eligible for international trading at delivery.

A contractual period allowing a seller to make arrangements for transfer documentation extends beyond preparing documents. It includes steps needed to ensure that the seller can tender the agreed documents while complying with their covenants, including procuring the release of a vessel from detention.

The Buyers agreed to buy the bulk carrier Rewa under an amended Norwegian Saleform 1993 memorandum of agreement. The contract required delivery in the condition existing at inspection, with specified certificates, and allowed the Sellers three banking days after notice of readiness to make arrangements for the documentation needed for a legal transfer.

After a new MARPOL Annex IV requirement took effect, the vessel lacked an International Sewage Pollution Prevention certificate and was briefly detained in Hong Kong. The Buyers cancelled. A sole arbitrator held that both matters entitled them to do so. Field J allowed the Sellers’ appeal on questions of law. The Buyers appealed, raising the proper construction of clauses 11 and 14.

1. Appeal dismissed. The court unanimously affirmed Field J’s order.

2. Clause 11 concerned the vessel’s delivery condition within an “as was” sale. Read with clause 8 and Addendum No 1, it required the Sellers to deliver the originals of the trading, national, international and other certificates which the vessel had at the time of inspection. The words referring to certificates the vessel had at inspection qualified both the national and international certificates and the other certificates.

   The clause contained no sufficiently clear obligation to provide a certificate not held at inspection merely because it had become necessary for international trading by delivery. That construction gave commercial certainty and accorded with the parties’ contractual expectations. The arbitrator’s contrary construction was rejected. The court also cautioned against generally resorting to earlier versions of standard forms and drafting-history material when construing contractual wording.

3. Clause 14 addressed the Sellers’ failure to be ready validly to complete a legal transfer by the cancelling date. Its allowance of three banking days to make arrangements for the clause 8 documentation was not confined to assembling or executing documents. It covered steps enabling the Sellers to tender transfer documentation consistently with the covenants in it and under the memorandum of agreement.

   Accordingly, where the agreed Bill of Sale covenanted that the vessel was free from detentions, procuring release from detention within the three-day period was an arrangement for the documentation. Although the Bill of Sale’s form was unobjectionable, tendering it while the vessel remained detained would breach its covenant and the sale contract. The Sellers therefore had the contractual period in which to cure that position.

• Court of Appeal (Civil Division) — dismissed the Buyers’ appeal and affirmed Field J’s order: [2012] EWCA Civ 153.
• High Court, Queen’s Bench Division, Commercial Court — Field J, by order dated 30 March 2011, allowed the Sellers’ appeal on questions of law from the arbitral award.
• London arbitration — the sole arbitrator held that the Buyers could cancel and recover their deposit. The arbitration and appeals were governed by the Arbitration Act 1996.