DS -Rendite-Fonds Nr106 VLCC & Ors v Titan Maritime SA & Ors

A contract must be construed objectively, starting with its language and commercial context. Commercial common sense assists where the language permits competing constructions, but it is not an overriding criterion. A specific contractual floor rate cannot be rendered illusory by a later adjustment mechanism. Where the parties objectively shared a continuing intention, expressed that accord, and the executed instrument failed through mistake to record it, rectification for common mistake is available. A special contractual regime ends when the event defining it ends, so the general regime resumes. A charterer bears the burden of bringing itself within the plain words of an off-hire clause.

The Owners sought construction and, alternatively, rectification of a Charter Restructuring Agreement governing payment of hire for eight VLCC vessels. The principal dispute concerned whether semi-annual adjustments were calculated subject to a US$22,000 floor rate. Further issues concerned the hire payable after the end of sub-charters and alleged off-hire of two vessels.

The Defendants did not appear at trial. The court determined the contractual construction, rectification, post-sub-charter hire regime, off-hire allegations and resulting monetary claims.

1. Construction. Applying the objective approach in Investors Compensation Scheme v West Bromwich Building Society, [1998] 1 WLR 896, Chartbrook Ltd v Persimmon Homes Ltd, [2009] 1 AC 1101, and BMA Special Opportunity Hub Fund Ltd v African Minerals Finance Ltd, [2013] EWCA Civ 416, the court held that “Market Rates” in Schedule 4, arts 2.4.1 and 2.4.2 meant 3.35% below the Clarkson Index, even where that figure was below US$22,000. The language and defined contractual terminology prevailed over the commercially more attractive construction advanced by the Owners.
2. Rectification. The parties had an objectively expressed and continuing common intention that US$22,000 per day per vessel would be an irreducible minimum, paid upfront and not reduced by semi-annual adjustment. The CRA failed to reflect that accord through drafting mistake. The requirements identified in Swainland Builders Ltd v Freehold Properties Ltd, [2002] 2 EGLR 71, and the objective approach approved in Daventry District Council v Daventry & District Housing Ltd, [2012] 1 WLR 1333, were satisfied. The CRA was rectified by inserting “or Floor Rate as applicable” after “Market Rates” in arts 2.4.1 and 2.4.2.
3. Post-sub-charter hire. The special regime in Schedule 4, art 3 applied only during the Vessel’s Deferred Hire Period. Thereafter Schedule 4, art 2 applied, including the floor rate and semi-annual adjustment mechanism. The reference to “Market Rate” in art 3.6 was shorthand for the art 2 regime and did not override arts 3.5 and 3.10.
4. Off-hire. The Charterers bore the burden of showing that the off-hire clause operated in the circumstances: Royal Greek Government v Minister of Transport, (1948) 82 Ll.L.Rep. 196; The Doric Pride, [2006] 2 Lloyd’s Rep. 175. Periodic dry docking was not within the relied-on clause, and the contractual five-day off-hire limit also defeated the claims. Neither vessel was off hire as alleged.
5. The Owners received the rectification order, the declaration concerning post-sub-charter hire, monetary judgment for the pleaded sums and interest at 1% over the US Prime Rate. Their construction declaration was refused because the true construction was different from that advanced.