Pan Oceanic Chartering Inc v UNIPEC UK Co Ltd & Anor

A broker’s expectation of commission is not, without more, an established contractual right capable of protection by the tort of interference with an existing contract. Under New Jersey law, that tort also requires breach of the contract interfered with.

An implied-in-law promise arising under New Jersey brokerage law was contractual in nature for the purposes of Rome I. English law therefore applied. Even if Rome II applied, the place of the broker’s direct loss was where commission should have been received, not where the charterer failed to nominate cargoes. The claims consequently failed.

Pan Oceanic Chartering Inc claimed damages from UNIPEC UK Co Ltd and UNIPEC Asia Co Ltd after nominations under a West African contract of affreightment ceased, depriving Pan Oceanic of expected brokerage commission.

The claims were based on an alleged New Jersey implied-in-law promise to perform the chartering contract and on intentional interference with a separate brokerage agreement between Pan Oceanic and Tankers International LLC. The court determined the applicable law, the existence and scope of the brokerage agreement, the requirements of the tort, and certain quantum issues.

1. Implied-in-law promise. The alleged New Jersey promise was contractual in nature for Rome I purposes. Identifying the relevant obligation required consideration of the facts which, under New Jersey law, could give rise to it, without adopting New Jersey law’s legal characterisation. The parties had freely accepted the broker’s services, knew the commission mechanism and entered into the chartering contract. English law therefore applied and the New Jersey claim failed.
2. Alternatively, if Rome II applied, Article 14(1)(b) did not establish a choice of English law because Pan Oceanic had not freely negotiated the choice-of-law clause for itself. Under Article 4(1), the direct loss was the non-receipt of commission where it should have been received, namely New York. Article 4(3) would not displace that result: the high threshold for a manifestly closer connection with England was not met.
3. Even if New Jersey law applied, the court would not have extended the implied-in-law brokerage doctrine to these facts. The doctrine protects a broker from non-payment for work already performed. A shipping broker’s continuing after-fixture services and voyage-based commission differed materially from the real-estate brokerage cases.
4. Tortious interference. A separate brokerage agreement existed between Pan Oceanic and Tankers International. It required Pan Oceanic to assist in obtaining and negotiating the new contract and, if concluded, to provide after-fixture services for 1.25 per cent of freight, deadfreight and demurrage earned by Tankers International.
5. The brokerage agreement conferred no right to commission on a guaranteed minimum number of liftings. Pan Oceanic therefore had an expectation, not an existing contractual right, as to those liftings. The claim for interference with an existing contract failed for that reason. It also failed because New Jersey law required breach of the contract interfered with, whereas Tankers International had not breached its conditional obligation to pay commission.
6. For completeness, the court considered the New Jersey malice test, involving intentional conduct without justification and the balancing factors in the Restatement. The predominant motive for cessation of nominations was the UNIPEC group’s changing trading strategy, not capture of the brokerage. UUK had not caused the relevant loss and, in any event, lacked the necessary malice.
7. The claims were dismissed. The court also held that the automatic-renewal provision in the contract of affreightment was enforceable and operated according to its terms, but this did not affect the result on liability.