Jiangsu Guoxin Corporation Ltd v Precious Shipping Public Co Ltd

Where a shipbuilding contract contains an operative extension-of-time regime covering the relevant delay, the prevention principle has no application. The principle is not an overriding rule of public or legal policy, and the parties may contract out of some or all of its effects.

Contractual delay provisions should be construed as a coherent scheme. A clause covering causes beyond the builder’s control may include wrongful buyer-induced delay. Notice requirements ordinarily apply to claims for extensions unless a more specific contractual regime governs. A modification gives rise to an extension only where the contractually required agreement on consequential changes has been reached. An optional postponement for buyer default must be communicated by the seller.

The claimant appealed under section 69 of the Arbitration Act 1996 against two partial final awards concerning shipbuilding contracts for vessels Hulls 21B and 22B.

The arbitral tribunal had decided that the seller could not extend delivery or cancellation dates without operating the relevant contractual machinery, and that the prevention principle had no scope in light of the contracts’ express terms. The appeals concerned the construction of the delay, extension, modification and buyer-default provisions in the amended SAJ contracts.

1. Appeals dismissed. The tribunal had reached the correct answers on both preliminary issues.
2. The court accepted that the contracts contained an implied term that neither party should actively and wrongfully prevent the other from performing. That term was limited to active prevention and wrongful conduct. The prevention principle was wider than breach of contract, but it was not an overriding rule of public or legal policy. The parties could provide for extensions of time and contract out of some or all of the principle’s effects, following North Midland Building Ltd v Cyden Homes Ltd [2018] EWCA Civ 1744.
3. Article VIII.1 was not confined to conventional force majeure. Its reference to causes beyond the seller’s or subcontractors’ control was sufficiently wide to include buyer-induced delay outside the seller’s control. The contract’s division between permissible and non-permissible delay was intended to cover the field. Delays caused by buyer default were excluded from the 180-day cancellation calculation, including wrongful conduct amounting to breach of the implied non-prevention term. Article III.1(d) was to be read consistently with Article VIII.3.
4. Article VIII.2 required notice for delay claims falling within Article VIII.1 where no more specific notification or agreement regime applied. Even on the narrower construction of Article VIII.1, its wording could cover reasonably foreseeable buyer-induced delays not otherwise provided for. The court agreed with the notification-oriented analysis in Zhoushan Jinhaiwan Shipyard Co Ltd v Golden Exquisite Inc [2014] EWHC 4050 (Comm), but distinguished the contractual and contextual setting and adopted a wider construction of Article VIII.1.
5. Article V.1 contemplated modification only with written agreement on consequential matters, including delivery time and price. If that agreement was absent, the seller could refuse the modification; the contract did not provide for an unagreed extension or a notice regime for such a claim.
6. For buyer default under Article XI, notice under Article XI.2 was not a prerequisite to postponement under Article XI.4(a). However, because postponement was at the seller’s option, the seller had to communicate that it had exercised the option, ordinarily before the contractual delivery date.

The judgment records that permission to appeal from the arbitral awards had been granted by Teare J. The High Court (Commercial Court) dismissed both section 69 appeals and upheld the tribunal’s answers on the preliminary issues.