OCM Maritime Nile LLC & Anor. Courage Shipping Co. & Ors.

Following a valid termination of a bareboat charterparty for an Event of Default, an owner may repossess the vessel where the charterparty gives an unqualified repossession right. A clause allowing the owner, at its option, to demand immediate payment of outstanding sums does not make such a demand a condition of repossession.

Relief from forfeiture may be available in principle for a financing bareboat charter. It should nevertheless be refused where restoration or restitution would expose the owner and associated persons to serious sanctions consequences, and there is little prospect of a licence permitting lawful performance. Substantial loss to the charterer does not outweigh those decisive considerations.

The respondent owners provided finance for the acquisition of two vessels, which they owned and demised to the appellant charterers under bareboat charterparties. The charterers contributed to the purchase prices and had purchase options and end-of-term purchase obligations.

After the charterers’ beneficial owner was designated a Specially Designated Global Terrorist, the owners terminated the charterparties for an Event of Default and sought possession. Sir Andrew Smith, sitting in the Commercial Court, held for the owners on construction, possession and relief from forfeiture: [2022] EWHC 452 (Comm).

The charterers appealed, contending that repossession required a prior payment notice under clause 46 and, alternatively, that relief from forfeiture should have been granted by restoring the charters or ordering restitution.

1. Appeal dismissed. The owners were entitled to repossess upon termination for an Event of Default without first serving a clause 46(a)(i) notice demanding the Outstanding Principal and Indemnity Sum. Clause 29, as amended, gave an unqualified repossession right on termination under any applicable provision. Clause 46(a) made a payment demand optional, and the conditional wording in clauses 46(a)(iii) to (v) merely prevented specified remedies where a demand had been made and paid.
2. The financing and hire-purchase character of the arrangements did not justify departing from their clear terms. Nor did the potentially serious consequences for the charterers, including loss of their investment and purchase options. Those consequences could also arise on the charterers’ construction if a payment demand were served and not promptly met. Construing a demand as mandatory would leave terminated charterers able to retain possession indefinitely without paying hire, which was commercially implausible.
3. The court upheld the refusal of relief from forfeiture. Although the judge’s unchallenged conclusion was that this type of financing bareboat charter could in principle attract such relief, the decisive facts were that the designated individual remained the charterers’ beneficial owner and there was little prospect of an OFAC licence. Restoring the charterparties or ordering repayment would expose the owners and associated US persons to serious sanctions consequences. That made relief inappropriate.
4. The alleged windfall was not decisive. The vessels’ condition, arrests and potential liabilities meant that their true sale values were uncertain. It was unnecessary to determine whether the charterers’ litigation misconduct independently barred equitable relief.

• Court of Appeal (Civil Division) — dismissed the charterers’ appeal on construction and relief from forfeiture: [2022] EWCA Civ 1091.
• Commercial Court — held that the terminations were effective, the owners were entitled to possession, and relief from forfeiture should be refused: [2022] EWHC 452 (Comm).