NKD MARITIME LIMITED v BART MARITIME (No 2) INC

A force majeure clause referring to inability to transfer title is not necessarily engaged by an inability to deliver a vessel in accordance with contractual delivery provisions. The court must construe the parties’ use of “transfer of title” and “delivery” in their contractual context.

Where an agreed delivery location is inaccessible, a substituted location may arise under the contract. “Arrival” may be established where the vessel has reached the nearest safe point made possible by the relevant obstruction. A customary waiting place need not have been used repeatedly before if it is the appropriate place for vessels to wait in the circumstances.

Temporary governmental restraint constitutes “inability” only where its probable duration materially undermines the commercial adventure. Mere hindrance or delay is insufficient.

Bart agreed to sell the vessel Shagang Giant to NKD for recycling at Alang, India. NKD paid the contractual initial payment. After the vessel was refused permission to enter the relevant vessel traffic service area, governmental Covid-19 restrictions delayed the desk review, inspection and anchorage permissions required for the ordinary recycling process.

NKD terminated the memorandum of agreement under its force majeure clause, relying on restraint of governments. Bart treated the termination as repudiatory, retained the initial payment and counterclaimed for further losses. The central issues were the meaning of transfer of title, the contractual delivery-location provisions, the effect of governmental restraint, and the amount recoverable under the default clause.

1. The claim failed. NKD was not entitled to terminate under clause 10. Its notice constituted a default and repudiation. Bart was entitled to retain the initial payment, but recovered no further sum.
2. On construction, “transfer of title” and “delivery” were used as distinct concepts in the MOA. Transfer of title required payment of the price, delivery of the Bill of Sale and deletion from the relevant ship’s register. Delivery, a Protocol of Delivery and Acceptance, and the documents associated with the notice of readiness were not prerequisites to transfer of title. Accordingly, an inability to deliver in accordance with the delivery provisions did not itself establish inability to transfer title: paras [53]-[59].
3. Alternatively, delivery obligations had been fulfilled. “Outer anchorage Alang” meant the inspection anchorage identified as the PQRST area, not the vessel’s actual position outside the VTS Khambat limits: para [63]. However, the second paragraph of clause 2(a) applied. The vessel had arrived because it had reached as near as possible to the agreed location, which was inaccessible because entry into the VTS area was refused. The actual anchorage was a place where vessels customarily waited in those circumstances. A place could qualify even if the particular obstruction was rare or novel, provided it was consistent with normal navigational safety and seamanship: paras [64]-[78].
4. Further, “inability” under clause 10 was materially more demanding than hindrance or delay. Temporary governmental restraint had to be assessed by reference to its probable duration and whether it materially undermined the commercial adventure. Relevant considerations were analogous to those considered in Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The ‘Sea Angel’) [2007] EWCA 547. The anticipated delay did not meet that threshold: paras [86]-[91].
5. Under clause 8, contractual interest was payable only to the extent that Bart was actually out of pocket. Because the losses were covered by the retained initial payment, no additional interest or damages were recoverable: paras [95]-[103].

Not an appeal. The judgment records that the parties’ cross-actions were consolidated in this Court by order dated 5 June 2020.