Gravelor Shipping Limited v GTLK Asia M5 Limited & Anor

Contractual rights arising after termination must be construed so that a party cannot rely on its own failure to perform a necessary step. Where a charterparty provides for transfer of title after payment of a termination sum, an owner cannot indefinitely withhold the demand that triggers the payment regime. A payment restriction clause may require cooperation and an alternative account or currency where sanctions make the contractual payment route practically unavailable. Payment into a frozen account can nevertheless constitute payment if the payment process is complete and the payee’s lack of access results from an external legal restriction. Specific performance may be appropriate for specific chattels where there is a real risk that damages could not be enforced or would not provide an adequate remedy.

Gravelor, the bareboat charterer of two bulk carriers, sought summary judgment and declaratory relief concerning its alleged entitlement to acquire title to the vessels under two charterparties. The Owners had terminated the charterparties after alleged non-payment of hire. Gravelor accepted that the underlying dispute about default and the exercise of its ordinary purchase options was triable, but argued that it could acquire title at least under the termination regime in clause 18.3.

The parties disputed whether a clause 18.3 demand had been made, whether Gravelor’s alleged failure to redeliver prevented transfer, whether a bankruptcy opinion was required, how sanctions affected payment, and whether specific performance was appropriate. The Owners also sought a limited stay under Arbitration Act 1996, s 9.

1. Clause 18.3 entitlement. The Owners’ construction, under which they could terminate, withhold a demand indefinitely and thereby prevent both payment and sale of the vessels, was commercially untenable. Clause 18.3 therefore carried an implied obligation to make the demand within a reasonable time. In any event, the Owners’ communications and, conclusively, the witness statement specifying the termination sums amounted to a demand. The demand could not be withdrawn at will.
2. Gravelor’s arguable breach of the redelivery obligation did not prevent it exercising the clause 18.3 transfer right. The express conditions in clauses 18.3 and 18.6 were payment and compliance with clauses 19.2 and 19.3. The contract used clear language where compliance with all obligations was intended to be a condition.
3. Clause 19.3 was engaged because Gravelor accepted, for the purposes of the application, that its non-payment of hire remained an arguable continuing default. A satisfactory bankruptcy opinion was therefore a condition of transfer.
4. Clause 8.10 applied even if the disputed change of ownership meant that the Owners were no longer legally sanctioned, provided the banking incapability resulted from the original designation. It applied to incapability at both paying and receiving banks. The evidence established to the summary judgment standard that payment in US dollars into the nominated account could not be made within the contractual period.
5. Payment into a frozen account could be good contractual payment. The Owners’ difficulty in accessing the funds arose from an external restriction on the payee, not from an incomplete payment process. However, clause 8.10 required the Owners to nominate an alternative account and accept payment in euros where necessary to make performance practically possible. The Owners agreed that the sums could instead be paid into court.
6. The vessels were specific chattels within s 52 of the Sale of Goods Act 1979. Damages were clearly inadequate at the hearing date because enforcement was highly uncertain, the vessels’ condition was deteriorating, and the disputed transfer created substantial enforcement difficulties. The court was not required to await possible improvement by trial.
7. The court did not finally determine whether it could make a final specific-performance order where alternative contractual bases remained triable. It indicated that interim mandatory specific performance could be justified if Gravelor established an in-principle entitlement and paid the higher possible amount, while preserving recovery of any excess.
8. The limited stay application under s 9 of the Arbitration Act 1996 was no longer pursued. The precise order was left to be settled after consideration of the clause 19.3 condition and consequential matters.

First-instance decision. No prior appellate decision is stated in the judgment.