SY Roro 1 PTE Ltd & Anor v Onorato Armatori SRI & Ors

Where a transaction is structured through back-to-back bareboat charters, the effect of terminating the head charter depends on the contractual arrangements. In this case, the contractual purpose and express terms meant that termination of the head charters brought the sub-charters and sub-sub-charters to an end.

Relief against forfeiture is discretionary. In bespoke commercial contracts between sophisticated parties, commercial certainty and the bargain actually made carry substantial weight. The court must measure alleged disproportionality against that bargain and will not rewrite it by imposing a new charter. A guarantor will not be ordered to perform vague obligations to compel third parties to act.

The claim concerned two Ro-Ro ferries let through back-to-back bareboat charters forming part of a financing structure. The owners terminated the head charters after a change of control in the operating company and sought redelivery against the chartering group under multipartite agreements and guarantees.

An arbitral tribunal had declared the head charters validly terminated, refused relief against forfeiture for the head charterers, and ordered redelivery. The vessels were not redelivered. The sub-charterers and sub-sub-charterers, who were not parties to the arbitration agreement, contested the legal consequences of termination, sought relief against forfeiture, and resisted orders against them and the charter guarantor.

The central issues were whether the subordinate charters ended automatically or had to be terminated, whether the owners’ notices and delay affected their rights, whether relief against forfeiture was available, and what orders could properly be made against the guarantor.

1. Orders for redelivery. The defendants other than the charter guarantor were ordered immediately to redeliver the vessels and deregister them from the Italian Bareboat Registry. The court’s orders supplemented the arbitral tribunal’s orders of 22 December 2023.
2. Effect of termination. The landlord and tenant authorities could not be transferred seamlessly to ships, and a sub-bailment can in principle outlast a head bailment. The answer nevertheless depended on the contracts. The multipartite agreements expressly recorded that the charters were on back-to-back terms. Their commercial purpose was to preserve the owners’ ability to recover the vessels despite the intra-group charter chain. The head charters also required redelivery free of any sub-charter. On that contractual basis, termination of the head charters brought the subordinate charter chain to an end.
3. Alternative MPA case. The owners were in any event entitled under the multipartite agreements to instruct the sub-charterers and sub-sub-charterers to redeliver. The September notices were insufficiently specific if automatic termination did not apply, but the later notices clearly required termination or redelivery. The owners had not lost their rights by delay or election. The period before notice was justified by the need for certainty that the change of control had occurred. The sub-sub-charterers could redeliver without a direction to terminate the time charters, since the vessels’ master and crew remained on board.
4. Abuse of process. The sub-charterers and sub-sub-charterers were not precluded from advancing their case. The tribunal had not determined their position, and these proceedings were their only opportunity to be heard on it.
5. Relief against forfeiture. The court assumed, without deciding, that it had jurisdiction to grant relief. It refused relief in the exercise of discretion. The reduction in the family holding company’s shareholding from 77.4% to 51% could be materially significant. The parties had agreed that the change would trigger termination. The commercial consequences therefore had to be measured against the agreed bargain. Commercial certainty, the sophisticated parties’ contractual allocation of risk, and the absence of any adequate remedy for the change of control outweighed the alleged disproportionality. A new charter imposed between the owners and sub-charterers was in any event unlikely to be ordered.
6. Charter guarantor. Specific performance was refused against the guarantor. The proposed order to compel, cause or instruct the other group companies to redeliver was uncertain. The guarantees were, in the usual way, monetary obligations and did not provide a sufficiently distinct non-monetary obligation for the order sought.
7. The defendants’ claim for an indemnity was dismissed. Quantification of monetary relief was left for proof and consequential orders.

First-instance expedited trial in the Commercial Court. The judgment records earlier arbitral proceedings and awards, including the tribunal’s orders for termination, redelivery and deregistration, but this was not an appeal from those awards.