Ocean Clap Shipping Limited v Global Offshore Services BV & Anor

A contract cannot be inferred from conduct where that conduct is equally, or more readily, explained by the parties’ existing contractual rights and obligations. Conduct inconsistent with an existing contract does not, without more, establish a different contract. Clear and unequivocal conduct is required for waiver or promissory estoppel, and an estoppel by convention requires a shared assumption, reliance and unconscionability. A guarantee containing separate obligations may impose liability on default without a demand, even if another obligation is demand-based. An expiry provision may prevent liabilities arising later without extinguishing liabilities which arose during the guarantee period.

Ocean Clap Shipping Ltd and MT Kailash Sarl claimed sums due under bareboat charterparties for the vessels Ben Nevis and Kailash. They also claimed the maximum guaranteed sums from Global Offshore Services Ltd, the charterers’ parent company. The defendants argued that a General Agreement had cancelled or replaced the charterparties, or that waiver or estoppel prevented enforcement. The guarantors alternatively argued that claims were barred because proceedings began after the guarantee periods expired.

The court determined whether the alleged agreement had been formed by conduct or otherwise, whether waiver or estoppel arose, and how the guarantee provisions operated.

1. General Agreement. The defendants failed to establish any binding agreement cancelling the charterparties, releasing accrued liabilities or replacing the arrangements with new SPV charters. The alleged conduct, including non-payment of hire and owners’ payment of operational costs, was consistent with the charterers’ lack of funds and the parties’ existing contractual relationship. It was not conduct explicable only by the alleged General Agreement.
2. The negotiations repeatedly remained subject to contract and contemplated formal documentation. The alleged distinction between negotiations conducted by persons “up above” and conduct “on the ground” was artificial. The evidence also lacked clarity and consistency as to the agreement’s terms and date.
3. Waiver and estoppel. The owners’ conduct was not clear and unequivocal. The continuing negotiations were inconsistent with any shared assumption that the charterparties and guarantees had already been cancelled. Waiver, promissory estoppel and estoppel by convention therefore failed.
4. Guarantees. Clause 2.1.1(a) was a separate “see to it” obligation. Liability arose when the charterers failed to perform their obligations and did not depend on a demand. Clause 3 provided that the guarantees ceased to be continuing guarantees after the guarantee periods, but did not extinguish liabilities arising during those periods. Alternatively, a demand under clause 2.1.1(b) did not have to be made within the guarantee period.
5. The charterers were liable for US$29,994,886.28 under the Kailash Charterparty and US$46,554,735.50 under the Ben Nevis Charterparty, with contractual interest. The guarantors were liable for US$6 million and US$7.5 million respectively, with contractual interest. The parties were directed to agree an order reflecting the judgment.