David Bailey QC and Marcus Mander acted for the Seller before the Court of Appeal in a dispute arising under a Memorandum of Agreement for the sale of a vessel on Norwegian Saleform 1993 terms.  The dispute raised the controversial question as to the Seller’s entitlement to claim the deposit in circumstances where the Buyer fails to pay it and the Seller cancels the MOA, in relation to which London maritime arbitrators have reached conflicting decisions. 

In this case, the arbitration tribunal held that, although the obligation to pay the deposit had accrued at the time of cancellation, under clause 13 of the NSF 1993 the Seller’s only entitlement was to “compensation” and the Seller was therefore not entitled to claim the amount of the unpaid deposit.  In so doing the tribunal followed the reasoning of the Singapore Court of Appeal in The Anna Spiratou[1998] 2 SLR 536 when considering the NSF 1987 and distinguished the decision of the English Court of Appeal in the well-known decision The Blankenstein [1985] 1 WLR 435. 

The Seller appealed and Teare J. reversed the tribunal’s decision in a judgment reported at [2013] 1 Lloyd’s Rep 50. 

The Buyer then appealed to the Court of Appeal.  The Court of Appeal (Sir Brian Leveson, and Tomlinson and McFarlane LJJ) upheld the judgment of Teare J and dismissed the Buyer’s appeal. 

The Court of Appeal held that the rights conferred by clause 13 of the NSF 1993 are to be distinguished from, and are additional to, those which arise at common law, and had no effect on the rights and obligations to be spelled out of clause 2 of the form.  It followed that, at the time of termination, the Seller had an accrued right to the deposit which was not lost by virtue of clause 13.        

A further point of particular interest is that the Court of Appeal also found that the right to “compensation” conferred on the Seller by clause 13 of the form is sufficient to entitle the Seller to recover compensation in at least the amount of the deposit by analogy with the position at common law.  As the Court acknowledged, this conclusion is contrary to the view of Singapore Court of Appeal in The Anna Spiratou.  It may not be long before a disappointed Seller argues that it is therefore entitled to claim damages in the amount of the deposit even where the deposit has not accrued due at the time of termination.

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