The Commercial Court (Dias J) has today handed down judgment in The “Agathonissos”.
Dave Barnard (led by Nigel Eaton KC of Essex Court Chambers) acted successfully for the buyers in two arbitration appeals due to a serious irregularity and on a point of law, brought pursuant to sections 68 and 69 of the Arbitration Act 1996.
The dispute arose out of agreements for the sale of four vessels concluded on the Norwegian Saleform 2012. It concerned the obligation, contained in clause 2 of the Saleform, for the buyers to pay a deposit after an escrow account had been opened, and to provide such documents as were necessary to open that account. It was assumed, for the purpose of the appeal, that the buyers had breached clause 2 by failing to provide the documents necessary to open the escrow account.
The focus of the Commercial Court’s decision was whether the sellers were entitled to claim the deposit in debt, as the relevant tribunals had determined, or whether they could claim only in damages. The answer would have a significant effect: the buyers alleged that any damages would necessarily be nil because the sales would ultimately have failed and the deposits returned (a so-called “Golden Victory” point, which the Court did not determine).
In support of their claim in debt, the sellers relied upon a principle of ‘deemed fulfilment’ of a condition precedent, which was said to apply where a party prevented the satisfaction of that condition precedent in breach of contract. The principle dates back to Lord Watson’s judgment in the 19th century Scots law decision of the House of Lords in Mackay v Dick (1881) 6 App Cas 251. That is a case well known to English lawyers: Lord Blackburn’s judgment is the oft-cited basis for the implied contractual duty of co-operation.
Following a discussion of principle and a detailed review of the authorities, Dias J held that the ‘deemed fulfilment’ principle forms no part of English law. As a result, the sellers could bring a claim in damages, but not in debt. Dias J’s decision brings English law into line with the position suggested in leading practitioner works, including Chitty on Contracts and Treitel’s Law of Contract.
Other notable features of the decision include:
- The sellers argued that the damages for a breach of clause 2 of the Saleform are always equal to the value of the deposit, based upon the decisions of the Court of Appeal in The “Blankenstein” and The “Griffon”. Dias J rejected that argument: ordinary principles of the assessment of damages apply.
- Dias J allowed the buyers’ appeal based upon a serious irregularity, pursuant to section 68(2)(d), where the Tribunal had “overlooked” pleaded issues (see [125]).
- Dias J allowed a separate but related section 69 appeal, brought by the sellers, in relation to a point of construction concerning the conclusion of management agreements. In so concluding, Dias J reiterated that differently-constituted arbitral tribunals may legitimately take different views of the same facts and reach different conclusions based on the same facts (see [131]).
Dave Barnard (and Nigel Eaton KC) were instructed by Charles Weller and Giyan Tang of Reed Smith LLP.
