CA-2025-000005 - [2025] EWCA Civ 1227

The essential facts

The Charterparty

The issue arises in the context of a bareboat charter dated 11 February 2013, on an amended BIMCO Barecon 2001 form, whereby a Croatian shipbuilder named Brodotrogir DOO (“BDOO”), with its main shipyard in Trogir, agreed to charter a 49,708 DWT chemical & oil product tanker it was building to Songa Shipping Pte Ltd (“the Charterparty”). The Charterparty was for the period of 5 years, plus or minus two months at charterers’ option. The tanker was in due course named SONGA PRIDE (“the Vessel”). On 17 December 2013 the Charterparty was novated by the original parties to the Owners (a Marshall Islands special purpose vehicle in the same beneficial ownership as BDOO) and the Charterers (another member of the Norwegian Songa Group of companies) respectively. On the same date BDOO guaranteed the Owners’ obligations under the Charterparty.

The Vessel was delivered to the Charterers on 23 December 2016.

The terms of the Charterparty

Part 1 of the Barecon 2001 form provides boxes for the parties to insert specific details in relation to the standard terms in Part II. In addition to the matters set out above, box 16 of the Charterparty provided that the place of redelivery at the expiry of the charter period pursuant to clause 15 of the standard terms would be “One safe port, berth or anchorage WorldWide in Charterers option…”. Box 35 provided for English governing law and arbitration of any disputes in London in accordance with LMAA terms as set out in clause 30(a).

Clause 28 provides for early termination of the Charterparty. Clause 28(a) deals with default by the Charterers, such as unrectified failure to pay hire in accordance with clause 11, providing that in those circumstances the Owners shall be entitled to withdraw the Vessel from the service of the Charterers with immediate effect by written notice. Clause 28(b) deals with default by the Owners such that the Charterers are deprived of the use of the Vessel and such breach continues for 14 days, providing that in those circumstances the Charterers shall be entitled to terminate the Charter with immediate effect by written notice to the Owners. Clause 28(c) provides that the Charter shall be deemed to be terminated in the event the Vessel becomes or is declared a total loss. The relevant sub-clause for present purposes is clause 28(d), which provides for insolvency issues, amended in the case of the Charterparty to provide for insolvency issues affecting BDOO as well as those affecting the Owners and the Charterers, as follows:

“Either party shall be entitled to terminate this Charter with immediate effect by written notice to the other party in the event of an order being made or resolution passed for the winding up, dissolution, liquidation or bankruptcy of the other party (otherwise than for the purpose of reconstruction or amalgamation) or if a receiver is appointed, or if it suspends payment, ceases to carry on business or makes any special arrangement or composition with its creditors. The Charterers shall have the same rights in case of a similar event in respect of the Guarantor.”

Clause 28(e) provides that termination of the Charter in accordance with the provisions of clause 28 shall be without prejudice to all rights accrued due between the parties prior to the date of termination and to any claim that either party may have.

Clause 29 provides for repossession of the Vessel in the event of termination in accordance with one of the provisions of clause 28 as follows:

“…the Owners shall have the right to repossess the Vessel from the Charterers at her current or next port of call, or at a port or place convenient to them without hindrance or interference by the Charterers, courts or local authorities. Pending physical repossession of the Vessel in accordance with Clause 29, the Charterers shall hold the vessel as gratuitous bailee only to the Owners. The Owners shall arrange for an authorised representative to board the vessel as soon as reasonably practicable following the termination of the Charter. The Vessel shall be deemed to be repossessed by the Owners from the Charterers upon the boarding of the Vessel by the Owners’ representative. All arrangements and expenses relating to the settling of wages, disembarkation and repatriation of the charterers’ Master, officers and crew shall be the sole responsibility of the Charterers.”

Termination of the Charterparty and repossession of the Vessel

On 16 October 2020 the Commercial Court in Split confirmed a Restructuring Plan and Pre-Bankruptcy Agreement in relation to BDOO. The Charterers claimed that was an event that entitled them to terminate the Charterparty with immediate effect under clause 28(d) and purported to effect such termination on 14 May 2021, shortly after the Vessel had completed discharging its cargo at the port of Stockton in California, notifying the Owners that it was ready for them to take repossession.

The Owners refused to repossess the Vessel at Stockton, but insisted that it be brought by the Charterers to Trogir. On 16 August 2021, after a standoff during which the Vessel had been taken to Mexico to reduce costs, the Charterers commenced the voyage to Trogir under protest. On 20 September 2021, after sailing for 37 days, the Charterers arrested the Vessel at Gibraltar. On 7 January 2022 the Owners provided security as ordered by the Supreme Court of Gibraltar and took possession of the Vessel.