BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
Neutral Citation Number: [2020] EWHC 3448 (Comm)Case No: CL-2018-000495IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESCOMMERCIAL COURT (QBD)Royal Courts of JusticeStrand, London, WC2A 2LLDate: 16/12/2020Before :MR JUSTICE FOXTON--------------------Between :SK SHIPPING EUROPE PLCClaimant- and (3) CAPITAL VLCC 3 CORP(5) CAPITAL MARITIME AND TRADING ----Chris Smith QC (instructed by Preston Turnbull LLP) for the ClaimantStephen Phillips QC and Marcus Mander (instructed by Reed Smith LLP) for theDefendantsHearing dates: 19-22, 26-29 October and 2-3 November 2020.Draft judgment to parties: 7 December 2020Approved Judgment.Mr Justice Foxton--------------------Covid-19 Protocol: This judgment will be handed down by the judge remotely bycirculation to the parties’ representatives by email and release to Bailii. The date andtime for hand-down will be deemed 16 December 2020 at 10:00 am.
Mr Justice FoxtonApproved JudgmentSK Shipping v CMTCMR JUSTICE FOXTON:1.This action arises out a long term charterparty (“the Charterparty”) entered intobetween the Claimant (“the Owner”) and the Third Defendant (“the Charterer”) inearly December 2016 in respect of the Owner’s very large crude carrier, the “CCHALLENGER” (“the Vessel”).2.In summary:i)The Charterer alleges that it was induced to enter into the Charterparty byfraudulent misrepresentations made by the Owner as to the Vessel’s fuelconsumption, and claims rescission and/or damages.ii)If the Charterparty cannot be rescinded, the Charterer alleges that it wasentitled to and did terminate the Charterparty by reason of the Owner’sbreaches of the Charterparty.iii)The Owner seeks damages for what it contends was the Charterer’srepudiatory breach of the Charterparty.iv)The Owner also claims that the Fifth Defendant (“CMTC”) guaranteed theCharterer’s obligations and liabilities under the Charterparty. CMTC (now)accepts that a guarantee was concluded (“the Guarantee”), but contends that itis not enforceable because s4 of the Statute of Frauds 1677 has not beencomplied with.3.The Owner was represented by Chris Smith QC, and the Defendants by StephenPhillips QC and Marcus Mander. I am grateful to all counsel, and their instructingsolicitors, for the considerable work which went into ensuring an efficient hearing, forthe high quality of their written and oral submissions and for the spirit in which thecase was conducted.4.The case was heard on a mixed hybrid/wholly remote basis, with 7 days of evidenceand three days of opening and closing submissions. Unfortunately, the range of issueswhich the case raised meant that a number of points received little (if any) attentionduring the hearing, and have had to be resolved on the basis of the parties’ writtensubmissions and the documents.THE WITNESSESThe Owner’s witnesses5.Mr Ray Jin Sung Kim (“Mr Ray Kim”) worked in SK Shipping Co Ltd (“SKShipping”)’s Tanker Operations and Tanker Chartering Teams until July 2018, whenhe went to work for GS Caltex. He moved from the Tanker Operations to the TankerChartering Team on 7 November 2016, when he was 33 years old. Before hisinvolvement in the fixtures which give rise to this litigation, he had never beenresponsible for fixing or chartering any vessel (whether on a spot or period basis).However, over the Friday and weekend before he began in the Tanker CharteringTeam, he was responsible for preparing the speed and consumption data circulated bySK Shipping which is at the heart of this action.
Mr Justice FoxtonApproved JudgmentSK Shipping v CMTC6.Mr Ray Kim was subjected to demanding, but conspicuously fair, cross-examinationby Mr Phillips QC over the course of two days, giving evidence by video link at theend of his working day in Korea from 6pm to midnight. He gave evidence in English,and his English was good but not fluent. For the most part, I found Mr Ray Kim anhonest and forthcoming witness. He was frequently willing to accept propositionswhich were adverse to the Owner’s case, and expressed disagreement with theevidence of other witnesses called by the Owner when it did not accord with his ownviews or experience. He was also willing to acknowledge deficiencies in the work hehad performed when these were pointed out to him by Mr Phillips QC, and to acceptthat the verification exercise he undertook proved essentially beyond his capabilities.7.However, he was somewhat less forthcoming in acknowledging the awareness withinSK Shipping after the Charterparty had been concluded of the fact and extent of theover-consumption as compared with the warranted position; the Ship ManagementTeam’s disquiet when it learned of the warranties which had been offered; and thetensions which this generated within SK Shipping. On those matters, I have found thecontemporaneous documents and inherent probabilities a better guide to Mr RayKim’s perceptions at the time than his evidence at the trial.8.Mr Sebin Im (“Mr Im”) was the head of the Tanker Chartering Team from January2016 until he left SK Shipping in March 2020. I found him a more guarded witnessthan Mr Ray Kim, but someone who once again gave honest answers, a number ofwhich were supportive of aspects of the Charterer’s case. He too had had very limitedexperience of time chartering vessels before November 2016. His recollection ofevents in November 2016 was limited, and I formed the clear impression that, so faras the consumption analysis was concerned, he did not concern himself with the detailof the work Mr Ray Kim had done, but only with the outcome as reported to him. Hiscommand of English was much more limited than Mr Ray Kim’s.9.Once again he was markedly less forthcoming when giving evidence about theinternal reactions and views within SK Shipping once consumption issues began tomanifest themselves during the charters. In particular, I find that in his evidence, hesought to downplay the extent of the tensions which emerged within SK Shippingtowards the end of December 2016 and in January and February 2017 about the levelof consumption which had been warranted on the VLCCs.10.The Owner’s final witness was Mr Hae Yong Son (“Mr H Y Son”), who has workedwithin SK Shipping since joining it as a 3rd Engineer in March 1994 and who wastechnical manager and head of the Ship Management Team from 1 January 2016. Iformed the impression that Mr H Y Song was reluctant to make any criticisms of thecompany for whom he still works, even in relation to matters which are notsusceptible to serious dispute (such as the fact that the VLCCs’ performance under thevarious charters fell significantly short of the warranted consumption or the likelihoodof the VLCCs’ consumption performance having deteriorated between 2013 and2016). This may have been, as Mr Phillips QC suggested, out of a sense of loyalty tothe company within whom he has been all his life, or it may have been from areluctance to criticise past or present colleagues with the “SK Shipping family”.11.Whatever the reason, I have approached his evidence with caution and, as with allwitnesses, sought to test it against the inherent probabilities and the contemporaneousdocuments. On technical issues, I have relied on the views of the expert witnesses
Mr Justice FoxtonApproved JudgmentSK Shipping v CMTCrather than those put forward by Mr H Y Son, which on a number of issues (e.g. theinfluence of the cargo loaded on the Vessel’s performance on the Southwold-TanjungPelepas voyage) the experts did not support.The Defendants’ witnesses12.The Defendants’ first witness was Mr Andreas Koniliadis. Mr Koniliadis is themanaging director of Curzon Maritime Limited (“Curzon”), a firm of charteringbrokers. However, his relationship with CMTC and the Capital Maritime group wentfar beyond that of a conventional chartering broker. Curzon was owned by thebeneficial owner of CMTC until it was sold to its management in 2004. Thereafter,the overwhelming majority of business undertaken by Curzon– some 90% - wasperformed on behalf of the Capital Maritime group. Curzon was not paid in theconventional way by receiving commission on each transaction. The effect of theevidence was that Mr Marinakis (the ultimate shareholder of the Defendants) woulddecide whether Curzon would receive commission on a particular transaction, andhow much. Mr Koniliadis explained that “we discuss kind of on an on-going basisabout which commission, in which deals we take commission or not”. Mr Konialidisused a Capital Maritime email address as well as his Curzon email address in hiscommunications. Mr Rexer of the brokers Poten & Partners (“Poten”), who clearlyhad a close personal and professional relationship with Mr Konialidis, described himin contemporary correspondence as Capital Maritime’s “Chartering Manager” and MrVentouris gave evidence that Curzon “continue to manage some of the charteringactivities of” Capital Maritime’s fleet. While Mr Konialidis’ relationship with CapitalMaritime was sui generis, in my view these descriptions capture the extent to whichMr Konialidis was integrated into the Capital Maritime organisation.13.Mr Konialidis was a careful witness, who was fully on top of the issues in the caseand the evidence before the court. He was subjected to testing cross-examination incourt for nearly three days. On certain topics, I formed the view that he was reluctantto give answers which might undermine the Charterer’s case:i)His reluctance to accept that many of the exchanges which Poten had with himwould not have been appropriate if Poten had been acting as SK Shipping’sexclusive broker.ii)His evidence that he understood Poten to be SK Shipping’s brokers, and thatthat was how he treated Poten during the negotiations. For reasons I explainbelow, I am satisfied that Poten operated as intermediate brokers, and that MrKonialidis knew this to be the position.iii)Aspects of his evidence on the Guarantee issue. For example both he and MrVentouris suggested that the reason why the Charterparty was never signedwas because serious problems began to emerge with the VLCCs. I accept thatthere was a period when revision to the terms of the Charterparty was underconsideration (in particular as to laycan and delivery) as a result of the latedelivery of the Vessel, during which period finalisation and signature of thewritten contract were put on hold. Thereafter, it is clear from the documentsthat the delay in signing was on SK Shipping’s side, it being the Defendants’expectation and experience that the owner signed first. This was both theevidence of Mr Ventouris as to the “unwritten practice” and the position
Mr Justice FoxtonApproved JudgmentSK Shipping v CMTCrecorded in a note of a meeting which took place between representatives ofboth sides in March 2017. Had the Defendants told Mr Konialidis that adecision had been taken not to sign the charterparties due to problems whichhad arisen on the Owner’s side, I am satisfied that this would have beenmentioned in one of Mr Konialidis’ frank instant messenger conversationswith Mr Rexer.14.On these issues, I have concluded that Mr Konialidis’ recollection had becomecoloured by the dispute and his awareness of which answers would support theCharterer’s case. That has made me approach Mr Konialidis’ evidence with somecaution. As with the other witnesses, I have sought to test the evidence against thedocuments and the inherent probabilities. I make further findings in relation to theproduction of documents sent or received by Curzon below.15.Mr Ventouris was the Chief Commercial Officer of one of the Capital Maritime groupcompanies until he retired from that role in 2020, and he remains the Chief Executiveofficer of CMTC. He clearly has great experience of the tanker market. He had nodirect involvement in negotiating or concluding the Charterparty, and for thosereasons I found the passages in his witness statement addressing the issues ofrepresentation and inducement of no real assistance.16.I had concerns as to certain aspects of Mr Ventouris’ evidence:i)In cross-examination, he recalled in detailed terms a conversation with MrMarinakis in which Mr Marinakis had told him how important the apparentfuel efficiency of the VLCCs had been to the decision to charter the vessels.While the truth of this recollection was not challenged in cross-examination, Ifound it surprising – in a case in which a central issue was whether statementsabout the Vessel’s consumption had induced the Charterparty – that thisrecollection had not featured in Mr Ventouris’ witness statement. It suggestedto me a real risk that Mr Ventouris’ recollection had come to be coloured bythe issues in the case.ii)As with Mr Konialidis, I am unable to accept Mr Ventouris’ evidence that hisdiscussions with Mr Rexer “were conducted on the basis that his client was SKShipping”, or that the reason why the Charterparty was never signed wasbecause of problems with the Vessel. On both of these points, Mr Ventouriswas giving evidence with a view to supporting the Defendants’ case.iii)The figures of over-consumption he advanced in his witness statement weresignificantly higher than those set out in the evidence of another of theDefendants’ witnesses, Mr Iliou. He was unable to explain how they had beenprepared and he accepted that Mr Iliou’s figures were more reliable. Inaddition, he made various criticisms of SK Shipping’s conduct in his witnessstatement which were based on a misunderstanding of the position, and whichhe withdrew in cross-examination. This reflected a tendency on his part tooverstate the position.iv)Another good example of this tendency was the suggestion in his witnessstatement that the turbocharger incident (which I address at [82-83] and [289290] below) had caused Total to place all of the vessels in Capital Maritime’s
Mr Justice FoxtonApproved JudgmentSK Shipping v CMTCfleet – some 34 vessels - “on hold for chartering purposes”, and that it “took usseveral weeks” to convince Total not to penalize Capital Maritime’s othervessels. However, there was not a hint in the documents of any suchsuggestion being made, Mr Ventouris’ own evidence about it was inconsistent,and if there had been any such suggestion, even for a short period, I am sure itwould have featured in the contemporary documents – for example in theCharterer’s own communications (in which it clearly wished to communicatethe significance of the turbocharger breakdown in the most forceful terms) orin Mr Konialidis’ instant messenger exchanges with Mr Rexer (in whichcriticisms of SK Shipping were not in short supply).17.For these reasons, and in particular given the tendency for his recollection of events tohave been shaped by the Defendants’ case in the litigation, I have approached MrVentouris’ evidence with caution.18.The Defendants’ final witness was Mr Mavrelos who was Capital Maritime’sTechnical Director until his retirement in February 2020. His evidence, as served,contained a great deal of inadmissible opinion evidence, which the parties agreed toexclude. He gave evidence about what he saw during his inspection of the Vessel inJune 2017 and produced a number of contemporaneous photographs. I have relied onthe evidence of the experts as to the conclusions to be drawn from those photographs.Absent witnesses19.Both sides made submissions as to the inferences which should be drawn from thefact that particular individuals were not called as witnesses by the other side (applyingthe well-known principles set out in Wiszniewski v Central Manchester HealthAuthority [1998] PIQR P324).20.The Defendants pointed to the absence of Mr Byung-Jin Huang who was head of theTanker Operations Team in 2016. On the evidence, he had left SK Shipping’semployment three years ago, and I do not therefore draw any inference from hisabsence. However it is noteworthy that the only individual who had worked in theTanker Operations Team who gave evidence was Mr Ray Kim, who moved on fromthat department at around the time the decision was taken to send the speed andconsumption data in issue to the market. I have considered whether I should draw anyinferences from the failure to call a witness from the Tanker Operations Team in thecontext of the misrepresentation claim. However, as I explain below, in my view it issufficiently clear that it was Mr Ray Kim and Mr Im who were involved in the workon the data, and that if others had been involved in the decision to send out this data inthis form and use it as the basis of the speed and consumption warranties, this issomething which would have featured in the internal emails which were sent onceproblems emerged, especially the emails which Mr Ray Kim sent defending hisconduct. In particular the July 2017 email discussed at [40] below was forthright –particularly so in the corporate environment in which it was sent - in calling out theShip Management Team as “the people who try to evade responsibility for the FOCdata”. If there were similar arrows to be fired in the direction of the TankerOperations Team, I am confident Mr Ray Kim would have fired them.
Mr Justice FoxtonApproved JudgmentSK Shipping v CMTC21.However, I have drawn an adverse inference from the failure to call someone from theTanker Operations Team when considering the Owner’s case as to the investigationsundertaken into the cause of the over-consumption in 2017.22.The Owner pointed to the absence of Mr Marinakis, who, on the evidence, took thedecision to charter the VLCCs, including the Charterparty, and was the principalsource of Mr Konialidis’ instructions. No explanation was offered for Mr Marinakis’absence, and I accept that it is appropriate to draw an inference from his absence thathis evidence would not have assisted the Defendants on the issues of inducement andas to process by which the decision that CMTC would provide the Guarantee wasreached and communicated within CMTC. However, the drawing of such inferenceshas not proved determinative of any findings I have made and I accept, so far as theDefendants’ case in fraud is concerned, that their entitlement to rely on the strongpresumption of inducement in that context would not have been set at nought merelybecause Mr Marinakis was not called to give evidence.The expert witnesses23.Mr Justice Teare gave permission for expert evidence on the following topics:i)From engineering experts on the cause of the alleged overconsumption ofbunkers, the steps that ought to have been taken by the Claimant to resolve thesame, and the efficacy of the steps in fact taken in this regard by the Claimant.ii)From ship-broking experts on the quantum of the Claimant's claim and theDefendants' counterclaim.24.However, the instructions given to the experts, and consequently their reports, rangedfar beyond the permission granted, and the major part of the expert cross-examinationwas addressed to topics for which no permission had been obtained.25.The marine engineering experts, Mr Tom Masters for the Owner and Mr Steven Saltfor the Charterer, both addressed the exercise which Mr Ray Kim (who was not amarine engineer) had performed to verify the speed and consumption data. Thatevidence proved to be of limited assistance, because this topic did not raise any issuesof marine engineering expertise. The evidence which the experts were qualified togive – on the causes of over-consumption, the extent of under-performance and thereasons for the turbocharger failure – was subject to only limited cross-examinationbecause of time constraints.26.Similarly, the evidence of the two chartering brokers – Ms Jean Richards for theOwner and Mr Peter Clements for the Charterer – ranged far beyond the (permitted)issue of quantum. Overruns in the trial timetable, some resulting from unforeseeableevents, meant that even after adding a day to the trial, there was very limited time forthe cross-examination of these experts. In the event, part-way through Ms Richards’cross-exa
Shipping”)’s Tanker Operations and Tanker Chartering Teams until July 2018, when he went to work for GS Caltex. He moved from the Tanker Operations to the Tanker Chartering Team on 7 November 2016,
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