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Case 1:07-cv-03397-JGK Document 20-3 Filed 06/21/2007 Page 1 of 3
[1996) Vol. 2 LLOYD'S LAW REPORTS 299

Q.B. (Com. Ct.)] The" AnangelExpress" PART3

QUEEN'S BENCH DIVISION

(COMMERCIAL COURT)

Apr. 22, 23, and 24; May 13, 1996

ADRIATIC MARE ENTERPRISES S.A.

v.

NEWCO A.G.

(THE «ANANGEL EXPRESS")

Before Mr. Justice WALLER

Cbarter-party (Time) - Performance guarantee - Validity - Shipowners alleged defendants guaranteed perrorman~e obligations of charterers under

time charter - Charterers failed to comply with

obligations - Shipowners claimed under guarantee

- Whether binding contract of guarantee entered

into.

The defendants (Newco) had sold 35,000 tonnes

Brazilian basic pig iron to Dongkuk Steel Mill c.&f.

Korea shipment April/May and to fulfil that contract

had bought the same tonnage from Grupo Viena Ltd.

(Iron Trade Ltd.) f.o.b. Ponta da Madeira, BrazH for

shipment May 16-31, 1993.

Newco also sold a further 5000 tonnes of Brazilian

foundry pig iron to Nu Lake c.&f. Korea shipment

Apri11May, 1993 and purchased a similar tonnage from

Iron Trade Ltd. f.o.b. Ponta da Madeira, Brazil for

shipment May 16-31, 1993. /' . Zaco were the German agents of KSH Schlffahrt

G.m.b.H. (KSH) and they confirmed that they would

meet Newco's freight commitments of between 35,000

and 40,000 tonnes.

KSH made their profits by chartering in vessels to

fulfil their commitments and on occasions chartering in

larger vessels to fulfil sub-charters obtaining completion cargoes for their own account.

KSH set about negotiating a charter for a vessel

through Zaco. Zaco used German brokers Frachtk<;mtor

Junge and Co. (FCJ) who on May 11, 1993 contacted

John Kilgour & Co. Ltd. (Kilgours), London based

brokers with a Brazilian cargo expertise. Kilgours acted

purely as intermediaries and approached the plaintiffs'

brokers Agelef Shipping Co. (London) Ltd. (Agelef).

Communications passed up and down the chain.

From the outset the plaintiffs made clear through

Kilgours to FCJ that they would require a performance

guarantee from Newco. That fact never came up the

chain to Newco until May 17, 1993.

Negotiations continued between the parties and in

the event the plaintiffs let their vessel AlUlngelExpress

to KSH under a time charter dated May 18, 1993.The

reconfirmation of May 14. 1993 stated inter alia that

. .. charterers agree to performance guarantee to be

as per Ownerswordingon Newcoletterheaded

paper and signed by Newco . . .

KSH failed to comply with some of its financial

obligations under the time charter and the owners

claimed the outstanding sums under or as damages for

breach of the contract of guarantee against Newco.

Newco contended that it never entered into any

contract of guarantee with the owners. Newco's case

was that although there were discussions between KSH

and Newco as to the possibility of providing such a

guarantee that discussion never cuhriinated in any

binding contract as between Newco and KSH never mind as between Newco and the owners.

Held, by Q.B. (Com. Ct.) (WALLER,J.), that

(1) on the facts and the evidence the only agreement

that the owners ever had was between themselves and

KSH that KSH would produce a performance guarantee; the negotiations between KSH and Newco had

reached a stage where KSH could be confident that

Newco would produce a guarantee if necessary; Newco

were clear that they would produce a guarantee if it

were asked for and if the arrangements were put in

place so far as a completion cargo was concerned;

however the guarantee was never actually asked for

(see p. 303, col.2); .

(2) if the owners were to succeed they had to

establish an agreement between them and Newco; they

did not get that agreement as at the time they alleged

Le., May 17, 1993;such agreement as was reached was

between KSH and the owners and possibly between

KSH and Newco; it was doubtful whether such agreement as was reached between KSH and Newco was

more than a firm understanding binding in honour, but

even if it were more, no guarantee was ever produced

by Newco in favour of the owners pursuant to whatever

obligation Newco undertook vis-a-vis KSH; the owners' claim against Newco would be dismissed (see

p. 303, col. 2).

This was an action by the plaintiffs Adriatic

Mare Enterprises S.A. the owners of Anangel

Express claiming against the defendants Newco

A.G. outstanding .sums under, or as damages for,

breach of the contract of guarantee which they

alleged Newco had granted in respect of the performance obligations of the charterers KSH Schiffahrt G.m.b.H., to whom the owners had chartered

the vessel, KSH having failed to comply with some

of its financial obligations.

Mr. Alistair Schaff (instructed by Messrs. Waterson Hicks) for the plaintiffs; Mr. Charles Priday

(instructed by Messrs. More Fisher Brown) for the

defendants.

The further facts are stated in the judgment of

Mr. Justice Waller.

Judgment was reserved

Monday May 13, 1996

Case 1:07-cv-03397-JGK Document 20-3 Filed 06/21/2007 Page 2 of 3
300 LLOYD'S LAW REPORTS

WALLER,1.] The" AnangelExpress"

[1996] Vol. 2

[Q.B. (Com. Ct.)

JUDGMENT

Mr. Justice WALLER:

Introduction

This action concerns a claim on a disputed

contract of guarantee. The plaintiff shipowner of

Anangel Express ("owners") contend that the

defendant ("Newco") entered into an enforceable

contract of guarantee in respect of the obligations of

a charterer KSH Schiffahrt G.m.b.H. ("KSH")

under a time charter-party dated May 18, 1993.

KSH failed to comply with some of its financial

obligations under the charter-party. and owners

claim the outstanding sums under, or as damages

for breach of, the contract of guarantee against

Newco. It is somewhat disconcerting to find that the

sum claimed is something less than U.S.$200,OOO,

but that reflects the fact that owners feel strongly

that a guarantee was granted by Newco, and Newco

feel equally strongly that no such guarantee was

entered into.

Newco contends that it never entered into any

contract of guarantee with owners. Newco's case is

that albeit there were discussions between KSH and

Newco as to the possibility of providing such a

guarantee, that discussion never culminated in any

binding contract as between Newco and KSH never

mind as between Newco and owners. Newco also

assert that if any guarantee was offered on its

behalf, such offer was unauthorized. In the final

alternative, Newco assert that any contract of guarantee which was entered into, would be unenforceable under s. 4 of the Statute of Frauds, 1677andlor

for want of consideration.

Background to the negotiations

Newco had sold 35,000 tonnes Brazilian basic

pig iron to Dongkuk Steel Mill c.&f. Korea shipment April/May, 1993 and to fulfil that contract had

bought the same tonnage of basic pig iron from

Grupo Viena Ltd. (Iron Trade Ltd.) f.o.b. Ponta da

Madeira, Brazil for shipment Apr. 15 - May 15

(ultimately amended to May 16-31).

Newco also sold a further 5000 tonnes of Brazilian foundry pig iron to Nu Lake c.&f. Korea

shipment April/May, 1993 and purchased a similar

tonnage from Iron Trade Ltd. f.o.b. Ponta da

Madeira, Brazil for shipment Apr. I - May 1

(amended May 16-31, 1993).

Newco had confirmation from Zaco, who were

the German agents of, and indeed shared common

officers and offices with KSH, that they would meet

Newco's freight commitments for between

35,000-40,000 tonnes at U.S.$27.50 per tonne.

This appears from telexes between Feb. 5-15, 1993

(see B2II-2, 4-5, 7). Thus, as at February, 1993,

KSH had a freight commitment to Newco to

provide tonnage to Newco for voyages including a

May, 1993 voyage from Brazil to Korea.

KSH contracted as principals and made their

profits by chartering in vessels to fulfil their commitments and, on occasions, chartering in larger

vessels to fulfil sub-charters (such as that with

Newco) obtaining completion cargoes for their own

account. KSH set about negotiating a charter for a

vessel through Zaco, Zaco using German brokers

Frachtkontor Junge and Co. ("FCI").

FCJ were and are an established and well reputed

firm of shipbrokers who would have appreciated

that John Kilgour & Co. Ltd. ("Kilgours") who

were London based brokers, had a Brazilian cargo

expertise. Kilgours acted purely as intermediaries

but would in their turn approach owners through

owners' agents Agelef Shipping Co. (London) Ltd.

("Agelef"). It appears that FCJ's first contact with

Kilgours was on or about May 1), 1993, and that it

was from that stage that active broking took place,

communications passing up and down the chain as

is normal in such negotiations.

One of the problems for Zaco was that physically

there were no vessels in the required size available

in Brazil or South Atlantic and thus they were going

to have to take up tonnage either from the Far East

or India which would mean a pre-ballast voyage of

20-25 days. Their intention was to perform the

voyage with tonnage of at least 50,000 DW or even

bigger in order to have the chance of completing the

vessel with additional cargo. (See fax Zaco to

Novacom, (Newco's agents in Brazil) dated May

11, 1993, p. 42.) Serious negotiations started as at

May 11, 1993. From the outset owners made clear,

through Kilgours to FCJ, that they would require a

guarantee from Newco. That fact never came up the

chain to Newco itself until May 17, 1993. That in

my view is an important factor.

The negotiations

As early as May 13, 1993 it would seem that

KSH had offered a performance guarantee of

U.S.$l,OOO,ooo "given by Newco". This appears

from faxes of the above date. That led to Agelef

faxing Mr. Sayers of Kilgours a draft wording for a

guarantee (B2I49) which made clear that owners

required a guarantee to be issued on the guarantor's

notepaper, signed by the guarantor's authorized

signatory.

At this stage the brokers were quite substantially

apart in relation to the daily rate of hire and other

terms.

Matters were left inconc1usive on May 13, 1993

but on May 14, 1993, first Kilgours reported to FCJ

the owners' attitude to a guarantee in these terms:

Can Newco afford 2.5 million if not what can

they agree. Lets address this right now.

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