[1996]Vol. 2

Q.B. (Com. Ct.)]

LLOYD'S LAW REPORTS 301

The" Anangel Express" [WALLER,J.

FCJ's responsewasto askfor afigure ofU.S.$1 m.

to be inserted in the guarantee(see B2171).This

seemsto link with a copy of the guaranteeat p. 78

of the Bundle which has FCJ's writing "up to an

amountof U.S.$1m."

The ownerscounteredfor a guaranteeof U.S.$2

m. (seeKilgours to FCJat 1506 on May 14, 1993

(B2172».

Ultimately, at 19 46 that evening negotiations

were fixed firm"on subjects".Kilgoursconfirmed

toFCJ- .

. . . sub bunker quantities, sub details and sub

charterersreconfirmationby 4pm London time

on Monday.

That reconfirmation referred to a provision at the

end of the telex stating -

. . .charterers agree to performance guarantee to

be as per Owners wording on Newco letter

headed paper and signed by Newco with the

insertion in line 4 after" same" - up to 1~ m.

US$. .

Two points are of importance. First, (as I have

already indicated), Newco had at this stage not been

informed of the requirement for a guarantee. Second, albeit it was clear from the negotiations

between Mr. Sayers and Mr. Buesig of FCJ that one

reason why confirmation had to wait was because

Newco had to be contacted, the terms of the

confirmation were that "charterers" should agree to

a performance guarantee signed by Newco. Mr.

Sayers in his evidence, who was negotiating on

behalf of Kilgours, was quite clear that what he was

expecting at this stage was the agreement of charterers that a guarantee from Newco would be

supplied.

Mr.Kunzof Newcohadin factbeenawayin the

week up to and includingMay 14, 1993.Thatmay

be one reason why Newco had never been contacted in relation to the possibility of giving a

guarantee. In any event he returned to the office on

Monday May 17, 1993. At the same time Mr. Frank

Eger of FCJ returned to the office to deal with the

matter in place of Mr. Buesig. Mr. Eger was most

unenthusiastic about the fact that any guarantee

from Newco had been offered. It is not precisely

clear to me whether that was after contact with

Zaco and viaZacowithNewcoor not,but it matters

not, becauseboth Mr.Eger and Newco,once they

knew about it, were unenthusiastic about the offer

of a Newco guarantee.

During Monday May 17, 1993, owners through

Kilgours and Mr. Sayers maintained their position

that a guarantee was necessary and to some extent

. they relied on the fact that charterershad already

agreed to a U.S.$I.5 m. guarantee. When Newco

were contacted by Mr. Kehr of KSH, Mr. Kunz for

Newco was adamant,at least at first, that Newco's

exposure should not exceed their freight liability.

This was Mr. Kunz's own 'evidence and is supported by the statement put in under the Civil

Evidence Act of Mr. Kehr. Newco were however

prepared to assist up to their freight liability. Their

freight liability was calculated both by them and

owners as about U.S.$I.l m.

Owners were not prepared to accept a guarantee

limited to U.S.$1.1 m. and were insistent upon a

guarantee of U.S.$I.5 m.

There was clearIy some discussion between Mr.

Kunz and Mr. Kehr relating to a financing procedure which would involve Newco paying their

freight liability directly to owners up to the amount

of Newco's freight liability but in respectof KSH's

liabilities for ballast bonus and hire. Telexes dealing with this were exchanged between Zaco and

Newco on May 17, 1993 in the afternoon (see

B2/1Ol). Those telexes are timed at 3 41 in the

afternoon which is coming close to the time by

which KSH had to reconfirm to owners if they were

to fix the vesseL

In relation to the above there is very little

dispute.

There is also no doubt that by the end of the

afternoon Mr. Eger, on behalf of FCJ, had confirmed to Mr. Sayers, for Kilgours, that a guarantee

would be produced, but the words in which he did

so, as Mr. Sayers himself confirmed, are set out in

the telex at p. 136 of the Bundle as follows:

Charterers agree to performance guarantee to

be as per Owners wording on Newco letter

headed paper and signed by Newco with the

insertionin line 4 after "same" - up to 14m.

US$.

That telexin factalsoindeedconfirmeddetailsand

all important terms as agreed between owners and

charterers.

Strangely, when Kilgours telexed owners the

terms of the fixture, they set out all terms as per

the telex to FCJ but without the term relating to the

performance guarantee as quoted above. The explanation of Mr. Sayers for that term not being in the

telex to owners was that he was telexing Mr. Pat

Clinkskel on behalf of owners who was dealing

with details, whereas it was Mr. John Merrett, who

gaveevidencebeforeme,whowasdealing with the

question of the guarantee, and the evidenceof Mr.

Sayers was that he had confirmed orally to Mr. John

Merrett that a Newco guarantee was to be supplied.

There isnodoubtthatMr.Merrett, (whose evidence

I accept entirely), thought that he was getting

confirmationon behalf of Newco that they would

issue a performance guarantee, and not simply a

confirmationfrom charterers.I have to say that I

find Mr. Sayers' explanation for not putting all

terms as confirmed to FCJ in the telex to owners,

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302 LLOYD'S LAW REPORTS

WALLER, J.] The "Anangel Express"

[1996] Vol. 2

[Q.B. (Com. Ct.)

not altogether satisfactory since it seems to me that

when one looks at Mr. Sayers' notebook relating to

the negotiations, matters are not quite so clear cut

so far as negotiating the guarantee or details with

the different representatives of owners. In any

event, this was such an important term - why not

put it in? One explanation for not putting it in is that

it makes clear that in fact all Kilgours had at this

time was an agreement from charterers that they

would produce a guarantee from Newco as opposed

to any agreement from Newco. The expectation

would have been that a guarantee would be forthcoming and thus no problem would arise, but the

only bargain which Kilgours had was in fact with

charterers.

In any' event, two questions arise at this stage;

first ,isthe question whether Mr. Kunz, on behalf of

Newco, agreed with anyone to provide a guarantee

as opposed to agreeing that he would consider

giving one; second would arise the question

whether, even if he did agree to give a guarantee,

whether he authorized KSH to give that guarantee

on behalf of Newco, or whether he left it to Newco

to decide precisely what it would agree. Certainly,

on the wording of the telexes at this stage, the

maximum which owners appear to have obtained is

an agreement of the charterers to provide a performance guarantee from Newco.

Let me however consider those questions further

by reference both to the evidence and to the

sequence of events thereafter.

On the documents, what happens after the confirmation on May 18, 1993 is as follows. First, Zaco

wrote to Novacom copy to Newco, confirming

yesterday's agreement that they had fixed Anangel

Express for performing the above cargo. At the

conclusion of that telex they said:

Thanks support for fixing this vessel especially

for performance guarantee as agreed.

What Mr. Kunz said in his evidence about this

sentence was that he must have seen the telex at an

earlier stage but that he could not recall noting the

reference at the bottom to a performance guarantee.

He said that if he had seen it then he would have

taken it to be a reference to Newco's willingness to

provide a guarantee up to the level of Newco's

freight commitment if a guarantee was still

required. It is perhaps important at this stage to go into the difference between the evidence of Mr.

Kehr and Mr. Kunz as to what occurred on May 17,

1993.

Mr. Martin Kehr did not give evidence at the

trial. It would seem that he originally gave a

statement to Newco, that statement being taken by

Mr. Jung the secretary of Newco, with the assistance of Mr. Kunz. It is quite clear that the way,!n

which that statement was taken was by Mr. Kunz

telling Mr. Jung the way in which he said that

negotiations between him and Mr. Kehr went and

trying to get Mr. Kehr to sign the statement accepting that position. Mr. Jung and Mr. Kunz said that

when they met Mr. Kehr he in fact did accept the

position as put forward in the draft statement

prepared at that stage. There was however some

dispute about the payment of sums which Mr. Kehr

said were due to him and it is on that basis that they

say the statement was never in fact signed.

Mr. Kehr's statement at that stage would have

supported Mr. Kunz' s evidence which was to the

effect that when asked by Mr. Kehr to consider

giving a performance guarantee, first, Mr. Kunz

was very reluctant to do so; second, he refused to

do so insofar as it meant going beyond Newco's

freight commitment; and third, that thus the understanding was that if a guarantee were to be given, it

would be necessary for Newco to arrange the

completion cargo or at the very least receive money

that would otherwise be payable to KSH from

Metallgesellschaft, t~e shippers of the completion

cargo. Mr. Kunz before me was quite clear that all

he ever said was that he would consider giving a

guarantee either within the limits of Newco's

freight commitment including, if it could be '

arranged through Newco, the freight for the completion cargo. Alternatively, he would consider a

guarantee of U.S.$1.5 m. provided that insofar as

that exceeded Newco's freight commitment,

Newco obtained some form of security over the

completion cargo proceeds. He accepted in answer

to questions from me that if, as a fact, some

. arrangement had been made in relation to that cargo

which would have provided Newco with the difference between Newco's own freight commitment

and U.S.$1.5 m., and if a guarantee had been

actually asked for, there is little question that

Newco would have supplied it.

Mr. Kehr provided a statement to the plaintiffs'

solicitors. That has been put in as a Civil Evidence

Act statement and has not been cross-examined to.

In that statement there was nothing about Mr. Kunz

simply being prepared to consider a guarantee and

nothing about any guarantee that would be on offer

being subject to any arrangement in relation to the

completion cargo. Mr. Kehr stated in par. 13 as

follows:

Following all the long discussions Zaco,

through Mr. Kunz, finally made their position

clear. While always reluctant to give a guarantee,

if pushed I should agree a guaranteeOon their

behalf for US$ I million. If, however, Owners

still remaining adamant before fixing the vessel

they had to have a guarantee for US$ 1.5million

I was authorized by Mr. Kunz to confirm it on

Newco's behalf, there were no conditions

attached.

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[1996] Vol. 2

Q.B. (Com. Ct.)]

LLOYD'S LAW REPORTS 303

The "Anangel Express" [WALLER, 1.

Owners relied on the following aspects as being

consistent with Mr. Kern being accurate in the

above evidence as to what Mr. Kunz had authorized

him to do. First, at about mid-day on May 17

Newco evidently faxed to Zaco a draft of the

guarantee referring to U.S.$1.5 m. (see pp. 83/84 of

the Bundle). Second, on May 19 Newco wrote to

Zaco requesting - . ..as per our teleon. kindly give us full style of

headowners for guarantee for above mentioned

vessel.

That led to a draft of the guarantee being produced

as disclosed by Newco on discovery with the full

name of the owners in it again referring to U.S.$1.5

m. (see p. 150). Thirdly, there was correspondence

between Zaco, FCJ and Kilgours relating to

whether the payment which Newco were going to

make on behalf of KSH up to the amount of their

freight commitment would be deducted from any

liability under the performance guarantee (see e.g.

pp. 207, 208 and 209). This in turn led to a draft of

the guarantee being produced by Newco referring

to credit being given under the guarantee for any

payment made (see p.242 in the Bundle). That

form of draft referred to a charter-party dated May

17, 1993, and in that form it was communicated to

Kilgours and by them to owners who requested the

date to be changed from May 17 to 18.That request

reached Newco who produced a draft with that date

changed.

- What howeverdid not happen was that Newco

ever provided a copy of the guarantee signed as the

draft indicated that it would be.

Considerable negotiations then took place in

relation to the obtaining of the completion cargo in

relation to which no arrangements were ever made,

so far as Newco were concerned, for the obtaining

of any benefit therefrom and the question of any

final execution of the guarantee just seems to have

been forgotten. Mr. Kunz suggested in his statement

that in June he was told by Mr. Kehr that the

guarantee was no longer required; this seems to be

somewhat inconsistent with what Mr. Kunz himself

replied rather nearer the time when first asked to

meet a liability on a guarantee. At that stage he

stated that Newco had denied the existence of any

guarantee. (See p. 10 of Bundle 6.)

My view on all of the above is as follows.

However unsatisfactory it may have been for

owners, the only agreement that they ever had was

between themselves and KSH that KSH would

produce a performance guarantee. The negotiations

between KSH and Newco reached a stage where

KSH could be confident that Newco would produce

a guarantee if necessary, because KSH was reasonably confident itself that it could- see to it that

Newco were liable for their own freight commitment and secured in relation to the balance up to

U.S.$1.5 m. via a completion cargo. Newco were

clear that they would produce a guarantee if it was

asked for, and if, (as it expected), the arrangements

were put in place so far as a completion cargo was

concerned. All the above explain the production of

the various drafts and the variation to the tenus

being drafted and shown to the ¥arious parties. In

I

fact what appears to have ultimately happened is

that the guarantee was never actually asked for. It

was not for example forwarded by FCJ on June 9,

1993 with the charter-party (see p. 289). KSH also

had some difficulty fixing the completion cargo. It

was not actually fixed by June 9, 1993 (see p. 292).

It may be at this stage that Mr. Kern said to Mr.

Kunz that he did not think a guarantee was going to

be wanted. In any event, neither Mr. Kehr nor Mr.

Kunz contemplated chasing up owners to see if a

guarantee was still wanted. Possibly Mr. Kunz felt

a little anxious, really appreciating that owners

must have wanted a guarantee, and it is for that

reason he used the word "deny" at p. 10 of Bundle

6.

In any event, what owners need to establish if

they are to succeed, is an agreement between them

and Newco. They certainly did not get that agreement as at the time they allege i.e. May 17, 1993.

Such agreement as w~ reached was betWeenKSH

and owners, and possibly KSH and Newco. I am

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 owners pursuant to whatever obligation

Newco undertook vis-a-vis KSH. All Newco ever

did was to produce drafts of what it would be

prepared to sign.

10 the result, points on the Statute of Frauds do

not I arise and the claim of owners against Newco

must be dismissed.

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