Claim No: CFI 112/2020
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
RADA TRADING LLC FZC
Claimant
and
ARYA PETROLEUM FZE
Defendant
JUDGMENT OF JUSTICE LORD ANGUS GLENNIE
| Hearing : | 23 and 24 February 2022 |
|---|---|
| Counsel : | Stephen Stamboulieh instructed by Stamboulieh Law, PLLC on behalf of the Claimant Asha Bejoy instructed by Bin Eid Advocates & Legal Consultants, Dubai on behalf of the Defendant |
| Judgment : | 29 April 2022 |
UPON the Claimant’s Claim Form dated 30 November 2020
AND UPON the Defendant’s Defence with Counterclaim dated 3 February 2021
AND UPON the Claimant’s Reply to Defence dated 8 March 2021
AND UPON the Claimant’s Amended Particulars of Claim dated 27 April 2021
AND UPON reviewing the Claimant’s skeleton argument dated 16 February 2022
AND UPON reviewing the Defendant’s skeleton argument dated 18 February 2022
AND UPON reviewing all documents recorded on the case file
AND UPON hearing Counsel for the Claimant and Counsel for the Defendant at the trial held before Justice Lord Angus Glennie on 23 and 24 February 2022
IT IS HEREBY ORDERED THAT:
1. There be judgment for the Defendant.
2. The Claimant’s claim fails and is dismissed.
3. The Defendant’s counterclaim succeeds to the extent that the Claimant must pay the Defendant the sum of AED 220,901, plus interest thereon at the rate of 9% a year from the date of this Order.
4. The Claimant shall pay the Defendant’s costs of the action, to be assessed by the Registrar on the standard basis if not agreed.
Issued by:
Nour Hineidi
Registrar
Date of issue: 29 April 2022
At: 10am
SCHEDULE OF REASONS
Introduction
1. The Claimant (“RaDa”) is domiciled in the Fujairah Free Zone. It has a branch in the Dubai Multi Commodities Centre (“DMCC”). It is engaged in the oil trading business. The Defendant (“Arya”) is a Free Zone Establishment registered with Hamriyah Free Zone Authority in Sharjah. It rents out oil storage tanks.
2. On 26 August 2020, the parties entered into a Storage Lease Agreement (the“Agreement”), in terms of which Arya agreed to lease storage tank No ST-06 at Plot No 1 E-01-A1, Hamriyah Free Zone, Sharjah (the“Tank”), including pipings and fittings (collectively“The Facility”) to RaDa on terms therein set out. The “Lease Period” was from 30 August 2020 until 27 November 2020, with a right to extend the Agreement for a further period on such terms as parties might agree. Payment for the Lease of the Facility was to be made at the rate of US$ 5,700 per cubic metre per “month” (a month for this purpose being a period of 30 calendar days), based on actual tank capacity, with other specified charges for particular operations.
3. RaDa duly arranged for a quantity of Fuel Oil 380 CST (the“Product’’) to be delivered into the Tank from the M/T PV OIL JUPITER. That vessel arrived at the port on 3 September 2020 and gave all relevant Notices. However, the M/T PV OIL JUPITER was unable to berth alongside the Facility at that time or at any time until about 3 October 2020, when the vessel was provided with a Free Zone Bill of Entry. Throughout this time the Tank was unavailable. It had in it another cargo, belonging to Valens DMCC (“Valens”), which was due to be loaded onto the M/T PRESTIGIOUS, which was itself waiting to berth at the Facility. It will be necessary to look at this in more detail. For present purposes it is sufficient to note that the M/T PV OIL JUPITER berthed at the Facility on 3 October 2020 and completed discharge of her cargo into the Facility on 6 October 2020.
4. Arya have issued a credit note to RaDa for the payment made by RaDa for the month of September 2020, the first month under the Agreement in respect of which RaDa had paid in advance for use of the Facility but the neither the berth nor the Tank were in fact available to it. But RaDa have presented additional claims. They claim to be re-imbursed by Arya in the amount of US$239,367, which they have had to pay their sellers by way of demurrage under their sale and purchase agreement. They also have claims for damages for loss and loss of profit arising out of the delay in berthing and discharging the vessel.
5. For its part, Arya advances a counterclaim for sums due but unpaid under the Agreement. This claim is not disputed except to the extent that RaDa can set off its own claims against Arya’s counterclaim.
The Agreement
6. In the Agreement there is frequent use of the term “lease” and associated expressions such as “Lease Period”, “Lease Rent”, “lessee” and “lessor”. Section 1 of the Agreement (“Definitions”) makes it clear that the service offered by Arya (the“Lessor”) is the handling, management and dealing with liquid storage by Arya on behalf of RaDa (the“Lessee”); and that the term “Lease Rent” means the Facility Charges payable to Arya for such services and “shall in no manner whatsoever be deemed to mean and purport the renting, hiring, letting or leasing of the Facility owned by Arya”.
7. The relevant provisions of the Agreement are as follows (for ease of reference, the name of the party has sometimes been inserted in square brackets):
“2. LEASE PERIOD:-
2.01 This Agreement will commence by and between the parties hereto with effect from 30th Day of August 2020 and will end on 27th Day of November 2020 (both days inclusive).
2.02 The First Party [Arya] hereby agrees to offer its Facility to the Second Party [RaDa], which the Second Party hereby agrees to take from the First Party, for a period of 3 Months (for this purpose month means 30 calendar days) from the above stipulated date.
2.03 This Agreement can be further extended for an additional period on such terms and conditions that may be agreed by both parties. ...
3. FACILITY CHARGES:-
3.01 The Facility charges will be calculated @ US$5,700/- per Cubic Metre per Month (for this purpose month means 30 calendar days) based on actual tank capacity.
3.02 The aforesaid Facility charges include the charges for receiving & discharging of the cargo of the Second Party through ship and to the storage tanks without any obligation or responsibility of the First Party for the same.
3.03 ...
4. PAYMENT TERMS:-
4.01 The Lease Rent is payable on the 1st Day of every Preceding Month.
4.02 ...
7. VESSEL ACCEPTANCE:-
7.01 The Second Party [RaDa], through its shipping agents, shall obtain vessel acceptance directly from Hamriyah Port Authorities and follow the rules and regulations for handling vessels at berth and outside anchorage area.
7.02 The First Party [Arya] shall not be responsible, in any manner whatsoever, for any demurrage, indemnity or consequential loss. However, the First Party shall provide all reasonable assistance in expediting the discharge and loading of the nominated cargo of the Second Party.
7.03 The First Party shall be responsible for the entrance license so that the vessels are allowed to enter into the harbor/dock and to connect ourselves with the pipeline of the Facility.
10 DOCUMENTATIONS AND CUSTOMS FORMALITIES:-
These will be complied with, as per Sharjah Customs Procedures including payment of duty (if applicable), by the Second Party or its nominated agent. All documentation including delivery order, bill of entry, bill of lading for imported cargo, bill of export/export and delivery ticket for all tanker loading will be processed by the Second Party or its agent and a copy of the same shall be handed over to the First Party within 24 hours of discharge and/or loading of the cargo.
15 SURRENDER & ACCEPTANCE OF THE FACILITY:-
15.01 At the commencement of this contract the First Party shall handover the tank, pipelines and the Facility in a condition suitable for the Goods declared by the Second Party. The Second Party may appoint an independent surveyors at their cost to validate the same for their assurance.
15.02 Upon the expiration of the terms of this Agreement, the Second Party shall handover/surrender the entire Facility including the storage tanks cleaned and in good state and condition in accordance with the age of the Facility.
15.03 ...
16 MODIFICATIONS:-
The parties hereto hereby agree that this document contains the entire agreement between them, and that this Agreement shall not be modified, changed, altered or amended, in any manner whatsoever, except through a written amendment signed by both the parties hereto.
18 DEFAULTS:-
The First Party shall be deemed to have defaulted the provisions of this Agreement if and when, interalia, it does not give free, full and unencumbered passage to its Facility to the Second Party even though the Second Party has fully complied with all the clauses of this Agreement. ...
19 FORCE MAJEURE:-
Neither party hereto shall be liable in damages or have the right to terminate this Agreement for any delay or default in performing hereunder if such delay or default is caused by conditions beyond his control including, but not limited to Acts of God, government restrictions, (including the denial or cancellation of any necessary license), wars, insurrections and/or any other cause beyond the reasonable control of the party whose performance is affected.
26This Agreement is subject to and shall be governed by the International laws and the Parties shall submit to the exclusive jurisdiction of the Courts of the DIFC.”
The Evidence
8. Before the trial began, parties had co-operated in preparing a Chronology of Events referring to documents in the Trial Bundle. While not having the status of an agreed chronology, this exercise eased considerably the task of trawling through documents otherwise found only as exhibits to pleadings and witness statements. In addition to the documents in the Trial Bundle, I heard factual evidence from three witnesses: Mr Aurelian Panc, General Manager of RaDa; Mr Rishabh Khare, Deputy General Manager of RaDa; and Mr Animesh Khandheria (“Mr Animesh”), Administrative Manager of Arya Petro Products FZE, a sister company to the Defendant, Arya. All filed witness statements and were cross-examined on them. I shall refer to their evidence in due course, but I should say at this stage that I found them all to be straightforward and honest, and I found their evidence helpful in resolving this dispute. I also heard expert evidence from Ms Clare Lavin of Grant Thornton, who was called by RaDa to speak to their damages claim, filed a Report and was cross-examined on it. For reasons which will become clear, I did not need to make findings on the basis of her evidence, but I had no reason to doubt her expertise and honesty.
The facts in more detail
9. The Agreement was entered into on 26 August 2020. I have already set out the relevant terms. For present purposes the key date is 30 August, when the Lease Period began. RaDa say that as at that date they were entitled to be given an empty tank into which to discharge their oil. It does not matter that their vessel, the M/T PV OIL JUPITER, arrived and presented Notice of Readiness only on 3 September - the Tank should have been empty as at 30 August. In fact, the Tank the tank was not empty at that time, nor was it empty when the M/T PV OIL JUPITER arrived at the port. It contained a cargo of oil waiting to be loaded into the M/T PRESTIGIOUS, which was waiting to berth and had been waiting to berth for some time already.
10. It is suggested by Arya that it was known and agreed between the parties that there would be some delay before the Tank would become available. Accordingly, it is necessary to look briefly at the discussions between the parties at the time the Agreement was concluded.
11. According to Mr Khare of RaDa, there was some initial contact between the parties in about February 2020, when he made enquiries of Arya about their tanks in general, including the location and pricing. The details of this early contact do not matter. On about 25 August 2020 Mr Khare approached Mr Animesh and told him that they were looking for a tank for a delivery scheduled for the beginning of September 2020. They discussed the size of the tank required by RaDa, the required commencement date and the monthly rent. Mr Animesh told Mr Khare that there might be a minor delay with the availability of the tank, since Arya would only have the tank back (free of cargo) within about a week or so. The next day, on 26 August, Arya’s terminal operator sent RaDa the draft Agreement which contained a commencement date of 30 August. Mr Khare interpreted this as confirmation from the terminal operator, who was in a position to know best, that the delay contemplated by Mr Animesh would only be for about 4 days. That was satisfactory since RaDa were expecting a delivery at the beginning of September. On that basis RaDa went ahead and entered into the Agreement with Arya without raising any further questions about the possibility of further delays.
12. Mr Animesh’s account is slightly different. Although employed by a sister company of Arya, he was involved in the day-to-day affairs of Arya, particularly in connection with the negotiation and conclusion of Agreements with other parties prior to their being submitted to management for review and final approval. He confirmed that RaDa approached Arya on 25 August (the contact was by telephone) seeking the lease of a tank with certain specifications for three months from the month of September 2020. During these initial discussions Arya informed RaDa that the specific tank under consideration was already leased to Valens and was being used by them; and that there could be a delay in handing over the tank to RaDa. He explained to Mr Khare that Hamriyah Port is one of the busiest ports in the UAE and that cargo vessels were given priority over other vessels. This could cause delays to the berthing of other vessels and in any event quite apart from that, there could be significant congestion and delays at the port. He informed Mr Khare of the possibility of the tank not being available during September. Mr Animesh also referred in his evidence to Arya’s contract with Valens which was initially for the period 16 February to 16 March 2020 but had thereafter been extended on a continuing basis, with the last extension (agreed on 22 July 2020) being until 12 October 2020. However on 14 August Valens notified Arya that the M/T PRESTIGIOUS would arrive at the terminal the next day to load her cargo from the tank; and that therefore they requested extending the existing contract only for a further 15 days (i.e. until 30 August). It was on that basis that Arya entered into the discussions with RaDa on 25 August for the lease of the tank from 30 August.
13. As already indicated, I found both witnesses to be honest and straightforward in their evidence. However, I consider that Mr Animesh was prone to exaggerate in his account of the warnings he gave Mr Khare about the risk of delays at the port. I accept that he told Mr Khare that there might be delays in the tank becoming available to be used by RaDa, but this was in the context of a discussion between them which took place on 25 August. What I understand him to have been telling Mr Khare was that, seen as from 25 August, there would be some delay before the tank would be available. In the context of Valens having told Arya on 14 August that their vessel, M/T PRESTIGIOUS, was due to arrive on 15 August and that they, Valens, did not want to continue their lease beyond 30 August, it would be logical for Arya to suggest to RaDa a start date of 30 August and for RaDa to understand this start date (as set out in the Agreement) as taking account of the short delay mentioned by Mr Animesh. I do not accept, therefore, that Mr Animesh told Mr Khare that the availability of the tank to RaDa might be delayed beyond 30 August; and I do not consider that Mr Khare should have understood from anything said by Mr Animesh that there was any likelihood of any significant delay in Arya handing over the (empty) tank to RaDa beyond the start date set out in the Agreement.
14. The M/T PV OIL JUPITER arrived at the Hamriyah anchorage at 16:20 UTC on 3 September 2020 and gave Notice of Readiness, i.e. notice that she was ready to commence discharging her cargo of 5961.861 mt of Fuel Oil. On the same day Q9 FZE, a Free Zone entity linked to Arya, sent an NOC, effectively a berthing request, to the Harbour Master of Hamriyah port. It was noted on the NOC that the M/T PV OIL JUPITER would come alongside after completion of loading of M/T PRESTIGIOUS.
15. The day-to-day operations at Hamriyah port and the position and movement of vessels on arrival at the port were recorded in a document entitled “Shipping schedule of Hamriyah Port” (the“Shipping Schedule”), relevant pages of which were exhibited to Mr Animesh’s witness statement. By reference to this document Mr Animesh pointed out a number of relevant matters. The following are of particular significance:
(1) The M/T PRESTIGIOUS (mis-spelt “PRESITOUS” in this entry in the Schedule) arrived at the port on 16 August. At that time there were 22 tankers ahead of her, all waiting to berth. There were also a number of cargo vessels waiting to berth.
(2) By 26 August there were 10 tankers ahead of M/T PRESTIGIOUS. The tankers ahead of M/T PRESTIGIOUS in the queue all appear to have arrived at the port before her; and all those behind her in the queue appear to have arrived after her. The document supports Mr Animesh’s oral evidence that tankers arriving at Hamriyah port were generally - not always but generally - directed to proceed to a berth on a first come first served basis.
(3) By 31 August there were seven tankers ahead of M/T PRESTIGIOUS all waiting to berth.
(4) By 6 September there were 4 tankers ahead of M/T PRESTIGIOUS all waiting to berth. The M/T PV OIL JUPITER is recorded as having arrived on 3 September. Including M/T PRESTIGIOUS, there were 16 tankers ahead of her in the queue waiting to berth. The M/V HLV HAWK, a very large cargo vessel carrying construction materials, which had arrived only on about 1 September, had been given priority and was occupying a berth within a matter of days after her arrival. This supports Mr Animesh’s evidence that cargo vessels were given priority over tankers when it came to allocation of berths.
(5) By 9 September M/T PRESTIGIOUS was near the head of the queue. There were two tankers ahead of her but it is not clear how effective their presence was. There were 12 tankers ahead of M/T PV OIL JUPITER in the queue.
(6) By 13 September both M/T PRESTIGIOUS and M/T PV OIL JUPITER were still waiting to berth, in approximately the same positions in the queue. The M/V HLV HAWK was still occupying a berth in the Main Harbour.
(7) By 17 September M/T PRESTIGIOUS and M/T PV OIL JUPITER were both still waiting to berth, in approximately the same positions in the queue (they had moved up one position).
(8) By 21 September M/V HLV HAWK had completed discharge and M/T PRESTIGIOUS had moved to Berth #4 Main Harbour. M/T PV OIL JUPITER was at number 6 in the queue of tankers waiting to berth.
(9) On 22 September M/T PV OIL JUPITER was still at number 6 in the queue of tankers waiting to berth. At about this time, or perhaps shortly thereafter, M/T PRESTIGIOUS shifted to Berth #2 Inner Harbour to load her cargo from the tank.
(10) By 27 September it appears that M/T PRESTIGIOUS had completed loading her cargo and had left the berth, which was occupied by other vessels/tankers. M/T PV OIL JUPITER was third in the queue waiting to berth.
(11) There was no change on 1 October, save that M/T PV OIL JUPITER was now second in the queue.
16. On 3 October 2020 the Government of Sharjah, Department of Seaports & Customs, issued a Free Zone Bill of Entry for the M/T PV OIL JUPITER. By 5 October M/T PV OIL JUPITER had berthed, discharged her cargo and sailed.
17. The conclusions which I draw from the evidence, so far as relevant to the issues in this case, are as follows. There was at the relevant time serious congestion at Hamriyah port. Tankers arriving to load or discharge from or into shore tanks were held in a queue, their position in the queue being largely a reflection of when they arrived at the port. I accept the evidence that tankers were generally called in to berth on a first come first served basis. Cargo vessels, by contrast, were often given priority over tankers, and this contributed to the berthing delays for tankers and other vessels. The M/T PRESTIGIOUS arrived at the port to load her cargo from Arya’s tank on 16 August but, despite her intended cargo being ready to load, was not able to berth until late September. In consequence the tank was not empty and available to RaDa until about the end of September. Separately, the M/T PV OIL JUPITER arrived at the port on 3 September and was unable to berth until into October. This was so for two reasons: first, because Arya’s tank into which she was to discharge her cargo was not empty, which was a consequence of M/T PRESTIGIOUS being unable to berth and load her cargo from the tank; and second, because in any event the M/V PV OIL JUPITER was in a queue of tankers waiting for permission to berth, and was only granted permission when she reached the head of the queue.
RaDa’s damages claims
18. RaDa’s claim is straightforward. The Agreement with Arya stipulated that the tank would be available to it from 30 August 2020. It was not in fact available to it until the end of September. Until then it had a cargo in it belonging to Valens, which had to be loaded onto the M/T PRESTIGIOUS before the tank could be made available to RaDa. As a result RaDa was deprived of the use of the tank for the first month of the three month period covered by the Agreement and has suffered loss and damage: it claims to have incurred a liability in demurrage to Fornax Energy (under its purchase contract with them) in the sum of US$239,367; and it says it has suffered a loss of profit US$287,676 (reduced from a pleaded figure of in excess of US$350,000 in light of the Claimant’s expert report) because of its inability to “rotate” (i.e. sell) that cargo and successive cargos - the normal course of business, it says, is to sell the cargo stored in a tank every 10 days or so, so being deprived of the tank for about 30 days resulted in loss of profit on three cargos.
19. In the course of submissions, I was referred by both parties to a large number of statutory provisions and decided cases. While I am grateful for the assistance, I do not propose to set them out in this judgment or to refer in detail to the legal submissions presented to me. In my view the case is straightforward, can be decided on the facts and requires little elaboration.
20. The starting point is that Arya, in the Agreement, agreed to make the tank available to RaDa from 30 August 2020 until 27 November 2020, both days inclusive (clauses 2 and 15). The tank was not available and in the requisite condition as at 30 August or at any time until the end of September. Arya was therefore in breach of the Agreement in that respect. It does not matter for these purposes whether there was some discussion prior to concluding the Agreement about the possibility of delays in making the tank available. I have found as a fact that there was no such discussion sufficient to put RaDa on notice that there might be some delay beyond 30 August. But even if there had been some such discussion it would not have affected the position. The simple point is that Arya agreed to have the tank available to RaDa by 30 August, and they took the risk of port congestion making this impossible to achieve. Arya was in breach of the Agreement for the period from 30 August until the end of September.
21. What follows from that finding? The first point to make is that RaDa would be entitled to recover any Lease Rent paid by it in advance and attributable to the period when it did not in fact have the tank available to it. Had there been an issue about this I would have made an order requiring advance Lease Rent for this period to be repaid. But this is not necessary because there is no issue about this point. On 5 October 2020, Arya issued a Credit Note to RaDa for the rent paid in advance for this period. In effect, the payment made in advance for the first month has been treated as discharging RaDa’s liability for the second month.
22. But RaDa’s claims for damages by reference to (a) its liability in demurrage and (b) its loss of sales (rotation of cargos) both proceed on the assumption that the delay in berthing the M/V PV OIL JUPITER and therefore the delay in discharging her cargo and making it available for sale was all caused by the tank not being empty, as it should have been under the Agreement, when the M/V PV OIL JUPITER arrived at Hamriyah port on 3 September. I do not find that to be established on the evidence. The Shipping Schedule establishes quite clearly that a vessel such as the M/V PV OIL JUPITER could not expect to arrive at the port and go straight to a convenient berth. There was a long queue of vessels waiting to berth and berths were generally allocated on a first come first served basis. Priority given to dry cargo vessels increased the risk of delay. It was for that reason that the M/T PRESTIGIOUS could not berth on arrival, indeed could not berth until over a month after her arrival, despite the fact that a cargo was waiting in the tank to be loaded onto her. I have no reason to suppose that the M/V PV OIL JUPITER would have berthed any sooner had the tank been clear of cargo and available to RaDa in accordance with the Agreement.
23. It follows that the damages claims advanced by RaDa fail.
24. I should just add this, in case the matter goes further. Although the documentation evidencing RaDa’s liability in demurrage was not as full as it might have been, I accept that RaDa incurred that demurrage liability in the sum claimed. If, therefore, contrary to my findings, the delay in berthing was caused by the non-availability of the tank, then RaDa would be entitled to recover this demurrage liability as part of its claim for damages. So far as concerns the damages claim based on loss of sales (rotation), the exercise of making any relevant findings of fact is fraught with difficulties. I would, however, not accept that RaDa would have managed to deliver and sell a cargo every 10 days. Clare Lavin, RaDa’s expert, thought every 15 days was more realistic. I consider that to be overtly optimistic, given the delays at the port. She, of course, accepted that she had not considered the cause of the vessel being delayed in getting into berth. If my findings are correct, and the delay in berthing was in fact due to congestion at the port, then a turnaround of even 15 days seems out of the question. I would have held that RaDa had failed to prove this part of its case.
Arya’s counterclaim for unpaid Lease Rent
25. The monthly Lease Rent - a month being 30 days for these purposes - was AED 220,901 payable in advance. RaDa paid for the first month in advance. They were given a credit note by Arya because the tank was not available to them for that first month. That credit note effectively paid the second month. Subject to a defence of set off, RaDa accept that they owe rent for the third month, again in that same sum of AED 220,901. Since I have held that RaDa’s claims must fail, it follows that there is no set off available to RaDa and I shall give judgment for this amount in favour of Arya on its counterclaim.
26. Arya have also invoiced RaDa for a further month, on the hypothesis, as I understand it, that, since the first month was effectively wiped out (because the tank was unavailable), the three-month term of the Agreement began at the end of September and ran until late December. It is not suggested that this is an extension of the Lease Period expressly agreed between the parties, though there is a suggestion that there was an implied agreement by conduct. I can see no basis for this part of the counterclaim, if indeed it is insisted upon.
Disposal
27. In light of the above, I shall make the following Order. There will be a judgment for the Defendant on the Claimant’s claim, so that the Claimant’s claim fails and is dismissed. The Defendant’s counterclaim succeeds to the extent that the Claimant must pay to the Defendant the sum of AED 220,901 plus interest on that sum at the rate of 9% a year from the date of this order.
28. The Claimant must pay the Defendant’s costs of the action, to be assessed by the Registrar on the standard basis if not agreed.