On 19 June 2015, the Commercial Court gave judgment in DE-RENDITE FONDS NR. 106 VLCC TITAN GLORY GMBH & CO TANKSCHIFF KG & 7 Ors -v- TITAN MARITIME S.A, Panama & 8 Ors ("TITAN GLORY") for sums exceeding USD 250 million in an application for summary judgment on the claims and strike out of the defence.
The claim is the second action brought by the Claimants against the Defendants arising from a series of time charterparties entered into between 2004 and 2007, when market rates were substantially higher than they are today.
Given the change in the market rates, the parties entered into a Charter Restructuring Agreement (CRA) which provided for lower rates of hire to be paid on an on-going basis and for the difference to be paid on redelivery.
The Defendants failed to pay hire at the newly agreed rates which led to an action which came before the Commercial Court in which judgment was given in November 2013 (DS-Rendite Fonds Nr. 106 VLCC Titan Glory GmbH & Co Tankschiff KG & Ors -v- Titan Maritime SA & Ors [2013 EWHC 3492]), with judgments in that action given in favour of the Claimants in excess of USD 50 million.
The claim in the present action concerned hire payments said to be outstanding and claims for the differential that fell due at redelivery in accordance with the CRA.
One of the points raised by the Defendants was whether the Claimants were in breach of an obligation to negotiate in good faith. In an agreement of August 2014, the following clause was agreed: "Parties to negotiate in good faith settlement of the Historic Overdue Hire".
The Defendants argued that this clause was an agreement to waive and/ or abandon any right to continue to pursue the claim, alternatively that the Claimants had agreed to limit their claim to a reasonable sum to be negotiated in good faith.
There are a number of English decisions which have held that clauses which expressed that the parties would negotiate in good faith were unenforceable. However, last year, for the first time, the Commercial Court in Emirates Trading Agency LLC -v- Prime Mineral Exports [2015] 1 WLR 1145 held that a good faith negotiation clause was enforceable.
In relation to the argument Mr Justice Males held that he did not need to decide whether the Judge in Emirates was wrong regarding the enforceability of good faith negotiation clauses. There had, on the facts before him, been an attempt to negotiate the claims during which the Claimants had indicated a willingness to accept a substantial discount which could not be described as a failure to negotiate in good faith. Emirates remains the only decision which upholds good faith negotiation clauses as enforceable and it remains to be seen whether it will be followed or distinguished as being confined to its facts.
Despite the enormity of the sums claimed Mr Justice Males was prepared to grant the claimants application for summary judgment and awarded the sum of USD 265,182,828.48 (including interest) against the Defendants, with the result that the Claimants will not have to pursue their claims to a full trial of the issues.
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