BP Oil International Ltd v. Target Shipping Ltd (Target) [2013] EWCA Civ 196

In the October 2012 edition of our Shipping E-Brief, we reported on the Commercial Court decision in this case ([2012] EWHC 1590 (Comm)). That decision has now been overruled by the Court of Appeal.

The Court of Appeal confined its decision to a narrow point of construction of the voyage charterparty in question. The Commercial Court Judge had held that the parties did not make any relevant agreement as to the rate of overage freight that was payable for discharge in the US Gulf and that, therefore, the owners were entitled to reasonable overage freight, on the basis of Section 15 of the Supply of Goods and Services Act 1982.

The Court of Appeal has allowed the Owners’ appeal, holding that the Owners’ construction of the charterparty was correct. The Owners were therefore entitled to 100% of the freight rate (i.e. Worldscale 135) for the overage. In paragraph 19 of the judgment, Lord Justice Longmore explained the Court of Appeal’s reasoning, which is also of general interest concerning the construction of contracts:

“When [the parties] have taken elaborate trouble and set out their agreement over many pages, the idea that there is a lacuna which the court has to fill is inherently unlikely. If filling the lacuna leads to an inquiry which is likely to be the subject of evidence and potential dispute, I would accept that one or other of the constructions put forward by the parties is likely to be right. In this case it is the owners’ construction which is correct.”

The Court of Appeal did not, therefore, need to address the more complex issues of mistake which had arisen in the Commercial Court.