DS-Rendite-Fonds NR.106 VLCC Titan Glory GmbH & Co Tanschiff KG & Ors v Titan Maritime SA & Ors [2013] EWHC 3492 (Comm) concerned a Restructuring Agreement (CRA) entered into by the Claimant Owners and Defendant Charterers.

The CRA provided (in Schedule 4 Article 2.1) that hire would be paid at the higher of the Floor Rate (US$22,000 per day per vessel) and the Market Rate. The Market Rate for any given month was defined in Article 2.2 as 3.35% below the Clarkson Index for the month. Hire was payable monthly in advance, so the Market Rate hire was to be paid by reference to the Clarkson Index for the previous month. A semi-annual adjustment was to be carried out under Article 2.4, due to the fact that the actual index rate for the month in question might be different from that for the previous month.

Owners sought a declaration as to the proper construction of the CRA. The issue was whether, when calculating “the average of the Market Rates for the previous period of six months” under Article 2.4, the daily rate input for each month was:

  1. The higher of (i) US$22,000 and (ii) 3.35% below the Clarkson Index rate referred to in Article 2.2; or
  2. 3.35% below the Clarkson Index rate, even if that was less than US$22,000.

Owners took the view that (a) was correct, and that if the true construction of the CRA did not give effect to that, then it should be rectified on the ground of common mistake.

The Court held that the true construction of the CRA was as set out in (b) above. Owners’ claim for rectification was successful, as it met all of the requirements for rectification.

It was held that the parties had a common continuing intention that a minimum hire of US$22,000 per day per vessel would always be payable and not deferred. There was an outward expression of that common continuing intention, which continued at the time of the execution of the CRA. Finally, there had been a mistake (a drafting error on Owners’ part) which meant that the CRA did not reflect the common intention.

The Court considered the rectification examples given in Daventry DC v Daventry and District Housing Ltd [2011] EWCA Civ 1153. This situation fell squarely within one of those examples, i.e. that the parties were subjectively and objectively in agreement but the formal documentation failed to give effect to that agreement. Equity permitted rectification in those circumstances.