Zhoushan Jinhaiwan Shipyard Co Ltd v Golden Exquisite Inc

Judgment

Section Para No. Introduction 1 The contracts 2 The disputes 6 The arbitration awards 11 The appeals 16 Approach to interpretation 22 The contractual scheme 27 Buyer’s breach delays 36 The right to cancel under Article VIII.3 40 The presumption against the Buyer benefiting from its own breach 45 Were the alleged delays ‘”permissible” delays? 57 The effect of failure to give notice of delay 63 Conclusion on cancellation 71 Equitable set-off 72 Conclusions 78

Mr Justice Leggatt :

Introduction

These four appeals from arbitration awards raise questions of interpretation of the cancellation provisions in four materially identical shipbuilding contracts. The vessels which are the subject of the contracts are known by their respective Yard Hull numbers: J0051, J0052, J0119 and J0120. In each case the contract was made between Zhoushan Jinhaiwan Shipyard Co Ltd of the People’s Republic of China (“the Yard” or “the Builder”) and a buying company specially created for that purpose (“the Buyer”) which formed part of the Golden Ocean Group. In each case the Buyer has purported to exercise a contractual right to cancel the contract on account of delay in delivering the vessel. In each case the Yard has sought to argue that the cancellation was wrongful on the ground that a relevant part of the delay was caused by the Buyer’s own breach of the contract. The central question raised by these appeals is whether the factual allegations made by the Yard as to the extent and cause of delay, if proved, provide an answer to the Buyers’ claims, or whether on the proper interpretation of the contracts the cancellations were lawful even on the facts alleged.

The contracts

Article I of each contract contained a description of the vessel to be built. Article II specified the contract price of the vessel and provided for the price to be paid by the Buyer in five instalments, with the final instalment due upon delivery of the vessel. Article III provided for the contract price to be adjusted in various circumstances. Relevantly for present purposes, Article III.1(b) required the contract price to be reduced by deducting US$7,000 from the final instalment for each day that the delivery of the vessel was delayed by more than 30 days but less than 210 days after the Delivery Date specified in Article VII. Article III.1(c) gave the Buyer a right to cancel the contract if the delay in the delivery of the vessel continued for a period of at least 210 days. This right was expr