Neutral Citation Number: [2009] EWHC 1216 (Comm)
Case No: 2008 FOLIO 736
Case No:2008 FOLIO 829
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 05/06/2009

Before :

MR. JUSTICE TEARE
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Between :

	(1) INTA NAVIGATION LTD
(2) GENEL DENIZCILIK NAKLIY ATI AS	Claimants	
	- and -		
	(1)	RANCH INVESTMENTS LTD
WAH KWONG SHIPPING HOLDINGS LTD	Defendants	
			
	Between :		
	(1) RANCH INVESTMENTS LTD		
	(2) WAH KWONG SHIPPING HOLDINGS LTD	          Claimants	
	-and-		
	(1)	GRENADINE MARITIME SA
(2)	CENTROFIN MANAGEMENT INC	
Defendants	
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David Lewis (instructed by Holman Fenwick Willan LLP) for the Claimants in Folio 736
James Drake (instructed by Lax and Co. LLP) for the Defendants in Folio 736 and Claimants in Folio 829
Timothy Young QC (instructed by Ince and Co.) for the Defendants in Folio 829
Hearing dates: 15 May 2009
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Judgment
Mr. Justice Teare:
1.	These are two appeals against arbitration awards of Messrs. Hamsher, O’Donovan and Gaisford brought with the permission of Burton J. pursuant to section 69 of the Arbitration Act 1996. Both appeals concern the nature of a right granted to the buyer of a ship under construction to purchase a second ship under construction. In each case the buyer was awarded damages against the seller in the sum of US$2,249,999. Although the two appeals are separate they were heard together. This judgment is therefore my judgment in both appeals. 
2.	By a MOA dated 26 November 2004 the Claimants in the first appeal (2008 Folio 736) collectively described as “Geden”, agreed to sell to the Defendants, collectively known as “Wah Kwong”, Hull No.S271, a 159,000 dwt crude oil tanker which was under construction by Hyundai pursuant to a shipbuilding contract dated 29 December 2003. The purchase price under the latter contract was US$48,500,000. The purchase price under the MOA was US$70,500,000. The terms of the MOA were based on the Norwegian Sale Form. They provided for a deposit of 10% of the sale price to be paid within 5 banking days from the date of the sale agreement, 60% of the purchase price to be paid one banking day prior to delivery of the ship and the balance to be paid on the signing of the Protocol of Delivery and Acceptance. The ship was to be delivered and taken over at Hyundai’s yard. The expected time of delivery was “as per the shipbuilding contract” and was to be before 31 March 2007. There were other references to the shipbuilding contract in the cancelling date, permissible delays and force majeure clause. 
3.	Clause 25 of the MOA was entitled First Refusal for Hull No.S272 and provided as follows:
“If and when it is decided to sell the second vessel (Hull No.272) then sellers to confirm to buyers in writing the best price at which the sellers have decided to sell the vessel stating the name of the third party buyers and providing evidence of the sale recap or other document constituting the sale. Wah Kwong or their nominee as buyers are to have 24 London business hours of sellers’ notice in writing within which to increase the aforementioned best price by USD 1 (one United States Dollar) after which the sale will become subject to the lifting of buyers’ board approval within a further 24 hours. 

If Wah Kwong do not exercise the option to purchase the vessel and sellers dispose of the vessel – by finalising a recap or other document constituting a sale – within maximum of 30 days sellers’ notice to Wah Kwong for a price which is less than that offered to Wah Kwong then the price differential to be paid to Wah Kwong. If Wah Kwong however exercise their option to purchase the vessel and then resell the vessel within one month of exercising their option then any price increase to be paid to Geden Lines. 

Notwithstanding the foregoing if sellers do not decide to sell the vessel within the 30 days as in paragraph 2 above but decide to dispose of the vessel thereafter they will notify Wah Kwong of their decision to sell as in paragraph 1 above and Wah Kwong’s option to improve sellers’ best price as above will be revived in accordance with the procedure outlined in paragraph 1 and 2 above.”

4.	Over one year later, on 15 December 2005, Wah Kwong entered into a MOA to sell Hull S271 to the Respondents in the second appeal (2008 Folio 829), Centrofin. The terms were based upon the MOA between Geden and Wah Kwong save that the price was US$80,500,000.  Clause 25 was in essence the same but was modified to reflect the fact that the right of first refusal arose once Geden as “the Sellers’Sellers” had decided to sell and provided that Centrofin was to exercise its option to buy within a shorter time than provided in the earlier MOA, presumably to give Wah Kwong time to exercise its option. It provided as follows:
“If and when it is decided by Sellers’ Sellers to sell the second vessel (Hull No.272) then sellers to confirm to buyers in writing the best price at which the Sellers’ Sellers have decided to sell the vessel stating the name of the third party buyers and providing evidence of the sale recap or other document constituting the sale. Centrofin Management or their nominee as buyers are to have 16 London business hours of sellers’ notice in writing within which to increase the aforementioned best price by USD 1 (one United States Dollar) after which the sale by Sellers to Centrofin Management will become subject to the lifting of buyers’ board approval within a further 16 hours. 

If Centrofin Management do not exercise the option to purchase the vessel and Sellers’ Sellers dispose of the vessel – by finalising a recap or other document constituting a sale – within maximum of 30 days sellers’ notice to Centrofin Management for a price which is less than that offered to Centrofin Management then the price differential is to be paid to Centrofin Management upon receipt by Sellers of such price differential from Sellers’Sellers. If Centrofin Management however exercise their option to purchase the vessel and then resell the vessel within one month of exercising their option then any price increase to be paid to Sellers. 

Notwithstanding the foregoing if Sellers’ Sellers do not decide to sell the vessel within the 30 days as in paragraph 2 above but decide to dispose of the vessel thereafter they will notify Sellers and Sellers will notify Centrofin Management of their decision to sell as in paragraph 1 above and Centrofin Management’s option to improve Sellers’ Sellers’ best price as above will be revived in accordance with the procedure outlined in paragraph 1 and 2 above.”
 
5.	The first question of law in respect of which permission has been given to appeal relates to the proper construction of clause 25 in each MOA. In essence that question is whether the sale which results from the process described in clause 25 (in both MOAs) is on the terms on which Geden (as sellers in the 2004 MOA and as sellers’ sellers in the 2005 MOA) have decided to sell Hull No.S272 to the third party, save as to price, or on the terms of the respective MOA, save as to price. Before considering this question it is necessary to recount what happened.
6.	On 21 December 2005 Geden sent an email to Wah Kwong advising it that Geden had agreed a contract of sale for Hull No.S272 which was due to be delivered in May 2007 on novation terms to Marmaras Navigation for US$80,500,000. The contract was conditional on the Yard, Hyundai, agreeing to the novation. “Novation terms” were described in the tribunal’s Reasons (at paragraph 44) as being terms pursuant to which 
“the buyer steps into the shoes of the seller, the buyer has immediately to reimburse the seller all the instalments already paid to the yard and also pay the amount of any profit made by the seller on the sale – in other words, the buyer must pay the full contract price less the amount of the further instalments payable to the yard as they fall due. In addition the buyer has to bear the costs of supervising the balance of the new building contract.” 
7.	Such terms were contrasted with a sale on the terms of the Norwegian Sale Form 
“which provide for the payment of a deposit but for the balance to be paid only when the vessel is delivered.” 
8.	The Reasons recorded that it was common ground between the parties’ experts that the difference between selling Hull No.S272 on Norwegian Sale Form terms and on novation terms was a price differential of approximately US$2.5-US$3 million. 
9.	Thus by agreeing to sell Hull No.S272 on novation terms to Marmaras Geden had secured a sale price some $2.5-$3 million less than it would have secured had it sold to Marmaras on Norwegian Sale Form terms. However, by selling on novation terms Geden would realise its profit on the sale when signing the novation agreement rather than on the delivery of the ship.    
10.	The email from Geden to Wah Kwong was passed by Wah Kwong to Centrofin. 
11.	On 28 December 2005 Centrofin replied to Wah Kwong as follows:
With reference to the various messages earlier received
today from sellers, the Buyers maintain that at no stage to
date have they been given any notification whatsoever by the 
Sellers in accordance with clause 25 of the above mentioned
MOA.

Notwithstanding this fact, and without prejudice to any of
their rights, the Buyers have now understood from the 
correspondence forwarded today from Sellers through
brokers, that the Sellers’ Sellers have entered into
negotiations with clients of Marmaras Navigation for the
sale of hull S272. Buyers wish to confirm to the Sellers that,
upon receipt of notification in accordance with the MOA
dated 18/12/2005 clause 25, they will confirm their
agreement to pay USD 80,500,001 (eighty million, five
hundred thousand and one united states dollars) for 
Hyundai Samho hull S272 with delivery 15th May 2007. The
transaction will be subject to getting agreement of Hyundai
Samho to do the Novation Agreement.
 
Buyers should pay simultaneously at the time of signing the
Novation Agreement, the first two 10% instalments which
have been paid to the yard by the Sellers’ Sellers and the 
price difference between the Sale Price and original
contract price for hull S272 as follows:

2 x USD 4,850,000 (sign contract payment and second
payment to the yard) plus USD 32,000,001 (being USD 
80,500,001 USD (sale price) less USD 48,500,000 (contract
price) Total USD 41,700,001.

The next two instalments to the yard which will be paid by
the Buyers are 10% of original contract price on steel 
cutting and 10% of original contract price on launching.
60% of original contract price to be paid on delivery to the
yard by the Buyers.

This message shall constitute confirmation of the Buyers’
declaration of their option to purchase hull S272 by
exercising their rights as under the MOA clause 25. Buyers
look forward to receiving necessary documentation
including novation agreement.

Finally, Buyers wish to stress that in case Hyundai Samho
fails to approve the execution of a novation agreement for 
the sale of hull S272 to Buyers as per above, then
Buyers’ rights as described in clause 25 are to be
considered fully revived, and any alternative sale of the
vessel will have to be executed in accordance with the 
procedure described in clause 25.”

12.	That  reply was forwarded by Wah Kwong to Geden on the same day. The terms of the reply clearly indicated that Centrofin and Wah Wwong understood that they were agreeing to purchase on novation terms. 
13.	On the following day, 29 December, there were further exchanges in the course of which Wah Kwong confirmed to Geden that it wished to purchase the vessel on novation terms notwithstanding the “absence of a proper clause 25 notice.” Centrofin also confirmed to Wah Kwong that “the offer which we were told had been made by Marmaras was matched word for word by Centrofin plus one dollar as per Clause 25 of the MOA and within the timeframe specified by that Clause. Centrofin has therefore operated the contract, and in particular Clause 25, in accordance with its terms and are therefore entitled to Hull No.S272.” 
14.	On 4 January 2006 the shipyard, Hyundai, refused its consent to the novation.
15.	There was a dispute between the parties as to whether the above exchanges gave rise to a contract between the respective parties. The tribunal was of the view that any defect in the clause 25 notice had been waived but was doubtful whether the respective responses had been made within the time specified in clause 25.  Thus the tribunal made no finding as to whether the exchanges between the parties produced a valid contract of sale. However, the tribunal held that if any such contract was made (either between Geden and Wah Kwong or between Wah Kwong and Centrofin) it was subject to a condition subsequent that the shipyard would consent to it and enter into a novation agreement. Since the shipyard refused such consent any contract resulting from these exchanges did not survive (see paragraphs 54-58 of the Reasons).   
16.	On 6 January 2006 Geden sent a further email to Wah Kwong as follows:
“We confirm that we agreed to to sell our suezmax Hull no 
S272 as per below terms to the Buyers subject to getting
agreement of Hyundai Samho for Novation Agreement.

Sellers: Geden Line or its nominee

Buyers: Marmaras Navigation Ltd. Or it nominee

Price: 81,000,000 USD net to Sellers (The price is net to
Sellers, brokerage is not included to the price and Sellers do 
not know how much it is).

Vessel: Hull no S272 159,000 dwt suezmax with delivery
15th May 2007.

Payment Terms: Novation basis. So Buyers will pay 2 times
4,850,000 USD (paid instalments to the yard till today by
Buyers) plus 32,500,000 USD (profit of Sellers)
simultaneously at the time of signing the Novation 
Agreement. Total 42,200,000 USD. Third (steel cut), fourth
(launching) and delivery payment will be done by Buyers.

Novation Basis: Buyers will take the contracts as if they
were there from day one and Sellers will leave the contract
totally to Buyers other than the plan approval. Only plan 
approval will be done and finalized by Sellers, and all other
obligations and benefits will pass to Buyers.”

17.	That message was passed by Wah Kwong to Centrofin on the same day.
18.	On 9 January 2006 Centrofin replied to Wah Kwong as follows:
“We refer to our right of first refusal and option to purchase
		Hull S272 under Clause 25 of MOA dated 15.12.2005.
		
		On 28th December 2005 we exercised our right under
		Clause 25 of the MOA to purchase Hull S272 at the 
		proposed ‘best price’ plus US$1, namely US$80,500,001
		and a contract was concluded accordingly. However, since
		then you have persistently disputed the validity of our
		purchase and your recent attempt to serve what you say is 
		another Clause 25 notice is a plain repudiation of that
		contract. We can see that there is scope for prospective
		uncertainty and we are anxious to impose a suitable level of
		certainty on how we proceed in the future.

		Therefore, in order to achieve that certainty and entirely
		without prejudice to all our rights under that contract we
		accept your repudiation of that contract and it is therefore
		terminated subject to our right to claim damages for that
		repudiation and loss caused by it.

		However, in order to mitigate our loss, we now respond to
		your purported Clause 25 notice of 6th January 2006 in
		which you give notice of the ‘best price’ of US$81 million
		and we hereby confirm, pursuant to Clause 25 of the MOA,
		our agreement to increasing that aforementioned best price
		by US$1 (one United States Dollar). We also hereby lift the
		subject of our board approval of the contract for the
		purchase of Hull S272 at that price of US$81,000,001.

		In making this response by way of mitigation, we should
		note that (i) your purported notice is invalid since it does
		not (in breach of your obligation) provide evidence of the
		sale recap or other document constituting the sale and what
		we say below is without prejudice to our right to claim
		damages in the event that that breach causes us loss; and
		(ii) your purported notice contains a number of matters
		which are not relevant as between ourselves in concluding
		the “… sale by Sellers to Centrofin…” as expressly
		contemplated by Clause 25 of our MOA and with which we
		are not concerned in concluding this contract with your
		goodselves. You are, of course, free to enter into a novation
		agreement, as contemplated by Geden Line’s
		communication should you wish in order to enable you to
		perform your obligations to us under the MOA.

		There is therefore now in existence between ourselves a
		binding contract whereby we agree to purchase and you
		agree to sell Hull S272 for a price of US$81,000,001 for
		delivery 15th May 2007. The deposit in respect thereof will
		be paid following execution of the formal contract
		document.

		All our rights against you (both Ranch Investments Limited
		And Wah Kwong Shipping Holdings Limited as guarantors
		of the obligations of Ranch Investments Limited) are all
		formally reserved.”

19.	On the same day Wah Kwong replied to Geden as follows:
“We have received the following from our clients’ Buyers
which  please treat as coming from our clients without
prejudice to our clients right to claim in respect of the
earlier notice(s) served pursuant to clause 25.

Quote

We now respond to your purported Clause 25 notice of 6th
January 2006 in which you give notice of the ‘best price’of
US$81 million and we hereby confirm, pursuant to Clause
25 of the MOA, our agreement to increasing that 
aforementioned best price by US$1 (one United States
Dollar). We also hereby lift the subject of our board
Approval of the contract for the purchase of Hull S272 at
that price of US$81,000,001.

In making this response by way of mitigation, we should
note that your purported notice is invalid since it does not
(in breach of your obligation) provide evidence of the sale
recap or other document constituting the sale and what we
say is without prejudice to our right to claim damages in the
event that that breach causes us loss.

unquote” 

20.	It is to be noted that Wah Kwong, although purporting to pass on the message received from Centrofin, in fact passed on an edited version of that message. Whereas Centrofin had referred specifically to a novation in terms which suggested that Centrofin was not to be party to it, Wah Kwong omitted that reference.  
21.	On 11 January 2006 the shipyard, Hyundai, again refused to consent to the novation agreement.
22.	On 27 January 2006 Geden gave notice under clause 25 that it had agreed to sell Hull S272 at a price of US$82,800,000 on “Geden usual MOA terms with logical amendments.” The notice was passed on to Centrofin. However, Centrofin responded that it had already made two binding contracts for the purchase of the vessel and it was not going to bid more, albeit on a without prejudice basis. Centrofin therefore suggested that the matter be referred to arbitration. Wah Kwong passed on that response to Geden.   
23.	The tribunal held that a binding contract of sale had been concluded between Geden and Wah Kwong and between Wah Kwong and Centrofin on 9 January 2006 (paragraphs 59-61 of the Reasons). Each of those contracts was on the terms of the respective MOA for hull no.S271 (paragraph 50 of the Reasons). Since novation was not part of those terms neither contract was subject to a condition subsequent that the yard approved the novation of the shipbuilding contract. 
24.	In view of its findings as to the terms of the contracts which flowed from the implementation of clause 25 in each MOA the tribunal held that Geden was in breach of the contract of sale with Wah Kwong and that Wah Kwong was in breach of its contract of sale with Centrofin when Geden and Wah Kwong each said that, in view of the failure of the shipyard to agree to a novation, it could not proceed with the sale contract (see paragraphs 62-63 of the Reasons).
25.	The tribunal therefore held that Centrofin could recover damages from Wah Kwong and Wah Kwong could recover damages from Geden in a sum equal to the difference between the price agreed in January 2006 of US$81,000,001 and the market value of hull no.S272 in January 2006 for a sale on normal Norwegian Sale Form terms for delivery in May 2007. The tribunal found that market value in the sum of US$83,250,000 and accordingly assessed the damages payable by Geden and Wah Kwong in the sum of US$2,249,999 (paragraphs 64-67 of the Reasons). 
26.	The tribunal set out its reasons for concluding that on the true construction of clause 25 of each MOA any sale resulting from the operation of clause 25 would be on the terms of the MOA save as to price; see paragraphs 46-49 of the Reasons. They may be summarised as follows:
(i)	The sellers were seeking to imply restrictions on the unrestricted wording of clause 25 and clear words were required for such restrictions. There were no such words.

(ii)	Terms cannot be implied and contracts cannot be rewritten to reflect what might have been commercially reasonable as opposed to what might be required on the grounds of business efficacy.

(iii)	It was inconceivable that the parties to the original MOAs would have agreed that the buyers would have only 16 or 24 London buinsess hours to agree to buy a new building whose price was moving constantly upwards and whose value would be in the region of US$80 million on the basis of the terms of a “sale recap” which would generally contain only the main heads of agreement and could usually be set out on half a sheet of A4. This was described as a “fundamental” reason for the tribunal’s decision.  

(iv)	The argument of the sellers would mean that the buyers had no clear right of first refusal but only a qualified right since the exercise of their right to purchase could be negated by the refusal of the yard to consent to a novation.

(v)	The most natural reading of clause 25, absent any words to the contrary, was that in circumstances where the buyers and sellers had agreed to purchase one vessel on negotiated terms as set out in the MOA, the right of last refusal of the purchase of a sister vessel would be agreed on those terms rather than any other terms.

27.	Counsel for Geden submitted that the tribunal’s construction of clause 25 was wrong. He argued:
i)	Clause 25 was silent as to the terms upon which the buyer was to buy the second vessel in the event that they gave notice to increase the third party’s price by US$1. In those circumstances the question for the arbitrators to determine was what the express words of clause 25, read as a whole against the relevant background, would reasonably be understood to mean. He relied upon the judgment of the Privy Council given in AG of Belize and Others v Belize Telecom Limited [2009] UKPC 11 in which Lord Hoffman addresses and restates the process by which a contract is construed and in particular the process by which terms may be implied in a contract. Lord Hoffman’s restatement requires courts and arbitrators to apply the familiar tests of implication in order to answer the fundamental question, namely, whether the term sought to be implied will spell out in express words what the contract, read against the relevant background, would reasonably be understood to mean.
ii)	There were two different methods of reselling vessels under construction, one on Norwegian Sale Form terms and the other on novation terms. That was part of the relevant background. Having regard to that background “clause 25 would reasonably be understood to mean that, if Geden confirmed an agreement to sell the vessel to a third party on a novation basis and subject to Hyundai’s consent, Wah Kwong’s right to buy for US$1 more would be a right to buy also on a novation basis and also subject to Hyundai’s consent.” 
iii)	The words of clause 25, “evidence of the sale recap or other document constituting the sale”, are consistent with the buyers needing to know the details of the terms upon which they had to consider buying. 
28.	The approach of the court to appeals from arbitration awards has been summarised in Kershaw Mechanical Services Limited v Kendrick Construction Limited [2006] EWHC 727 (TCC) by Jackson J., after a review of the authorities:
“1. The court should read an arbitral award as a whole in a fair and reasonable way. The court should not engage in minute textual analysis.
2. Where the arbitrator’s experience assists him in determining a question of law, such as the interpretation of contractual documents or correspondence passing between members of his own trade or industry, the court will accord some deference to the arbitrator’s decision on that question. The court will only reverse that decision if it is satisfied that the arbitrator, despite the benefit of his relevant experience, has come to the wrong answer.”
29.	The Reasons of the tribunal do not state in terms that the relevant background against which the objective intentions of the parties are to be construed includes the fact that there are two methods of reselling vessel sunder construction. However, the tribunal refer in paragraph 44 of their Reasons to the argument of Geden which relied on “the fact that there are two separate methods of buying new buildings for future delivery”. The tribunal then describes those two methods of sale. There is no suggestion that the tribunal did not accept that there are two such methods. Moreover, the parties’ experts assessed the likely price differential between the two methods which suggests that they were familiar with them. Those two methods were illustrated by the MOAs dated 26 November 2004 and 15 December 2005 (Norwegian Sale Form terms) and by the proposed terms on which Geden had decided to resell to Marmaras Navigation (novation terms). In those circumstances I consider that the Reasons make clear that there are two methods of reselling vessels under construction and that, since the parties were engaged in the selling and buying of vessels under construction, such fact forms part of the background knowledge which was reasonably available to the parties and in the light of which clause 25 and the objective intentions of the parties should be construed. 
30.	Before examining the tribunal’s reasons for its decision I shall set out my understanding of how clause 25 works and my opinion (without the benefit of the tribunal’s reasoning) as to what clause 25 would reasonably be understood to mean. It was not suggested that there is any material difference between clause 25 in the 2004 MOA and clause 25 in the 2005 MOA. For that reason I shall discuss clause 25 in terms of the sellers and the buyers without differentiating between the two MOAs.  
31.	Clause 25 contemplates that the sellers may decide to sell Hull No.S272 and provides that if they do so decide then they must inform the buyers of the “best price” at which they have decided to sell and provide the name of the third party buyer and evidence of the “sale recap or other document constituting the sale.” In those circumstances the buyers are granted what is called in the title to clause 25 “first refusal”. That confers on the buyers the option to buy the vessel from the sellers. The body of clause 25 sets out the method by which the buyers may opt to buy the vessel, namely, by increasing the “best price” by US$1. 
32.	Without the benefit of the tribunal’s reasoning I would consider that the meaning which clause 25 would convey to a reasonable person is that a sale of Hull No.S272 by the sellers to the buyers would be on the terms set out in “the sale recap or other document constituting the sale”, for these reasons. 
33.	First, clause 25 does not oblige the sellers to provide the buyers with an option to buy Hull No.S272 at a certain time in the future. The sellers are free to decide whether they wish to sell the vessel or not. But if they decide to sell the vessel to a third party then they must provide the buyers with an option to buy it. That is the contractual context in which the question of construction arises.  
34.	Secondly, the “best price” at which the sellers have decided to sell will necessarily reflect the terms on which the sellers have decided to sell. It would be commercially unreasonable to expect the price, albeit increased by US$1, to be divorced from the other terms of the proposed sale to the third party. The inappropriateness of divorcing the price from the terms is highlighted by the circumstance, part of the background against which the clause must be construed, that whether the sale of a sister ship of hull no. S271 is on the basis of the Norwegian Sale Form or on the basis of a novation of the shipbuilding contract will mean a substantial difference in price. 
35.	Thirdly, from the sellers’ point of view it would be unreasonable and inequitable if they were obliged to sell to the buyers on terms which were different from those which they had negotiated with the third party and on the basis of which they had decided to sell at a particular price (the “best price”). If they had negotiated a price on novation terms and were then compelled to sell at the same price (plus US$1) to the buyers on Norwegian Sale Form terms they would receive a price which reflected the circumstance that they would receive their profit on the sale at the time of signing the novation agreement and would not have to bear the costs of supervising the balance of the shipbuilding contract when in fact they would receive their profit at the later date of delivery and would have to bear the costs of supervising the balance of the shipbuilding contract.  
36.	Fourthly, from the buyers’ point of view it would not be unreasonable or inequitable if the buyers, having opted to buy the vessel pursuant to their right of first refusal, were bound by the terms on which the sellers had decided to sell to the third party. Before exercising their option the buyers would have had the benefit of “evidence of the sale recap or other document constituting the sale”. Such evidence would indicate whether the sellers had decided to sell on Norwegian Sale Form terms or on novation terms. The buyers would expect that the price at which the sellers had elected to sell reflected the terms on which the sellers had decided to sell. If the buyers elected to buy at a novation price (plus US$1) which reflected the circumstance that the sellers would receive their profit on signing the novation agreement and would not have to bear the costs of supervising the balance of the shipbuilding contract, it would be unreasonable if the buyers could purchase on Norwegian Sale Form terms and therefore not have to pay the bulk of the purchase price until delivery or bear the costs of supervising the balance of the shipbuilding contract.  
37.	Fifthly, and for the above reasons, the sellers, having negotiated novation terms with the third party and having provided evidence of “the sale recap or other document constituting the sale” to the buyers would reasonably expect to sell on those terms either to the third party at the “best price” or to the buyers at the best price plus US$1.  Likewise, the buyers, having been advised of the price at which the sellers had decided to sell to third party and having been provided with the evidence of “the sale recap or other document constituting the sale” would reasonably expect, if they opted to buy pursuant to their right of first refusal, to buy on those terms. 
38.	However, the tribunal reached a different conclusion, namely, that if the buyers opted to buy the vessel pursuant to clause 25, the terms on which they did so would be those of the MOA between the sellers and the buyers regarding Hull No.S271 save as to price. The members of the tribunal are very experienced in resolving commercial and maritime disputes and it is appropriate that this court should accord some deference to the tribunal’s decision and only reverse it if satisfied that the tribunal, despite the benefit of its experience, has come to the wrong answer. It is therefore necessary to examine carefully and fairly the tribunal’s reasons for its decision.
39.	The tribunal’s first reason for its decision was that the sellers were seeking to imply restrictions on the unrestricted wording of clause 25 and clear words were required for such restrictions. The tribunal said there were no such words. The tribunal did not identify the restriction it said the sellers were seeking to impose on the unrestricted wording of clause 25 but I assume that it was that any contract which resulted from the giving of a clause 25 notice would be on the terms the sellers had offered to the third party. However, the buyers were also seeking to imply restrictions on the unrestricted wording of clause 25, namely, that any contract which resulted from the giving of a clause 25 notice would be on the terms of the original MOA between the sellers and the buyers. The express words of clause 25 do not identify the terms of the contract which results from the giving of a clause 25 notice. The question of construction to be resolved is whether the sellers’ or the buyers’ construction of clause 25 spells out in express words what clause 25, read against the relevant background, would reasonably be understood to mean. 
40.	In answering that question it is relevant to note that neither clause 25 nor any other part of the relevant MOA obliges the sellers to sell the sister vessel S272. Further, neither clause 25 nor any other part of the relevant MOA seeks in express terms to limit the terms on which the sellers, if they choose to sell, must sell. Yet, on the buyers’ construction of clause 25 the sellers, if they decide to sell to a third party on novation terms, will be obliged to offer the sister vessel to the buyers at the price they have decided to sell to the third party plus US$1 but on the terms of the original MOA, notwithstanding that the sellers had chosen to sell to the third party on novation terms. This obligation will in practical terms force the sellers to negotiate with third parties for the sale of the vessel on the terms of that MOA, save as to price. I consider that that is such a striking restriction on the sellers’ freedom of contract that clear words would be required to impose such a restriction on the sellers, especially where the sellers are obliged to give the buyers evidence of the sale recap or other document constituting the sale. The absence of such words is therefore an indication that clause 25, when read against the relevant background, would not reasonably be understood to mean that any sale of the sister vessel to the buyers must be on the terms of the original MOA.   
41.	The tribunal’s second reason for its decision was that, although it could see “the merits of the points made based on commercial reasonableness”, terms cannot be implied and contracts cannot be rewritten to reflect what might have been commercially reasonable as opposed to what might be required on the grounds of business efficacy. 
42.	In his restatement of the principles which underlie the implication of terms in a contract Lord Hoffman confirmed that a court cannot introduce terms to make a contract fairer or more reasonable. In AG of Belize and Others v Belize Telecom Limited [2009] UKPC 11 at paragraph 16 he said: 
“The court has no power to improve upon the instrument which it is called upon to construe, whether it be a contract, a statute or articles of association.  It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means.” 
43.	But it is apparent from his discussion of the well used phrase “necessary to give business efficacy” that considerations of commercial reasonableness have a role in determining what a contract read as a whole, against the relevant background, would reasonably be understood to mean. Thus Lord Hoffman said at paragraphs 22 and 23:
“Take, for example, the question of whether the implied term is "necessary to give business efficacy" to the contract. That formulation serves to underline two important points. The first, conveyed by the use of the word "business", is that in considering what the instrument would have meant to a reasonable person who had knowledge of the relevant background, one assumes the notional reader will take into account the practical consequences of deciding that it means one thing or the other. In the case of an instrument such as a commercial contract, he will consider whether a different construction would frustrate the apparent business purpose of the parties. That was the basis upon which Equitable Life Assurance Society v Hyman [2002] 1 AC 408 was decided. The second, conveyed by the use of the word "necessary", is that it is not enough for a court to consider that the implied term expresses what it would have been reasonable for the parties to agree to. It must be satisfied that it is what the contract actually means. 
23. The danger lies, however, in detaching the phrase "necessary to give business efficacy" from the basic process of construction of the instrument. It is frequently the case that a contract may work perfectly well in the sense that both parties can perform their express obligations, but the consequences would contradict what a reasonable person would understand the contract to mean. Lord Steyn made this point in the Equitable Life case (at p. 459) when he said that in that case an implication was necessary "to give effect to the reasonable expectations of the parties." 
44.	“Practical consequences” are therefore relevant in determining whether a suggested implied term spells out in express words what a contract, read against the relevant background, would reasonably be understood to mean. This is also apparent from paragraph 27 of Lord Hoffman’s restatement:  
“…., the fact that the proposed implied term would be inequitable or unreasonable, or contradict what the parties have expressly said, or is incapable of clear expression, are all good reasons for saying that a reasonable man would not have understood that to be what the instrument meant.” 
45.	I consider (for the reasons I have set out earlier in this judgment) that the buyers’ construction of the MOAs and clause 25 in particular produces a commercially unreasonable result, namely that the sellers would be obliged to sell to the buyers at a price (plus US$1) which did not reflect the terms on which that price had been negotiated. In circumstances where the sellers provide to the buyers evidence of the sale recap or other document constituting the sale the reasonable expectations of the parties would be that the terms in the sale recap or other document constituting the sale would be the terms of the sale between the sellers and the buyers. That is an indication that clause 25, when read against the relevant background, would not reasonably be understood to mean that any sale of the sister vessel to the buyers must be on the terms of the original MOA.   
46.	The tribunal’s third reason for its construction of clause was described, in paragraph 47 of its Reasons, as the “fundamental reason” why it could not accept the sellers’ argument. It considered that it was “literally inconceivable” that the parties would have agreed that the buyers would only have 16 or 24 London business hours to decide whether or not to buy a new building on the basis of a “sale recap” which would only contain the main heads of agreement. This reason is not only strongly worded but is also on a topic on which the tribunal can be expected to have much “trade” knowledge. I must therefore accord it considerable deference. However, it is to be observed that the tribunal concentrated upon the phrase “sale recap” whereas the phrase in clause 25 is in fact “sale recap or other document constituting the sale”. The tribunal did not expressly consider, in paragraph 47, the latter part of that phrase. In construing clause 25 regard must be had to the whole of the phrase. I consider that the reference to “or other document constituting the sale” manifests an intention that the sale recap or other document of which evidence was to be produced must “constitute” the sale. Although it was observed on behalf of Centrofin that clause 25 did not refer expressly to a document which evidenced the terms of the sale I consider that a requirement to produce evidence of a sale recap or other document which constitutes the sale requires production of evidence which sets out the terms which constitute the sale, and not just the “main heads of agreement relating to, for instance, price and payment terms”. In circumstances where the whole phrase was not expressly considered by the tribunal I do not consider that the court should be inhibited from expressing its own view of the meaning of clause 25. 
47.	I have considered whether the above approach to the Reasons involves reading them in other than a fair and reasonable way and engaging in minute textual analysis. I do not consider it does. The tribunal has not considered the effect of the whole phrase “sale recap or other document constituting the sale words” but only the first two words. Whilst observing that the words “or other document constituting the sale” have not been considered by the tribunal involves textual analysis of the tribunal’s reasons it is not “minute” textual analysis. It is a fair observation of what has and has not been considered by the tribunal.
48.	In addition, the tribunal concentrated exclusively on the interests of the buyers. The interests of the sellers must also be considered. Clause 25 contemplates that they will have negotiated a sale of hull S272 to a third party (subject to the vessel being offered to the purchasers of hull S271) and in those circumstances would expect the buyers to have to reach a decision swiftly as to whether they wished to exercise their right of first refusal. The interests of both parties are, it seems to me, accommodated by, on the one hand, the requirement that the sellers provide the buyers with evidence of the terms of the proposed sale in the form of evidence of the sale recap or other document constituting the sale and, on the other hand, the requirement that the buyers respond within a short period of time. 
49.	In his written submissions counsel for Centrofin postulated the circumstance that the sale recap or other document constituting the sale might provide a term such as “all other terms as per MOA” of which no copy was provided. He said that the buyer would not know what terms it was being asked to bind itself to, still less within the 24 or 16 business hours. He said there was no provision in clause 25 requiring the recap to spell out all the terms, other than the “best price”. However, the seller is obliged by clause 25 to provide evidence of the sale recap or other document constituting the sale and in the circumstance postulated by counsel the MOA would be such a document. 
50.	In this context it is also necessary to refer to the statement by the tribunal in paragraph 41 of the Reasons that the purpose of that part of clause 25 which required provision of “evidence of the sale recap or other document constituting the sale” was 
“to avoid the danger, or even a suspicion, of the sellers advising a “best price” which in truth had not been offered to them. In other words, the parties were attempting to avoid the shipping equivalent of disreputable auction houses in taking bids “from the chandeliers” in order to pretend that there had been a genuine bid offer at a certain price when that was not the case.” 
51.	That is a different purpose from that which was suggested by the sellers, namely, to provide evidence of the terms which constituted the sale on which the sellers had decided in order that the buyers would be equipped to decide how to exercise their right of first refusal or option to purchase. The tribunal, by its construction of clause 25, did not consider that the purpose suggested by the sellers was a purpose of clause 25. However, the objective commercial purpose or aim of a contractual term depends upon the meaning which clause 25, read against the relevant background, would reasonably be understood to mean. I do not consider that the tribunal’s view of the purpose of providing “evidence of the sale recap or other document constituting the sale” should necessarily prevent the court from reaching its own view of the meaning of clause 25 and in consequence of the objective purpose or aim of providing such evidence. For the reasons I have given earlier in this judgment I consider that the objective purpose or aim of providing such evidence was to inform the buyers of the terms upon which the sellers had decided to sell in order that they might decide whether or not to exercise their option to purchase. 
52.	The tribunal’s fourth reason for its construction of clause 25 was that the sellers’ construction of the clause would mean that the buyers had no clear right of first refusal but only a qualified right since the exercise of their right to purchase could be negated by the refusal of the yard to consent to a novation. That is true in circumstances where the sellers have decided to sell on novation terms. But there is no express restriction on their doing so. The buyers have no right to demand that the sellers sell the sister vessel to them. The buyers only have a right to require the sellers, if the sellers have decided to sell to a third party, to offer them a right of first refusal or an option to buy. In circumstances where the buyers have no right to require the sellers to sell the sister vessel to them but only a right of first refusal it is not inconsistent with that right, it seems to me, that the shipyard must give consent if those are the terms on which the sellers have decided to sell to a third party. 
53.	Counsel for Centrofin made a similar point to that made by the tribunal when he said that clause 25 provided for one condition subsequent (the lifting of buyers’ board approval) whereas the effect of the sellers’ construction was to add a second. However, I do not consider that where a second condition subsequent is introduced by reason of the terms on which the sellers have decided to sell, such introduction demonstrates that the sellers’ construction must be wrong. 
54.	The final reason given by the tribunal for its construction of clause 25 is that the most natural reading of clause 25, absent any words to the contrary, is that, in circumstances where the buyers and sellers have agreed to purchase one vessel on negotiated terms as set out in the MOA, “any right to last refusal of the purchase of a sister vessel (under construction at the same yard) would be most likely to be agreed on those terms rather than on any other terms….” This mirrors the tribunal’s earlier observation that clearer words (than those to be found in clause 25) were not required to lead to the buyers’ construction of clause 25.  
55.	However, I disagree that that construction is either the most natural reading of clause 25 or the meaning which clause 25, read in the context of the whole of the MOA and against the relevant background, would reasonably be understood to have. The tribunal does not appear to have given any consideration to the circumstance that the buyers’ right of first refusal or option to buy arises only after the sellers have decided to sell to a third party and have agreed the terms of sale with that third party. When consideration is given to that circumstance I consider that the sellers’ construction of clause 25, read in the context of the whole of the contract, spells out in express words what the clause would reasonably be understood to mean. This is emphasised when regard is had to the background against which the contract and clause 25 are to be construed, namely, that the sellers might choose to sell the sister vessel on Norwegian Sale Form terms or on novation terms. Given that they have a right to choose the terms on which they decide to sell to a third party and that their obligation to offer the right of first refusal or an option to buy only arises after they have negotiated the terms upon which they wish to sell, clause 25 would in my judgment be reasonably understood to mean that, if the buyers elect to buy, the ensuing contract between the sellers and the buyers would be on the terms on which the sellers had elected to sell. 
56.	Counsel for Centrofin submitted that that the effect of clause 25 was that the “best price” plus US$1 was to be inserted into the existing MOA. This was said to be perfectly sensible in the context of an existing detailed MOA. However, it does not, in my judgment, reflect the contractual context of the buyers’ option, namely, that it only arises once the sellers have decided to sell to third parties on certain terms. Counsel argued that the evidence which the clause obliged the sellers to provide was concerned with evidence of the existence of a sale recap rather than with identifying the terms of the sale and that the clause required the sellers to confirm the best price, not the terms including price. However, clause 25 obliged the sellers to provide evidence of the “sale recap or other document constituting the sale”, not evidence of the existence of the sale recap or other document constituting the sale. It is also true that clause does not say in express terms that the seller shall provide evidence of the terms which constitute the sale. However, for the reasons I have given, the latter construction appears to me to be the meaning which the clause would reasonably be understood to have. The explanation for the price being expressly mentioned is that that was the one term which the buyer had the option of improving by the addition of US$1. 
57.	It was also argued that the arguments based upon the tribunal’s construction being unreasonable are answered by the ability of the sellers to look after their own interests in presenting a “best price” on the terms already agreed between the parties in the MOA. It was said that the reality is that what has caused the problem for the sellers is the way they have seen fit to establish their “best price”. However, there is no express term which limits the terms on which they may decide to sell to a third party. There may be many reasons why, after signing the MOA, the sellers decide that they wish to sell the sister vessel Hull no.S272. If the market value of the sister vessel has risen since signing the MOA and they wish to realise their profit on the resale rather than wait until the time of delivery to realise it they may choose to sell on novation terms. Thus the sellers’ best interests may lie in selling on novation terms. The MOA does not oblige the sellers, if they wish to sell the sister vessel to a third party, to do so on Norwegian Sale Form terms rather than on novation terms. If they decide to sell on novation terms and negotiate a price on those terms that is “the best price at which they have decided to sell the vessel”. It is therefore in my judgment unreasonable to suggest that the sellers are obliged to look after their own interests by negotiating a best price on the terms of the original MOA notwithstanding that they have decided to sell on novation terms. Indeed, the suggestion seems to me such an unreasonable result, having regard to the contractual context in which the question of construction arises, that it cannot, in my judgment, reflect the meaning which clause 25 read as a whole, against the relevant background, would reasonably be understood to have.       
58.	Finally it was observed that clause 25 contemplated a “sale” between the sellers and the buyers and it was suggested that the sellers’ construction of clause 25 produced a shipbuilding contract between the shipyard and the buyers. I do not accept that this analysis shows that the sellers’ construction of the clause must be wrong. If the terms of the contract resulting from the operation of clause 25 are novation terms there is a “sale” between the sellers and the buyers of the sellers’ rights to Hull No.S272, albeit that title to the vessel will ultimately be transferred by the shipyard to the buyers. That, in my judgment, amounts to a sale between the sellers and the buyers for the purposes of clause 25. 
59.	Having considered the tribunal’s reasons and the other arguments addressed to me in support of its decision I am satisfied that the tribunal, despite the benefit of its relevant experience, has reached a wrong decision when construing clause 25 of the MOA. It follows that the two awards of damages against the sellers must be set aside.  
Additional questions
60.	There were two further questions on which permission to appeal was given. Since the answers to those further questions cannot affect the outcome of these appeals I shall deal with them quite shortly. 
61.	The first additional question was described as follows: Where A is contractually obliged to offer B a right of last refusal/right of first refusal/the right to exercise an option, and A includes in A’s offer an extra contractual provision, what is the effect of an unqualified acceptance of that offer by B ? Put into the context of this case the question is whether, even if the tribunal’s construction of clause 25 was correct, the tribunal was correct to hold that the contract in fact made on 9 January was not subject to Hyundai consenting to a novation. Since the replies of Wah Kwong and Centrofin to the clause 25 notice were different it is necessary to deal with each appeal separately. 
62.	Geden say that the clause 25 notice sent on 6 January was an offer which made express reference to the need for the shipyard’s consent to a novation and that Wah Kwong’s reply on 9 January was an unqualified acceptance of that offer. The tribunal did not accept this argument. In its fax dated 24 June 2008 giving further reasons for its decision the tribunal said that, in the light of its decision as to the construction of clause 25, Geden was not entitled to introduce an extra contractual provision and Wah Kwong was entitled to ignore any such provisions added to the clause 25 notice. 
63.	Although Geden’s email dated 6 January is comparable to an offer to sell I do not consider that it should be regarded as an offer to sell in form or in substance. Rather, it was a notice pursuant to clause 25 which, if Wah Kwong confirmed its willingness to pay US$1 more than “the best price”, would result in a contract of sale subject to the lifting of Wah Kwong’s board approval. Wah Kwong’s response to that notice was, as observed by the tribunal, strictly in accordance with clause 25. It stated that it agreed to increase the best price by US$1 and lifted the subject as to board approval. In form and substance the exchange consisted of a notice followed by a response pursuant to clause 25 as a result of which exchange a contract came into being pursuant to the express terms of clause 25. I therefore do not consider that the tribunal’s decision on this question was wrong.  
64.	Centrofin’s response to the clause 25 notice used language which made clear that the novation to which reference had been made in the notice was not relevant to the position as between Wah Kwong and Centrofin. There is therefore no question of Centrofin’s response to the notice being an unqualified acceptance of an offer.   
65.	The second additional question only arises as between Geden and Wah Kwong. It is: Did the First Contract (ie that assumed to have been made pursuant to the first clause 25 notice in December) create an estoppel by convention estopping Wah Kwong from denying that the Second Contract (ie that made pursuant to the second clause 25 notice) was subject to Hyundai consenting to a novation ? The tribunal said in its fax dated 24 June 2008 that there was no estoppel and in particular that it did not consider that the messages exchanged with regard to the First Contract evinced a convention or understanding that any notice exercising the option in clause 25 that was silent as to the need for the shipyard to consent to a novation would be subject to such consent being obtained. I consider this is a finding of fact which either cannot be challenged on appeal or, if it is a finding of mixed law and fact, I am not satisfied that the tribunal was wrong to find as it did.
Conclusion
66.	These two appeals succeed on the ground that the tribunal’s construction of clause 25 was wrong. The awards of damages should be set aside.