Neutral Citation Number 2013 EWHC 3492 ( Comm)
Case No: 2012-211
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL

Date: 13/11/2013

Before :

MR JUSTICE HAMBLEN
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Between :

	DS-Rendite-Fonds Nr.106 VLCC Titan Glory GmbH & Co. Tankschiff KG
And others
	Claimants	
	- and -		
	Titan Maritime S.A
And others	Defendants	

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Andrew Baker QC and Graham Charkham (instructed by Clyde & Co LLP) for the Claimant
The Defendants were not represented
 
Hearing dates: 4, 5 and 6 November 2013
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Judgment
Mr Justice Hamblen : 
Introduction
1.	This case concerns the proper construction of a Charter Restructuring Agreement (“CRA”) made between the owners of a fleet of VLCC vessels, the 1st-8th Claimants (“the Owners”), and the vessel charterers, the 1st-8th Defendants (“the Charterers”), and a claim, if necessary, for rectification of the CRA.
2.	Each of the Owners is a German Limited Partnership (“KG”), a special investment vehicle, which owns one of the VLCCs.  The Charterers are part of the Pac Star group and the 9th Defendant, Pacific Star International Holding Corporation (“Pac Star”), is guarantor of the Charterers’ obligations.  The vessels are: Titan Glory, Saturn Glory, Neptune Glory, Mercury Glory, Pluto Glory, Artemis Glory, Leo Glory and Younara Glory (“the vessels”).
3.	The vessels were all subject to long-term period time charters based on the Shelltime 4 form.  When markets collapsed at the end of 2008 and beginning of 2009, all the time charters had several years to run.  
4.	Early in 2009 the Charterers stopped paying the full amount of hire due under the time charters due to alleged financial difficulties.  During the course of 2009 there were various discussions between the parties concerning a possible restructuring.
5.	The discussions eventually resulted in the CRA, which was signed on 31 March 2010.  
6.	The CRA addressed both the issue of outstanding unpaid hire and how hire was to be paid going forward.  In relation to future hire, the essential agreement was for a new rate of hire to be paid during a ‘Restructuring Period’ of 1 January 2010 to 31 December 2014.  The charter rate of hire would still be earned during that period, but payment of any shortfall would be deferred until the end of the Restructuring Period or earlier lawful termination.   In respect of hire payments during the Restructuring Period the CRA refers to a ‘Market Rate’ derived from a Clarkson Index, a ‘Floor Rate’ of US$22,000 per day, and six-monthly adjustments.
7.	In late January 2011, the parties fell into dispute over the meaning and effect of the Floor Rate and how it features in the six-monthly adjustments.  That is the main dispute falling to be resolved at this trial.  Further issues have also arisen between the parties concerning the rate of hire payable after the termination of certain sub-charters and also off-hire.
General factual background
8.	 Each of the Owners is a KG managed by GVT Gesellschaft für die Verwaltung von Beteiligungen an Tankschiffen mbH (“Dr Peters“).  Each KG purchased its VLCC from a company belonging to or controlled by Pac Star and chartered it back to a company within the Pac Star group under a long term time charter which incorporated an option to purchase at the end of the charter period. 
9.	 From January 2009, the Charterers approached the late Mr Jurgen Salamon, then the Managing Owner of the Dr Peters Group, seeking to renegotiate the terms for the payment of hire.  From January 2009 onwards Charterers’ hire payments were short, late, or both.  The Owners put the Charterers on notice of the shortfalls and reserved their rights, including the right to terminate their respective time charters.  This pattern continued alongside the negotiations that led, ultimately, to the CRA.
10.	Mr Ghassan Ghandour was the Managing Director of Gulf Marine Management S.A. and the governing mind and will of the Charterers and of Pac Star for the purpose of negotiating and concluding the restructuring of the time charters.  They were also represented at meetings and in correspondence by Mr Antonios (Tony) Kaffas and Mr Andrew Wettern of Gulf Marine.
11.	Mr Salamon and Mr Thomas M Dewner constituted the governing minds and will of the Owners.  Mr Salamon died in November 2012.  Mr Marc Bartels of Dr Peters also attended one of the meetings and conducted some correspondence.
12.	From mid-2009, the Charterers and Pac Star were also represented by Messrs Navis Corporate Finance GmbH & Co KG (“Naves”) and Jefferies International (“Jefferies”), consultants engaged by them to assist in designing restructuring possibilities.  The individuals involved from Naves/Jefferies were Mr Axel Siepmann and Mr Robert Rau of Naves and Mr Hamish Norton of Jefferies.
13.	From September 2009, the Charterers and Pac Star were represented in addition by Watson Farley Williams (“WFW”) (mainly Mr Francis (Frank) Dunne.
14.	From December 2009, the Owners were represented also by their German lawyers, Ahlers & Vogel (mainly Dr Jan-Erik Pötschke, although Mr Martin Rosenzweig occasionally dealt with the matter in his absence).
15.	Various proposals and counter-proposals were exchanged, and discussed at meetings, during the course of 2009.  They culminated in an agreement upon the restructuring terms at a final, main meeting, in Geneva, on 10 December 2009.  This was followed by the preparation and signature of a Term Sheet (signed in mid-January 2010) as a written record of what had been agreed in Geneva.  Thereafter there was the drafting, agreement and signing of the CRA (signed on 31 March 2010).
16.	I accept and find that at the time of reaching agreement in Geneva, signing the Term Sheet and finally entering into the CRA, both parties were aware that:-
(1)	The Charterers were heavily indebted to the Owners, had received numerous demands for prompt payment, backed by the service of anti technicality notices, and were at risk that the time charters might be terminated.  The time charters required hire to be paid in full, monthly in advance.  The Charterers had asked for a measure of deferral.
(2)	Each Owner was a KG investment vehicle, financed by bank loans, and would need a certain minimum time charter revenue to cover their obligations to the banks and pay operating expenses.  (The time charters were akin to financing leases or hire-purchase agreements.)  The Owners said that the fixed minimum required was US$22,000 per vessel per day.
(3)	The Charterers were not willing to divulge the actual earnings of each vessel.
(4)	The Clarkson Index, Time Series 69865, is an independent assessment of spot market earnings rates, published monthly in arrears.
(5)	The spot market was capable of dramatic rises and falls from month to month.  It could well fall below the Floor Rate of US$22,000 per day, as indeed it did during four months in 2009.
(6)	The vessels, Mercury Glory, Artemis Glory and Leo Glory (“the Time Chartered Vessels”) were to be, and by the time the CRA was signed had been, sub-chartered by their respective Charterers, for 3-year periods that would run until about the end of 2012 or beginning of 2013.  The sub-charter hire rates were less than the hire rates in the time charters between the respective Owners and Charterers; but were above the US$22,000 per day minimum the Owners had said they needed to service their obligations to the banks and to pay operating expenses.
The Issues
17.	The principal issues to be determined are:
(1)	The semi-annual adjustments – construction/rectification 
(i)	Whether, upon the true construction of the CRA, when calculating “the average of the Market Rates for the previous period of six months (January to June or July until December each year …)” under Article 2.4.1 and 2.4.2 of Schedule 4, the daily rate input for each month is (a) the higher of (i) US$22,000 and (ii) 3.35% below the Clarkson Index rate referred to in Article 2, para. 2, or (b) 3.35% below the Clarkson Index rate, even if that is less than US$22,000.
(ii) If the answer to (1) is (b), whether the CRA should be rectified so as instead to have effect (a).
(2) Rate of hire after termination of sub-charters
What rate of hire is payable in advance in respect of each Time Chartered Vessel after its respective ‘Vessel’s Deferred Hire Period’?
(3)	Off hire
(i)	Was “Saturn Glory” off hire from 17 March 2013 and throughout April 2013 as alleged by Charterers; and
(ii) Was “Neptune Glory” off hire from 2 April 2013 and throughout the remainder of April 2013 as alleged by Charterers?
(4)	Relief/Quantum
What relief are the Owners entitled to and how much is now due and outstanding, and not already the subject of judgment, on the monetary claims included in the action?
The trial
18.	In December 2012 the case was set down for trial in November 2013 with a time estimate of 5-7 days.
19.	On Friday 11 October 2013, Clyde & Co LLP, the Owners’ solicitors, received notices (one for each Defendant) that the Defendants’ solicitors, WFW, were no longer instructed, although it appears that they still represent all of the Defendants “regarding restructuring of the charters and other issues not the subject of the High Court litigation”.
20.	 So far as this action is concerned, the notices suggested that the Defendants intended to appear “in person”, but did not identify any individual(s) by whom the Defendants might intend to appear or indicate when any application might be made for permission to be represented in that way.  In the event, no application has been made, nor have WFW been replaced by new solicitors.  The Defendants were asked numerous times to communicate their intentions in respect of the trial, but did not respond.  
21.	The Defendants did not seek to appear at the trial and it has therefore been conducted in their absence.  The Defendants had earlier exchanged witness statements.  However, they did not seek to call any witness evidence and neither the Defendants nor the Owners applied for permission to admit the statement evidence under the Civil Evidence Act.  The statements were accordingly not put before the court.  The Defence was before the court and I was taken through it by the Owners’ counsel.  Although the Defence was verified by a statement of truth it is not evidence at trial – see CPR Part 32.6.   The Owners called as witnesses Mr Thomas Dewner, the Chief Financial Officer of the Dr Peters Group at the material time, and Dr Jan-Erik Pötschke of Ahlers & Vogel.  In addition there was a statement adduced under the Civil Evidence Act of Martin Rosenzweig of Ahlers & Vogel.  
Issue (1) - The semi-annual adjustments – construction
The CRA
22.	The Preamble to the CRA states that the parties intend hire to continue to accrue in full, but payment to be deferred to an extent set out in the CRA, except that in relation to the Time Chartered Vessels, there was to be a full waiver of hire in respect of a certain defined amount.  The Restructuring Period is defined as 1 January 2010 to 31 December 2014.
23.	The amendments to the Charterers’ hire payment obligations during the Restructuring Period are effected by ‘The Addendum’ at Schedule 4 to the CRA.  The main, and general, provision is Article 2.  By Article 3, different provision is made, derogating from Article 2, for part of the Restructuring Period only, in respect of the Time Chartered Vessels.
24.	The most material provisions of Article 2 of Schedule 4 are as follows:
“Article 2.

Charter Hire Payments

1.	The obligation to pay hire in each of the Charter Parties shall be varied with effect from 1 January 2010 (so as to be applicable to the hire payable in respect of January 2010 and all subsequent periods to the end of the Restructuring Period) so that, subject to  paragraphs 4,5 and 7 of this Article 2 and save as provided in Article 3, each Charterer shall pay charter hire for its Vessel to the relevant Owner monthly in advance at the higher or (i) USD 22,000 (the “Floor Rate”) and (ii) the Market Rate (as defined in Paragraph 2 of this Article 2), for the preceding calendar month multiplied by the number of days in the relevant month. Five days automatic off-hire calculated on the basis of the charter hire rate agreed in the respective Charter Party prior to it being amended by The Addendum is permitted under the Charter Parties in any calendar year and the total annual amount will be deducted from the hire for January of the following year (or from the hire for such later month as the Charterers may elect). Where a Charter Party terminates other than on 31 December in any year the Charterer shall be entitled to a rebate of hire equal to a pro rate proportion of the 5 days’ annual off hire allowance and if a Charter terminates before all accrued off hire has been deducted from hire. Owners shall make a corresponding payment within 10 running days of the termination date.

2.	The market rate (“Market Rate”) for any month shall be 3.35% below the rate determined using Time Series No. ID 898645 (or such other designator assigned to such data from time to time) published by Clarkson Research Service Limited (“Clarkson”) showing the monthly average of the daily earnings of a vessel expressed as daily time-charter equivalent of voyage freight rules, expressed in US dollars per day (hereinafter “TCE”)…..

3.	The applicable Clarkson Index for the Market Rate payable for January 2010 shall be the TCE for December 2009, for the Market Rate payable in February 2010, the TCE for January 2010 and so forth….

4.	The hire payment received by Owners every month will be adjusted semi-annually in arrears according to the following principle:
4.1	Should the average of the Market Rates for the previous period of six months (January until June or July until December each year, respectively) be in excess of the evening rate actually paid in respect of those months, Charterers will remit the corresponding shortfall to the Owners together with the next monthly charter hire payment.
4.2	Should the average of the Market Rates for the previous periods of six (January until June or July until December each year, respectively) be lower than the average rate actually paid in respect of those months, the corresponding excess shall be credited against the next monthly charter hire payment(s), such that the Charterer may reduce the payments due under Paragraph 1 of the Article 2 by a corresponding amount”.
25.	In summary, Article 2.1 provides that hire is to be paid at the higher of the Floor Rate and the Market Rate.  The Market Rate for any month is defined in Article 2.2 to be 3.35% below the Clarkson Index for the month.  Since hire is payable monthly in advance, Market Rate hire is to be paid by reference to the Clarkson Index for the previous month, as explained in Article 2.3.  Because the actual Index rate for the month in question may be different to that for the previous month, a semi-annual adjustment is to be carried out under Article 2.4.  
26.	The Owners say that, upon the proper construction of the CRA, the purpose and effect of the adjustment is to correct payments made at the rate of Max.{US$22,000, Index (prior month)} to payments at the rate of Max.{US$22,000, Index (current month)}.  In other words it is to correct for the ‘lag’ caused because payments are made initially by reference to the preceding month’s Index rate.  On both sides of the comparison, the rate for each month must be at least the Floor Rate.  
27.	The Charterers, by contrast, say that the semi-annual adjustment compares what is paid initially, Max.{US$22,000, Index (prior month)}, with the Clarkson Index rate simpliciter, {Index (current month)}, even if it is below the Floor Rate.  On that construction the hire not deferred simply tracks the Clarkson Index and is not ultimately subject to any floor.
The approach to construction
28.	The general approach is to consider what a reasonable person having the background knowledge available to the contracting parties would have understood themselves to be agreeing by using the language they used in their contract:  Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896, 912-913; Chartbrook Ltd v. Persimmon Homes Ltd [2009] 1 AC 1101, at [14]-[15].
29.	A helpful recent summary of the relevant principles is set out by Aikens LJ in the case of BMA Special Opportunity Hub Fund Ltd & Ors v African Minerals Finance Ltd. [2013] EWCA Civ 416 at [24]:
“There has been considerable judicial exposition of these principles by the House of Lords and the Supreme Court in recent years – [Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101; Re Sigma Finance Corp [2010] 1 All ER 571 and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900]. There is no point in my going over the same ground again at any length. The court’s job is to discern the intention of the parties, objectively speaking, from the words used in the commercial document, in the relevant context and against the factual background in which the document was created. The starting point is the wording of the document itself and the principle that the commercial parties who agreed the wording intended the words used to mean what they say in setting out the parties’ respective rights and obligations. If there are two possible constructions of the document a court is entitled to prefer the construction which is more consistent with “business common sense,” if that can be ascertained. However, I would agree with the statements of Briggs J, in Jackson v Dear [2012] EWHC 2060 at [40], first, that “commercial common sense” is not to be elevated to an overriding criterion of construction and, secondly, that the parties should not be subjected to “…the individual judge’s own notions of what might have been the sensible solution to the parties’ conundrum”. I would add, still less should the issue of construction be determined by what seems like “commercial common sense” from the point of view of one of the parties to the contract.”
30.	The Owners place particular reliance on those passages in Lord Hoffman’s judgment in Chartbrook v. Persimmon in which he states that, although the court should not readily find that parties have made linguistic mistakes, particularly in formal documents, nonetheless the process of construction may involve a conclusion that something has gone wrong with the language.  Where that is the court’s assessment, the linguistic difficulty is overcome by pronouncing the meaning and effect, on its proper construction, of the language used.  In that regard, “there is not, so to speak, a limit on the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.” (Chartbrook v. Persimmon, supra, at [25]; see also at [21]).
The meaning of Schedule 4 Articles 2.4.1 and 2.4.2
31.	The Owners identified the relevant background circumstances as being those set out in paragraph 16 above, and I so find.  
32.	They stressed as a key consideration that a right to be paid at least US$X has no real meaning or effect if there is attached an obligation to refund shortly thereafter some or all of what has been paid.  It would mean that the agreed Floor Rate is in reality no floor rate at all.  By contrast, a right to be paid at least US$X is entirely real and meaningful, although it comes with an obligation to refund shortly thereafter some or all of anything paid in excess of US$X.
33.	Bearing that in mind, the Owners submitted that whereas their construction of the CRA gives real meaning and effect to the agreement to pay at least a Floor Rate of US$22,000 per day per vessel, the Charterers’ construction, by contrast, renders that agreement illusory.  The Owners’ construction provides for a payment stream of at least US$22,000 per day per vessel; the Charterers’ construction does not.  The Charterers’ construction turns an agreement to track the Clarkson’s Index, subject to a floor of US$22,000, into a simple agreement to track the Index.  Further, whilst on the Charterers’ construction, the Floor Rate serves no commercial purpose, on the Owners’ construction it has two obvious and important commercial purposes, namely:  a) to ensure that each KG will still receive during the Restructuring Period at least the minimum revenue needed to discharge its financing obligations and pay for the operation of its VLCC; and b) to enable each KG to know in advance, and plan on the basis of, a minimum revenue that will be generated during the Restructuring Period (and a maximum, therefore, that could be deferred).
34.	The Owners submitted that reading the language sensibly, its purpose and effect is limited to effecting the correction for the monthly time lag in Index rates.
35.	They recognised that there is a possible problem with the language in that it refers to a comparison between “the average of the Market Rates for the previous period of six months …” and “the average rate actually paid in respect of those months”.  If “Market Rates” there refers to its defined meaning of 3.35% below the Clarkson Index rates then on the face of it that will be the adjusted rate paid, even if it is below the floor.  If so, then, as the Owners submitted, Article 2.4, is no longer a mere adjustment mechanism complementing Article 2.1.  Instead, Article 2.4, is the primary rule, requiring hire simply to track the Clarkson Index, and there is in reality no floor rate.  They submitted that that cannot have been the intention of the CRA, given Article 2.1.  Reasonable parties would have taken Article 2.4.1 and 2.4.2, to be referring to the ‘floored’ ‘Market Rate’ that Article 2.1 requires.  Reading Article 2.4.1 and 2.4.2, in that way, allows all the working parts of the arrangement to have useful purpose and sensible effect.
36.	The Charterers contended in their Defence that the Owners’ construction is contrary to the plain language of the CRA and that it:
(i)	“writes word into Art.2 para 4.2 which are not there;
(ii)	conflates the Floor Rate with the market Rate, even though each term was clearly defined in contradistinction to the other in Art.2 paras 1 and 2 respectively;
(iii)	confuses the basis for calculating the minimum advance monthly hire for each Vessel und Art para 1 (where, subject to the provisions identified in Art 2 para 1, floor did apply), with the basis for calculating the semi-annual adjustment in arrears under Art.2 para 4.2 (where it did not).” 
37.	I recognise the force of the Owners’ case that the “Floor Rate” was exactly that – a rate below which the hire payable would not fall.  I also recognise that Article 2.1 is the primary hire payment provision and that Article 2.4 is meant to be addressing the specific issue of the monthly time lag in the Index rate.  I also accept that their construction makes far more commercial sense than that of the Charterers, although I would not agree that the Charterers’ construction is absurd or that it makes the agreement to a “Floor Rate” meaningless, since there will still be a “Floor Rate” paid in the first instance.  
38.	In the final analysis, however, I am unable to accept that what a reasonable person having the background knowledge available to the contracting parties would have understood themselves to be meaning by using the words “Market Rates” in Article 2.4.1 and 4.2 was “Market Rate or Floor Rate as applicable”, which is where the Owners’ construction leads.  Not only do the words “Market Rates” naturally refer to a rate reflecting the market rather than a fixed or floored rate, but in the CRA “Market Rate” was a defined term, and was defined by reference to the Clarkson Index. “Floor Rate” was separately and differently defined.  Moreover, on the Owners’ construction, not only does “Market Rate” in Articles 2.4.1 and 2.4.2 differ from its contractual definition, but it differs from the meaning of “Market Rate” elsewhere in the CRA.  The Owners’ construction involves rewriting the clause in a manner inconsistent with the words used and the agreed contract terminology.
39.	The Owners further submitted that in so far as the true construction of the relevant provisions is ambiguous, reference may be made to the signed Term Sheet which the CRA was intended to implement.  They submitted that where a contract is entered into to implement a prior, concluded agreement, the prior agreement is admissible and, whilst caution needs to be exercised, it may help to resolve ambiguity over the meaning or effect of the final contract - see Lewison, “The Interpretation of Contracts”, 5th Ed., section 3.05.  However, even if it is legitimate to have regard to the Term Sheet, for reasons explained below, I do not consider it assists in resolving any ambiguity there may be.
40.	Finally, I should add for completeness that I suggested another possible construction of Articles 2.4.1 and 2.4.2 which was that the adjustment exercise was only to be carried out in respect of those months in the previous six months where the monthly rate paid was an “average” Market Rate, as opposed to a Floor Rate.  However, as the Owners pointed out, this means that it is not (or may not be) a six month averaging exercise (as the clause contemplates).  Other difficulties were identified when worked examples were considered, such as that it would mean that there is no adjustment even where the Index rate turns out to be above the Floor Rate, which is inconsistent with the adjustment scheme. In the light of these difficulties, and since neither party supports such a construction, it is unnecessary to consider it further.
41.	I accordingly conclude that upon the true construction of the CRA, when calculating “the average of the Market Rates for the previous period of six months (January to June or July until December each year …)” under Article 2. 4.1 and 2.4.2 of Schedule 4, the daily rate input for each month is 3.35% below the Clarkson Index rate, even if that is less than US$22,000.  This makes it necessary to consider the claim for rectification.
The semi-annual adjustments – rectification
The relevant principles
42.	In the present case the Owners seek rectification on the grounds of common mistake.
43.	In Chartbrook v Persimmon the House of Lords (in the leading judgment of Lord Hoffman) approved the summary of the requirements for rectification for common mistake set out by Peter Gibson LJ in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71 at [33]: 
“The party seeking rectification must show that: (1) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; (2) there was an outward expression of accord; (3) the intention continued at the time of the execution of the instrument sought to be rectified; (4) by mistake, the instrument did not reflect that common intention.”
44.	In Chartbrook v Persimmon the House of Lords stated that the prior accord had to be objectively determined.  Although the rectification part of the decision in that case was obiter, in Daventry District Council v. Daventry & District Housing Ltd [2012] 1 WLR 1333 the Court of Appeal accepted that it was an analysis which they should follow.  Etherton LJ in his judgment at paragraphs [85] to [89] (with which Lord Neuberger MR agreed) explained the policy justification for the objective approach as follows:
“85 By way of reinforcement of those points, it may be helpful to consider the policy considerations justifying the intervention of equity by rectification for mutual mistake of a contract binding on the parties at common law. There are primarily four factual situations to consider. The first one is where the parties subjectively and objectively (that is to say in their communications passing between them—or “crossing the line”) are in agreement but the formal documentation as executed fails to give effect to that prior agreement. The documentation should be rectified to bring it into line (retrospectively) with their prior accord. Subject to such matters as delay and prejudice to any third party interests, there is no good reason not to do so.

86 The second scenario is where the parties never subjectively had the same intention, but the communications crossing the line show that objectively there was a common continuing intention at all relevant times prior to the execution of the final documentation, and the formal documentation reflected those prior communications. In that situation, whether or not rectified, one or other of the parties will be bound by a contract which they did not subjectively intend to enter into. It is right that the claimant should not be entitled to rectification to bring the documentation into line with a subjective intention and belief that was never communicated to the defendant and to which the defendant never agreed.
	
87 The third scenario is where there was objectively a prior accord, but one of the parties then subjectively changed their mind, but objectively did not bring that change of mind to the attention of the other party. It is right that, if the documentation gives effect to the objective prior accord, the formal documentation should not be rectified to reflect the changed but uncommunicated subjective intention; and if the documentation as executed reflects the changed but uncommunicated subjective intention, it should be rectified to give effect to the objective prior accord. To do otherwise would be to force on one of the parties a contract which they never intended to make on the basis of an uncommunicated intention and belief.

88 The fourth scenario is where there was objectively a prior accord (whether or not a subjective common intention), and one of the parties then objectively changed their mind, that is to say objectively made apparent to the other party that they intended to enter into the transaction on different terms. Leaving aside rectification for unilateral mistake (the requirements for which are quite different), it is right that, if the documentation as executed gives effect to the objectively indicated change of mind, a claim for rectification to give effect to the earlier prior accord should be refused. Once again, to do otherwise would force on the defendant a contract which they never intended to make on the basis of the claimant's uncommunicated subjective intention to enter into a contract on the basis of the original accord notwithstanding the defendant's objectively communicated change of mind.

89 That analysis shows why it is good policy to favour objective accord or objective change of accord over subjective belief and intention in cases of rectification for mutual mistake.”
45.	In the Daventry case there were differences between the Court of Appeal judges both as to the proper legal analysis and as to its application to the facts.   Of particular significance in that case was how the objective approach was to be applied to the issue of continuing common intention.  The approach of the majority on that issue (Etherton LJ and Lord Neuberger MR) was to focus on whether the party resisting rectification had objectively indicated an intention which was different to the prior accord.  Lord Neuberger stated the relevant question to be whether, in the light of the exchanges between the parties, viewed objectively and in their context, the party resisting rectification signalled a departure from the prior accord (per Lord Neuberger at [204], [205] and [208]).
46.	As to the relevance of the subjective understanding of the parties, Lord Hoffman stated as follows in Chartbrook v Persimmon at [64]-[65]:
“64 ….in Cambridge Antibody Technology Ltd v Abbott Biotechnology Ltd [2005] FSR 590 , in which he rejected a submission that evidence of the subjective state of mind of one of the parties contained in statements which had not been communicated to the other party (“crossed the line”) was inadmissible. In my opinion, Laddie J was quite right not to exclude such evidence, but that is not inconsistent with an objective approach to what the terms of the prior consensus were. Unless itself a binding contract, the prior consensus is, by definition, not contained in a document which the parties have agreed is to be the sole memorial of their agreement. It may be oral or in writing and, even if the latter, subject to later variation. In such a case, if I may quote what I said in Carmichael v National Power plc [1999] 1 WLR 2042 , 2050–2051: 

“The evidence of a party as to what terms he understood to have been agreed is some evidence tending to show that those terms, in an objective sense, were agreed. Of course the tribunal may reject such evidence and conclude that the party misunderstood the effect of what was being said and done.”

65 In a case in which the prior consensus was based wholly or in part on oral exchanges or conduct, such evidence may be significant. A party may have had a clear understanding of what was agreed without necessarily being able to remember the precise conversation or action which gave rise to that belief. Evidence of subsequent conduct may also have some evidential value. On the other hand, where the prior consensus is expressed entirely in writing, (as in George Cohen Sons & Co Ltd v Docks and Inland Waterways Executive 84 Ll L Rep 97) such evidence is likely to carry very little weight. But I do not think that it is inadmissible.” 
47.	In relation to the need for an “outward expression of accord”, it has been stated that this is “more an evidential factor than a strict legal requirement” – per Mummery LJ in Munt v Beasley [2006] All ER (D) 29 at [36].  As stated in Chitty on Contracts (31st ed.) at 5-117: “the accord may include understandings that the parties thought so obvious as to go without saying, or that were reached without being spelled out in so many words”.
48.	In their Defence the Charterers placed reliance on the entire agreement clause in the CRA.  However, such a clause is not a bar to rectification.  It defines where alone the terms by which the parties agree to be bound are to be found.  However, the remedy of rectification does not seek to find contractual terms outside the four corners of the document, but rather to ensure that the document contains what it was supposed to contain.  Nevertheless, an entire agreement clause may, depending on the facts, be a factor to take into account in deciding whether a prior accord or common intention was (objectively) intended to be given effect by the final contract - see generally, Hodge on Rectification, paras. 3-165 to 3-168.
The facts
49.	From January 2009, the Charterers failed to discharge their hire obligations under the time charters, paying short, late or both, and asked for a rescheduling of those obligations.  It was made clear to the Charterers at the outset, and acknowledged by them, that each KG Owner required sufficient income from its VLCC to meet financial commitments inter alia to its bankers.
50.	Negotiations began in earnest at a meeting in Paris on 8 April 2009, between Messrs Salamon, Dewner, Ghandour and Wettern.  The Charterers were invited to come up with a firm proposal and it was explained to them that it was a requirement of any restructuring that the KGs had to receive a monthly income sufficient to cover interest, operating expenses and amortisation plus a minimum distribution.  As Mr Dewner stated in evidence, “ that any restructuring should ensure predictability by setting a level below which the rate of hire received by Owners would not fall … was repeatedly made clear” at that meeting and subsequently.
51.	The Charterers’ proposal, submitted on 14 April 2009, was to fix a maximum amount of hire to be deferred and a corresponding ‘floor rate’ (referred to as such), below which the hire not deferred would never fall.  This proposal was re-submitted, in more formal form, on 18 May 2009.  Again, the ‘Floor Rate’ (now capitalised) that was set by the proposed terms was a rate below which the hire not deferred could not fall; and the Owners understood the Charterers’ proposal to have that effect.
52.	The Owners’ counter-proposal, sent on 4 June 2009, likewise proposed a ‘Floor Rate’ below which the hire not deferred could not fall, set by fixing a maximum amount that could be deferred.  The Owners thus understood that on both sides, ‘floor rate’/’Floor Rate’ was being used to mean a fixed minimum daily rate of hire payable – i.e. a figure below which hire would not fall.
53.	A little later in June, Naves/Jefferies were introduced into the process, having been engaged by the Charterers and Pac Star.
54.	The parties met in Dortmund on 3 September 2009.  Naves/Jefferies presented a new proposal, under which 3 VLCCs would be fixed on period sub-charters (at, it was suggested, US$31,000 per day) and the other VLCCs would be traded spot.  The sub-charter earnings for the time chartered vessels plus notional earnings for the spot vessels of 4% above an independent market assessment would be ‘pooled’ and paid to the Owners.  This was rejected by the Owners because it did not give them a guaranteed minimum rate of hire.  The Owners’ representatives explained to the meeting that the whole ethos of a KG was to have certainty; that pooling the vessels with the majority being placed on the spot market removed that certainty and left the KG exposed to market fluctuations in an entirely unrestricted manner, and that a known and certain minimum monthly income was required.
55.	On 25 September 2009, Naves on behalf of the Charterers forwarded a revised proposal.  It was the same in substance as the proposal rejected by the Owners in Dortmund and remained unacceptable to them.  It asserted that the Owners would be expected to receive sufficient ‘fixed income’ to cover outgoings; but it did not in fact guarantee any such minimum.
56.	There was an informal meeting in Hamburg on 3 November 2009, following which proposals were submitted for the Charterers by Pac Star and Gulf Marine on 9 November, and by Naves on 23 November, leading to a meeting in Hamburg on 26 November.  As with the rejected September proposals, these involved ‘pooling’ and no guaranteed minimum income per vessel.  At the meeting, the Owners made explicitly clear that a ‘Floor Rate’ of US$22,000 per day per vessel had to be agreed, to ensure that all the vessels could cover the operating expenses and mortgage interest, with equal treatment of all the Owners.  Mr Siepmann of Naves confirmed that the Charterers would pay US$22,000 per day plus anything above that they were actually earning, as was reported by Mr Dewner at the time.
57.	Following the Hamburg meeting, Naves sent a revised proposal on behalf of the Charterers.  It incorporated the agreed requirement for a minimum amount of hire not deferred equal to US$22,000 per day per vessel, but it did so by guaranteeing that minimum over a 12-month period.  That was not acceptable to the Owners.  Their counter-proposal of 2 December 2009 required payment of the agreed floor rate of US$22,000 per day per vessel, regardless of what she was earning, as a primary cash-flow and not by way of periodic average guaranteed after the fact.  The Owners’ proposal was that whatever the VLCCs were earning should be paid to the Owners (the ‘Actual Rate’), but “A Floor Rate of USD22,000 p.d. for each vessel will be paid regardless of the Actual Rate”.
58.	A final negotiation meeting took place in Geneva on 10 December 2009, at which the parties’ commercial deal was finalised.  The parties sought to record what had been agreed in Geneva in a signed Term Sheet (finalised in January 2010).  The CRA eventually finalised and signed in March 2010 was supposed to give effect, in turn, to what had been recorded in the Term Sheet.
59.	On 7 December 2009, prior to the Geneva meeting, Pac Star sent a draft term sheet which referred again to a pooling of earnings and implemented the agreed Floor Rate only after the fact by a guarantee of average earnings over each 12 months.  The next day, Dr Peters returned it with tracked amendments again agreeing the Floor Rate of US$22,000 per day per vessel but again making it clear that this was to be by way of primary cash-flow, not periodic average.
60.	At the time of the Geneva meeting the parties were therefore already agreed that there was to be a minimum amount of hire that was not to be deferred and that is what they meant when they referred to a ‘floor rate’ or ’Floor Rate’.  They were also already agreed that the Floor Rate would be US$22,000 per day per vessel.  The point of difference between them was whether that US$22,000 per day per vessel minimum would be, directly, a minimum monthly cash-flow, or, indirectly (after the fact), a guaranteed minimum average over 12 months.  
61.	At the Geneva meeting it was Mr Dewner’s evidence that he opened the discussions and set out the position that a floor rate of US$22,000 per day was necessary and reflected the KGs bottom line. He explained that an average of US$22,000 over a period was not acceptable.  In response the Charterers’ accepted US$22,000 per day as a cash obligation, as recorded in Mr Dewner’s contemporaneous notes.  By this Mr Dewner reasonably understood that this sum would be paid now rather than being deferred and that there would be no averaging.  The point in issue between the parties in relation to the floor rate was therefore resolved as the Owners had required.  There was then a discussion of the benchmark which would be used for the market rate of hire payable for each vessel.  The concept was “pay as you earn” in excess of the floor rate.  The period for adjusting the benchmark rate was also discussed and it was decided to do so every six months.
62.	Dr Pötschke’s evidence was to similar effect.  He was in no doubt that it was agreed at the meeting that under no circumstances would the hire received be below US$22,000 per day and that this figure was not to be subject to downward adjustment.  He explained in oral evidence that although he could not exactly remember the words used, it was explained to Charterers that no matter what happens the Owners needed the US$22,000 per day floor rate and the Charterers agreed to that.
63.	I accept their evidence and find that at the 10 December Geneva meeting it was agreed between the parties that the floor rate would be US$22,000 per day that it would be paid up front rather than over a period, and that it was not to be subject to any downward adjustment.  It was to be an irreducible minimum, as Owners had always insisted upon.  At the meeting there was an accord to that effect which was outwardly and objectively expressed.
64.	Following the Geneva meeting, the Term Sheet was prepared in order to set out the agreement which had been reached.   The first draft of the Term Sheet was sent by Dr Pötschke to Naves for comments.  It stated that it “sets out agreed terms for the restructuring of the Charters in respect of the VLCCs”.  In relation to payment of hire it stated as follows:
“4. Payment of hire starting as of 1st January 2010.
As of 1st January 2010 the actual charter hire for each of the VLCCs as published by the Clarksons monthly index [such index is to be clarified by the parties] (the "Market Rate"), however, in no event less than a minimum floor rate, is payable monthly in advance to the KGs:
(a)The minimum payable floor rate is USD22,000 per day per vessel and is payable monthly in advance ("the Floor Rate").
(b) The Market Rate will be adjusted semi annually according to the following principle:
(aa) Should the average of the Market Rate over the previous period of six months be in excess of the actually paid Market Rate, Charterers will remit the difference to the KGs together with the next monthly charter hire payment.
(bb) Should the average of the Market Rate over the previous period of six months be lower than the actually paid Market Rate, the KGs will credit the difference to the Charterers at the next semi annual adjustment date of the Market Rate.”
65.	Although the Term Sheet emphasised that the hire was to be “in no event” less than the Floor Rate, it was also the document which introduced the concept of adjustment by reference to the “Market Rate”.
66.	The Term Sheet went through a number of drafting iterations.  The basis of the Clarkson Index and the rate to be derived therefrom was agreed, as was a provision in relation to the Time Chartered vessels.  There were also some drafting changes to the adjustment provision.  The final version of the Time Sheet was produced on 19 January 2010.  It provided that:
"3 a) Time Charter Vessels
For vessels on period time charter, i.e. MERCURY GLORY, ARTEMIS GLORY AND LEO GLORY, hire shall be calculated at the net time charter rate, meaning the gross charter hire less brokerage commission (5% commission rate for MERCURY GLORY and 3.75% commission rate each for ARTEMIS GLORY and LEO GLORY) to be evidenced by copies of the relevant recaps which include details of commissions and payees.  The net time charter rate so arrived at (the "Time Charter Rate") shall be used for determining the hire actually to be paid by applying the terms of the relevant Charter Party. 
b)	Spot Market Vessels 
As of 1st January 2010 and until expiry of the Charter Restructuring Period the actual charter hire for each of the VLCCs trading spot, i.e. currently TITAN GLORY, SATURN GLORY, NEPTUNE GLORY, PLUTO GLORY and YOUNARA GLORY and after the expiry of the respective three years time charter also MERCURY GLORY, ARTEMIS GLORY and LEO GLORY is calculated on the basis published by the Clarksons monthly index Time Series No. ID 69865 for the monthly earnings and in case such TCE is not published at the due date for hire payment using the average TCEs as published by Clarkson under Time Series No. ID 69918 for weekly earnings net of usual commissions at a fixed rate of 3.35% (the "Market Rate"), however, in no event less than a minimum floor rate, is payable monthly in advance to the KGs. The first applicable Index shall be the December 2009 index. 
aa)	The minimum contractually agreed floor rate is USD 22,000 per day per vessel and is payable monthly in advance (the "Floor Rate") at the latest within the first two Banking Days (as defined in Clause 8. hereof) of the month for which the charter rate is due and otherwise in accordance with the Charter Parties.
bb)	The Market Rate will be adjusted semi-annually in arrears according to the following principle:
(i) Should the average of the Market Rate over the previous period of six months be in excess of the actually paid rate, Charterers will remit the difference to the KGs together with the next monthly charter hire payment.
(ii)	Should the average of the Market Rate over the previous period of six months be lower than the actually paid rate, the Charterers will be entitled to deduct the agreed difference from the next monthly hire payment(s)".
67.	The Owners submitted that the signed Term Sheet records, objectively, a consensus that minimum hire at the Floor Rate of US$22,000 per day per vessel would always be payable and not deferred.  They submitted that this is the plain effect of paragraph 3(b) (including sub-paragraphs (aa) and (bb)) of the Term Sheet.  However, although the Term Sheet made clear that the hire to be paid was to be no less than the Floor Rate, it also provided for an adjustment to be made by reference to the defined Market Rate.  It therefore raises a similar issue of construction to that under the CRA.  Although the Owners’ construction argument is stronger in relation to the Time Sheet, I do not consider that the Term Sheet clearly records a consensus that US$22,000 per day would always be and remain payable.  
68.	 I accept and find, however, that the exchanges between the parties between the Geneva meeting and the execution of the Term Sheet viewed objectively and in their context, did not signal a departure from their prior accord at that meeting.  There was no proposal or discussion of any arrangement whereby the US$22,000 minimum hire paid would be reduced through adjustment or otherwise.  The drafting difficulty emanated from the Owners’ own first draft of the Time Sheet, but viewed objectively they would not be understood as thereby seeking to change what had been agreed and giving up on their consistent and insistent stance that the Floor Rate was an irreducible minimum.  This is all the more so given the emphasis in the very same document that “in no event” was less than the Floor Rate to be paid.  Although there were exchanges in relation to the wording of the adjustment provision, there were no worked examples of the adjustment or any indication that either party was proposing or contemplating that the payment of the Floor Rate would be in any way affected thereby.   
69.	Thereafter, the CRA itself was drawn up to implement the Term Sheet.  The first draft of the CRA was sent by Dr Pötschke to Mr Dunne at WFW on 12 February 2010.  The operative clause read:
“Article 2.

Charter Hire Payments
1.	During the Restructuring Period the Charterers shall pay to the Owners monthly in advance the charter hire for each Vessel (subject to Article 3. hereof) on the basis of the Market Rate as defined in sub-clause 2 of this Article, i.e. the Market Rate multiplied by the days of the respective month.
2.	The market rate ("Market Rate") is calculated on the basis of the daily earnings of a vessel expressed as daily time-charter equivalent of voyage freight rates, expressed in US-Dollars per day as published by Clarkson Research Service Limited ("Clarkson") under their Time Series No. ID 69865 (or such other designator assigned to such data from time to time) for the monthly average of earnings (hereinafter "TCE") or, in the event such TCE is not published at the due date for hire payment, using the average of the TCEs as published by Clarkson under Time Series No. ID 69918 (or such other designator assigned to such data from time to time) for the weekly average of earnings for a month until the due date for hire payment in each case net of commissions at the fixed rate of 3.35%.  However, if using the above method of calculation the market rate would be less than USD 22,000.00 (United States Dollars twenty thousand) per day pro rata then the Market Rate to be paid to Owners shall be deemed to be USD 22,000.00 without deduction of any commissions (the "Floor Rate").

4.	The hire payments received by Owners every month will be adjusted semi-annually in arrears according to the following principle:
4.1	Should the average of the Market Rate for the previous period of six months (January until June or July until December each year, respectively) be in excess of the actually paid rate, Charterers will remit the difference to the Owners together with the next monthly charter hire payment.
4.2	Should the average of the Market Rate for the previous period of six months (January until June or July until December each year, respectively) be lower than the actually paid rate, such amount shall be credited against the next monthly charter hire payment(s). "

70.	On 1 March 2010, Mr Henderson of WFW sent a revised draft CRA to Mr Salamon.  The operative clause was amended as follows:
Charter Hire Payments
1.	Subject to Paragraphs 4 and 7 of this Article 2 and save as provided in Article 3, each Charterer shall pay charter hire for its Vessel to the relevant Owner monthly in advance at the higher of (i) US$22,000 (the "Floor Rate")) and (ii) the Market Rate (as defined in Paragraph 2 of this Article 2), for the preceding calendar month multiplied, in either case, by the difference between (a) the number of days in the relevant month and (b) the number of days for which the Vessel was off hire under the Charter in any prior month not previously accounted for …..
2.	The market rate ("Market Rate") of a Vessel for any month shall be 3.5% below the rate for that Vessel determined using Time Series No. ID 69865 ….. published by Clarkson …
4.	The hire payments received by Owners every month will be adjusted semi-annually in arrears according to the following principle:
4.1	Should the average of the Market Rates for the previous period of six months …. be in excess of the average rate …
4.2	Should the average of the Market Rates for the previous period of six months (January until June or July until December each year, respectively) be lower than the average rate actually paid in respect of those months, the corresponding excess shall be credited against the next monthly charter hire payment(s), such that the Charterer may reduce the payments due under Article 2, paragraph (1) by a corresponding amount. "
71.	The draft was not materially amended thereafter.  The parties’ and their solicitors’ focus of attention was upon the payment of the historic overdue hire.  The CRA was eventually signed on 31 March 2010.
72.	The CRA was intended to give effect to the Term Sheet, not to change or renegotiate the commercial bargain in principle recorded by the Term Sheet.  The Term Sheet states that the CRA is to be “mutually agreed … in good faith for the implementation of the restructuring encompassed in this Term Sheet” and by paragraph 10 of the Term Sheet, the parties agreed “to settle the form of the [CRA] to implement the restructuring … as soon as possible …”.  Neither side indicated at any stage in the CRA drafting exchanges that they were seeking to do anything different.
73.	I find that the exchanges between the parties between the signing of the Time Sheet and of the CRA, viewed objectively and in their context, did not signal a departure from their prior accord at the Geneva meeting.  Again, there was no proposal or discussion of any arrangement whereby the US$22,000 per day minimum hire paid would be reduced through adjustment or otherwise.  The drafting changes did not objectively indicate any intent to depart from what had been agreed in relation to the Floor Rate at the Geneva meeting. 
74.	I accordingly find that there was an accord reached at the Geneva meeting that minimum hire of US$22,000 per day per vessel would always be payable, and not deferred, by the adjustment mechanism or otherwise, and that the common intention reflected by that accord continued up to the time of the execution of the CRA.  
75.	In so far as it is necessary to address the parties’ subjective understanding, I accept the evidence of Mr Dewner and Dr Pötschke that that accord reflected the Owner’ understanding of what had been agreed at the Geneva meeting and at all material times thereafter.  This understanding is supported by a number of contemporaneous documents during the relevant period, and in particular reports to investors.  The reason that the CRA did not reflect that understanding was a drafting error, and ironically one which originated from the Owners’ side.
76.	I further find that that was also the Charterers’ subjective understanding.  That must have been their understanding at the time of the Geneva meeting in the light of the findings I have made of what was then agreed.  Thereafter there is no evidence to suggest any change of mind on their part, still less any attempt to persuade the Owners to resile from what had been agreed.  The only possible evidence of any change is the drafting of the adjustment clause by the Owners in the Term Sheet by reference to the Market Rate and that mechanism being followed through various drafts into the CRA.  There is, however, no evidence to suggest that the Charterers appreciated the significance of this drafting, or intended it to have the effect which I have held it to have.  
77.	Further, although only limited disclosure was provided by the Charterers, it included Pac Star Board Minutes from March 2010 approving the CRA for signature.  The “main terms” of the CRA outlined to the Pac Star Board included the obligation for each Charterer to pay monthly in advance the Clarkson Index 69865 rate, subject to the Floor Rate of US$22,000 per day.  They included, “as an exception to the agreed change”, the obligation to pass through the sub-charter hire, less commission, on the Time Chartered Vessels for the duration of the sub-charters.  They did not include the semi-annual adjustment provision at all.  There was no hint given to the Pac Star Board that in fact they need not worry about the Floor Rate, because it would fall away at the end of every six-month period. 
78.	Yet further, the Defendants unjustifiably restricted their disclosure search to the period up to 30 April 2010, and wrongly excluded from their search entirely documents in the possession of Naves/Jefferies, and unduly limited the places they searched to one computer server in an office in Greece. The Defendants’ attention was repeatedly drawn to these deficiencies by the Owners’ solicitors, but the Defendants refused to address them, leading to the issue of an application on 4 October 2013 which resulted in a specific disclosure order being made by Mr Justice Males on 17 October 2013, which has not been complied with.  Between the issue and hearing of the application instructions were withdrawn from WFW in relation to this litigation, but not otherwise.  No explanation has been provided for the withdrawal of instructions, although it appears to be a matter of choice.  Had the Defendants appeared at the trial their witnesses would no doubt have been much pressed in cross-examination as to what their subjective understanding was and would have had to provide proper disclosure of internal documents.  In all the circumstances I consider that I am entitled to infer that they failed to provide disclosure and to participate in the trial because they appreciated that they had no case on the issue of subjective understanding, or none that would stand up to scrutiny.  For this reason also I find that at all material times they shared the Owners’s subjective understanding of what had been agreed.
79.	In the light of these findings it follows that the requirements of rectification are met: (1) 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; (2) there was an outward expression of that accord; (3) the intention continued at the time of the execution of the instrument sought to be rectified; (4) by mistake, the instrument did not reflect that common intention.
80.	I further find that this is a case which falls within scenario 1 of the rectification examples given by Etherton LJ in his judgment in Daventry at [85] to [89].  The parties were subjectively and objectively in agreement but the formal documentation failed to give effect to that prior agreement.  The equity for granting rectification in such a case is clear.
81.	The Owners’ rectification claim accordingly succeeds.  I consider that the appropriate way of rectifying the CRA to reflect the parties’ agreement is to amend the reference to “Market Rates” in Article 2.4.1 and 2.4.2 so that it reads “Market Rates or Floor Rate as applicable”.
Issue (2) - Rate of hire after termination of sub-charters
82.	The sub-charters of the Time Chartered Vessels, Mercury Glory, Artemis Glory and Leo Glory, and the corresponding Vessel’s Deferred Hire Period in each case, came to an end on 31 January 2013, 2 December 2012 and 31 December 2012.  
83.	The Owners submitted that for the remainder of the Restructuring Period, Schedule 4, Article 2, applies, as it does to the other VLCCs, so that payments must be made as per Article 2.1, with semi-annual adjustments under Article 2.4.  It submitted that that is the obvious intention and effect of Article 3.5 and 3.10 which provided as follows:
“5.  With effect from 1 January 2010 (so as to be applicable to hire payable in respect of January 2010 and subsequent periods), the obligation to pay hire under the Charter Parties of each of the Time Chartered Vessels shall be varied so that the respective Charterer of the Time Chartered Vessel shall pay hire in accordance with this Paragraph and Paragraph 6 below and not in accordance with Article 2 until 30th January 2013 or, if earlier, such time as the employment of the relevant Time Chartered Vessel under the relevant Sub-Charter is terminated. The period during which hire is payable as aforesaid is the “Vessel's Deferred Hire Period” .

10.  In respect of any period after the elapse of the Vessel’s Deferred Hire Period (even if the Sub-Charter continues), hire in respect of such Vessel shall be payable in accordance with Article 2 rather than Article 3.  ...”
84.	The Charterers’ case was that neither Article 2.1 (including the Floor Rate) nor Article 2.4 (the semi-annual adjustments) applies by reason of Article 3.6 which provides that:
“6. Charterer 4, 6 and 7 shall each inform Owner 4, 6 and 7 (as the case may be) in relation to their Vessel of the date and time of re-delivery (for whatever reason such re-delivery may occur) within 5 banking days of such re-delivery. Further, these Charterers shall also provide such information confirming that the Time Chartered Vessels are still employed under the Sub-charters as may be reasonably requested by Owner 4, 6 and 7 for the purposes of this Agreement. In case such information is not provided to Owner 4, 6 or 7 within 5 banking days from such reasonable request by Owner 4, 6 or 7, Charterer 4, 6 and 7 shall become obliged to pay the Market Rate for the respective Time Chartered Vessel until such information is provided and shows the relevant Time Chartered Vessel is still employed under the relevant Sub-charter. However, in any event and regardless of any extension of the Mercury Sub-Charter, the Artemis Sub-Charter or the Leo Sub-Charter or the entering into any new commitment for the Time Chartered Vessel, Charterers 4, 6 and 7 shall pay the Market Rate after the elapse of Vessel’s Deferred Hire Period.”
85.	The Charterers’ case was that the last words of Article 3.6 make it clear that it was the Market Rate which was to be paid after the elapse of the Vessel’s Deferred Hire Period – i.e. 3.35% below the Clarkson Index rate.
86.	I agree with the Owners that this construction puts undue weight upon the mention of ‘Market Rate’ in Article 3.6 and fails to construe that Article in the context of Schedule 4 as a whole.  When Schedule 4 is considered as a whole the scheme agreed was as follows:
(1)	The parties expressly noted in Article 3.1-4 that for the duration of the sub-charters the Time Chartered Vessels would be earning substantially less than the sum which would otherwise be payable under the corresponding (head) time charters.  At the same time, the sub-charter rates were above the all-important Floor Rate.
(2)	The parties therefore agreed that for the duration of the sub-charters only the respective Owners of these vessels would accept hire in accordance with a special regime which was an exception to Article 2.
(3)	That regime was that the sub-charter rate would be passed through to the Owners (although higher than the Floor Rate and even if also higher than the Clarkson Index rate), but the Deferred Hire liability in respect of these vessels, for the duration of the sub-charters, would be capped as set out in Article 3.8 at US$40,000,000.  To that extent the CRA operated as a complete waiver of the respective Owners’ rights to hire at the original charter rates.  This exception was spelled out in the opening recitals to the CRA (although this aspect of the agreement was later amended).
(4)	At the end of the relevant sub-charter the respective Vessel’s Deferred Hire Period came to an end, and with it the basis for the special regime, derogating from the general agreement under Schedule 4, Article 2.  Schedule 4, Article 2, was thus intended to apply thereafter, for the remainder of the Restructuring Period, as indeed is stated in Article 3.5 and 3.10.
87.	The Charterers’ suggestion that upon termination of the sub-charters there should be a new regime, neither the Article 2 general regime nor the Article 3 special regime for the sub-charter period, under which the hire not deferred would be calculated without reference to the Floor Rate and without the semi-annual adjustment mechanism is contrary to the entire pattern of the CRA, strains the language of Article 3 and requires one to give no meaning to Articles 3.5 and 3.10, as quoted above.  
88.	The words relied upon in Article 3.6 are in the context of a clause dealing with a particular issue, namely failure by the Charterers to inform the Owners of redelivery of the Time Chartered Vessels.  The wording used was not meant to override the general scheme of the CRA or what is provided in Articles 3.5 and 3.10.  “Market Rate” in this context is simply being used as a shorthand to refer back to the Hire Rate regime of Article 2.  The contract should be read in a consistent rather than a conflicting manner.
89.	For all these reasons I reject the Charterers’ case on this Issue and find that the rate of hire payable in advance in respect of each Time Chartered Vessel after its respective ‘Vessel’s Deferred Hire Period’ is that set out in Article 2.
Issue (3) – Off Hire
Saturn Glory
90.	The Charterers allege that Saturn Glory went off hire at 0518 UTC on 17 March 2013 and remained off hire throughout April 2013 pursuant to Clause 21 of the time charter so that no hire was payable in advance in April 2013.
91.	It is well established that the burden of proof is upon a Charterer to show that the off-hire clause operates in the relevant circumstances – see, for example, Royal Greek Government v. Minister of Transport (1948) 82 Ll.L.Rep. 196, at 199 (Bucknill LJ).  As stated by Rix LJ in The Doric Pride [2006] 2 Lloyd’s Rep. 175, at 179, “under a time charter the risk of delay is fundamentally on a time charterer, who remains liable to pay hire in all circumstances unless the charterer can bring himself within the plain words of an off-hire provision”.
92.	The Charterers’ factual case was that “upon completion of discharge at Sikka at 0518 UTC 1048 LT on 17th March 2013 the Vessel traded as directed by and/or for the account of the 2nd Claimant and/or its agents, sailing first to Fujairah to await orders, thence to Kaohsiung to discharge cargo as directed by and/or on behalf of the 2nd Claimant and/or its agents and/or nominees and thence to drydock at the Huarun Dadong shipyard, Shanghai, where she remained throughout April 2013”.  The Charterers’ case is therefore seemingly that for this period of time the vessel was under Owners’ orders for the purpose of a periodic dry docking.
93.	Clause 21 of the Charterparty, upon which the Charterers rely, is the main, detailed off-hire provision of the Shelltime 4 form.  It lists numerous sundry events which may constitute off-hire causes but the Charterers do not identify any such event within the clause upon which they seek to rely.  The Charterers appear to be relying on a periodic dry docking of the vessel, but periodic dry docking is not within Clause 21.  It is provided for specifically in the Shelltime 4 form, by Clause 22, but that clause has been deleted.
94.	Furthermore, even if the Charterers could bring themselves within an off hire clause, the parties agreed to limit the Charterers strictly to 5 days off hire (for 2013) (see Clause 55).  They have the full benefit of that by operation of Schedule 4, Article 2, para. 1 of the CRA and accordingly cannot claim further off hire.
95.	In any event, the factual basis upon which the Charterers found their off-hire claim is unfounded.  I find that Saturn Glory was awaiting voyage orders from 20 March 2013 which were eventually given on 21 April 2013; they were for loading Upper Zakum Crude at Zirku Island and Arabian Light Crude at Ras Tanura, laycan 26th April.  
96.	For all the above reasons the Charterers’ off-hire allegation in relation to Saturn Glory fails.
Neptune Glory
97.	Here, the Owners accept the facts claimed by the Charterers in their Defence.  There is, however, no good off-hire claim, for the reasons given in paragraphs 91-94 above in relation to Saturn Glory.
98.	It follows that neither vessel was off hire as alleged.
Issue (4) –Relief/ Quantum
99.	In relation to the construction issue the Owners sought a declaration to reflect what they contended was the true construction of the CRA.  Since I have held against them on that issue their claim for such a declaration fails.  They have not suggested that a declaration is necessary should I find against them, and my holding is in any event clear.
100.	I shall make an order that the CRA be rectified to the effect set out in paragraph 81 above.
101.	I shall grant the declaration sought in relation to the rate of hire payable after termination of the sub charters for the Time Chartered Vessels.
102.	As to quantum, the figures used in the Tables to the Re-Re-Re-Amended Particulars of Claim are common ground.
103.	The Charterers do not dispute any of the figures pleaded as such, but say only that:
(1)	On Saturn Glory and Neptune Glory, the respective Charterers have the off-hire claims considered above.
(2)	As regards all of the Spot Vessels, the Charterers were entitled to make deductions applying their semi-annual adjustment method.  Since the Owners’ method of semi-annual adjustment is correct, the Charterers have no defence to these claims.
(3)	As regards the Time Chartered Vessels, the Charterers admit that the sums pleaded have not been paid but say that upon the termination of the sub-charters hire was payable at the Market Rate without reference to the Floor Rate, so that no further payment is due. Since the Owners’ construction is correct on that point, then the sums claimed by them are due.
104.	The Owners have produced a Table showing the sum owed by each Defendant. I propose to give a monetary judgment which reflects that Table.
105.	As to interest, the Owners’ claim is in US dollars.  On each summary judgment the court granted daily interest at a commercial rate, taken to be 1% over the US Prime Rate of 3.25%.  The Charterers consented to interest being awarded at that rate on each occasion and I accept the Owners’ submission that the same rate should be applied again now.  An updated interest table will be provided on judgment.
106.	For reasons of practicality, the pleadings have taken matters up to, but not beyond, April 2013.  That is to say:  in relation to disputes over semi-annual adjustments, claims are made in this action up to and including the semi-annual adjustment for July-December 2012; in relation to disputes over initial amounts paid at the start of each month, for that month, claims are made in this action up to and including the payments made for April 2013.  The Owners’ rights are reserved in their entirety in respect of the semi-annual adjustments for January-June 2013 (and any later semi-annual adjustments, if the time charters are not terminated prior thereto), and in respect of initial monthly payments for May 2013 and subsequent months (including future months, if the time charters are not terminated prior thereto). 
Conclusion
107.	For all the reasons outlined above, the Owners are entitled to relief and monetary judgment as set out under Issue (4).