RTI Ltd (Respondent) v MUR Shipping BV (Appellant) - [2024] UKSC 18

Easter Term
[2024] UKSC 18
On appeal from: [2022] EWCA Civ 1406

JUDGMENT

RTI Ltd (Respondent) vMUR Shipping BV (Appellant)

before

Lord Hodge, Deputy President
Lord Lloyd-Jones
Lord Hamblen
Lord Burrows
Lord Richards

JUDGMENT GIVEN ON
15 May 2024

Heard on 6 and 7 March 2024

Appellant
Nigel Eaton KC
Adam Woolnough
(Instructed by Rosling King LLP (London))

Respondent
Vasanti Selvaratnam KC
James Shirley
(Instructed by Campbell Johnston Clark Ltd (London))

LORD HAMBLEN AND LORD BURROWS (with whom Lord Hodge, Lord Lloyd-Jones and Lord Richards agree):

Introduction

Force majeure clauses relieve a party from its obligation to perform under a contract on the occurrence of a specified event or state of affairs. Such clauses commonly provide, expressly or impliedly, that the clause cannot be relied upon if the effects of what would otherwise be a force majeure event or state of affairs could be avoided by the exercise of reasonable endeavours by the party affected.

The central issue which arises on this appeal is whether the exercise of reasonable endeavours may require the party affected, if it is to be entitled to rely on the clause, to accept an offer of non-contractual performance from the other contracting party in order to overcome the effects of the event or state of affairs. The majority of the Court of Appeal (Males and Newey LJJ) [2022] EWCA Civ 1406, [2023] Bus LR 355, [2023] 1 Lloyd’s Rep 463, held that it may do so in certain circumstances and that it did so on the facts found by the arbitrators in this case. Jacobs J in the High Court [2022] EWHC 476 (Comm), [2022] Bus LR 473, [2022] 2 Lloyd’s Rep 297, and Arnold LJ, dissenting in the Court of Appeal, held that it could not do so, absent clear wording to that effect. So, according to the majority of the Court of Appeal (overturning Jacobs J, Arnold LJ dissenting), the force majeure clause could not be relied on by the affected party in this case. That party now appeals to the Supreme Court.

The facts

On 9 June 2016, MUR Shipping BV (“MUR”), a Dutch company, and RTI Limited (“RTI”), a Jersey company, entered into a contract of affreightment based on an amended Gencon form voyage charterparty. MUR was the shipowner (and is the appellant before us) and RTI the charterer. The contract provided for the carriage of about 280,000 tonnes per month, 15% more or less in RTI’s option, of bauxite in bulk in lots of 30,000 tonnes up to 40,000 tonnes, 10% more or less in MUR's option, from Conakry in Guinea to Dneprobugsky in Ukraine, between 1 July 2016 and 30 June 2018. The monthly quantities and the loading rate meant that, in practice, there would be a continuous flow of vessels loading at Conakry, and a corresponding flow of freight payments from RTI to MUR. The specified freight payments were to be made in US dollars.

Clause 36 of the contract provided as follows:
1. Subject to the terms…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] UKSC 18
Decision Date

CaseChat Overview and Summary

The case of RTI Limited v MUR Shipping BV involves a dispute over the interpretation of a force majeure clause in a contract of affreightment. MUR Shipping BV, the appellant, invoked the force majeure clause due to sanctions imposed on RTI Limited's parent company, which caused probable delay in payment in US dollars. RTI Limited rejected MUR Shipping BV's invocation of the force majeure clause and offered to pay in euros instead. The arbitrators ruled in favour of RTI Limited, stating that MUR Shipping BV could have overcome the force majeure event by accepting RTI Limited's offer to pay in euros. The Court of Appeal upheld the arbitrators' decision, but Arnold LJ dissented. MUR Shipping BV appealed to the Supreme Court.

The central issue in the appeal is whether the exercise of reasonable endeavours under a force majeure clause may require a party to accept an offer of non-contractual performance from the other contracting party in order to overcome the effects of the event or state of affairs. The majority of the Court of Appeal held that it may do so in certain circumstances, while Jacobs J and Arnold LJ dissented.

The Supreme Court found in favour of MUR Shipping BV, holding that a reasonable endeavours proviso does not require acceptance of an offer of non-contractual performance absent clear wording to that effect. The Court emphasised that the object of reasonable endeavours provisos is to maintain contractual performance, not to substitute a different performance. The Court also highlighted the importance of certainty in commercial contracts, stating that parties should not be required to forego valuable contractual rights unless it is made clear that that was their intention.

The Court rejected the arguments put forward by RTI Limited, which were based on cases such as B & S Contracts and Design Ltd v Victor Green Publications Ltd and the doctrine of frustration. The Court found these cases to be of limited assistance in relation to the issue of whether reasonable endeavours in a force majeure clause requires the affected party to accept an offer of non-contractual performance from the other party.

In conclusion, the Supreme Court allowed MUR Shipping BV's appeal, holding that a reasonable endeavours proviso does not require acceptance of an offer of non-contractual performance absent clear wording to that effect. The decision provides clarity on the interpretation of force majeure clauses and the role of reasonable endeavours provisos in such clauses.

Orders