‘Disappointed’ Allseas contemplating next step in SFL dispute

AGML and vessel owner SFL entered into protracted negotiations over the charter of the 1,750 teu Green Ace to the UK based logistics firm’s subsidiary Allseas Global Project Management (AGPM).

AGPM wanted to charter Green Ace to operate on its China Express service during the boom years immediately after the pandemic in 2022. However, when freight rates began to slide some months into the charter AGPM wanted to renegotiate the charter terms, SFL refused and the ship was returned to the owner.

That sparked the litigation with SFL claiming that parent company AGML was the guarantor of the 24-month contract, while AGML believed it had not agreed to any such guarantee. And the decision by the court came down to just two short words, “to be”.

AGML claim that the phrase in the contract: “to be guaranteed by Allseas Global Management Limited” means that the guarantor – AGML – will provide a guarantee in the form of some kind of further (signed) instrument, but only if and when the parties agree the terms of such an instrument in the form of some kind of further (signed) instrument,” according to Judge Christopher Hancock KC.

Whereas SFL’s lawyers argued: “The charterer’s performance is to be guaranteed by AGML – and that wording is properly construed as a promise to guarantee which is intended to be effective without further agreement or formality.”

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Judge Hancock concluded that the normal understanding of the business language should prevail and cited a number of cases with precedent.

He further cites the email evidence that shows discussions between the contracting parties, through their brokers of a “provision of security from a company further up in the corporate chain other than AGPL,” explained the Judge.

In handing down his decision the judge said he was unable to accept the evidence of AGML director Darren Wright that no such discussions took place.

“Instead, I think that his [Darren Wright’s] more guarded evidence given orally is more reliable,” and citing meeting notes taken by SFL’s broker, he added that discussions over “a change of the identity of the Charterer from AGPL to AGML,” had taken place even before their meeting.

“It is in my view clear that AGML had accepted that it would have to provide corporate security over and above that provided by AGPL,” concluded Judge Hancock.

And in coming to that conclusion, he decided that AGML was therefore liable for the costs of the charter for the period contracted, with the vessel having been handed back to the owners ahead of the 24-month period, as freight rates had crashed, and the China Express service had become unviable.

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An AGML statement said: “Naturally, it is disappointing that the Court ruled as it did, especially given the merits of the case. The ruling is being considered internally at DCW Management Limited [AGML changed its name on 3 April 2024] and until all avenues are explored no further comment will be made.

“The ruling does not in any way affect the Allseas UK forwarding or liner divisions and they both continue to deliver a first-class service to customers.”