P v A & Anor

This is an appeal under section 69 of the Arbitration Act 1996 brought by the claimant charterers with the leave of Burton J. The appeal arises out of a Contract of Affreightment (“COA”) dated 2 April 2007 on the Americanized Welsh Coal Charter form. The defendants were the owners.

The COA was for “6 cargoes each of 70,000 metric tons 10% more or less in Charterers’ option of Iron Ore or Coal” The cargo option was in turn dependent on the charterers’ choice of load port. The vessel was to proceed to “Quebec (where to load Iron Ore) or in charterers’ option Baltimore (where to load Coal)”. The discharge port in either case was Constanza.

The appeal lies against an award of Lord Steyn, Steven Gee Q.C. and Anthony Scott dated 5 December 2007 whereby it was held that “the Charterers’ conduct amounted to a repudiatory breach of the 5^th voyage thereby releasing Owners from any further performance of that particular voyage.”

There is some dispute as to the appropriate formulation of the questions of law. But the essential issues are two-fold: (1) whether the nomination by the charterers of the laycan spread for the 5^th voyage was irrevocable and (2) whether the arbitrators erred in law in holding that the charterers were in repudiation in purporting to revoke them.

The relevant ship was “TBN” pursuant to Clause 23. That clause apart, there was no provision whatsoever as to when the carriage of the 6 cargoes was to take place. Clause 23 reads as follows:

“Vessel to be of highest Lloyds or equivalent Class, valid ISM code, no tween hatches, max 20 years of age.

Vessel to have unobstructed holds and be suitable for grab discharge.

Charterers to give 30 days notice with 10 days notice laycan spread and Owners to nominate the vessel latest 10 days prior first day with complete itinerary of the vessel including previous port(s) agents’ contacts details.

Vessel nomination to be confirmed by the Charterers latest 24 hours after nomination Saturday, Sunday excluded.

Please advise detailed itinerary, vessels present position, where and what the vessel is discharging, agents name and contact details at the time of the nomination.”

The only other clauses of the COA that need to be set out are as follows:

“3.

Vessel to give 7/5/3/2/1 day(s) notice to Agents at load port …… as well as to Shippers and Receivers, Owners are to notify Charterers immediately if there is a change in the readiness of more that 24 hours.

4.

The cargo to be loaded into vessel as per clause 26 weather working days of 24 consecutive hours. Any time lost through …. any cause whatsoever beyond the control of the Charterer affecting mining, transportation, delivery and/or loading of the coal, not to be computed as part of the loading time (unless any cargo actually loaded during such time). In the event of any stoppage or stoppages arising from any of these causes continuing for the period of six running days from the time of the vessel’s being ready to load, this charter shall become null and void; provided however that no cargo shall have been shipped on board previous to such stoppage or stoppages…

15.

Vessel not to tender before 9am on see Clause 23 and if vessel be not ready at loading port as ordered before 9am see Clause 23, or if any wilful misrepresentation be made respecting the size, position or state of the vessel, Charterer to have the option of cancelling this Charter, such option to be declared on notice of readiness being given.

26.

LOADING RATE:

20,000 metric tons per weather working day of 24 consecutive hours, Sundays and Holidays included basis Quebec, 30,000 metric tons per weather working day of 24 consecutive hours, Sundays and Holidays included basis Baltimore.

NOTICE OF READINESS:

Vessel not to tender N.O.R. prior commencement of laycan.

Notice of Readiness to be tendered at any time day or night, Sundays and Holiday included whether in port or not, whether in berth or not, whether in free pratique or not, whether entered Customs cleared or not.

LAYTIME:

A)

Laytime for loading shall commence twelve (12) hours after the Notice of Readiness is tendered unless sooner commenced.

B)

In case Supplier can arrange to load before laytime commences, then time actually used in loading shall count as laytime.

…...”

The chronology of events as found by the arbitrators can be summarised as follows:

The award (made by a majority made up of Lord Steyn and Mr. Scott) found that the effect of the notice dated 6 September defined the 5^th voyage (against the background of clauses 1, 15 ,23 and 26 of the COA) as a voyage from Baltimore to Constanza for a cargo of coal, the vessel not to tender notice of readiness at Baltimore 5 October 2007 and with a cancelling date for the purposes of clause 15 of 14 October 2007. In the result, once the laycan notice was given it was written into the COA and could not be changed save by agreement.

Thus the tribunal found that the charterers’ insistence that they had the right to move the laycan dates because the shippers would not have a cargo for the period between 5/14 October amounted to a proposal for a substitute voyage. Their message to that effect demonstrated a clear intention not to be bound by the original nomination.

In this connection the tribunal also placed reliance on clause 4 of the COA. The charterers’ statement that their suppliers were unable to provide cargo until 21/30 October “brought clause 4 into operation”. Thus “even if the vessel arrived on the 14^th October, the last day of the laycan, she would have had to wait for more than 6 running days before the charterers earliest availability of cargo became available.” Thus the charter for the fifth voyage would have become “null and void”.

The Claimant’s submission was that the tribunal had erred in law. I briefly summarise their argument as follows:-

The owners’ submission equally briefly expressed was as follows:

It was at the heart of the charterers’ case on this appeal that in their messages of 20 and 24 September they were merely identifying a later cancelling date because the relevant cargo would not be available for some days after the notified cancelling date. That simply amounted, so the argument ran, to an indication by the charterers of their intention not to exercise the option to cancel until that later date (if at all). The charterers were not refusing to load the contractual cargo at the contractual port: i.e. merely stating that this would occur later than originally hoped, whereby demurrage might be incurred.

The difficulty with this submission (leaving aside the terms of the messages referred to) is that the arbitrators have found as a fact that the charterers were saying:

Further, in my judgment, the tribunal’s decision that the charterers had no right to move the laycan was correct. The structure of the COA was to define the timing of the 6 voyages solely by reference to the obligation on the charterers under Cl 23 to give 30 days notice of a 10 day laycan spread. It follows that the nomination of the laycan was essential to complete the definition of the parties’ obligations in regard to the timing of the 5^th voyage including the date when the relevant vessel must engage on its approach voyage and the earliest date for tendering NOR.

Notice would by definition also identify both the loading port and the cargo. It was common ground that the effect of the notice giving the laycan period was to write those particulars into the charterparty: The Jasmine B [1992] 1 Lloyd’s Rep. 39. Likewise when in due course a vessel was duly nominated by the owners: Union Transport v Continental Wines [1992] 1 Lloyd’s Rep. 229. (I reject the submission that the need for confirmation by the charterers afforded any right of rejection of a qualifying vessel.)

Without these matters being written into the COA, it would be unworkable. The selection of the load port and the cargo is accepted to be irrevocable. Thus, the laycan notice must be either revocable or irrevocable. But, as the owners put it, it cannot be revocable for some purposes and not others. It is also accepted by the charterers that once a vessel is nominated (and if relevant confirmed) for the laycan, it also becomes irrevocable. However, in my judgment, as soon as the notice is given the owners can rely on it. The idea that over the period of 20 days before the nomination of the vessel has to be made the charterers can change the laycan dates as frequently and as substantially as they see fit, or even thereafter up to the stage that an estoppel be clearly established, is commercially unreal and uncertain.

For what it is worth, the owners’ position is supported by the leading text book. Laycan narrowing provisions in a time charter serves to define the charter period: The Nizuru [1996] 2 Lloyd’s Rep. 66. In the case of voyage charters as here, the point is put this way in Cooke on Voyage Charters (3^rd Ed.) para 4.19:

“There are, however, some charter provisions under which the notice is intended to be definitive of the parties rights’ and where the approach adopted in the time charter cases would be appropriate. For example, a notice served pursuant to a provision which requires one of the parties to give a post-contractual notice defining or narrowing the lay-can period would no doubt be held to have the effect of defining the period conclusively.”

Accordingly it follows in my judgment that the tribunal was fully entitled to treat the charterers’ insistence on their “entitlement” to move the laycan period as constituting “a clear intention not to be bound by their original nomination”. Notably the charterers themselves recognised in their message of 17 September that their proposal to move the laycan was a proposed “amendment” and not a substitute notice. The next message on 20 September made it plain that the charterers were only prepared to maintain the original laycan period if the owners undertook a voyage from a different loading port (and for that matter to a different discharge port.) It accordingly followed that the charterers were evincing an intention not to be bound by an essential term in regard to the 5^th voyage. Put at its lowest this was well within the range of permissible conclusions open to the tribunal.

There remains the issue of Clause 4. Despite the discussion in paragraphs 22 to 24 of the award, the tribunal’s conclusion as regards the charterers’ evinced intention contained within their message of 20 September stands alone from Clause 4. The significance of Clause 4 may be somewhat misstated. The fact that circumstances might arise following the arrival of the vessel at the loading port whereby the 5^th voyage charter might become “null and void” because of delays in the delivery of the coal beyond the control of the charterers was not a necessary ingredient of the reasoning.

Whilst I accept the mere statement of the charterers that their suppliers were unable to provide cargo until the later stem might not bring clause 4 into operation, nonetheless it is implicit that the tribunal was finding as a matter of fact that the difficulties being encountered by the charterers were beyond their “control”. If so, it followed that in due course it was manifest that the 5^th voyage would be rendered null and void even if the vessel served NOR at the last possible time under the original nominated laycan.

This in turn would furnish an explanation why the charterers were not minded to stand by their original nomination. It would equally provide an explanation as to why the owners were not minded to nominate a vessel for the prospective laycan, to rely on the charterers not to cancel in the event of delay and to accept demurrage payments in lieu.

In the result the appeal must be dismissed.