X v Y

This has been the hearing of an arbitration appeal brought with leave of Hamblen J by X, Respondent/Charterers in the arbitration, against the Award by Mr Simon Gault, dated 12 June 2010, in favour of the Claimant/Owners, Y. There were originally three issues between the parties, but only one now remains for me to resolve, namely whether the Arbitrator was correct to conclude that Y’s claim for demurrage was made in time, within the time limit laid down by the Charter Party dated 21 September 2007.

This Charter Party, being a Continent Grain Charter Party, containing terms otherwise in accordance with a SYNACOMEX 2000 form, contained a number of additional clauses, but materially, for the purposes of this dispute, an Arbitration Clause, Clause 36, which is a modification of the Centrocon Arbitration Clause. The arbitration clause provided, inter alia, that a claim would be time-barred unless the claimant’s arbitrator was appointed “within 12 months of final discharge or termination of this Charterparty.”

The Charter Party constituted a consecutive voyage charter for three consecutive voyages. Discharge in respect of the first voyage under the Charter Party was completed on 8 February 2008. By virtue of Additional Clause 30 “balance of freight, less despatch or plus demurrage, as the case may be, is payable 28 days after completion of discharge and receipt/agreement of all closing accounts, including Time Sheets supported by Statements of Facts and Notices of Readiness.” This date was accordingly 7 March 2008. Discharge under the third and last of the three consecutive voyages was completed on 18 May 2008, and the balance of freight was consequently due on 14 June 2008. Twelve months from the first date of discharge (the cut-off date contended for by X) was accordingly 8 February 2009. Y’s claim for US$ 376,086.03 in demurrage, incurred in respect of the first voyage, was made by Arbitration commenced by Y on 23 February 2009. It is, or has become, common ground that termination of this Charter Party should be treated as 14 June 2008 (the last date for payment of the balance of the freight as set out above), such that 12 months from that date of termination (Y’s cut-off date) would not expire until 14 June 2009. If X’s construction of the time-bar provision in Clause 36 is right, Y’s claim for demurrage in respect of the first voyage was commenced 15 days out of time. If Y’s construction is right, then its claim was more than 3 months in time.

So far as the construction of the Clause by the Arbitrator is concerned, his task was to construe the meaning of the words “within 12 months of final discharge or termination of this Charter Party”. He concluded, following the decision of the Court of Appeal (Lord Denning MR, Megaw LJ and Sir Gordon Willmer) in The Simonburn [1973] 1 Lloyd’s Law Rep 392, upholding the decision of Mocatta J [1972] 2 Lloyd’s Law Rep 355, that final discharge in a consecutive voyage charter means final discharge of the cargo on the voyage in respect of which the claim arises, i.e. in this case the first of the three voyages (see paragraphs 42 and 43(a) of his Reasons). As for “termination of this Charter Party”, he concluded that that meant (on the facts of this case) termination of the Charter Party at the end of the third voyage, and that the claim was not time-barred by reference to that alternative time limit expressly provided for in Clause 36. He concluded, at paragraph 43 of his Reasons, as follows:

“(d)

… As with most issues of construction, the proper construction of clause 36 is largely a matter of impression. In a single voyage charter, there would not normally be a significant delay between “Final discharge” and “Termination of this Charter Party”. In the context of a single voyage charter, in my view it is more likely than not that the time bar in clause 36 was intended to run from the later of these two events rather than the earlier in order to give the parties 12 months in which to pursue any cause of action which accrued after discharge of the cargo. That intention seems to me to be more in accord with a clause which gives two alternative events from which the time bar runs. In the normal case, the inclusion of an alternative time bar running from “Termination of this Charter Party” would be to extend the time when a claim became time barred beyond the date when it would become time barred if time ran only from “Final discharge” of the cargo, and I conclude that this was the intention of the clause. I appreciate that when incorporated into a consecutive voyage charterparty, the result of this construction can be that time may not start to run until a considerable length of time after the voyage in relation to which the cause of action has accrued. I also appreciate that by incorporating clause 36 into a consecutive voyage charterparty, the parties may not have realised that the result might be a considerably longer period before any claim under the charterparty was time barred than would be the case when the clause was used in a single voyage charterparty. However, I do not think that there is any justification for construing the clause differently when it appears in a single voyage charterparty to when it appears in a consecutive voyage charterparty. If the parties wish time to run under a consecutive voyage charterparty from “final discharge” of the cargo on the voyage pursuant to which the relevant obligation arose, it would be easy enough to achieve that by deleting the alternative of time running from “Termination of this Charter Party”.

(e)

… Accordingly, I conclude that in this case, the time bar under clause 36 ran from termination of the parties’ primary obligations under the charterparty and not from “final discharge” of the cargo under the first voyage, as termination of the parties’ primary obligations under the charterparty occurred after “final discharge” of the cargo under the first voyage. I reach this conclusion on the basis of what I find to be the ordinary and natural meaning of the words used and I do not think it is necessary to resort the contra proferentem principle to reach the conclusion which I have reached on the construction of Clause 36.”

On this appeal, Mr Semark for X has supported the conclusion of the Arbitrator as to the meaning of final discharge, but has challenged his conclusion with regard to the Clause as a whole. He submits that, on a proper construction of the Clause, it must mean that the time limit starts by reference to final discharge or termination of this Charter Party, whichever is theearlier, and that the reference to termination is to a situation in which the Charter Party is, for whatever reason, terminated prior to the actual or intended date of discharge, such that, on any basis, the date of discharge at the end of the relevant voyage is the last available cut-off. Mr Nolan supports the conclusion of the Arbitrator as to the construction of the Clause, but further or in the alternative:

The first question logically to decide is the meaning of final discharge, as to which Mr Semark and the Arbitrator both rely on The Simonburn. Mr Semark particularly emphasises the concise reasoning of Lord Denning at 394:

“The important words of the clause are:

“Any claim must be made in writing within three months of final discharge.”

Originally when the Centrocon form was introduced, it was for a single voyage. On such a voyage the words “final discharge” meant the discharge of the cargo for that voyage, that is, the final discharge of the whole cargo for that voyage.

The problem here is to apply the clause when it is not a single voyage charter but a consecutive voyage charter.

The objects of a clause such as this were well stated by Mr Justice Mocatta in The Himmerland [1965] 2 Lloyd’s Rep 353. They are (a) to provide some limit to the uncertainties and expense of arbitration and litigation; and (b) to facilitate the obtaining of material evidence. To these I would add (c) to facilitate the settling of accounts for each voyage as and when they fall due.

In order to achieve these objects, I think the words “final discharge” mean final discharge of the cargo on the voyage in respect of which the claim arises. The Judge so held: and I agree with him. The owners are out of time and this claim is barred.”

There are thus three reasons: (i) the importance of certainty (ii) the objective of obtaining material evidence within a short time after the relevant events (iii) the facilitation of the settling of accounts for each voyage separately. Mr Nolan points out that, since the Court in The Simonburn was addressing the original and unamended Centrocon form, and not Clause 36 in the form before me, the decision is not strictly binding. Further he submits (i) that the nature of the difference between the two clauses, namely the added words by reference to termination, means that the clause is now different, and the presence of the alternative of termination of this Charter Party (on the basis of his contention) gears the whole clause more towards the end of the last voyage. His submission is that the obvious meaning of the words final discharge in a consecutive voyage charter is by reference to the discharge of the last cargo. He submits that the objects of certainty and speed of collation of evidence are as well served by his construction, now that the period has been extended from 3 months to 12 months. He submits that, when the period was only 3 months, in the context of a charter for five consecutive voyages, as in The Simonburn, the apparent intention that claims be brought and evidence be gathered would be undermined if the 3-month period only started to run from the end of the last voyage. Evidence, instead of being gathered within 3 months, might not be gathered until 3 months after completion of the last voyage, i.e. perhaps 8 months after the event. However in the case of a 3-voyage charter party such as the present one, with a 12-month time limit, evidence gathered in proceedings commenced 364 days after final discharge of the cargo carried on the first voyage is unlikely to be significantly fresher than evidence gathered in proceedings commenced 364 days after termination of the charter party following completion of the third voyage, about 3 months later. He further submits that (contrary to the views of Mocatta J, Lord Denning, and Megaw LJ), in a consecutive voyage charter a settling of accounts at the end of the charter party is preferable, when there can be a final balancing of accounts with off-setting of dispatch and demurrage on all three voyages.

I conclude that, although I might be free to reach a different conclusion in relation to this clause from that reached in relation to the original unamended Centrocon form in The Simonburn, I should not do so. Although my decision is addressed to this case, namely a

I therefore approach the construction of Clause 36 on the basis that the Arbitrator was correct in his conclusion with regard to the interpretation of final discharge, and I turn to the balance of the clause, which has been the subject matter of Mr Semark’s appeal.

The principles of construction are not in doubt:

Before I address the submissions of the parties, it should be clarified that there was one apparent conclusion by the Arbitrator which neither party supported, and, because it was certainly of some significance in the way that Mr Semark put his appeal in his skeleton (as will appear), I should clear this out of the way. This appeared in a passage in paragraph 43(b) of the Arbitrator’s Reasons, as follows:

““Termination of this charter party” plainly means discharge of the parties’ primary obligations under the charter party either by performance or by accord and satisfaction or by repudiatory breach or by frustration [or] by any other method by which such obligation may come to an end, and I can sensibly so construe these words.”

If indeed the Arbitrator meant that a charter party continues, i.e. termination of it does not take place, until after “performance or … accord and satisfaction”, i.e. until payment in full of any outstanding claims, for example, for freight, then that cannot be right. Mr Semark, not surprisingly, based a good deal of submission in his skeleton upon this apparent conclusion, by reference to its leading to an “uncommercial result”. Thus he submitted as follows, in his skeleton:

“16.

For example, one consequence of the Arbitrator’s approach was that he was unable to specify when (i) the termination event would have occurred and/or (ii) when time would have commenced for the purposes of limitation. His wide, open-ended interpretation of “termination” therefore extended the start of the limitation period to some wholly indeterminate future point …

20.

Again, the Arbitrator’s contrary analysis creates uncommercial results:

(a)

If his view that the Charterparty cannot be said to be “terminated” whilst any party’s obligation remains unfulfilled is correct, it would then always be open to a charterer to defeat an owners’ right to rely on a timebar provision simply by failing to pay the 5% balance freight to him, irrespective of how much time had elapsed since the completion of discharge.

(b)

Similarly, if the Arbitrator’s approach is right, a demurrage claim could never be timebarred whilst it remained outstanding.”

Termination must be the date when the last of the primary obligations under the Charter Party is due to be performed, not when it actually is performed. This became common ground during the course of argument, as set out in paragraph 3 above, as the date due for payment of the balance of the freight. However, the Arbitrator’s conclusion does not depend upon, or need, such an extended and uncertain date for the date of termination.

I turn to Mr Semark’s submissions:

He supports this conclusion as follows:

Mr Nolan however submits that he is simply adopting the straightforward meaning of the words “within … 12 months of final discharge or termination of this Charter Party, whatever the case may be”, and his construction does indeed, as the Arbitrator intended, “give effect to both terms”. There are two starting points for the giving of notice, either the final discharge or the termination of the charterparty, and the claim is in time if it complies with either deadline. It is not a question of when a cause of action arises, but when notice must be given, and it is in time if within 12 months of either date. He is not therefore reading in the words “whichever is the later”, as characterised by Mr Semark.

Mr Nolan’s submissions are as follows:

I am persuaded by Mr Nolan that his submissions are to be preferred, for the reasons he has given, such that the same conclusion is reached as was reached by the Arbitrator, although without reference to his more flexible construction of termination, if such it was, referred to in paragraphs 11-13 above. Mr Nolan’s case, on this part of Clause 36, is in no way inconsistent with The Simonburn: it is a construction of a different clause, with an added alternative time limit, and none of Mr Semark’s submissions persuade me that Mr Nolan’s solution is in any way unworkable or inconsistent either with authority or with commercial practice. I also accept that his construction, insofar as this is relevant at all, is a more satisfactory way of dealing with the black hole in such a way that a 12-month time limit becomes universally applicable to all possible events.

I conclude that Mr Nolan is not involved in adding words, but is construing the existing words without any addition. He does not need ‘whichever is the later’, nor indeed is that appropriate, where, on his construction, notice can be put in within twelve months of either trigger date. It is Mr Semark who is adding the words ‘whichever is the earlier’, and, I conclude, is doing so when I am not in any way satisfied (to revisit Chadwick LJ’s words) “that the words actually used produce a result which is so commercially nonsensical that the parties could not have intended it” or indeed that “they did intend some other commercial purpose which can be identified with confidence”: both conditions require to be satisfied before Mr Semark’s words can be added and in my judgment neither are.

Like the Arbitrator, therefore, I do not need to resort to the ‘contra proferentem’ rule.

It was suggested that the construction of this clause, as contained in a consecutive voyage charter, would or might be of general application. That depends whether there are other such clauses which contain two alternative trigger dates for the 12-month time limit; but I am satisfied that, as to the construction of this particular clause, the Arbitrator’s conclusion that the notice given by Y which, in the event, was given within 12 months of the termination, was in time, was correct, and Y is not time-barred.

In the circumstances, I do not need to resolve the s12 application by Y, referred to in paragraph 5(ii) above. My attention has been drawn to Vosnoc Ltd v Transglobal Projects