White Rosebay Shipping SA v Hong Kong Chain Glory Shipping Ltd

This is an appeal from an arbitration award pursuant to section 69 of the Arbitration Act 1996 brought with the leave of Cooke J. The claimants in the arbitration were White Rosebay Shipping SA, the owners of mv Fortune Plum, a “Supermax” bulk carrier, and the respondents in the arbitration were Hong Kong Chain Glory Shipping Limited who had chartered the vessel from the owners for a period of 35/38 months pursuant to the terms of a charterparty on an amended New York Produce Exchange Form. The owners claimed, inter alia, that the charterers had renounced the charterparty by evincing an intention not to perform the charterparty and the owners purported to terminate the charterparty on account of such renunciation. The arbitral tribunal, which consisted of Duncan Matthews QC, Belinda Bucknall QC and Timothy Rayment, held that there had been a renunciation of the charterparty by the charterers but that the owners, before terminating the charterparty, had affirmed the charterparty. Accordingly the owners were unable to claim damages, estimated at over US$4m., from the charterers. By this appeal the owners seek to challenge the tribunal’s conclusion that the owners had affirmed the charterparty.

Whether or not there had been a renunciation of the charterparty and if so, when, was a major issue in the arbitration. The tribunal made detailed findings in paragraphs 14-83 of its award as to the charterers’ conduct. Those findings may be summarised as follows.

By clause 4 of the time charterparty dated 20 July 2010 the charterers promised to pay hire at the rate of US$17,700 per day. The vessel was delivered to the charterers on 23 July 2010 and thereafter all hire payments were due on or before 23^rd. of each month.

Between July and December 2010 hire was paid a few days late but always in a single payment. Between January and March 2011 hire was paid but a week or more late. The tribunal concluded that there was nothing “seriously worrying” about the way the charterers were paying hire. However, the tribunal said that a significant change occurred from April 2011. The hire due on 23 April 2011 was not paid. The charterers apologised for that and offered to pay the hire in two 50% tranches on subsequent dates. They in fact did not do so but paid in three instalments with the last on 3 June 2011. There were similar difficulties with the hire due on 23 May 2011 and on 23 June 2011. By this time the owners were seriously concerned that the charterers’ persistent late payment of hire was causing financial difficulties for the owners. The pattern of late payment continued with the hire due on 23 July 2011 and 23 August 2011. On 14 September 2011 the owners demanded payment of the outstanding hire, then over US$1m., by 15 September 2011 and reserved their rights to withdraw the vessel and/or exercise their lien on cargo and sub-freights. The charterers apologised and said that they hoped to have “a good cash flow by the end of the month”. They had earlier referred to a cash injection from the Group of which they formed part and to the redelivery of their most expensive Capesize vessel to its owners. They now referred to the fact that a number of their vessels would arrive at their discharge port by the end of the month.

On 22 September 2011 the owners informed sub-charterers that they were exercising their lien on all sub-freights and sub-hires. They also informed the charterers but received no reply from them. A sum of US$138,097.29 was recovered from the sub-charterers.

The hire due on 23 September 2011 was not paid on that day. On 27 September 2011 the owners required payment of the hire due on 23 September 2011 within 3 banking days failing which they would withdraw the vessel from the charterers’ service. On 29 September 2011 the charterers apologised for the delay in payment and requested more “time and understanding”. They promised to pay at least one month’s hire within a week and the rest before the end of October 2011.

On 30 September 2011 the owners asked the charterers whether their parent company would provide a guarantee of all past and future payments of hire. The charterers said that would have to be taken up internally and in the meantime offered an immediate payment of US$500,000. The owners were contacted by sub-charterers who told them that they understood from the charterers that unpaid hire was no longer a problem. The tribunal concluded that a reasonable shipowner could infer that this was an attempt by the charterers to persuade the sub-charterers to pay hire to the charterers. The owners instructed the master not to enter port or deliver the cargo on board the vessel.

On 4 October 2011 the sum of US$529,373.75 due on 23 July 2011 was paid and the vessel proceeded into port and discharged her cargo. The owners thought that the charterers would honour their promise to pay the other outstanding hires. So on 4 October 2011 the owners said they had decided not to withdraw the vessel. In fact there were to be no further payments of hire.

On 13 October 2011 the owners learnt that a freezing order had been issued by the English Court against the assets of the group of which the charterers were part. On the same day the owners asked the charterers when the next payment of hire would be made. No reply was received and the owners inferred that the charterers would only make payments when under extreme commercial pressure to do so and otherwise intended to trade the vessel without paying hire. The tribunal considered that this was a reasonable inference to draw. The owners therefore informed the sub-charterers that they were exercising their lien over sub-freights and sub-hires and served a statutory demand on the charterers pursuant to section 155 of the Insolvency Act 2003 (of the British Virgin Islands). The sum claimed as due was over US$1m. and the notice warned that if it was not paid within 21 days (on or before 4 November 2011) it would be open to the owners to put the charterers into liquidation. There was no response from the charterers either to notice of the statutory demand or to notice of the exercise of the owners’ lien.

On 21 October 2011 the owners issued an invoice for the sum of US$1,533,861.37 in respect of the hire due on 23 August, 23 September and 23 October 2011. On 24 October 2011 the owners gave notice of withdrawal if the sums due were not paid within 3 banking days. However, the vessel was not withdrawn because the owners thought that the threat of winding up the charterers would cause them to pay the outstanding hire.

On 1 November 2011 the owners learnt that the current sub-charterparty had been amended to delete the owners’ right to a lien on sub-freights and sub-hires. They inferred that the charterers were seeking to divert the sub-freights and sub-hires to themselves, allowing them to trade the vessel without paying hire. The tribunal concluded that this was a reasonable inference to draw. On 4 November 2011 sub-hire in the sum of about US$187,000 was paid by the sub-charterers to the owners.

By 7 November 2011 (a Monday) it was apparent to the owners that the statutory demand had not been paid and they concluded that the charterers were not going to make any more payments. The tribunal found and held in paragraph 104 of the award that a reasonable shipowner, in the position of the owners, was entitled to conclude on 7 November 2011 that the charterers did not intend to pay hire in the future. Thus there had been a renunciation or anticipatory breach of the charterparty by the charterers.

The findings of particular relevance to this issue, which were made by the tribunal in paragraphs 86-92 of the award, may be summarised as follows.

On 9 November 2011 the vessel anchored at Bayuquan and tendered notice of readiness to discharge. On 11 November (a Friday) the charterers instructed the master to proceed to Hong Kong after leaving Bayuquan. On the same day the owners learnt of personnel departures and changes within the charterers’ group which cemented the owners’ conclusion that the charterers were not going to pay any more money. The owners decided on that day that they would have to end the charterparty.

On 12 November 2011 the owners sent the master a message saying that the charterparty was to be terminated and that following departure from Bayuquan the vessel was to proceed to a suitable area to wait for further instructions. They had not so informed the charterers but the master passed on to the charterers the information he had been given and urged the charterers to pay the hire. The charterers replied to the master saying that the owners should withdraw their order and that if it were carried out the vessel would be put off-hire. They apologised for the late payment of hire but made no proposals for paying it.

On 14 November 2011 (the Monday) the vessel completed discharging and sailed from Bayuquan. In the morning the owners informed the charterers that they had evinced a clear intention that they were no longer willing or able to be bound by the charterparty and that this was a “repudiatory/renunciatory” breach of the charterparty which the owners accepted as terminating the charterparty. The charterers replied that the withdrawal was wrongful and a repudiatory breach of the charterparty. On the same day and on 16 November 2011 sub-hire, in the amounts of about US$195,000 and US$138,000, was paid to the Claimants by sub-charterers of the vessel.

The tribunal concluded that the owners had affirmed the charterparty. It is necessary to set out the material paragraphs of their award.

“105.

The Respondents contend that even if they were in renunciatory breach of the contract, nevertheless the Claimants affirmed it and were themselves in repudiatory breach in withdrawing the vessel from the Respondents’ service. The principles are not in issue. See The KANCHENJUNGA [1990] 1 L1.L.R. 391 at 398 et seq. and Stocznia Gdanska v Latvian Shipping [2002] 2 L1.Rep 436. See also Chitty on Contract at para 24-003. See also Wilken & Villiers, The Law of Waiver, Variation and Estoppel (3^rd ed.) at para 4.08 which states,

“It is important to note that even though a waiver may be spelt out from conduct, that conduct must be unequivocal in the true sense of the word. The conduct must be capable of one construction only, namely that X has chosen to forego its rights.”

106.

For the purposes of this contention the Respondents take as their starting point the expiry of the clause 31 notice sent on 24^th October, namely 27^th October. For the reasons already given, we do not consider that a reasonable shipowner in the position of the Claimants, would have been entitled to form the necessary conclusion any earlier than the next banking day after expiry of the statutory demand, namely 7^th November. Thereafter the Claimants had a reasonable period of time in which to consider whether to accept the renunciation. The question therefore is, what period of time was reasonable in all the circumstances and, depending on the answer to that, did the Claimants after expiry of that period act in a manner consistent only with their treating the contract as still alive? As to what period of time was reasonable, it cannot be any later than 11^th November because on that day Mr. Hiokazu in fact made up his mind to accept the breach and on the following day he acted upon that decision by giving the Master instructions not to comply with the Respondents’ order to proceed to Hong Kong after completion of discharge at Bayuquan.

107.

Bearing in mind the need to review with care the lengthy history of the Respondents’ approach to its obligation to pay hire, almost certainly involving input from the Claimants’ solicitors, we do not consider that the period between 7^th and 11^th November is unreasonable. In that period the charterparty remained on foot and the Claimants were bound to comply with it. It follows that such compliance did not constitute an unequivocal act from which it could be inferred that they would not exercise their right to treat the contract as repudiated. They took no other action that could have that effect.

108.

After 11^th November, however, the Claimants, having made up their mind to accept the repudiatory breach, did not do so by withdrawing the vessel immediately. Instead they allowed the vessel to remain in the service of the charterers for the purposes of discharging the cargo. We can understand the commercial reasons which gave rise to the Claimants’ desire to relieve themselves of the expense and responsibility of delivering the cargo before withdrawing the vessel, but in our view, the continued compliance with the charterparty, was a clear affirmation. In the words of the editors of The Law of Waiver, Variation and Estoppel (supra) it was conduct capable of one construction only, namely that the Claimants had chosen to forego their rights. The Claimants sought to answer the Respondents’ case by pointing out that they had repeatedly reserved all their rights. We do not, however, consider that a reservation of rights can suffice to protect the Claimants in circumstances where they acted in a manner which was wholly inconsistent with their accrued right to withdraw the vessel. It necessarily follows from the foregoing that the Claimants’ withdrawal of the vessel on 14^th November was itself a repudiatory breach.”

In paragraph 105 the tribunal directed itself that the conduct alleged to be an affirmation must be unequivocal in the sense that the conduct must be capable of one construction only, that is, that the owners have chosen to forego their right to terminate the charterparty. That cannot be said, and was not said, to be wrong in law. However, on behalf of the owners Mr. Gunning QC submitted that the tribunal nevertheless made three errors of law in respect of which the owners have been given leave to appeal. First, they wrongly considered that a shipowner who has made up his mind to accept a repudiatory breach must withdraw the vessel immediately. Second, they wrongly considered that the mere act of discharging can on its own amount to an unequivocal act from which it can be inferred that a shipowner intends to affirm the charterparty. Third, they wrongly considered that the owners were unable to terminate the charterparty in circumstances where the charterers continued to evince an intention not to perform the charterparty. Mr. Gunning further submitted that even if the tribunal could not be shown to have made any of these particular errors of law the tribunal must have erred in law because no reasonable tribunal, properly directed in law, could have concluded that the owners had, at some time before informing the charterers on 14 November 2011, affirmed the charterparty.

By way of introduction to his argument Mr. Gunning stressed the difficult situation in which an “innocent” shipowner would find himself were the tribunal’s approach to the question of affirmation correct. The shipowner, when deciding whether his charterer had evinced an intention not to perform the charterparty, has to be careful not to terminate the charterparty too early, that is, before the charterer had evinced such an intention. On the facts of this case a decision to withdraw the vessel before 7 November 2011 on the grounds of renunciation would have been premature, notwithstanding several months of late payments of hire and dishonoured promises to pay. But in addition, on the tribunal’s approach, the owners would also have to be careful, assuming that they had correctly judged that there had been a renunciation of the charterparty, not to be too late in accepting the renunciation as terminating the charterparty. On the facts of this case and on the approach of the tribunal the owners had to be careful to exercise their right to terminate between 7 November and the date between 11 and 14 November when, on the tribunal’s finding, the owners had affirmed the charterparty. It was said that in the context of renunciation of a charterparty by a charterer it was uncommercial for the owners to have a window of no more than a week within which to bring the charterparty lawfully to an end. Mr. Gunning said that this showed that the tribunal’s approach to affirmation must have been wrong in law. However, whether or not the tribunal’s approach was wrong in law must depend upon the owners being able to identify the error or errors of law made by the tribunal.

Mr. Gunning submitted that by saying in paragraph 106 that the owners had a reasonable time in which to consider whether to accept the renunciation the tribunal had used a test which is appropriate where the charterparty provides an express option to withdraw in certain circumstances (see for example, The Laconia [1977] AC 850 at p.872D per Lord Wilberforce) but is not appropriate where the question is whether the owners have affirmed the charterparty following a renunciatory breach which is continuing. Further, he submitted that there was no reason for treating the reasonable time as “necessarily bookended” by the date on which the owners had decided to exercise its right to terminate, as the tribunal did in paragraph 106. These two errors led up to and explained the tribunal’s error in paragraph 108 that the owners must terminate the charterparty immediately upon the expiry of the reasonable time.

I am unable to accept that the approach of the tribunal manifests an error of law in the manner suggested. In paragraphs 106-107 the tribunal was concerned to explain why there had been no affirmation between 7 November 2011 (when a reasonable owner in the position of the claimant owners would have been entitled to conclude that the charterers had renounced the charterparty) and 11 November (when the owners had determined to terminate the charterparty) notwithstanding that during that period of 5 days the charterparty had remained on foot and the owners had complied with it. The tribunal said in paragraph 106 that the owners had a reasonable period of time in which to consider whether to accept the renunciation. This was an unexceptional approach. First, it must be a matter of common sense that an innocent party is entitled to a reasonable period of time in which to decide whether to accept a renunciation. Second, such an approach is consistent with the approach of Rix LJ in Stocznia v Latco [2002] 2 Lloyd’s Reports 436 at paragraph 87 where he said:

“In my judgment, there is of course a middle ground between acceptance of repudiation and affirmation of the contract, and that is the period when the innocent party is making up his mind what to do. If he does nothing for too long, there may come a time when the law will treat him as having affirmed.”

Mr. Gunning said that Rix LJ made no mention of the innocent party having “a reasonable period” in which to decide whether to accept a renunciation and that all that Rix LJ was saying was that if the innocent party “does nothing for too long” the innocent party may be treated as having affirmed and that the circumstances Rix LJ had in mind were that another event may prejudice the innocent party’s rights (such as frustration or the innocent party’s own breach) or the party in repudiation may resume performance. It is true that Rix LJ pointed out that the innocent party ran the risk that an unaccepted renunciation, being a thing “writ in water” until acceptance, could be overtaken by other events such as those mentioned. But the effect of what Rix LJ said before pointing that out was that the innocent party had a reasonable period of time in which to make his mind up what to do. This is how his observation is understood in Chitty on Contracts Vol.1 at paragraph 24-002. Having quoted from Rix LJ’s judgment the editors say:

“The length of the period given to the innocent party in order to make up his mind will very much depend upon the facts of the case. The period may not be a long one because a party who does nothing for too long may be held to have affirmed the contract. The length of time will also depend upon the time at which the innocent party’s obligations fall due for performance.”

The tribunal expressly considered what time was reasonable in this case and concluded that it could not be any later than 11 November 2011 because on that day the owners had made up their mind to accept the breach and on the following day instructed the master not to comply with the charterers’ order to proceed to Hong Kong after the completion of discharge. It was submitted by Mr. Gunning that there was no legal basis for this finding and that the fact that an innocent party had internally made up its mind did not assist in showing that the outward conduct of the innocent party was capable of one construction only, namely, affirmation of the contract. But in my judgment all that the tribunal did was to note that by 11 November 2011 the owners had themselves concluded that they would accept the charterers’ renunciation as terminating the charterparty. That must be very good evidence that no period longer that that between 7 and 11 November was required for an innocent party to make up his mind as to what to do on the facts of this case. The “legal basis” for the tribunal’s finding was evidential.

Having found that the owners were entitled to the period from 7-11 November 2011 to decide whether to accept or affirm it followed, as the tribunal concluded in paragraph 107, that the owners’ compliance with the charterparty during that period (Mr. Gunning’s “outward conduct”) could not be regarded as an unequivocal affirmation of the charterparty.

I can therefore detect no error of law in paragraphs 106 and 107.

In paragraph 108 the tribunal said that the owners did not withdraw the vessel immediately. Mr. Gunning submitted that the tribunal wrongly considered that the owners were required to terminate the charterparty immediately after the expiry of the reasonable period for deciding what action to take. I do not accept that submission. In paragraph 106 the tribunal said that after the expiry of the reasonable period the question was whether the owners had acted “in a manner consistent only with their treating the contract as still alive.” This is not a statement that the owners were required to terminate the charterparty immediately upon the expiry of the reasonable period. The first sentence of paragraph 108, in my judgment, did no more than note that the owners did not withdraw the vessel immediately. The tribunal did not there say that the owners were required to withdraw the vessel immediately. Rather, the tribunal, having noted that there had been no immediate withdrawal, went on to consider what the owners in fact did after the expiry of the reasonable time and asked itself whether that conduct was capable of only one construction, namely, that the owners had chosen to forgo their right to withdraw the vessel. That is the correct approach to adopt. I must therefore reject the first suggested error law.

The conduct which the tribunal relied upon as amounting to an unequivocal affirmation of the charterparty was “allowing the vessel to remain in the service of the charterers for the purposes of discharging the cargo.” This amounted to “continued compliance with the charterparty” and was “a clear affirmation”. It was “conduct capable of one construction only, namely, that the Claimants had chosen to forego their rights.”

Mr. Gunning submitted that allowing the vessel to remain in the service of the charterers for the purposes of discharging the cargo could not be an unequivocal affirmation of the charterparty. He had four reasons for making this submission.

First, he said that allowing the vessel to complete discharge was clearly capable of more than one construction, the most obvious being that the owners were going to allow the discharge of the cargo to be completed before terminating the charterparty. Mr. Gunning said that discharge had commenced before 11 November 2011 and that if discharge was not an unequivocal affirmation before 11 November it could not become such after 11 November 2011. There is no express finding that discharge had commenced before 11 November 2011 but even if discharge had started before 11 November 2011 there was a clear difference between the period before 11 November and the period after 11 November 2011, namely, that before 11 November 2011 compliance with the charterparty could not amount to affirmation because it was within the period during which the owners were making up their mind what to do. Once that period had expired that could no longer be said and the sole question was whether the owners’ conduct could only be explained as an affirmation of the charterparty. The tribunal considered that very question and concluded that allowing the vessel to remain in service for the purposes of discharging the cargo was an unequivocal affirmation of the charterparty.

The tribunal expressly recognised “the commercial reasons which gave rise to the Claimants’ desire to relieve themselves of the expense and responsibility of delivering the cargo before withdrawing the vessel.” This must have been a reference to the fact that under a charterparty on the New York Produce Exchange Form it is the charterers’ obligation to discharge the cargo at its expense. Thus, in order to ensure that the owners did not have to pay for the costs of discharge the owners complied with the charterparty until discharge was complete. The tribunal understood that but concluded that “the continued compliance with the charterparty was a clear affirmation.” There was undoubtedly compliance with the charterparty after 11 November 2011 and the tribunal, having given itself the correct direction in law, concluded that in circumstances where the owners had had a reasonable time to decide what to do the owners chose to comply with the charterparty throughout the weekend until the Monday morning when discharge was complete. The tribunal decided that such conduct was capable of one construction only, namely, that the owners had affirmed the charterparty. This was not a judgment based upon “the mere act of continuing to discharge cargo” but upon the act of permitting the charterers to discharge at their expense pursuant to the charterparty. It is probably true that that the Owners had decided to allow discharge to be completed before terminating the charterparty. But the question the tribunal grappled with was whether that could be done without affirming the charterparty. The tribunal decided that it could not.

The second argument advanced by Mr. Gunning in support of the discharge point was that construing the owners’ conduct as allowing the discharge of the cargo to be completed before terminating the charterparty was consistent with the owners’ message to the master on 12 November 2011 and their orders that following departure from Bayuquan the vessel should find a suitable area to await further instructions. I agree that the owners’ message and instructions to the master were consistent with a decision to allow discharge to be completed before the charterparty was terminated. But the question considered by the tribunal was whether allowing the discharge of the cargo to be completed at the expense of the charterers was an affirmation of the charterparty. The tribunal held that it was.

The third argument advanced by Mr. Gunning in support of the discharge point was that compliance with the charterparty could not be regarded as an unequivocal affirmation of it because until termination the charterparty necessarily remained on foot. It is true that until termination the charterparty remained on foot but that does not mean that the owners had no option but to continue to comply with the charterparty. After 11 November 2011 the owners had a choice whether to accept the renunciation as terminating the charterparty or to affirm the charterparty. The owners did not have to go on complying with the charterparty. The tribunal held that they chose to do so in order to ensure that they did not have to bear the costs of discharge. The tribunal concluded that this was a clear affirmation of the charterparty.

The fourth argument was that the tribunal wrongly discounted the owners’ repeated reservation of their rights. However, in my judgment the tribunal did not “wrongly” discount the owners’ reservation of their rights. The tribunal held that in circumstances where, in the tribunal’s view, the owners had acted in a manner which was inconsistent with withdrawing the vessel they had lost the right to do so because they had affirmed the charterparty.

Having considered the various arguments advanced by counsel in support of the discharge point I have concluded that the owners have not identified any error of law committed by the tribunal. In truth, it seems to me, the owners are naturally disappointed by the tribunal’s finding and have sought to challenge a finding of fact by seeking to dress it up as a question of law.

It is appropriate at this stage to consider the owners further argument that no reasonable tribunal, properly directed as to the law, could have reached the conclusion that the owners had affirmed the charterparty and therefore the tribunal must have erred in law; see The Chrysalis [1983] 1 WLR 1469 at p.1475 per Mustill J. To make good this argument the owners must show that a correct application of the law would inevitably lead to only one answer, namely, that there had been no affirmation.

In Yukong Line v Rendsburg Investments [1996] 2 Lloyd’s Reports 604 at p.608 Moore-Bick J. said that:

“the Court should not adopt an unduly technical approach to deciding whether the injured party has affirmed the contract and should not be willing to hold that the contract has been affirmed without very clear evidence that the injured party has indeed chosen to go on with the contract notwithstanding the other party’s repudiation.”

The guidance of Moore-Bick J in Yukong Line v Rendsburg Investments was, I was told, cited to the tribunal, and indeed the case is mentioned in Chitty on Contracts Vol.1 at paragraph 24-003, to which paragraph the tribunal expressly referred.

A tribunal which is required to determine whether an innocent party has affirmed a contract has to exercise a judgment. The guidance given by Moore-Bick J makes clear that the exercise of such judgment is not a mechanical exercise. Where a judgment has to be made not all tribunals may reach the same conclusion. Evidence which one tribunal may judge to be “clear evidence” that the innocent party has chosen to go on with the contract notwithstanding the other party’s renunciation of the contract may be judged by another tribunal not to be such “clear evidence”. Similarly, conduct which one tribunal may consider to be an unequivocal act capable of one construction only, namely, that the innocent party has chosen to waive its right to terminate the contract may be regarded by another tribunal as an equivocal act, capable of more than one construction.

I accept that it is possible that another tribunal might have concluded on the facts of the instant case that there was no affirmation. Another tribunal might have reasoned that in circumstances where (i) the owners had clearly decided on 11 November 2011 to terminate the charterparty and had so informed the master on 12 November 2011 and where (ii) the cargo which had been loaded on board the vessel during the currency of the charterparty had to be discharged it was an “unduly technical approach” to regard the continuance of the charterparty over the weekend of 12/13 November 2011 to enable the cargo to be discharged as an unequivocal affirmation of the charterparty by the owners. Similarly, another tribunal might not have regarded the conduct of the owners as “clear evidence” that they had determined to go on with the charterparty, notwithstanding the renunciation of the charterparty by the charterers.

However, the tribunal which decided this case was well aware that there had to be clear evidence of affirmation and unequivocal conduct capable of one construction only and the tribunal concluded that continued compliance with the charterparty was “a clear affirmation” of it and “wholly inconsistent with [the owners’] accrued right to withdraw the vessel.” It was the task of the tribunal, having found the relevant primary facts and having properly directed itself as to the law, to apply the law to the facts. The resulting answer involves a judgment and so, as explained by Mustill J. in The Chrysalis, there is no “right” answer but a choice of answers, none of which can be described as “wrong”. That is, I consider, the case here.

I am therefore unable to say that the correct application of the law of affirmation to the facts of this case must inevitably lead to only one answer, namely, that there had been no affirmation. It follows that it cannot be concluded that the tribunal must have misunderstood the principles it directed itself to apply and so must have erred in law. It is not for the court to substitute for the tribunal’s answer the answer it might have given had it been the tribunal of fact. The parties have chosen to have their dispute resolved by an arbitral tribunal and not by the court. The court must respect that choice.

The appeal on the first two suggested errors must therefore be dismissed.

Mr. Gunning submitted that in circumstances where the charterers had continued to renounce the charterparty after the owners’ affirmation the owners were entitled to terminate the charterparty on 14 November 2011. The principle relied upon by the owners in this regard is that where the innocent party has affirmed the contract but the renunciation continues the innocent party may thereafter accept the continuing renunciation as terminating the contract. It was common ground that this point had been argued before the tribunal and yet, notwithstanding (as it was said by owners) that the charterers’ renunciation clearly continued until 14 November 2011, the tribunal made no mention of it.

The principle upon which reliance is placed is derived from Johnson v Agnew [1980] AC 367 at p.398 per Lord Wilberforce, Safehaven v Springbok [1996] 71 P&CR 59 at p.68 per Jonathan Sumption QC sitting as a deputy high court judge and Stocznia v Latco [2002] 2 Lloyd’s Reports 436 at paragraph 96 per Rix LJ.

Mr. Edey QC on behalf of the charterers submitted that in order for the innocent party to accept a renunciation after he had affirmed the contract there must be evidence of words or conduct by the other party which clearly demonstrate that he is continuing to renounce the contract notwithstanding the affirmation.

The two authorities which particularly touch on this point are Safehaven v Springbok and Stocznia v Latco.

In Safehaven v Springbok Jonathan Sumption QC noted that in Johnson v Agnew the House of Lords declined to treat an affirmation as irrevocable so as to prevent the innocent party from bringing the contract to an end when the repudiating party persisted in his failure to perform. He then said as follows at p.68:

“It does not follow from this analysis that the innocent party may in all cases change his mind after affirming the contract. If, for example, after he had affirmed it, the repudiating party’s conduct suggested that he proposed to perform after all, then that party’s previous repudiation is spent. It has no further legal significance. If, on the other hand, the repudiating party persists in his refusal to perform, the innocent party may later treat the contract as being at an end. The correct analysis in this case is not that the innocent party is terminating on account of the original repudiation and going back on his election to affirm. It is that he is treating the contract as being at an end on account of the continuing repudiation reflected in the other party’s behaviour after the affirmation. ”

The reference to the “other party’s behaviour after the affirmation” shows that it is not enough to rely simply upon the renunciation before the affirmation but that attention must be directed to the party’s behaviour after the affirmation. This is also shown by a further passage in the judgment on p.69:

“A refusal to perform a contract can amount to a repudiation only if it is absolute and goes to the root of the contract. The words or conduct said to demonstrate this must, moreover, do so clearly and unequivocally. This is as much true of words and conduct said to demonstrate that a party is persisting in an earlier repudiation as it is of the earlier repudiation itself.”

The statements of principle by Mr. Sumption were approved by the Court of Appeal in Stocznia v Latco [2002] 2 Lloyd’s Reports 436 at paragraph 96 per Rix LJ. In his judgment Rix LJ considered whether and in what circumstances a continuing repudiation after affirmation could be inferred from silence. He accepted that silence may not be mere silence but said that the silence in Stocznia v Latco was:

“overlaid with all that had gone before. It was a speaking silence. The difficulty with silence is that it is normally equivocal. Where, however, it is part of a course of consistent conduct it may be silence which not only speaks but does so unequivocally. Where silence speaks, there may be a duty on the silent party in turn to speak to rectify the significance of his silence.”

Accordingly, in a case of renunciation or anticipatory breach of contract (as opposed to a repudiation based upon an actual breach) the tribunal of fact must carefully consider whether there were words or conduct after affirmation which demonstrate that the renunciation of the contract is continuing, so that a later acceptance of the continuing renunciation will be a legitimate termination of the contract.

Mr. Gunning submitted that it was clear that the charterers continued to renounce the charterparty after the affirmation and that therefore the court was able to consider whether the decision of the tribunal was correct in law or not. However, there was no express finding to that effect and I do not consider that I can draw an inference to that effect (assuming the court has power to do so, which is doubtful; see The Baleares [1993] 1 Lloyd’s Reports 215 at p.228 per Steyn LJ). Whether the charterers, by words or conduct after the owners’ affirmation, continued to renounce the charterparty cannot be said to an inference “truly beyond rational argument” (which Steyn LJ suggested the court might have power to draw). The answer to that question is clearly a matter of fact for the tribunal. If the charterers were silent after the owners’ affirmation of the charterparty it is for the tribunal to decide whether such silence was a “speaking silence.”

Mr. Edey submitted that in circumstances where the tribunal had made no finding that the charterers had continued to renounce the charterparty after the owners’ affirmation the continued renunciation point was academic.

It is true that the tribunal has made no such finding. But, having found that after 11 November there was an affirmation, the tribunal stated in the final sentence of paragraph 108 of its reasons that “it necessarily follows from the foregoing that the Claimant’s withdrawal of the vessel on 14 November was itself a repudiatory breach”. In a case of renunciation or anticipatory breach (as opposed to repudiation based upon an actual breach) it does not necessarily follow that a termination following an affirmation is a repudiatory breach. For if the renunciating party continues to renounce the contract after the affirmation then the acceptance of that continuing renunciation is not a repudiatory breach but a lawful termination of the contract with a right to damages caused by the renunciation. Accordingly, in my judgment, the tribunal erred in law in concluding that it necessarily followed from the owners’ affirmation after 11 November that the owners themselves committed a repudiatory breach on 14 November. That error of law explains the absence of a finding as to whether or not there was a continued renunciation. If the charterers’ renunciation of the charterparty continued until 14 November when the owners purported to accept the charterers’ renunciation as terminating the charterparty then that termination is likely to be lawful and not repudiatory.

It follows that the appeal on the continued renunciation point must succeed. I consider that the appropriate order is to set aside the award and remit it to the tribunal so that it may consider, in the light of this judgment, whether the charterers’ renunciation of the charterparty continued after the owners’ affirmation of the charterparty and if so whether the owners’ termination of the charterparty on 14 November was a legitimate termination of the charterparty rather than a repudiation of it. If the former then it will be necessary for the tribunal to assess the damages recoverable by the owners.

With regard to the first two questions of law in respect of which leave to appeal was granted, the reasonable period and discharge points, the appeal is dismissed. With regard to the third point in respect of which leave to appeal was granted, the continued renunciation point, the appeal succeeds and the award must be set aside and remitted to the tribunal in order that the tribunal may decide the continued renunciation point in the light of this judgment.