St Shipping & Transport Inc v Kriti Filoxenia Shipping Co SA

The tribunal was convened in order to resolve disputes between ST Shipping & Transport Inc (“charterers”) and Kriti Filoxenia Shipping Co SA (“owners”). The dispute arose under a voyage charterparty dated 14 March 2003 and made on the BEEPEEVOY 3 form. The charterparty was governed by English law. It was originally made by owners with Alpine Shipping Co of Monrovia Inc. (“Alpine”) but was novated to charterers on 28 March 2003.

At paragraph 5 of the award the tribunal commented that the arbitration had proceeded at a snail’s pace. A four day hearing took place in May 2013. At both the hearing before the arbitrators and the hearing before me Mr Richard Waller QC appeared on behalf of charterers and Mr Simon Bryan QC appeared on behalf of owners. The disputes between the parties arose from the fact that at 11:20 GMT+1 on 1 April 2003, while the vessel was on her way to her first load port, charterers cancelled the charterparty. Owners denied that charterers had a right to cancel and accepted the cancellation as a repudiatory breach of contract for which they claimed damages. Charterers denied liability. The tribunal found that owners’ claim succeeded in the amount of USD 737,393.

Permission to appeal on two questions of law was sought. It was granted by Teare J on 20 February 2014 on the basis that the questions were of general public importance and that the decisions of the tribunal on these questions were at least open to doubt.

The two questions of law are:

Q1 Whether, on the true construction of the Charterparty, the Charterers’ right to cancel the Charterparty pursuant to clause 17 thereof survives a re-nomination of the first load port pursuant to clause 24;

Q2 If the Charterers’ right to cancel the Charterparty pursuant to clause 17 does survive a re-nomination of the first load port, whether on the true construction of the Charterparty Charterers are nevertheless not entitled to cancel the Charterparty in circumstances where the re-nomination was made at a time when the ETA for the re-nominated port was after the Cancelling Date.

For convenience I refer below to the first question as “Q1” or “the survival question”. Similarly I refer below to the second question as “Q2” or “the re-nomination time question”.

The rival contentions on the survival question are, in broad terms:

In oral argument before me charterers made it clear that they accepted that clause 24 enabled them to give a revised order which owners must instruct the master to obey even if the lateness of the revised order would cause the vessel to miss her cancelling date. Owners’ response included an assertion of inconsistency: how could an unfettered ability to give such an order be consistent with charterers’ own acknowledgment that if their contentions were right then an implied fetter was needed? Charterers’ riposte was that the assertion of inconsistency misunderstood the duty of co-operation.

Turning to the rival contentions on the re-nomination time question, these only arise if the survival question is answered, “yes”. That answer will have the consequence that the right to cancel conferred by clause 17 applies when the first load port is varied under clause 24. In that event, it is common ground that, in order to avoid what would otherwise be absurd consequences, there is a need to imply a fetter on charterers’ ability to utilise the cancelling provisions in clause 17. As to what that fetter should involve:

In the present case these questions of law arise in circumstances where the re-nominated first load port was in a part of the load port range which, from the time she left her previous discharging port, the vessel would never have been able to reach by 1600 hours on the cancelling date. Thus, on the one hand, it was not the timing of the re-nomination that prevented the vessel from reaching the re-nominated first load port prior to 1600 hours on the cancelling date. On the other hand, however, at all times prior to the re-nomination the vessel was expected to reach the originally nominated first load port by 1600 hours on the cancelling date, and owners had, from the time that they received the original nomination, been proceeding on that basis.

The charterparty

The crucial clauses in the charterparty are clauses 17 and 24. For purposes of analysis, I set them out below divided into numbered and lettered constituent parts.

Accordingly clause 17, which comprises three paragraphs, can be set out in this way:

Laydays/Cancelling

[17.1(1)] Laydays for the purpose of this Charter shall be from 1^st April 2003 (‘the Commencement Date’) to 3^rd April 2003 (‘the Cancelling Date’).

[17.1(2)] Laytime for the purposes of loading shall not commence before 0600 hours local time on the Commencement Date unless with Charterers’ sanction in which event laytime shall commence when the Vessel commenced loading

[17.1(2A)] and should the Vessel not be ready to load by 1600 hours local time on the Cancelling Date Charterers shall have the option of cancelling this Charter.

[17.1(3)] Should the Vessel, with Charterers’ sanction, have commenced loading prior to the commencement of laytime, as provided above, then the time from such commencement of loading to the commencement of laytime shall constitute additional laytime for the purpose of loading and discharging and in respect of the period(s) referred to in Clause 18.

[17.2(1)] If it appears to Charterers that the Vessel will be delayed beyond the Cancelling Date

[17.2(2)] Charterers may require Owners to notify Charterers of the date on which they expect the Vessel to be ready to load

[17.2(3)] whereupon Charterers shall have the option to cancel this Charter and such option shall then be declared by Charterers within 96 hours, Sundays and holidays excepted, of the receipt of the said notification from Owners.

[17.2(4)] In the event of Owners giving such notification and Charterers not exercising their option to cancel within the stated period, the third day after the readiness stated in Owners’ notification, or such other date as may be mutually agreed, shall be the new Cancelling Date for the purpose of this Clause.

[17.2(5)] If Owners fail to give such notification when requested by Charterers, Charterers shall have the option to cancel this Charter at any time prior to the arrival of the Vessel.

[17.3] Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages Charterers may have for the Vessel not being ready to load by the original Cancelling Date stated in this Clause.

Both sides agreed that the option at [17.2(3)] only arose if owners’ notification under [17.2(2)] identified the vessel’s expected readiness to load as being after 1600 hours on the cancelling date.

Similarly clause 24 can be set out:

Orders for Discharge Ports or Places

[24.1] If, at any time after the Vessel has completed loading the cargo or part cargo, as the case may be, Charterers instruct the Vessel to await their orders at one or more locations, then all time spent by the Vessel awaiting orders as aforesaid shall count as laytime or, if the Vessel is on demurrage, as demurrage.

Revised Orders

[24.2(1)] If after any loading or discharge port or place has been nominated

[24.2(2)] Charterers desire to vary such port or place,

[24.2(3)] Owners shall issue such revised instructions as are necessary at any time to give effect to Charterers’ revised orders and

[24.2(4)] any period by which the steaming time taken to reach the alternative port or place exceeds the time which should have been taken had the Vessel proceeded thither directly shall count as laytime or, if the Vessel is on demurrage, as demurrage.

[24.2(5)] Charterers shall pay Owners for additional bunkers consumed during such excess time at the replacement price as paid by Owners substantiated by copies of such documents as Charterers may require.

Additional provisions in the charterparty of potential relevance include:

Loading and Discharge Ports Range

3.

Subject to the provisions of Clause 24, the Vessel shall proceed to 1/2 safe port(s) Black Sea excl Bulgaria, Romania, Turkey [the italicised words were inserted by the parties]

Cargo

or so near thereunto as she may safely reach, and there load a cargo of …

…

Loading/Discharge Place

4.

The Vessel shall be loaded and discharged at any port, berth, dock, anchorage, submarine line, single point or single berth mooring facility, offshore location, alongside vessels or lighters, or any other place whatsoever as ordered by Charterers. Charterers shall exercise due diligence before directing the Vessel to any such places to ascertain that the Vessel can always lie safely afloat, but Charterers do not warrant the safety of any of the aforementioned places and shall be under no liability in respect thereof except for loss or damage caused by the failure to exercise due diligence as aforesaid.

Lightening at Sea

If a port is nominated which cannot accommodate the Vessel with the quantity of cargo carried, Charterers undertake to discharge sufficient cargo at a previous port or place, or into vessels or lighters, to enable the Vessel to enter and lie at such nominated port or place. Freight shall be paid in accordance with Clause 6 and lighterage shall be at the expense of the Charterers.

A place of lightening at sea shall not constitute a discharge port or place under Clause 19, but all time used for a lightening operation (excluding any time lost or spent by reason of any of the causes stipulated in Clauses 20 and 21) shall count against the number of running hours stipulated in Clause 18 for the purpose of calculating Charterers’ liability, if any, for demurrage as provided in Clause 22. For the purpose of this Clause the lightening operation shall be deemed to commence when the Vessel is properly tied up and moored alongside the lightening vessel and to end when unmooring has been completed.

Subject to the preceding paragraph of this Clause, any additional steaming and/or waiting time used solely by reason of Charterers’ orders to lighten at sea shall count as laytime or, if the Vessel is on demurrage, as demurrage.

Ship to Ship Transfer Operations

If Charterers require the Vessel to trans-ship cargo from or into another ocean going vessel the trans-shipment operation shall be carried out in accordance with the recommendations set out in the latest edition of the ICS/OCIMF Ship to Ship Transfer Guide (Petroleum) and Owners undertake that the Vessel and her crew will comply with such recommendations. Charterers shall provide and pay for all necessary equipment including suitable fenders and hoses. Owners shall permit supervisory personnel nominated by Charterers to attend on board, including a Mooring Master, to assist in the trans-shipment operation. In the case of a ship to ship transfer freight shall be paid in accordance with the provisions of Clause 6.

No provision herein contained as to laytime and demurrage shall be affected by the provisions of Clause 46.

Shifting

5.

Charterers may require the Vessel to load at more than one berth at each loading port or place and to discharge at more than one berth at each discharge port or place in which event Owners shall, in the first instance, pay expenses arising from any of the following movements of the Vessel:-

(a)

unmooring at, and pilotage and towage off, the first loading or discharge berth;

(b)

mooring and unmooring at, and pilotage and towage on to and off, the intermediate loading or discharge berths; and

(c)

mooring at, and pilotage and towage on to, the last loading or discharge berth.

Charterers shall reimburse Owners in respect of expenses properly incurred arising from any of the aforementioned movements upon presentation by Owners of all supporting invoices evidencing prior payment by Owners.

Charterers shall reimburse Owners in respect of any dues and/or other charges incurred in excess of those which would have been incurred if all the cargo involved at the particular port or place had been loaded or discharged at the first berth only. Time consumed on account of shifting shall count as laytime or, if the Vessel is on demurrage, except as otherwise provided in Clause 20.

Port and Terminal Combinations

For the purpose of freight payment, the places grouped in Port and Terminal Combinations in the New Worldwide Tanker Nominal Freight Scale (hereinafter referred to as ‘Worldscale’), as amended at the date of this Charter, shall be considered as berths within a single port, Charterers reimbursing shifting expenses in accordance with the foregoing provisions.

Rate of Freight

6.

… Owners option to slow steam down to about 12 ½ knots weather and safe navigation permitting.

…

Inert Gas System

12.

Owners undertake that the Vessel is equipped with a fully functional Inert Gas System which is in use on the date hereof and shall so remain during the period of this Charter and that the officers and crew are properly qualified by way of certification for, and experienced in, the operation of such System. Owners further undertake that the Vessel shall arrive at the loading port with her cargo tanks inerted and that such tanks shall remain inerted throughout the voyage and the subsequent discharge of the cargo. Any time lost, whether or not the Vessel is on demurrage, owing to deficient or improper operation of the Inert Gas System shall be for the Owners’ account.

The Vessel’s Inert Gas System shall fully comply with Regulation 62, Chapter II-2 of the SOLAS Convention 1974 as modified by its Protocol of 1978 and Owners undertake that such System shall be operated by the officers and crew in accordance with the operational procedures set out in the IMO publication entitled ‘Inert Gas Systems 1983’ as may, from time to time, be amended.

If Charterers so require, Owners shall arrange for the Vessel’s tanks to be de-inerted to facilitate inspection, gauging and sampling. Any time taken in de-inerting, inspecting, gauging, sampling and re-inerting thereafter shall count as laytime or, if the Vessel is on demurrage, as demurrage.

…

Amount of, and Definition of, Laytime

18.

Charterers shall be allowed 96 [figure in italics added by the parties] hours, together with any period of additional laytime arising under the provisions of Clause 17 if Charterers sanction loading of the Vessel before the commencement of laydays, as laytime for loading and discharging and in respect of any period(s) when the Vessel, in accordance with Charterers’ instructions, is proceeding or operating as referred to in Clauses 4, 5, 12, 21, 24, 25, 26, 29, 30 and 31. Sundays and holidays shall be included in respect of laytime for loading or discharging unless loading or discharging on the Sunday or holiday in question is prohibited by law or regulation at the port or place of loading or discharge and Charterers shall have the right of loading and discharging during the night.

Commencement and Termination of Laytime/Demurrage for Loading and Discharge

19.

Subject only to Clauses 17, 20 and 21:-

(a)

laytime or, if the Vessel is on demurrage, demurrage shall at each loading and each discharge port or place commence at the expiry of 6 hours after Notice of Readiness to load or discharge has been received from the Master or his agents by Charterers or their agents, berth or no berth, or when the Vessel commences to load or discharge at the berth or other loading or discharging place, whichever first occurs. Such Notice of Readiness may be given either by letter, facsimile transmission, telegram, telex, radio or telephone (and if given by radio or telephone shall subsequently be confirmed in writing and if given by facsimile transmission confirmed by telex) but Notice of Readiness shall not be given, without Charterers’ sanction, before the commencement of laydays; and

(b)

laytime or, if the Vessel is on demurrage, demurrage shall run until the cargo hoses have been finally disconnected upon termination of loading or discharging, such disconnection to be effected promptly; provided always that if the Vessel is detained for more than 2 hours beyond the final disconnection of hoses by the shore terminal solely for the completion of cargo documentation and the presentation of such documents on board the Vessel, laytime or, if the Vessel is on demurrage, demurrage shall re-commence after such period of 2 hours and terminate upon the completion of cargo documentation.

Suspension of Laytime/Demurrage for Loading and Discharge

20.

Time shall not count against laytime or, if the Vessel is on demurrage, for demurrage when spent or lost:-

(a)

on an inward passage, including awaiting daylight, tide, opening of locks, pilot, or tugs and moving from anchorage, even if lightening has taken place at the anchorage, until the Vessel is securely moored at the berth or other loading or discharging place specified by Charterers;

(b)

due, whether directly or indirectly, to breakdown, inefficiency or other cause attributable to the Vessel and/or Owners, including inability of the Vessel to pump out the cargo at the rate indicated in Clause 16 after taking account of any variations in back pressure;

(c)

as a result of a labour dispute, or strike, involving Master, officers or crew of the Vessel or tugs or pilot;

(d)

in, or in connection with, the handling of ballast unless this is carried out concurrently with loading or discharging such that no loss of time is involved; and

(e)

in cleaning tanks, pumps and pipelines.

Nothing herein contained shall be affected by the provisions of Clause 46.

Laytime/Demurrage/Force Majeure

21.

Any delay(s) arising from adverse weather or sea state conditions, fire, explosion, breakdown or failure of equipment, plant or machinery in or about ports or places of loading and/or discharge, Act of God, act of war, labour dispute, strike, riot, civil commotion, or arrest or restraint of princes, rulers or peoples or force majeure [the italicised words were inserted by the parties] shall, provided always that the cause of the delay(s) was not within the reasonable control of Charterers or Owners or their respective servants or agents, count as one half laytime or, if the Vessel is on demurrage, at one half of the demurrage rate.

…

Ice on Voyage

29.

If on passage to the nominated port or place of loading or discharge the Master finds that the port or place is inaccessible owing to ice he shall immediately request Charterers by radio for revised orders and remain outside the area of ice-bound water. The terms governing such time awaiting orders shall be in accordance with the provisions of Clause 24. Upon receipt of such request Charterers shall give orders for the Vessel to proceed to an alternative ice-free and accessible port or place where there are facilities for receiving or delivering the cargo. In this event freight shall be paid at the rate applicable under this Charter to such alternative loading or discharge port or place, and any period by which the steaming time taken to reach such alternative port or place exceeds the time which should have been taken had the Vessel proceeded thither direct shall count as laytime or, if the Vessel is on demurrage, as demurrage.

Ice at Loading/Discharge Ports or Places

30.

If, on or after the Vessel’s arrival at a nominated port or place of loading or discharge, there is a danger of the Vessel being frozen in, the Master shall proceed to the nearest safe and ice-free position and at the same time request Charterers by radio for revised orders. Upon receipt of such request Charterers shall give orders for the Vessel either to proceed to an alternative ice-free and accessible port or place, where there is no danger of the Vessel being frozen in and where there are facilities for receiving or delivering cargo, or to return to and load or discharge at the nominated port or place. If the Vessel is ordered to an alternative port or place the sum in respect of freight and delay to be paid by Charterers shall be as provided in Clause 29, but if the Vessel loads or discharges at the nominated port or place, then, subject to the provisions of Clauses 19, 20 and 21, the whole of the time occupied from the receipt of Notice of Readiness to load or discharge on the Vessel’s first arrival until hoses are disconnected after the completion of loading or discharge shall count as laytime, or if the Vessel is on demurrage, as demurrage. Any delay after the final disconnection of shore hoses caused by ice by reason of the Vessel returning to the nominated port or place on Charterers’ instructions shall count as laytime or, if the Vessel is on demurrage, as demurrage.

Quarantine

31.

Should Charterers require the Vessel to proceed to any port or place at which, at the time the Vessel is ordered to that port or place, there is quarantine time shall count as laytime or, if the Vessel is on demurrage, as demurrage whilst the Vessel is detained, but should quarantine be declared only whilst the Vessel is on passage to the port or place Charterers shall not be liable for any delay caused by such quarantine.

…

Estimated Times of Arrival

40.

If the Master fails to comply with any of the following provisions any delay, either at a loading or discharge port or place, resulting therefrom shall not count as laytime or, if the vessel is on demurrage, as demurrage and owners shall be responsible for any additional costs incurred by charterers arising from such non-compliance.

The Master shall send messages by radio or telex to charterers addressed ‘BP Shipping London’ and to the agents at the loading port or place advising the date and approximate hour of the vessel’s arrival. Such messages shall be sent upon the vessel’s sailing from the prior discharge port and 7 days and 72, 48 and 24 hours prior to the vessel’s estimated arrival at the loading port or place. Should the vessel be at sea or elsewhere when ordered by owners to proceed to the loading port or place the Master shall, if the vessel is less than 7 days or 72/48/24 hours, as applicable, from the loading port or place, immediately notify charterers and the agents of the vessel’s ETA in the manner aforesaid and thereafter notify charterers and the agents of the vessel’s ETA at such of the times as aforesaid as are applicable or immediately provide charterers with such other ETAs as charterers may request.

The Master shall notify charterers and the agents of the vessel’s ETA at the discharge port or place in the manner aforesaid also providing information as to the vessel’s expected arrival draught on even keel salt water either upon the vessel leaving the previous port or place or 72 hours prior to her estimated arrival at the discharge port or place, whichever is the later. Thereafter the Master shall notify charterers and the agents of the vessel’s ETA together with the information as aforesaid 48 and 24 hours, as applicable, from the discharge port or place or immediately provide charterers with such other ETAs as charterers may request.

The Master shall advise charterers and the agents promptly by radio or telex of any variation of more than 6 hours in estimated dates or times of arrival at the loading and/or discharge port or place.

Should the voyage involve passing the Cape of Good Hope the Master shall, on passing the Cape of Good Hope, send an additional radio or telex message to charterers, advising the vessel’s ETA off Land’s End or at the discharge port or place if already nominated, stating also the estimated arrival draught on even keel salt water.

Charterers shall have the right to see copies of all telexes (showing answerbacks) referred to in this clause.

…

Exceptions

46.

The provisions of Articles III (other than Rule 8), IV, IV bis and VIII of the Schedule to the Carriage of Goods by Sea Act, 1971 of the United Kingdom shall apply to this charter and shall be deemed to be inserted in extenso herein. This charter shall be deemed to be a contract for the carriage of goods by sea to which the said Articles apply, and owners shall be entitled to the protection of the said Articles in respect of any claim made hereunder.

Charterers shall not, unless otherwise in this charter expressly provided, be responsible for any loss or damage or delay or failure in performance hereunder arising or resulting from Act of God, act of war, seizure under legal process, quarantine restrictions, labour disputes, strikes, riots, civil commotions, arrest or restraint of princes, rulers or peoples, or force majeure. [The italicised words were added by the parties].

The Award

Much of the award was taken up with the resolution of issues of fact. I need not recount those issues. The tribunal summarised relevant findings in paragraph 35 of their reasons at sub-paragraphs (a) to (f). I set them out, with minor revisions to the wording and with the addition of new sub-paragraphs [dd], [g] and [h] for completeness.

(a)

on 28 March 2003 at 18:23, charterers nominated Tuapse as the first (and probably the only) loading port;

(b)

the vessel sailed from the previous discharging port of Santa Panagia on 30 March at 19:00 hours with an ETA Tuapse on 3 April at 14:00 hours;

(c)

on 31 March at 11:13, charterers requested ETAs for Tuapse and two other ports. These were given at 15:04 hours on the same day, for Tuapse (12:00 on 3 April), Sevastopol (03:00 on 3 April) and Batumi (03:00 on 4 April);

(d)

at 16:04 (or 17:30) on 31 March, charterers gave a revised order nominating Batumi as the (first) loading port;

[dd] at 21:02 on 31 March, owners confirmed their ETA for Batumi, which remained 03:00 on 4 April;

(e)

between 10:52 and 11:10 on 1 April, the master confirmed 03:00/4 April as the ETA Batumi; and

(f)

at 11:20 on 1^st April 2003, charterers gave notice to cancel the Charterparty “…AS ETA ADVISED BY OWNERS IS OUTSIDE LAYCAN…”.

[g] at this time the vessel had not yet reached the Black Sea, and thus had been following, and was continuing to follow, a route which would, until she exited the Bosporus, be identical for all three of the ports mentioned at (c) above; the deviation point for each of Sevastopol and Batumi would be on entering the Black Sea, but at 1120 on 1 April 2003 the vessel had yet to reach the Dardanelles;

[h] at 11:56 hours (GMT+1) on 2 April 2003, the owners e-mailed the charterers stating that the charterers’ purported cancellation was wrongful and that the owners accepted it as a repudiatory breach of the charterparty.

The issues were identified by the tribunal at paragraph 36 of the reasons:

(a)

was there a right to cancel for the vessel’s estimated late arrival at Batumi – the proper construction of clauses 17 & 24;

(b)

did the cancelling date of 16:00 hours local time on 3 April 2003 remain related to Tuapse;

(c)

was the revised order to Batumi valid (including whether it was invalidated (i) by a requirement to load a non-contractual cargo, (ii) because the revised order was not given within a reasonable time, and (iii) because it was not given in good faith); and

(d)

were the requirements of clause 17 satisfied?

The tribunal’s conclusions on issues (b), (c)(i), (c)(iii), and (d) are not challenged. I refer in section E5 below to an observation made by the tribunal when discussing charterers’ contentions on issue (b). Subject to that, I focus below on issue (a), which corresponds to Q1, and issue (c)(ii), which corresponds to Q2.

On issue (a) the tribunal observed that they were not concerned with the cancellation right set out in the first paragraph of clause 17. That right was exercisable only after a failure to arrive within the laydays. The tribunal noted that the present case concerned the second paragraph of clause 17, which provided:

a mechanism whereby the charterers acquired a right to cancel the charterparty in advance of the vessel’s failure to be ready to load by 16:00 hours local time.

Turning to clause 24, the tribunal noted that the second paragraph of that clause:

deals with what is to happen if, as the clause implies is permitted, a charterer having already nominated a loading port or a discharging port, changes its voyage orders by nominating a different loading port or a different discharging port. … it obliges the owners to give the master such instructions as may be necessary to ensure that the revised orders are followed. …

When summarising owners’ contentions on issue (a), the tribunal noted that owners cited a number of unsatisfactory situations that could arise if the cancelling date were to apply to the alternative port in the event of a revised order. For example:

(i)

a revised order could take place minutes before a vessel became an arrived ship and was ready to load at the original loading port (in this case, for example, at 15:30 hours on 3^rd April 2003) making it impossible to arrive at the alternative loading port by the cancelling date; or

(ii)

the vessel could be ordered to the furthest loading port in the range (and be in time to reach it within the cancelling date) only to be ordered to retrace her course back to a port in the range on or off the route previously followed but closer than the first nominated loading port; or

(iii)

a charterer could keep giving revised orders for alternative ports in the load port range until a vessel ran out of time for the purpose of the cancelling date; or

(iv)

to arrive within the laycan window, an owner could steam to the nominated loading port at an economical speed, only for the charterer later to revise the voyage orders to require the vessel to load at a more distant port.

In argument before the tribunal owners relied upon another example. For convenience, I shall number it [v]:

[v] where there is a wide-geographical range with (say) 4 days steaming time between ports within the range … [it] cannot be seriously suggested that an owner should speed at maximum speed to the first (nominated port), and so arrive (say) two days before the laycan (thus suffering considerable financial loss) just in case a charterer chose later to renominate the most distant port away in the load port range. In such circumstances, the owner would suffer loss by way of additional bunker consumption (in steaming at uneconomical speeds to each first load port on every voyage) but also during the waiting time; laytime would not commence until the start of the laycan (unless loading started early) but where, for instance, the owner had time chartered the vessel, they would need to pay the daily hire rate for that time.

Charterers’ answers to examples (i) to (iv) were described in paragraph 55 of the reasons:

… charterers said of the first three examples that the vessel missed the laycan because of the lateness of the revised order. In such circumstances because a late nomination would amount to a breach of the duty of co-operation, a charterer’s right of cancellation would not be exercisable. As for the fourth example, if there is a right to revise the voyage orders and change the loading port, then an owner should instruct the vessel to proceed at a speed which will ensure that she can reach the furthest port in the range just in case the nomination is changed prior to the deviation point. Where such a right is present, an owner is not entitled to perform the approach voyage or to make other assumptions on the basis that the nominated loading port will not be changed by a subsequent revised order. In short, the charterers’ case was that a requirement that the revised order be made within a reasonable time would create an arrangement that would make the application of the cancelling date to an alternative first loading port perfectly workable.

When summarising charterers’ contentions on issue (a) the tribunal noted, at paragraph 48 of the reasons, two points which I shall distinguish by dividing paragraph 48 into two parts, 48.[1] and 48.[2]:

48.[1] The charterers argued that if, as here, the charterparty allowed the charterers to revise their orders by nominating a different loading port, while accepting that the original nomination of Tuapse was written into the charterparty and was the contractual loading port, they said it was written ‘in pencil’. The effect of this was that when the charterers gave the revised order to Batumi, it replaced Tuapse as the contractual loading port and was therefore subject to the laycan regime contained in clause 17.

48.[2] They favoured what they described as a commercial common sense approach to the interpretation of the clauses and they too cited an unsatisfactory situation arising, in their case, from the owners’ construction. For example, if a revised order were made 10 minutes after the first nomination, a charterer would lose the significant commercial benefit represented by the laycan regime. The ship, they said, could present as ready to load before the laycan when the cargo was not ready or arrive after the laycan when the cargo may no longer be available.

The reasons then set out the tribunal’s explanation of why they concluded that following the revised order under clause 24, the cancellation provisions of clause 17 ceased to apply and in particular that those provisions did not apply to the alternative loading port of Batumi thus re-nominated. I discuss that explanation when examining charterers’ criticisms of it. Those criticisms fell into five categories, each concerned with particular aspects of the tribunal’s reasons. Those aspects, and the sections below where I discuss them, are:

The tribunal noted that if their conclusion on issue (a) were correct, then issue (c)(ii) did not arise. On issue (a) they had held that the cancelling provisions of clause 17 did not apply in the case of a revised order. Consequently, issue (c)(ii) (whether the revised order was given within a reasonable time) fell away: if there was no risk of cancellation for late arrival at the alternative port, there was no need for the revised order to be given within a reasonable time in order to avoid the cancellation. It was only if they were wrong and the right to cancel survived that it was necessary to consider how the reasonable time should be calculated.

The tribunal recorded that owners submitted that if the cancellation provisions survived re-nomination, then the duty of co-operation would require that the revised order be given within a reasonable time. As to the need to avoid cancelling date lateness, owners contended for a modified version of the cancelling date achievability provision described in section A1 above. What they contended for in this regard was a limitation so that a reasonable time must be:

(a)

not so late as would mean that, because of the lateness of the revised order, the vessel could not make her cancelling date …

As to the need to avoid delay, owners contended for a modified version of the utilisation ability provision identified in section A1 above. What they contended for in this regard was a limitation so that a reasonable time must be:

(b)

early enough to ensure that the vessel suffered no delay resulting from the timing of the revised order.

The tribunal recorded that in principle the charterers agreed with owners’ proposed modified cancelling date achievability provision. However, that apparent agreement was qualified. Paragraph 76 of the reasons stated in this regard that charterers:

… relied on the fact that power given to them by clause 24 could be exercised without financial cost to the owners because:

(1)

if the revised order was given before the vessel arrived at the deviation position (the position where the revised order made it necessary for the vessel to deviate from her course to the first port nominated), there was no additional steaming time or distance compared with the direct voyage to the alternative port; and

(2)

if the revised order was given after the deviation position, clause 24 provided for an indemnity against any additional cost incurred and allowed additional laytime or demurrage, as the case may be, if the overall voyage time was increased.

The charterers argued, therefore, that limitation (a) could not preclude a revised order prior to the vessel’s arrival at the deviation position and it was only if the need to deviate caused the vessel to arrive after the cancelling date that the charterers would not be able to exercise their option to cancel.

Turning to owners’ proposed modified utilisation ability provision, the tribunal noted that charterers suggested that this was not justified. Instead, charterers argued that:

(i)

until the vessel’s arrival at the deviation position, they possessed an unfettered right to give revised orders for an alternative loading port within the charterparty range; and

(ii)

only after the vessel passed the deviation point would the charterers have to pay for the extra steaming time and extra bunkers associated with the Revised Order, as set out in clause 24.

After dealing with factual questions as to the revised order and as to ETAs at Tuapse and Batumi, the tribunal returned to the question of what would, on the assumption that the cancelling provisions survived the re-nomination, constitute a reasonable time. At paragraph 111 of the reasons, the tribunal posed the question in this way:

The vessel was not delayed or prevented from reaching Batumi before the (assumed) cancelling date by the lateness of the revised order to proceed there, but when the revised order was given, the current ETA for Batumi was after that time. Knowing that ETA, could the charterers first substitute Batumi as the first loading port and then cancel the charterparty under the second paragraph of clause 17, if its cancellation provisions applied, on the ground that the vessel would be late arriving there?

The reasons then set out the tribunal’s explanation of why they answered that question in the negative. For convenience I discuss that explanation under six heads:

The case law

As regards the duty of co-operation, both parties referred to what had been said by the House of Lords in Mackay v Dick [1881] 6 App Cas 251. Relevant parts of the judgment in that case are set out in section D2 below. Mackay v Dick was not a shipping case. Background principles from shipping cases include the circumstances in which a cancelling clause may be invoked, and the general position under which a charterer need not have regard to owners’ convenience. I deal with these topics in sections D3 and D4 below. In section D5 below I deal with more recent cases.

In Mackay v Dick the House of Lords (Lord Selborne LC, Lord Blackburn and Lord Watson) was concerned with a Scottish appeal. The Court of Session had held that the appellant (Mr Mackay, a railway contractor) was liable to pay the respondents (Messrs Dick & Stevenson, engineers) the price of a patent steam-excavating machine which they had manufactured and supplied.

Findings made by the Court of Session, referring to Mr Mackay as “the Defender” and Messrs Dick & Stevenson as “the Pursuers” included the following:

(2)

… it was a condition of the … contract, that the Defender should not be bound to accept and pay for the said machine if it should fall short of digging and filling into waggons 350 cubic yards of clay, or other soft substances, within a day of ten hours, in a certain railway cutting which the Defender was about to make, called the Carfin cutting, after it is fairly tried on a properly opened-up face;

(3)

… it was impossible that the machine should have the stipulated fair trial, unless the Defender provided a properly opened-up face at the said Carfin cutting;

(4)

… the Defender failed to provide such properly opened-up face, notwithstanding repeated demands on the part of the Pursuers, and thus prevented the machine from being tested in the manner provided by the contract …

There were, in effect, two grounds of appeal. The first was that the appellant had not had the opportunity in the Court of Session of seeking a finding that the machine did not conform to the contract. The second ground of appeal was that trials of the machine had demonstrated that it did not conform to the contract. The second ground was dismissed because no such case had been made by the appellant in the courts below. It is the first ground of appeal which is relevant for present purposes.

I start with the speech of Lord Blackburn. It proceeds on the basis that relevant English law principles of the interpretation of contracts apply in Scots law. He described the contract that had been made by the parties in this way:

The Pursuers were to supply a machine capable of digging and filling into wagons at least 350 cubic yards of clay in a day. It was to be brought to the Defender’s cutting at Carfin, erected, and tested before February 1877. Both agreed that the event of the testing was to be conclusive. If the machine did not answer the test, the Pursuers were to remove it before the end of February; if it did answer the test the Defender was to keep it and pay the agreed price.

Lord Blackburn continued at page 263:

I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances. …

In his speech Lord Blackburn then referred to an early English case recorded in the yearbook of 9^th Edward IV, Easter Term, 4 A, concerning the great bell of Mildenhall. At page 264 he continued:

I mention this old case, decided in 1469, because it is on it that the different digests laying down the principle are all founded, and because I think it is obvious good sense and justice. Now, applying this principle to the present case; both agree that the machine shall be tested at Carfin, and therefore the Pursuers agreed that they would bring the machine to the Carfin cutting, and there erect it on the Defender’s land, and there do their part in working it till there had been a fair test; and the Defender agreed that he would do his part, and even if there had been no express mention in the letters of a properly prepared face, the nature of the thing shews that he agreed to let the Pursuers have access to a part of the cutting, put by the Pursuers in such a condition that the machine could be fairly tested by working at it, and to assist in working it there until there had been a fair test.

On the footing that the machine had been brought to the Carfin cutting and delivered within the period of an extension of time agreed between the parties, Lord Blackburn continued:

… it would follow in point of law that the Defender, having had the machine delivered to him, was by his contract to keep it, unless on a fair test according to the contract it failed to do the stipulated quantity of work, in which case he would be entitled to call on the Pursuers to remove it. And by his own default he can now never be in a position to call upon the Pursuers to take back the machine, on the ground that the test had not been satisfied, he must, as far as regards that, keep, and consequently pay for it.

Lord Watson referred to a finding by the Court of Session that the appellant failed to provide a proper face at Carfin cutting, notwithstanding repeated demands on the part of the respondents. He continued at page 270:

The respondents were only entitled to receive payment of the price of the machine on the condition that it should be tried at a proper working face provided by the appellant, and that on trial it should excavate a certain amount of clay or other soft substance within a given time. They have been thwarted in the attempt to fulfil that condition by the neglect or refusal of the appellant to furnish the means of applying the stipulated test; and their failure being due to his fault, I am of opinion that, as in a question with him, they must be taken to have fulfilled the condition. The passage cited by Lord Shand from Bell’s principles (§ 50) to the effect that, “if the debtor bound under a certain condition have impeded or prevented the event, it is held as accomplished. If the creditor had done all that he can to fulfil a condition which is incumbent on himself, it is held sufficient implement,” expresses a doctrine, borrowed from the civil law, which has long been recognised in the law of Scotland, and I think it ought to be applied to the present case.

Lord Watson added at pages 270 to 271:

It was argued for the appellant that the condition was only intended to operate in his favour, and that he might therefore dispense with it and defend himself upon the ground that the machine was, in point of fact, disconform to contract. But I cannot regard the stipulation in that light; it was so obviously for the interest of the manufacturers of this new patent machine to have the question, whether it was or was not conform to contract, determined by reference to a simple and definite test, instead of being left to the uncertainty of speculative opinion, aggravated by the risk of litigation.

Lord Selborne agreed with both Lord Blackburn and Lord Watson.

Charterers argued that the tribunal’s reasoning on issue (c)(ii) appeared to assume that a charterer’s right to cancel a charterparty for failure to reach the first load port by the cancelling date only arose in circumstances where owners were in actual or anticipatory breach of contract. This, submitted charterers, was wrong. They relied on Marbienes Companie Naviera SA v Ferrostaal AG (The Democritos) [1976] 2 Lloyd’s Rep. 149. The case concerned a time charter on the NYPE form which provided that the vessel was to be placed at the disposal of the charterers at Durban. It added:

… if required by Charterers, time not to commence before 1^st December, 1969, and should vessel not have given written notice of readiness on or before 20^th December, 1969, but not later than 4pm Charterers or their agents to have the option of cancelling this charter …

The vessel arrived at Durban on 16 December 1969, but her ’tween deck in number two hold was found to be collapsed. If repairs had been done straight away at Durban, they would have taken some days. She was nonetheless able to load the intended cargo at Durban and did so, leaving over for a later date the repairs which would need to be made to the ’tween deck. The charterers later sued for damages for the vessel being in an unfit condition when delivered. They admitted that they had waived any right to reject the vessel, but said they had not waived any damages claim.

At page 152 of the report Lord Denning said this:

Now there is nothing in this charter which binds the owners positively to deliver by Dec. 20, 1969. The only clue to any time of delivery is to be found in the cancelling clause. There is, of course, an implied term that the owners will use reasonable diligence to deliver the ship in a fit condition by Dec. 20, 1969. But that is not an absolute obligation. So long as they have used reasonable diligence, they are not in breach. In this case it is found that reasonable diligence was used, so there is no breach by them of that implied obligation.

Next the cancelling clause. Its effect is that, although there may have been no breach by the owners nevertheless the charterers are, for their own protection, entitled to cancel if the vessel is not delivered in a proper condition by the cancelling date. That is the sole effect.

On this point the Judge referred to the English cases, particularly Smith v Dart & Son (1884) 14 Q.B.D 105 at p. 110, when Mr Justice A L Smith said:

The shipowner does not contract to get there by a certain day, but says “if I do not get there you may cancel”.

But we have had the benefit of one or two others. The first is from Scotland, Nelson & Sons v The Dundee East Coast Shipping Co. Ltd. (1907) 44 S.L.R. 661. It was a voyage charter, but Lord M’Laren said this:

If it can be shown that the shipowners had used their best endeavours and that the delay was due to unavoidable accident or perils of the sea, I should have been of opinion that no damages were due. The contract could be cancelled but damages would not be due, for each party would then be within his rights.

A more direct authority is from the United States, United States Gypsum Transport Co. v Dampskibs Aktieselskabet Karmoy, (1930) 48 Fed. Rep. (2^nd) 376. It was a time charter; there was no date of delivery promised: but nevertheless there was a cancelling clause. It was on the New York produce form with the clauses similar to those here. The District Court said that:

The most that can be required of the owner … where no delivery date is provided in the charter, is to tender with reasonable dispatch, and the burden of proof is on the [-charterer-] to show that the owner has not used reasonable dispatch in tendering the ship.

The Court went on to say:

The charter … did not by its terms promise that the vessel would be delivered by any specified date, nor did, it by reason of any of its provisions imply a promise by the owner to deliver the vessel on or before any specified day … but the most that was implied … was that the owner would use reasonable dispatch in tendering the vessel.

These authorities show that as long as the owner uses reasonable diligence, he is not in breach, but the charterer is entitled to cancel if the vessel is not delivered by the cancelling date.

Mr Pollock referred to several voyage charters in which there was an “estimated time of arrival”. It has been always held that the estimated date has to be given honestly and on reasonable grounds and that he has to sail from his last port on his approach voyage so as to get there in time. That obligation is absolute. But those cases have no application to a charter such as this, where there is no promise at all to deliver by a certain date, but only an option to cancel if it is not so delivered.

Lawton and Bridge LJJ agreed with Lord Denning. Accordingly the judgment of Kerr J rejecting the charterers’ complaints in this respect was upheld. Bridge LJ added at page 154 of the report:

On the first point, that is to say, the question whether the owners’ obligation to deliver the vessel at Durban before the cancelling date of Dec. 20, 1969, was an absolute obligation, or no more than an obligation to use reasonable diligence, it seems to me that the matter is abundantly clear. It is, as I think well put by the learned Federal District Judge, Judge Campbell, in the United States decision to which Lord Denning, M.R., referred, the case of Gypsum Transport Co. v Dampskibs, (1930) 48 Fed. Rep. (2^nd) 376. The District Judge observes, at p. 377 of the report, that the very object sought to be accomplished by the use of the form of time charter with which we are concerned in this case, which has no specific provision as to date of delivery but only the lay cancellation clause, is-and I quote now from Judge Campbell’s judgment-

… that of protecting the owner, whose vessel is at the time of making under charter, from the liability which he would be under by promising delivery at any specific time, and protecting the Charterer by giving him the right to cancel the charter if delivery is not made by a specified time …

Again, support for this conclusion is to my mind clearly provided by a sentence or two in the speech of Lord Wrenbury, in the well-known case of Bank Line Ltd. v Arthur Capel & Co.,[1919] A.C. 435. That case was concerned with an issue as to whether a charter had been frustrated. The particular charterparty under consideration, as here, embodied no specific date as the date for the initial delivery of the vessel; it was a charter to run from the date when the vessel was delivered, but it embodied a clause providing for an earliest date of delivery and a cancellation date. Lord Wrenbury says at p. 460:

The owners agreed to let and the charterers to hire the steamer for 12 months, to commence at a date not fixed so far as Article 1 is concerned, except that it was to be the date when she was placed at the disposal of the charterers at a coal port as ordered by them. The effect of Article 26 is that that date may be any date not before April 1 subject to the right of the charterers to refuse her and to cancel the charter if she is tendered after April 30. During a reasonable time the owners owed to the charterers the contractual duty of tendering the vessel. If they were for reasons beyond their control unable to tender her within a reasonable time their contractual duty in that respect would cease.

In Tharsis Sulphur Copper Co Ltd v Morel Bos & Co [1891] 2 QB 647 the parties entered into a voyage charterparty which was applicable to several vessels. The charterparty provided:

3 b. The steamers will load from the factory of the charterers … and being so loaded shall therewith proceed to the Mersey (or so near thereunto as they may safely get), and deliver the same at any safe berth as ordered on arrival in the dock at Garston.

4.

Three working days, after being in turn, shall be allotted to the charterers (if the steamers are not sooner despatched) for loading up any quantity up to 1200 tons, and four days if the quantity exceeds 1200 and up to 1700 tons, and to be discharged when berthed with all despatch, as customary at the port of discharge with steamers carrying similar cargoes.

Disputes arose concerning occasions when a vessel arrived at Garston dock and a berth was ordered by the harbour master, but there was delay in unloading because the crowded state of the dock prevented the vessel being berthed for some time after arrival. The appellant owners said that Charles J at first instance had been wrong to reject the owners’ claim for damages in the nature of demurrage for delay on the part of the charterers in unloading the vessels. Owners’ contention was that from the time the vessel arrived at Garston dock the risk of there being no free berth rested with the charterers. The Court of Appeal rejected that argument.

Lord Esher MR said at pages 649 to 650:

This is not a case of merely carrying to the Mersey, but of carrying to Garston Dock, which is high up the Mersey. If that were all, the carrying voyage would end at Garston Dock, but it is not all, for the vessel is to deliver “at any safe berth as ordered.” Suppose there had been berths with numbers, and the contract had been to deliver at berth No. 1, the cases shew that the carrying voyage would not be at an end till the ship arrived and was ready to deliver at that No. 1 berth. The contract does not express any particular berth, but it does express the equivalent to that in using the words “as ordered,” which I take to mean as ordered by the charterers. Does that give the charterers the right to fix the place where the carrying voyage is to end? Even without authority I should say that it did, but Tapscott v Balfour has dealt with a charterparty in a similar form, where a particular dock has to be named, the necessary result of the agreement being that when the charterer exercises that power, the result is the same as if the dock had been named in the charterparty. That was decided nineteen years ago, and as it was a decision on a question of frequent mercantile interest, we should not interfere with the decision unless we were fully convinced that it was wrong. So far from entertaining that opinion I think the decision was quite right, and that when the charterer has to name a dock or a place in a dock, when he does so, it is as though it had been named in the charterparty, and indicates the termination of the voyage. To hold otherwise would be to give no effect to the words “as ordered”.

Bowen LJ said at page 651:

… The case is one which turns on the construction of a charterparty, and of course no rule can be laid down which will apply in all cases. But charterparties are well known documents, and the court is accustomed to travel on well known lines of construction in the interpretation of them.

… A good deal of the confusion which has prevailed has arisen from a misconception … that when a larger place, and a smaller one within the larger, are named for loading or discharge in the charterparty, the carrying voyage necessarily begins or ends on arrival at the larger place. I do not think that is the law …

Bowen LJ added at page 652:

Then we were told that an option was given to the charterer, and that it was not properly exercised unless a berth was chosen that was empty. But I think there was a confusion in this argument also. The option is given for the benefit of the person who has to exercise it. He is bound to exercise it in a reasonable time, but is not bound in exercising it to consider the benefit or otherwise of the other party. The option is to choose a port or berth or dock, that is one that is reasonably fit for the purpose of delivery. It will not do for instance to choose a dock the entrance to which is blocked – that would be practically no exercise at all of the option … To limit the option of the charterer by saying that, in the choice of a berth, he is to consider the convenience of the shipowner, is to deprive him of the benefit of his option. The most that can be said is that the charterer does not exercise his option at all unless he chooses a berth that is free or is likely to be so in a reasonable time. …

Kay LJ concurred with Lord Esher and Bowen LJ.

The observations of Bowen LJ in Tharsis Sulphur were cited in Johs Thode v Vda De Gimeno y Cia SL (The Steendiek) [1961] 2 Lloyd’s Rep. 138. The case concerned a voyage charterparty for a cargo of Spanish fruit. The charterparty stated:

1.

The steamer . . . shall . . . proceed, as ordered by Charterers or their Agents, to ONE/TWO/THREE usual loading places BARCELONA/Malaga range both inclusive . . . and there load . . . a full and complete cargo of FRUIT . . .

…

3.

The Captain to telegraph applying for orders … on arrival at port of outward discharge, stating when expected discharged and address for reply. The Captain shall also telegraph his departure from port of outward discharge. Should orders not have been received when finished discharge, the steamer shall proceed immediately to Valencia Roads for orders. …

…

6.

… should the steamer not have arrived at first loading or order port on the thirteenth of March 1958 by 2pm charterers or their agents have the option of cancelling or confirming this charterparty.

Charterers were informed on 3 March that the vessel had arrived at Hamburg and expected to complete discharging on 5 March. However the captain did not, while at Hamburg or thereafter, apply for orders. On 6 March charterers were informed that the vessel had sailed from Hamburg for Valencia. The master informed charterers that the vessel was expected to arrive at Valencia at noon on 13 March. Orders were received on 12 March that the vessel should proceed to Tarragona. At 7pm on 13 March the vessel arrived at Tarragona, at which time the charterers cancelled the charterparty in reliance upon clause 6. The arbitrator rejected a claim by the owners for wrongful repudiation, and stated three questions for the court. Question A was whether the charterers were in breach of the charterparty. Question B1 was whether Charterers had waived their rights under clause 6. Question B2, was whether, if charterers had waived their rights under clause 6, they were in breach of, and had repudiated, the charterparty.

At first instance Diplock J held that, subject to any rights resulting from owners’ failure to apply for orders on arrival at Hamburg, charterers’ right to give orders arose on the vessel’s arrival at Valencia Roads; that the obligation of the owners to apply for orders and their obligation to proceed to Valencia if orders were not received were separate obligations; that accordingly the charterers’ position under clause 6 was the same as if the failure to give orders as to loading port were not preceded by owners’ breach; that by giving orders on 12 March the charterers had anticipated orders which they would have been entitled to give when the vessel arrived at Valencia Roads; that charterers waived their right to fulfilment by owners of the obligation to arrive at Valencia Roads and their right to cancel under clause 6 if the vessel failed to arrive there by 2pm on 13 March; and accordingly that the charterers’ cancellation amounted to a repudiation.

The Court of Appeal (Holroyd Pearce, Willmer and Pearson LJJ) allowed the charterers’ appeal. They held that the owners’ obligations under clause 3 to apply for orders and to proceed to Valencia were not separate obligations; that, accordingly, clause 3 ceased to apply and charterers had their common law right to give orders within a reasonable time, which they had done; that the vessel did not arrive at the first loading port so ordered until after cancelling time; that the question of waiver did not arise; and that therefore the charterers were entitled to cancel the charterparty.

At page 145 Holroyd Pearce LJ stated:

At common law, the charterers have a right to give orders as to the port of destination within a reasonable time. Clause 3, however, to a certain extent limits that right. It is obviously desirable for the owners to know before the vessel leaves port what her destination is. That is particularly so when there is a cancellation clause, for the master will want to know how much time is at his disposal for arriving at his destination and whether he must put on extra speed. Therefore Clause 3 provides that the master shall be able to obtain orders before leaving the port of outward discharge. He must telegraph for orders, giving certain information. If the charterers give those orders nominating a certain port within the range, that port becomes the first loading port for the purposes of Clause 6. The charterers, in nominating such a port, do not have to consider what is reasonable or possible from the owners' position, but, having once nominated it, they cannot change it. (See Tharsis Sulphur and Copper Company, Ltd. v. Morel Brothers & Co., and Others, [1891] 2 Q.B. 647.)

If, however, no orders are sent by the charterers in reply to the master's telegram, then the vessel is bound (and entitled), under Clause 3, to proceed to Valencia Roads for orders, and that becomes the order port for the purpose of Clause 6. The charterers cannot then, after the vessel leaves Hamburg, alter that order port or substitute another loading port for the purpose of Clause 6.

If that be the general intention of Clause 3, it produces a sensible and convenient arrangement. But the whole scheme of Clause 3 contemplates the originating telegram from the master applying for orders. I find it difficult to construe the clause as meaning that on the vessel leaving the port of outward discharge the charterers have lost their right to nominate a port under Clause 3 in cases where they have not previously been informed of the master's whereabouts or of the fact that he is completing his discharge at the port of outward discharge. So to hold would enable an elusive master to deprive the charterers of their rights to give him orders by his failure to reveal his whereabouts or to telegraph for orders.

A more reasonable result is produced by reading Clause 3 as meaning that only if the master telegraphs for orders and gives his address and expected time of discharge do the other provisions of the clause apply. But, if he fails to telegraph, the situation for which Clause 3 was framed does not arise and the owners lose the benefit of it. The charterers (with any right to damages by reason of such failure) can then rely on their common-law right, under Clause 1, to give orders within a reasonable time. The master, receiving no orders, has at common law the option to stay in port until orders are given or to proceed to a reasonable port within the loading range. No doubt, on the present facts, the most reasonable port would be Valencia Roads.

At page 146 Holroyd Pearce LJ added:

If, therefore, Clause 3 ceased to apply in the facts of this case, the owners had no vested right or obligation, on leaving Hamburg, to proceed to Valencia Roads, and the charterers had their common-law right to give orders within a reasonable time. Since the order to go to Tarragona was given when the ship was well south of Cape de la Nao, where her courses to Valencia and Tarragona respectively would first diverge, it cannot be said that the order to go to Tarragona was not given in reasonable time. It was given nearly 11 hours before she came to the parting of the ways. Had it been given sooner it would not have enabled her to alter her course by one single degree.

No hardship or absurdity is caused by so construing Clause 3 since any results adverse to the owners are initiated by their master's breach of the clause, and any other construction would, in some circumstances, enable a master, by failing in his initial duty under the clause, to put a hardship or injustice on the charterers.

I would prefer to be able to reach the result at which the learned Judge arrived on these particular facts since the owners' breach of Clause 3 was largely technical and they appear to have the merits. But we are bound by the findings of the umpire and, loth as I am to differ from the learned Judge, I find myself unable to accept the construction of Clause 3 which appealed to him.

Willmer LJ said at page 147:

The situation … was that a vessel which had been chartered to proceed as ordered by charterers received orders from the charterers to proceed to Tarragona. These orders were accepted and acted upon without demur, and prima facie the result must be that Tarragona thereupon became the agreed first loading port, exactly as if it had been so named specifically in the charter-party in the first instance. Tarragona was a port within the permitted range, and therefore one which the charterers were entitled to nominate. It is well established that in giving orders for a loading port in such circumstances a charterer is not bound to consult the shipowner's convenience, but is entitled to name a port and require the ship to go there even where it is known that she cannot possibly reach the named port before the cancelling date. This does not in any way affect the charterer's right to cancel. This principle is illustrated by Moel Tryvan Ship Company, Ltd. v. Andrew Weir & Co., [1910] 2 K.B. 844, though the facts in that case were admittedly different from those of the present case.

Prima facie, therefore, and subject to any argument based on the provisions of Clause 3, the Steendiek was properly ordered to Tarragona, and, when she arrived there after the cancelling time, the charterers would be within their rights in cancelling the charter-party.

As to the argument based on the provisions of clause 3, Willmer LJ said at page 148 to 150:

It is accepted that the port of outward discharge in this case was Hamburg, whither the vessel had in fact carried a previous cargo for these same charterers. It is found by the special case, however, that the charterers did not know, at the time, that Hamburg was the port of outward discharge, or whether the vessel would be proceeding from Hamburg loaded or in ballast. Only during the course of the vessel's voyage did the charterers learn that the Steendiek was in fact proceeding in ballast from Hamburg to Valencia Roads. …

…

With all respect to the view of the learned Judge, I do not think that the argument for the shipowners can prevail. It seems to me to be based on a misconstruction of the terms of the charter-party. The basis of the charter-party is that the vessel is to proceed to one/two/three loading ports as ordered by the charterers. Prima facie, the charterers must be entitled at any reasonable time to exercise their option to order the vessel to this or that loading port within the permitted range. It is true that, by Clause 3, provision is specifically made for such an order to be given before the vessel leaves her port of outward discharge; if no such order is received before discharge is finished the vessel is not to wait about, but is to proceed immediately to Valencia Roads for orders. But I see nothing final in this provision. Clause 3 does not say that once the vessel has left her port of outward discharge no order for a loading port may be given until after she has arrived at Valencia Roads. I see no reason to read into the wording of Clause 3 any such provision as that in the absence of clear words to that effect.

…

Suppose a vessel, like the Steendiek, whose port of outward discharge is, say, Hamburg. No order for a loading port is given while the vessel is at Hamburg, and she accordingly sails immediately to proceed to Valencia Roads. While she is at sea, the charterers obtain a cargo at Malaga, which they desire the vessel to load. If the shipowners are right, the charterers are not entitled to order her straight to Malaga, but must wait until the vessel has reached Valencia before they can lawfully give an order, though the only result will be that the vessel must retrace her steps for several hundred miles in order to get to Malaga. It is no answer to say that in such circumstances the shipowners would no doubt in practice agree to accept an order to proceed straight to Malaga, so as to save their vessel from making a fruitless voyage to Valencia. The question is whether, under the charter-party, the charterers would have a legal right to give such an order. I can see nothing in the charter-party to deprive them of such a right.

It seems to me that, on the true construction of Clause 3, the obligation of the vessel to proceed to Valencia Roads for orders must be subject to the right of the charterers to give her orders for a loading port while she is in the course of the voyage, provided they do so at a reasonable time. No doubt if the charterers were guilty of unreasonable delay in giving such orders, so that the shipowners were put to additional expense, the latter might well have a good claim for damages against the charterers. But, in my judgment, they would have no right to disobey such an order, or to insist on completing their voyage to Valencia Roads before obeying it.

In these circumstances, when the charterers, on Mar. 12, ordered the Steendiek to proceed to Tarragona, they were not, in my judgment, doing anything which the charter-party prohibited them from doing, but were giving an order which they would have been perfectly entitled to give at any moment from the time when the vessel left Hamburg, and an order which, under the charter-party, the vessel was bound to obey. I think that there is force in Mr. MacCrindle's submission that, so far from the order being an anticipation of an order which the charterers would have been entitled to give on the arrival of the vessel at Valencia Roads, it is rather to be regarded as an order, which might have been given at Hamburg, being given rather late. Upon the giving of the order, Valencia Roads ceased to be of any relevance. Tarragona became the first loading port for the purposes of Clause 6 of the charter-party, and the charterers' right to cancel the charter-party must thus depend upon the time of the vessel's arrival at Tarragona. I find myself unable to accept the learned Judge's view that, the vessel being under a contractual obligation to proceed to Valencia Roads for orders, the charterers' option to cancel could arise only upon her failure to arrive at Valencia Roads by the cancellation time.

This is sufficient to dispose of the appeal; but I desire to say that I think the charterers are also entitled to succeed on the grounds which have already been stated by my Lord. It seems to me that a shipowner who has failed to carry out the requirements of the first sentence of Clause 3 of the charter-party cannot, on any view, be entitled, when no orders for a loading port have been received while the vessel is at her port of outward discharge, to insist on the vessel proceeding irrevocably to Valencia Roads to receive her orders there. In my judgment, Mr. MacCrindle was well founded in submitting that strict compliance on the part of the vessel with the requirements of the first sentence is a condition precedent to the application of the third sentence of Clause 3. If this were not so, an unscrupulous shipowner, whose vessel is in danger of being late if ordered to one of the more distant loading ports, but who thinks that she can reach Valencia in time, could deliberately refrain from applying for orders while the vessel is at her port of outward discharge, and then, relying on the absence of orders, send her to Valencia for the express purpose of defeating the right which the charterers might otherwise have to cancel the charter-party.

…

In these circumstances, on the facts as they are found, I am disposed to think that the situation envisaged by the third sentence of Clause 3 never arose. If that be so, the parties are thrown back on the obligation imposed by Clause 1, namely, an obligation on the ship to proceed, as ordered by charterers, to one/two/three ports within the permitted range. It was no doubt reasonable in the circumstances for the shipowners to give notice, as they did, that the vessel was proceeding to Valencia, since Valencia was in the middle of the permitted range of ports and was in any case the seat of the charterers' business. But I do not think that this is a very relevant circumstance, since for the first six days at least the course to any of the permitted ports would be the same.

It follows that, in my judgment, the fact that the shipowners failed to comply with their obligation under the first sentence of Clause 3 provides an additional reason for holding that the charterers were at liberty, at any time during the course of the vessel's voyage, to order her to any port within the permitted range. When they did so, that port – that is to say, in this case, Tarragona – became the first loading port within Clause 6 of the charter-party: and, if the vessel did not arrive thereat until after the cancelling time, the charterers were within their rights in cancelling the charter-party.

In these circumstances, I do not think that any question arises as to any waiver on the part of the charterers of their right to cancel the charter-party: nor do I think that there is any room for inferring an agreement to vary the terms of the original contract. When the charterers ordered the vessel to Tarragona they were exercising their right, and when the vessel obeyed she was performing her obligation, under the original charter-party. Beyond recording that the point was fully argued, therefore, I forbear to express any opinion on the interesting question whether the learned Judge could in any circumstances be justified, having regard to the umpire's findings in par. 5 (xii) and par. 9, in reaching the conclusion that there was anything in the nature of a waiver or a variation of the terms of the contract.

Pearson LJ agreed with Holroyd Pearce LJ. At page 150 he set out his own reasons for holding, in disagreement with Willmer LJ but in agreement with Holroyd Pearce LJ, that failure by charterers to respond to the master’s telegraphed application for orders would, under clause 3, have the consequence that the master was entitled and bound to proceed to Valencia for orders. In setting out those reasons he stated, as regards the intended operation of clause 3:

It is reasonable for the master to know, before he sails from the port of outward discharge, what his destination is, so that he can take in appropriate quantities of bunkers and water and provisions, and notify agents, and set his course and sail at a suitable speed to be able to arrive at the destination not later than 2 p.m. on Mar. 13. If, while he is on the way to Valencia Roads for orders, the charterers instruct him to proceed directly to a loading port instead of calling at Valencia Roads for orders, he is not bound to comply with the instruction, which is merely a request. He might, however, agree to do so, and in that case there would be an agreement to vary the charter-party, or at any rate the performance of it, and there might perhaps be read into such an agreement, by necessary implication, a term that the owners' position in respect of cancellation should not be prejudiced by their compliance with the charterers' request.

At page 151 he continued:

In the present case, however, Clause 3 could not operate as intended, because the owners, in breach of their obligation under the first sentence of the clause, failed to apply to the charterers for orders while the ship was at Hamburg, which was the port of outward discharge, and the charterers did not have the opportunity under the clause of giving orders naming loading ports.

It is contended on behalf of the owners, and the learned Judge has held, that, although the owners had not performed their obligation under the first sentence of Clause 3, nevertheless the third sentence of that clause operated in their favour, conferring on them a vested or indefeasible right to proceed immediately to Valencia Roads for orders. If that contention were correct, the effect would be that, by the unilateral and wrongful omission of the owners, the charterers were deprived of their right to require a direct voyage to a first loading port selected by them, and the owners were relieved of the risk of the ship being ordered to proceed directly to some distant port, such as Barcelona or Tarragona, which she might have difficulty in reaching by 2 p.m. on Mar. 13. The owners would be profiting by their own wrong. I am not able to accept the contention which has this result. The owners' breach of obligation should operate to their detriment and not to the detriment of the charterers. The charterers have their basic right under Clause 1 to nominate the loading ports. Clause 3 contains procedural provisions. The procedural provisions having been disregarded by the owners and so excluded from operation, the charterers are still entitled to nominate the loading ports or a loading port and require the ship to make a direct voyage to the first loading port. The owners have lost the right to have the charterers' orders given before completion of discharge at the port of outward discharge. Such orders may be given at a later time, though no doubt they must be given within a reasonable time.

…

Tarragona became the first loading port. The ship did not arrive there until some hours after 2 p.m. on Mar. 13, and did not arrive at any order port at any time. Accordingly, under Clause 6, the charterers had the option of cancelling or confirming the charter-party, and they elected to cancel it.

At page 152 Pearson LJ added:

In the end, however, the conclusion must depend on the answer that is given to the question of construction. If the charterers, on Mar. 12, still had a right to nominate a first loading port and require the ship to make a direct voyage to it, they were entitled to exercise that right in such a way as to gain an option for themselves under Clause 6 to cancel or confirm the charter-party. If, on the other hand, the charterers, on Mar. 12, had no such right and could only make a request, the making and acceptance of the request might give rise to some implied term or waiver or estoppel rendering ineffective any attempted cancellation by the charterers.

Mr. Goff contended (in so far as the contention might be open to him) that the nomination of Tarragona was, in the circumstances, not a genuine nomination of a loading port, and therefore constituted a breach of the charter-party by the charterers. But this contention, whether or not it was open and whatever effect it might otherwise have, must in any case fail for lack of proof. If the charter-party had not been cancelled, the charterers might not improbably have been able to provide a cargo, perhaps partly at Tarragona and partly at other ports.

In section D5.1 below I discuss an additional case in which observations were made to the effect that a party to a contract benefitting from an unfettered option concerning the other party’s mode of performance need not consider the convenience of the other party in the exercise of the option.

In Shipping Corp of India v Naviera Letasa, SA [1976] 1 Lloyd’s Rep 132 arbitrators had stated a special case raising two points. At the outset of his judgment (p. 137, left hand column) Kerr J summarised the first point, and his conclusion on it, in this way:

A time charter-party provided that the owners would deliver the vessel at a port to be named by the charterers from a number of geographical ranges and, as usual, that the charterers could cancel the charter if the vessel was not ready for loading at the named port by a certain date, commonly known as the cancelling date. The charterers first indicated that the vessel was to proceed towards range A [the US Gulf], leaving open for the time being the choice of a port in range A where she was to be delivered. They then changed their minds and formally ordered her to a port in range B, and I will refer to this port [Rio] as "B" for convenience. However, by then the vessel had passed the point at which the courses towards A and B diverged, with the result that she could no longer reach B by the cancelling date.

In these circumstances it was rightly conceded by the charterers that the order to B was given too late and in breach of the charter. The owners complied with the order, as the charterers intended they should, but the vessel inevitably arrived at B only after her cancelling date. The charterers then nevertheless purported to cancel the charter and refused to perform it, and the owners now claim damages for their consequential loss of the charter on a falling freight market. On these facts it seems to me to be almost self-evident that the charterers had no right to cancel the charter. The vessel's inability to reach the named port by the cancelling date was due to the charterers' breach in ordering her there too late as and when they did. It must then follow from this that the charterers cannot rely on the vessel's late arrival, for which they themselves had been responsible in breach of the charter, as a ground for cancellation.

As to the second point, Kerr J’s judgment continued on p. 137, right hand column:

The charterers then take a second point if they are wrong on the first. They submit that even if the cancellation was wrongful, the owners are only entitled to recover nominal damages, for the following somewhat elaborate reasons. They say that when they ordered the vessel to B it was not yet too late for them to have ordered her lawfully to any port in range A towards which she was then proceeding. Next, they say that instead of having ordered her to B they could lawfully have ordered her to some port in range A which she could also not have reached by her cancelling date. They say that on this basis they could and would in that event have cancelled the charter lawfully and that the charter was therefore already "worthless" to the owners when the order to B was given, so that only nominal damages are recoverable.

This somewhat surprising argument purports to be based on a number of authorities to the effect that in assessing damages for breach of a contract against a defendant who can perform a contract in different optional ways, it must be assumed in his favour that he would have performed it in the manner least beneficial to the plaintiff and most beneficial to him. Relying on this line of authority the charterers accordingly submit that if they had not ordered the vessel to B, it must be assumed that they would have ordered her to a port in range A which she could also not have reached in time, and that they would then have cancelled the charter lawfully. But it seems to me that this argument is as untenable as the first. How the charterers could or would have exercised their option if they had exercised it differently, or what assumptions should be made about this, is in my view entirely irrelevant. The fact is that the charterers exercised their option as they did by ordering the vessel to B, but in breach of the charter, with the consequences already mentioned. In these circumstances it does not matter what they might have done if they had done something different from what they did.

Later in his judgment, at p.141 right hand column, Kerr J gave more detailed reasons for rejecting the first point:

I accept Mr. Mustill's argument … as follows. The charterers had the option to cancel the charter if the vessel did not present herself ready for loading at the named port by the cancelling date, but the owners' obligation to proceed to the named port and to deliver the vessel required the co-operation of the charterers because they had to name the port. The position is therefore analogous to that referred to by Lord Blackburn in the famous passage in the case of Mackay v. Dick, (1881) 6 App. Cas. 251, at p. 263:

I think I may safely say as a general rule that where in a written contract it appears that both parties have agreed that something should be done which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.

Now, this does not mean that where one party to a contract has an unfettered option concerning the other party's mode of performance he must consider the convenience of the other party in the exercise of the option. Nor even, in the absence of some necessary implication from the circumstances, that he must opt in such a manner that the other party can perform without breach. Thus, it was rightly conceded by Mr. Mustill, subject to a possible reserve in the event of the charterers having acted in bad faith, that if (before there was any breach) the charterers had named a port, at a proper time and within the permitted options, which the vessel could not have reached by the cancelling date, then they could still have validly cancelled upon the vessel's late arrival at that port. If, for instance, the charterers had nominated Baton Rouge when the vessel had left Las Palmas, it having in effect been agreed that the final nomination would be made at or about that time, then the charterers could still have cancelled on the vessel's arrival at Baton Rouge after the cancelling date, at any rate if they had made the nomination in good faith. But the present position is different, because (a) the charterers were already in breach when they ordered the vessel to Rio, and (b) the effect of that breach was to render it impossible for the vessel to be delivered at the nominated port by her cancelling date.

At p. 142, left hand column, Kerr J continued:

Applying the principle of Mackay v. Dick, it follows that in these circumstances the charterers cannot rely on the vessel's non-arrival at Rio by the cancelling date as the necessary condition precedent which brought into operation their right to cancel. The reason is simply that the happening of the condition precedent was caused by their own breach. …

It therefore follows that the charterers' cancellation and refusal to perform the charter was a repudiation and that the owners are entitled to damages.

Kerr J then set out more detailed reasons on the second point. At p. 142, right hand column, he said:

This argument [that instead of Rio charterers could lawfully have ordered the vessel to a port in the US Gulf which she could also not have reached by her cancelling date] represents a valiant attempt to get out of a difficulty, but in my view it is quite untenable for at least two reasons. First, the breach for which damages fall to be assessed was the repudiation of the charter when the vessel was at Rio. When the order to proceed to Rio was given, Rio became the contractual port for delivery under the charter, and the charter remained in full force and effect until it was repudiated by the charterers at or about the time of the vessel's arrival at Rio. The owners' entitlement to damages therefore falls to be assessed on this basis, and all argument in relation to ports in the Gulf is simply irrelevant. Secondly, for the same reason, the line of authorities dealing with presumptions in favour of the defendant where he has optional modes of performances is equally irrelevant …

Events after loading a cargo at Batumi under a voyage charterparty gave rise to the disputes in Bulk Shipping AG v Ipco Trading SA (The Jasmine B) [1992] 1 Lloyd’s Rep 39. Part 1 of the charterparty dealt, among other things, with load and discharge ports. It included special provision 2, which set out a number of optional ranges from which charterers could nominate one or two ports, with a maximum of 3 ports total for loading and discharging. The charterparty also included a “Special Provision” M1, as follows:

M.1 Diversion

A.

Notwithstanding anything else to the contrary in this Charter Party and not withstanding what loading and/or discharging ports may have been nominated and Bills of Lading issued, Charterer shall have the right to change at any time its nomination of the loading and/or discharging ports in accordance with Part 1 of this Charter Party.

B.

Charterer shall have the right to order the vessel to interrupt her voyage at any time during the laden transit and await further orders.

C.

Charterer shall have the right to order the vessel to call at a port en route from loading port to discharging port(s) for sampling purposes.

D.

Any extra time and expense incurred by Owners in complying with Charterer's orders shall be for Charterer's account and calculated in accordance with Part 1, Clause 1 plus any proven expense of this Charter Party.

E.

Freight shall be based on the voyage actually performed.

F.

Charterer shall have the right to make as many changes as it deems necessary.

The parties agreed that two disputes should be decided using the originating summons procedure. The background to the first dispute was that:

The first question raised by the originating summons was whether the charterers were entitled to issue the order timed at 1624 on 25 May. In this context, at p. 42, left hand column, His Honour Judge Diamond QC made some observations about the commercial background to clause M1:

In the absence of any special provision in a charter-party, the effect of the nomination of a loading or discharging port by the charterer is that the charter-party must thereafter be treated as if the nominated port had originally been written into the charter-party and that the charterer has neither the right nor the obligation to change that nomination. (See Anglo-Danubian Transport Co. Ltd. v. Ministry of Food (1949) 83 Ll.L.Rep. 137 and Reardon Smith Line Ltd. v. Ministry of Agriculture, Fisheries and Food, [1961] 1 Lloyd's Rep. 385; [1962] 1 Q.B. 42.)

A charterer, however, sometimes desires to have the right to be able to change his loading or discharge port orders without first having to obtain the consent of the owners. If he happens to be the seller of the goods on board the vessel, he may wish to be able to divert the goods in the course of the voyage to a different buyer at a different discharge port from the one he has previously nominated. Again, there may be congestion or a strike at a nominated port of loading or discharge and the charterer may wish to have the right to change his nomination so as to be able to send the vessel to a different port which happens to be free from such delays. Hence it is not uncommon to find clauses in tanker charter-parties entitling the charterers to change their loading or discharge port orders after such orders have been given. Such clauses vary in the amount of flexibility given to the charterers.

At p. 42, right hand column, the judge said:

In my view, a clause such as this ought to receive a broad commercial interpretation free of what I may call ingenious limitations conjured up by the minds of lawyers. Where parties of more or less equal bargaining power have agreed upon a clause which is designed to achieve a certain commercial objective, a Court will normally construe the words of the clause so that it achieves that objective. A Court will not be astute to find hidden limitations that are unlikely to have occurred to the parties themselves.

In the present case I can see no reason to imply either of the two limitations suggested by [counsel for owners]. The clause entitles the charterer to change "at any time" its nomination of the loading and/or discharging ports. I can see no reason therefore to imply "so long as a notice of readiness has not been given" though it is possible, as I shall have to mention later, that the giving of a notice of readiness may indirectly affect the application of the clause for quite a different reason.

He added at p. 43, left hand column:

This is not to say, however, that a charterer must be held to have complete freedom to exercise his rights under cl. M.1 where to do so would put the charterer in breach of other negotiated and agreed terms of the contract. Although the clause applies "... notwithstanding anything else to the contrary in this charterparty", the Court will construe the charterparty as a whole giving due weight to all the terms agreed by the parties. A Court will not be quick to assume that a right given to party A under one clause is intended to cancel a right given to party B by another. It is only if, on construing the contract as a whole, it appears that the parties cannot have intended two clauses to live together that it is proper to hold that one clause is to prevail over another.

In this case special provision 2 provides "Always maximum three ports total load and discharge". I can find no basis for thinking that cl. M.1 was intended to conflict with this provision or to cut it down or to amend it in any way. Clause M.1 gives the charterer the right to change his nomination. It does not entitle him to add to the number of ports actually utilized for loading or discharge. It does not, for example, permit a charterer, once a discharging operation has begun at one port, to order the vessel to proceed to a second discharging port and then, after discharging has been proceeding for some hours, to nominate a third discharge port and then to repeat the process with perhaps a fourth or fifth port. While cl. M.1 permits a charterer to change his loading or discharge port orders at any time, those orders must not have the result that the vessel has in all more than three ports for loading and discharge. …

The judge then went on to conclude that, even without the implied terms sought by owners, the order of 25 May was not within special provision M1.

As to the second question, the background facts were that between May 26 and 29, 1990 there were discussions and negotiations between the parties as to the terms of a bank guarantee to be provided by the charterers as the basis for owners' agreement to comply with the order on a without prejudice basis. The negotiations were concluded and at 1821 hours on May 29 the owners ordered the master to proceed in the direction of New York for orders. However, 15 minutes later, at 1836 hours the owners countermanded such order and instructed the master to remain at the anchorage. The judge commented that presumably the reason for this was that the charterers had countermanded their previous order to the owners since it was agreed that, either on May 29 or 30, the charterers gave the order which is to be found set out in a telex sent by the charterers to the owners at 1402 hours on May 30. This stated that the vessel should proceed to Genoa to discharge her full cargo. The second question raised by the originating summons was whether the charterers were entitled to issue this order to the vessel.

On this question the judge said at p. 44:

The order to proceed to Genoa clearly amounted to a nomination of a discharge port. Even had cl. M.1A not been included in the charter-party, the nomination might well have been held to be valid, since the charterer was entitled to nominate two discharge ports and the vessel had only tendered at one such port, at most, namely Porto Torres. It is true that Porto Torres had been nominated as sole discharge port but the principle of Anglo-Danubian Transport v. Ministry of Food (sup.) is that, where in nominating a port or berth a charterer has exercised a right of election or selection (see The Prometheus, [1974] 1 Lloyd's Rep. 350 at p. 355), he cannot thereafter change the nomination unilaterally. I doubt whether it is justified to extend that principle so as to hold that a representation that the nominated port is to be the sole discharge port constitutes the exercise of a right of election or selection. But if I am wrong on this, the charterer was entitled under cl. M.1A to change its discharge port nomination. If Porto Torres is not to be regarded as an effective port of discharge, on the ground that the vessel did not discharge there, then the effect of the order was that the charterer changed its nomination of Porto Torres as sole port of discharge to one of Genoa as sole port of discharge. If, alternatively, Porto Torres had become an effective port of discharge, since the vessel had tendered a notice of readiness there, then the effect of the order was that the charterer changed its nomination so that Porto Torres became the first port of discharge and Genoa became the second. The nomination of Genoa did not, on either view, involve that the charterer had failed to comply with the provision " . . . Always maximum three ports total load and discharge". Nor did it involve that the charterer had nominated ports in different discharge ranges where not permitted by special provision 2. I conclude therefore that the order given on May 30 was clearly valid.

A duty to nominate the place for delivery of the vessel in a time charterparty was considered in Mansel Oil Ltd v Troon Storage Tankers SA (The Ailsa Craig) by Christopher Clarke J [2008] EWHC 2169 (Comm); [2008] 2 All E.R. (Comm) 898; [2008] 2 Lloyd’s Rep. 384, and by the Court of Appeal [2009] EWCA Civ 425. The case concerned a preliminary issue arising in relation to a time charterparty for a vessel which was to be delivered by owners at a port in West Africa “Ghana/Nigeria range in charterers’ option”. Clause 5 of the charterparty provided:

5.

The vessel shall not be delivered to Charterers before 25th September 2007 and Charterers shall have the option of cancelling this charter if the vessel is not ready and at their disposal on or before 31st October 2007. Notices: delivery/redelivery 30-25-15 days estimated then 10-7-5-3-2-1 definite days notice. All times are to be based on Universal Time (UT).

Owners said that the vessel was to be modified so that she could be used as floating storage for segregated parcels of clean petroleum products, and that for this purpose she arrived at Piraeus in June 2007. In September 2007 the parties agreed that the laycan would be amended to allow the delivery date to be extended up to 15 November 2007. In October 2007 the parties agreed that work to convert the forward bunker tank to CPP storage should be done. There was a dispute as to whether these works were “new” or “additional”, as was contended by the owners.

Charterers gave notice of cancellation on 16 November 2007 on the basis that the vessel, which was still in Piraeus, had not been delivered. Christopher Clarke J described the preliminary issue in this way:

10 … It is common ground between the parties (a) that the Vessel was not delivered to the Charterers by 15th November 2007; and (b) that the Charterers did not at any point nominate a delivery port within the delivery range. It is not suggested, for the purposes of the preliminary issue, that the non-delivery of the vessel by 15th November 2007 was the result of any breach of contract on Charterers' part: cf Shipping Corporation of India Limited v Naviera Letasa, SA [1976] 1 Lloyd's Rep 132.

11 … Cooke, J., ordered a trial of the following issue:

Whether the Applicants [i.e. the Charterers] were not entitled to cancel the charterparty by reason of any absence of nomination of a delivery port.

12 … it has been agreed that it is to be assumed for the purpose of the preliminary issue only that any nomination of the delivery port would have been futile because the vessel was not and could not have been ready and at the Charterers' disposal in the delivery range by the cancelling date. This is without prejudice to either party's right to raise any factual issue after the preliminary issue has been determined.

As to relevant principles of construction, at paragraph 47 Christopher Clarke J said this:

47 … What falls to be interpreted are the terms of this charterparty. That is prima facie to be done by taking the ordinary and natural meaning of the words used as they would be understood by reasonable business men in the position of the parties and in the context in which the agreement was made. Part of that context is that the parties to the charterparty were engaged in a venture, which, if it was to work, involved a degree of co-operation between them in the sense that the action to be taken by one party would be dependent on action previously taken, or information supplied, by the other.

Christopher Clarke J rejected a submission by charterers that the charterparty did not oblige them to nominate a delivery port at all. However he accepted charterers’ submission that the obligation had not arisen at the time when charterers cancelled the charterparty. In that regard he cited what was said in paragraph 5.17 of Voyage Charters , 2nd Edition (2001):

5.17.

In the absence of any prescribed time limit, it is submitted that the nomination of a loading or discharging port must be made within a reasonable time [a footnote at this point cited Johs Thode v Vda De Gimeno y Cia SL (The Steendiek)] and that it should be made early enough to ensure that the vessel suffers no delay resulting from the absence of nomination. In The Rio Sun [Gatoil International v Tradax Petroleum [1985] 1 Lloyd’s Rep 350] it was held that a c.i.f. buyer who had the right to name the discharging port owed such a duty to his seller who had chartered the vessel. There is no decision precisely in point in the context of a charterparty, although it has been held that the nomination of a loading port or range must be made at a time which will not prevent the vessel from making her cancelling date [a footnote at this point cited Shipping Corp of India v Naviera Letasa, SA]. …

Christopher Clarke J continued::

56 I agree with this approach. In my judgment the correct formulation of the obligation, in respect of this charterparty, is that it was for Charterers to make their nomination within a reasonable time which would be such time as was (a) not so late as would mean that, because of the lateness of the nomination, the vessel could not make her cancelling; and (b) early enough to ensure that the vessel suffered no delay resulting from the absence of nomination. Such a conclusion appears to me to be correct in principle, and consistent with the Owners' obligation of co-operation. Before the vessel reaches the deviation point the Owners can, without a nomination, do all that they need to do to comply with the charterparty, and without loss to themselves.

57 If so, then, in the present case the time by which Charterers were bound to make a nomination never arrived. On the assumed facts there was never a moment beyond which the lateness of the nomination was the cause of the vessel not meeting her cancelling since she was never capable of meeting the cancelling date whenever notice was given. Nor was she caused any delay by want of a nomination.

58 In those circumstances there had been no failure on Charterers part to make a nomination because the time when they were obliged to do so had not arisen. The parties cannot have intended that the Charterers should be disentitled from exercising a right to cancel because they had failed to make a nomination before they were obliged to do so.

An appeal by owners was unsuccessful: see [2009] EWCA Civ 425; [2009] 2 All ER (Comm) 495; [2009] 2 Lloyd's Rep. 371. Longmore LJ, with whom Richards and Waller LJ agreed, began his judgment with some introductory observations:

1 The purpose of a cancelling clause in a voyage or time charterparty is to fix a definite date by which, if the owners fail to deliver the vessel to the charterers, the charterers are entitled to wait no longer for the vessel to be delivered. In the absence of a cancelling clause an owner would be in breach of charter for failure to deliver on the contractual date but a charterer would not be able to treat the owner as being in repudiatory breach of contract until the delay was such as to frustrate the commercial purpose of the adventure. The length of that delay is notoriously difficult to agree or fix with any certainty and it is, therefore, not surprising that parties to a voyage or time charter are ready to agree a cancelling date in order to avoid all arguments about whether delay in delivery is such as to frustrate the adventure.

Commenting on owners’ argument that the charterparty required a nomination of a delivery port prior to exercise of the right to cancel, Longmore LJ said in paragraph 12:

12.

… It is common ground that, once repairs were completed, whichever port in the range was in due course nominated, the vessel would have to sail from Piraeus through the straits of Gibraltar and down the west cost of Africa. It would only be when the vessel was at or near Cape Palmas off Liberia at what has been called “the deviation point” that the owners would, at earliest, need to take into account the port at which actual delivery was to be made. This would be many days after 26th August or 9th September. Charterparties, on the whole, do not require the parties to make nominations pointlessly early and certainly do not provide that pointless requirements should be conditions precedent to the exercise of any other rights arising under the charter.

In paragraph 13 Longmore LJ said:

13 The judge held that, if matters had proceeded as originally hoped, a time would come when charterers would be obliged to nominate a port of delivery (para. 51) and (para. 56) that that time would be such time as was:

(i)

not so late as would mean that, because of the lateness of the nomination, the vessel could not make her cancelling date;

(ii)

early enough to ensure that the vessel suffered no delay resulting from the absence of nomination.

He added that, before the vessel reached the deviation point of Cape Palmas, the owners could without a nomination do all they needed to do to comply with the charterparty without any loss (and I might add, inconvenience) to themselves. It followed that the time for the charterers to make a nomination never arrived and that there was no question of charterers failing to make a nomination. He held further (para. 58) that the parties cannot have intended that charterers should not be entitled to exercise their right to cancel because they had failed to make a nomination before they were obliged to do so. I entirely agree with the judge as a matter of construction of the particular charterparty with which we are concerned. Subject to any authority to the contrary, that is an end of this appeal.

As argument proceeded it became apparent that both sides were content to proceed on the basis described by Christopher Clarke J in paragraph 47 of his judgment in the Mansel Oil case. Accordingly I take as my starting point the ordinary and natural meaning of the words used as they would be understood by reasonable charterers and owners in the position of the parties and in the context in which the agreement was made. Important background is that the parties to the charterparty were engaged in a venture, which, if it was to work, involved a degree of co-operation between them in the sense that the action to be taken by one party would be dependent on action previously taken, or information supplied, by the other.

Both sides were also in agreement that terms can only be implied into the charterparty if it is necessary to do so. I shall adopt that approach. I observe, however, that in other cases a question may arise whether the speeches of Lord Blackburn and Lord Watson in Mackay v Dick contemplate that contracts requiring co-operation constitute a definable category of contractual relationship, and if so what role “necessity” has in determining the legal duties associated with such contracts: see Treitel, The Law of Contract 13^th ed by Edwin Peel (2011) at paragraphs 6-042 to 6-045.

As to the understanding of reasonable charterers and owners in the position of the parties, I start with the reasons why it is in the interests of both sides to agree a cancelling date. They are set out by Longmore LJ in his introductory observations in Mansel Oil. At common law, unless the charterparty provides otherwise, both sides remain bound to the contract until the delay is such as to frustrate the commercial purpose of the venture. On the same footing, even if owners are in breach of duty, delay to that degree will be required before the breach can be treated as repudiatory. Inevitably there will be arguments as to when that stage has been reached, and by agreeing on a cancelling date those arguments can be avoided. In that regard charterers recalled the famous remark of Scrutton LJ in Bank Line v. Arthur Capel [1919] AC 435: “If you were to ask fifteen judges of the King's Bench Division to write down how much [delay] would terminate a Charter they would give fifteen different answers.”

The tribunal noted in paragraph 59 of their reasons that owners’ construction might well mean that a charterer would have no right to cancel unless and until the vessel’s delay in being ready to load was such to frustrate the contract. They added in paragraph 60, however:

But that is a situation that commonly exists under many voyage charterparties and, quite apart from this particular question, did exist under the charterparty. For example, a vessel could be ordered (as was possible in this case) to load at two ports. In the event of prolonged delay in her arrival at the second loading port (not being the result of the fault of either party) the charterer would not have a contractual right to cancel for her late arrival but would have to wait until the delay became a delay such as to frustrate the charterparty.

Charterers disputed the validity of the analogy with a second load port, for at a second load port the vessel would be partly laden and charterers would not wish to cancel. I agree that the analogy with a second load port is not strong. However the tribunal puts a much stronger point at the forefront of paragraph 60: it is commonly the case under many voyage charterparties that a charterer would have no right to cancel unless and until the vessel’s delay in being ready to load was such to frustrate the contract. Charterers are not in a position to gainsay what the tribunal has said in this regard.

It is in these circumstances that charterers urged that the ability to cancel if a vessel does not make her cancelling date is vitally important to a charterer. The idea that a charterer would relinquish this right, in the absence of express words, by the simple act of changing the identity of the first contractual load port was, they submitted, completely unreal. The approach to be taken, they said, was that “the courts are slow to construe clauses in charterparties as absolving owners from their duty to reach the contractual load port by the cancelling date”.

I do not underestimate the value to charterers of a cancelling date. On owners’ construction, it would be lost if charterers decided to re-nominate the first load port only a minute or two after nominating it. In argument charterers added that they would also lose their right to insist that loading could not start before the commencement date. The tribunal did not analyse this argument. I am prepared, for present purposes, to assume that it is correct. On this footing, the tribunal’s construction has the consequence that if charterers re-nominate the first load port they lose the benefit of the entire laycan provision. As it seems to me, whether the re-nomination occurs five minutes after the original nomination or five days after the original nomination, on the tribunal’s approach charterers have a commercial judgment to make. It is a commercial judgment about the value of the laycan provision in the particular circumstances which have led charterers to want to vary the first load port. Charterers can be expected to be in a position, on the assumption that re-nomination entails losing the laycan provision, to take a view either that the balance of risk is strongly in favour of re-nomination, or that it is strongly against, or that the position is less clear. What to do in the light of that assessment will be a matter for them.

Moreover it seems to me that in the context of the BEEPEEVOY 3 standard form it is important also to have regard to the commercial considerations which underlie the stipulation for an ability to re-nominate. In the absence of such an ability, charterers’ position as regards a nominated port is, as observed by Holroyd Pearce LJ in Johs Thode at p. 145: “having once nominated it, they cannot change it.” From owners’ point of view this is a highly desirable advantage, particularly where, as Holroyd Pearce LJ also observes on p. 145, there is a cancelling clause.

There are many reasons why charterers may wish to deprive owners of this highly desirable advantage. Some of them were discussed by His Honour Judge Diamond QC in Bulk Shipping. Where reasons of this kind may apply it will be desirable for the charterer to have greater flexibility. A feature of clauses depriving owners of certainty in this regard is, as noted by the judge at p. 42, that they vary in the amount of flexibility given to charterers. His approach to construction was to give such clauses “a broad commercial interpretation”, construing the words so as to achieve the parties’ commercial objective. It was in that context that he commented that it is proper to hold that one clause prevails over another “only if, on construing the contract as a whole, it appears that the parties cannot have intended two clauses to live together.” Charterers placed strong reliance on this comment, but it seems to me that owners are right to say that the answer must turn on the particular contract and clauses in question.

Charterers also placed reliance on what was said by Lord Diplock in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 717 concerning certain types of contract where there is a presumption that neither party intends to abandon any remedies for its breach arising by operation of law. But the present charterparty is not a contract of the type identified by Lord Diplock. Moreover, as charterers themselves stress in a different context, a cancelling clause is not a remedy for breach.

While in the respects identified above charterers’ contentions go too far, their observations about the commercial value of cancelling clauses are nevertheless powerful. I am not persuaded, however, that they are of such force as to knock out owners’ rival contentions as to the commercial undesirability of losing the certainty associated with an irrevocable nomination while remaining exposed to cancellation rights. Instead, resolution of the relationship between clauses 17 and 24 seems to me to call for a closer examination of how the two clauses work.

In paragraphs 50 to 52 of their reasons the tribunal set out the first element in their reasoning:

50.

… Firstly, clause 24 deals with revised orders for both loading and discharging ports and its provisions apply to any loading port and to any discharging port. It could, therefore, be invoked by a charterer to change the second or fourth load port or the first or third discharging port, for example. Its provisions are not, as clause 17’s are, restricted solely to the first loading port.

51.

Apart from conferring on a charterer the right to issue such revised orders and to require the ship owner to ensure they are carried out, the express provisions of the clause set out an agreed mechanism for compensating an owner for extra steaming time (as there defined) and extra bunker consumption. So far as concerns the extra steaming time, it provided that it was to count as laytime or, if the laytime had already expired, as demurrage. This meant simply that when the used laytime or time on demurrage was computed, the extra steaming time would count as used laytime or time on demurrage as appropriate.

52.

These compensation provisions that apply following the giving of revised orders for any loading and discharging port do not suggest that in agreeing clause 24, the parties considered whether and if so how the cancellation (as distinct from laytime and demurrage) regime in clause 17 in respect of the first loading port might apply in the event that the charterers were to give such revised orders. The clause simply does not address that issue.

Charterers accept that the liberty to vary extends to second load ports or discharge ports. This, they say, goes nowhere. Indeed they add that the two clauses did not need specifically to address survival of cancellation rights, for this followed automatically. As they explained in paragraph 19 of their appeal skeleton argument:

19.1

Clause 17 provides that if the Vessel was not ready to load by 1600 hours local time on the Cancelling Date (viz. 3 April 2003), Charterers would have the option of cancelling the Charterparty. The Charterparty also provided for anticipatory cancellation if it appeared that the Vessel would not be ready to load by the Cancelling Date and certain conditions were satisfied.

19.2

The reference to the Vessel being ‘ready to load’ must be a reference to the Vessel being ready to load at the first contractual load port;

19.3

Clause 17 also provides that ‘laytime for the purpose of loading’ shall not commence before 0600 hours local time on the Commencement Date (viz. 1 April 2003) (unless Vessel starts loading earlier with the sanction of Charterers);

19.4

Once Charterers nominated Tuapse as the load port, the position under the Charterparty was therefore that Owners could not start loading at Tuapse (without Charterers’ permission) before 0600 hours on 1 April 2003 and if the Vessel was not ready or would not be ready to load at Tuapse by 1600 hours on 3 April 2003, Charterers had the option of cancelling the Charterparty;

19.5

Charterers, as they were entitled to do under clause 24, revised their orders and changed the first contractual loadport from Tuapse to Batumi;

19.6

As a matter of ordinary language, the position under the Charterparty was therefore now that Owners could not start loading at Batumi (without Charterers’ permission) before 0600 hours on 1 April 2003 and if the Vessel was not ready to load or would not be ready to load at Batumi by 1600 hours on 3 April 2003, Charterers had the option of cancelling the Charterparty.

This analysis is superficially attractive. In essence, it likens a re-nomination to an original nomination. The original nomination of a first load port writes the nominated port into the charterparty, and gives charterers all the entitlements which the charterparty confers on them in relation to the first load port. At first sight it may seem logical to make an assumption (“the suggested equality assumption”) that clause 24 is intended to equate a re-nominated first load port with an originally nominated first load port, thus conferring on charterers in relation to the re-nominated first load port all the entitlements which the charterparty conferred on them in relation to the originally nominated first load port.

On this aspect there are practical problems, particularly as seen in owners’ examples (iv) and [v]. For present purposes, however, I draw attention to a conceptual problem. It seems to me that charterers’ analysis ignores owners’ points about inconsistency. The suggested equality assumption is unsound. Charterers themselves acknowledge that:

In these circumstances it seems to me that paragraphs 50 to 52 of the reasons provide a sound basis for thinking that clause 24 does not address what should happen in relation to the cancellation regime in clause 17.

At paragraph 58 of the reasons the tribunal said this:

58.

It is clear to us that in case of a revised order under clause 24, the draftsman or the parties, had that been the intention, could have introduced such provision as would apply the cancellation provision or a variation of it. They did not do so (although they made express provision for adjustments to the laytime and demurrage calculation). The effect of their not doing so, it seems to us, was to provide the charterers with the maximum of flexibility to enable them by means of an un-fettered liberty to revise their orders to tailor their shipping arrangements to suit their cargo arrangements.

The tribunal added at paragraph 59 of the reasons:

59.

For the same reasons, we are not satisfied that the implication of the term suggested either as a stand-alone term or as part of the duty of co-operation provides the correct construction for clause 24. The clause works satisfactorily as it is and it is not necessary for it to contain such a term. …

Charterers’ appeal skeleton argument in paragraph 24.2 identified paragraphs 58 and 59 as the tribunal’s “second reason”, and summarised this aspect of the tribunal’s reasoning as being that the implied term contended for by charterers “was unnecessary and qualified what would otherwise have been an unfettered liberty to revise their orders to tailor their shipping arrangements to suit their cargo arrangements”. The appeal skeleton then said in paragraph 26:

26.

The tribunal’s second reason confuses the unfettered nature of the right to make revised orders, with the fetter which applies to any nomination of the first contractual load port. Charterers’ case is simple: a charterer when nominating the first contractual load port, whether as an original or revised nomination, must do so within a reasonable time viz. not so late that it will cause the Vessel to miss the Cancelling Date. This fetter is an expression of a basic principle which is implicit in every English law contract: viz. a party cannot invoke a right to cancel or terminate a contract for non-fulfilment of a condition precedent where that party caused the condition precedent not to be fulfilled. [A footnote then cited Lord Blackburn’s speech in Mackay v Dick at p. 263.]

I confess that paragraph 26 of the appeal skeleton initially confused me. The second sentence said that charterers’ case was that when making a revised order as to the first load port, charterers were under a duty do so within a reasonable time, and in particular not so late that the re-nomination would cause the vessel to miss the cancelling date. From this I understood that charterers disagreed with the tribunal’s conclusion that a revised order under clause 24 contained no such fetter. I was puzzled when owners’ answering skeleton argument said that charterers accepted that their right to re-nominate the first load port was unfettered, as this seemed to overlook what had been said at paragraph 26 of the appeal skeleton.

It was only during the course of oral submissions that it became clear, to me at least, that the second sentence of paragraph 26 was intended to mean something quite different from what it said. As explained in section E1 above, charterers did not intend to contend that they were, at the time of re-nomination, under the duty not to impair cancelling date achievability. On the contrary, they agreed with the tribunal that a re-nomination could be made even where it would impair cancelling date achievability.

Thus, as I understand it, what charterers intended to say in paragraph 26 was that while, for the purpose of determining what was or was not a valid nomination, clause 24 did not impose a duty not to impair cancelling date achievability, nevertheless as regards a surviving cancellation regime postulated by charterers, clause 24 did impose a duty not to impair cancelling date achievability. This immediately raised the problem of inconsistency as highlighted by owners.

The problem can, in my view, readily be seen in an analysis of the last sentence of paragraph 26. Lord Blackburn’s speech at page 263 is cited for a proposition that “a party cannot invoke a right to cancel or terminate a contract for non-fulfilment of a condition precedent where that party caused the condition precedent not to be fulfilled”. But what Lord Blackburn in fact says is that “where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.” Applying this principle, the ability to cancel if the vessel does not achieve her cancelling date inevitably entails that charterers agree to do what is necessary on their part to enable the vessel to achieve the cancelling date. In other words, existence of a cancelling regime inevitably entails the duty not to impair cancelling date achievability. Thus if Lord Blackburn’s principle is applied then survival of the cancellation regime is incompatible with clause 24 containing the wide liberty which the charterers agree that it contains.

It is true that an analysis referring to a condition precedent is found elsewhere in Mackay v Dick, namely in the speech of Lord Watson. But Lord Watson does not say that it suffices, in order to treat the condition precedent as satisfied, that a party “caused” it not to be fulfilled. Instead he refers to a party which is at fault being taken to have fulfilled the condition. Thus he says expressly at p. 270, “and their failure being due to his fault”. If, however, it is accepted that the liberty to vary under clause 24 is so wide as not to involve a duty not to impair cancelling date achievability, then I do not understand how charterers can be said to be “at fault” in giving an order which impairs cancelling date achievability.

To my mind this flaw persists throughout the remainder of charterers’ criticisms of this “second reason”. They cite remarks by Willmer LJ in Johs Thode, and by Kerr J in Shipping Corp of India. I should not be taken as deciding that those remarks are generally applicable to a re-nomination. For present purposes my point is that when citing these remarks charterers nowhere recognise that neither of those cases involved a liberty to vary of the width found in clause 24 in the present case. Similarly charterers cite the inability to cancel under the present charterparty if an original nomination of the first load port impairs cancelling date achievability, but they nowhere recognise that this inability flows from Lord Blackburn’s reasoning with the consequence that an original nomination is only permissible if it complies with the duty not to impair cancelling date achievability.

In later submissions charterers maintained that there was no inconsistency. In that regard they sought to make a point in their favour by citing observations by owners on the re-nomination time question. The point was a false one, for when dealing with the re-nomination time question owners must necessarily assume that despite their objections about inconsistency the right to cancel has survived. Charterers’ later submissions, like their earlier ones, did not engage with the obvious problem of how a suggested fetter on ability to cancel could be implied in circumstances where it was permissible under clause 24 to give a revised order without regard to the suggested fetter.

Accordingly I conclude that the charterers’ criticisms of this “second reason” are unfounded.

At paragraphs 52 and 53 of the reasons the tribunal said this:

52.

These compensation provisions that apply following the giving of revised orders for any loading and discharging port do not suggest that in agreeing clause 24, the parties considered whether and if so how the cancellation (as distinct from laytime and demurrage) regime in clause 17 in respect of the first loading port might apply in the event that the charterers were to give such revised orders. The clause simply does not address that issue.

53.

It is equally the case that clause 17 does not address the issue of whether and if so how its provisions in respect of the first loading port might affect or be affected by the liberty in clause 24 to give revised orders.

At paragraph 57 of the reasons the tribunal said this:

… The BEEPEEVOY 3 form of charterparty is a document that has been drafted with considerable care. We are satisfied that if it had been the draftsman’s intention that the clause 17 cancellation would apply in the case of a revised order, there would have been included specific provisions catering carefully for how it would apply in the various situations that might arise. Clause 17 makes no reference to clause 24 and clause 24 makes no reference to clause 17. It is clear from looking at the charterparty as a whole, however, that it was the draftsman’s practice to make such cross references where it was necessary to create, qualify or emphasise the relationship between the way the clauses operated. For example, clause 18 refers to clause 17 itself and to clauses 4, 5, 12, 21, 24, 25, 26, 29, 30 & 31; clause 19 refers to clauses 17, 20 & 21; clause 20 refers to clause 46; clause 22 refers to clause 18; and clause 30 to clauses 19, 20 & 21.

At paragraph 58 of the reasons the tribunal said this:

58.

It is clear to us that in case of a revised order under clause 24, the draftsman or the parties, had that been the intention, could have introduced such provision as would apply the cancellation provision or a variation of it. They did not do so (although they made express provision for adjustments to the laytime and demurrage calculation). The effect of their not doing so, it seems to us, was to provide the charterers with the maximum of flexibility to enable them by means of an un-fettered liberty to revise their orders to tailor their shipping arrangements to suit their cargo arrangements.

The charterers’ appeal skeleton at paragraph 24.3 described what it called the tribunal’s “third reason”. This was that the two relevant clauses, namely clauses 17 and 24, “do not expressly address the issue as to whether, and if so how, the right of cancellation in clause 17 operates in the event of a re-nomination [here there was a footnote reference to paragraphs 52, 53 and 58 of the reasons] and, unlike other clauses, there is no express cross-referencing between the two clauses [here there was a footnote reference to paragraph 57 of the reasons].”

In this regard charterers’ first criticism was that the tribunal had overlooked the “default position” under which what had applied to the originally nominated first load port would equally apply to the re-nominated first load port. For the reasons given in section E1 above, however, in relation to cancellation rights the equality assumption is incorrect. This criticism thus does not have the strength which charterers attribute to it.

The next criticism advanced by charterers again sought to make a point in their favour by citing observations concerned with the re-nomination time question. On this occasion the observations were made by the tribunal. As on the previous occasion (see section E3 above) the point was a false one, for when dealing with the re-nomination time question the tribunal must necessarily assume that despite owners’ objections the right to cancel has survived.

In later submissions charterers pointed to clause 3 as expressly showing that the identity of the first load port was subject to clause 24. To my mind this assists owners rather than charterers: it suggests that if the cancelling provisions in clause 17 were to apply in the event of re-nomination of the first load port then they too would have been expressly made subject to clause 24.

By contrast, charterers pointed to provisions which would plainly be affected by a re-nomination but where no express reference to clause 24 was made. They gave as an example clause 40, dealing with estimated times of arrival. As it seems to me, however, this simply bore out what was said by the tribunal at paragraph 57 of the reasons: “looking at the charterparty as a whole … it was the draftsman’s practice to make such cross references where it was necessary to create, qualify or emphasise the relationship between the way the clauses operated.” Applying this approach, the ordinary operation of clause 24 across the generality of load and discharge ports was not something which needed an express cross-reference. But there were important things which were not in that category. Had there been an intention that cancellation rights should survive, given that the suggested equality assumption did not apply, I consider that the tribunal were right to conclude that express words would have been used to that effect.

Accordingly I conclude that charterers’ criticisms of this “third reason” are not made good.

At paragraphs 53 and 54 the tribunal set out the next stage in their reasoning:

53.

It is equally the case that clause 17 does not address the issue of whether and if so how its provisions in respect of the first loading port might affect or be affected by the liberty in clause 24 to give revised orders.

54.

If the charterparty was deficient in that respect, subject to whether any terms may properly be implied in the contract, it is not our role to remedy any such deficiency but rather, from the words used, to discern the parties’ intentions. Put starkly, the owners said that there was nothing in the clauses saying that the cancelling date applied and the charterers said there was nothing in the clauses saying that the cancelling date did not apply.

In paragraph 55, before setting out charterers’ contentions as cited in section E1.1 above, the tribunal described an argument advanced by owners. This was that, if the charterers were right to say that the whole of clause 17 survived a re-nomination, then charterers accepted that it was necessary to imply terms, and this would involve implying terms in clauses which were themselves clearly expressed. Having set out charterers’ contentions as described above, the tribunal continued in paragraph 56 of the reasons:

56.

An important and desirable feature of a cancellation provision is that in the event of the actual or threatened late arrival of a vessel at the first loading port, it creates certainty. Clause 17 is no exception: it stated clearly the circumstances in which the right to cancel arose, including what was required of each party, and the circumstances in which it could be exercised including the time limit for doing so, and catered for various situations. As we see it, the problem with linking what would otherwise be a clearly defined option to cancel with an ill-defined requirement on the part of the charterers to revise their orders within a reasonable time, is that it introduces uncertainty.

The tribunal returned to this aspect when dealing with issue (b). Owners had advanced a fall back argument that if clause 17 survived a re-nomination, the right to cancel could be exercised only if the vessel would not have been ready to load at the originally nominated port (Tuapse) by the cancelling date. The tribunal rejected that argument because clause 17, if it survived, was looking at an actual failure to be ready to load no later than the cancelling date. This was a reference to the contractual loading port, and on the assumption that the revised order was valid that loading port had been re-nominated. A reference back to the originally nominated port could result in the “absurd” consequence that charterers might re-nominate a closer port which the vessel might reach in time, but would retain a right to cancel if the vessel would not have made the originally nominated port in time. Moreover the laycan provisions in clause 17 were concerned with the vessel’s readiness for the contractual loading operation, which following a revised order would only occur at the re-nominated port.

After dealing with those matters, the tribunal commented in paragraphs 66 and 67 on an additional submission by charterers:

66.

The charterers did submit that in the event of a deviation arising out of a revised order, it was implicit from the treatment of the delay associated with a deviation necessary to comply with such revised orders (which we understood to be a reference to the additional steaming time referred to in clause 24), that such delay could not be used to cancel the charterparty. This meant, they said, that when exercising the right to cancel, a charterer must consider whether the extra steaming time associated with a clause 24 deviation is the reason the vessel will miss her laycan. If it is, the charterer would only be able to cancel if the vessel would miss her laycan by at least the extra time associated with any such deviation. If it exercised a right to cancel before that, the cancellation would be invalid as the vessel’s failure to be ready in time would have been caused by the deviation resulting from the revised order.

67.

The charterers submitted, therefore, that for the purpose of clause 17 such extra time is to be taken out of account. That would involve extending the cancelling date by the relevant period of delay or extra steaming time and the charterers would not be able to exercise their right of cancellation if the reason the vessel would have missed the cancelling date was the extra steaming time caused by the revised order. These submissions underline the fact that clauses 17 and 24 contain no provision for altering the cancelling date (or time) in the case of a revised order, and in the circumstances we need say no more about them.

A later passage, in the section of the reasons dealing with issue (c)(ii), is also relevant. At paragraph 120 of the reasons, the tribunal said this:

120.

We add that the complexities of investigating what the ETA Batumi would have been, and the extent to which the vessel might have proceeded differently if the order to proceed there had been given earlier, can be said to support our primary conclusion, that the right to cancel under clause 17 was not intended to apply when a revised order was given. This could explain why clause 24 refers to the laytime/demurrage provisions, but not to any right to cancel.

Charterers’ appeal skeleton argument at paragraph 24.4 identified a “fourth reason” given by the tribunal for its conclusion on the survival question. In this regard they cited 56 and 57 of the reasons. The fourth reason was described in this way:

The application of the cancellation provisions in clause 17 to the re-nominated port could only work fairly if the right to issue revised orders was qualified by an obligation to do so within a reasonable time. This qualification, according to the tribunal, was ‘ill-defined’ and would introduce ‘uncertainty’ into a context where certainty was an ‘important and desirable feature’. This alleged uncertainty made it ‘unlikely’ that the parties intended the cancellation provision to apply in the event the first load port was changed.

In their appeal skeleton charterers advanced three criticisms of this “fourth reason”. Charterers’ first criticism was that there was nothing “ill-defined” about the fetter that they posited. However, when the attempt was made to analyse the suggested fetter, particularly in the context of owners’ examples (iv) and [v], difficulties of definition soon became apparent.

Charterers’ second criticism was founded on an observation that in cases concerned with an original nomination (rather than a re-nomination) consideration may have to be given to the duty not to impair cancelling date achievability, and in that event there may be a degree of uncertainty. However, submitted charterers, this was not a reason to deprive the charterer of the protection of the laycan.

I do not quarrel with the observation described above. Even so, I am not persuaded that it gives rise to a valid criticism of the tribunal’s reasoning. Their point is that the simplest solution, consistent with established principle, is that the liberty given to vary the first load port is too wide to carry with it any continued ability to rely on the cancelling date. Thus the contrast is between a simple solution under which the duty not to impair cancelling date achievability will no longer be in play, and a more complex solution under which that duty will still be in play and questions will arise as to whether it calls for modification and if so in what respects.

Charterers’ third criticism was that there are various other well-known standard form charterparties where there can be no dispute as to the application of the cancelling date to the re-nominated port “notwithstanding the alleged self-same potential for dispute or uncertainty”. It is right that there are other standard form charterparties which, to varying degrees, identify that after a re-nomination the cancelling regime is to survive with certain modifications. This, however, does not meet the tribunal’s point. On the contrary, it supports the tribunal’s reasoning that the complexities are such that one would expect them to be expressly addressed if it were intended that the cancelling regime was to survive.

In later submissions the parties examined the examples of absurdity noted in section C above and possible implied terms that might deal with them. I do not consider that it is profitable to examine them at this stage: the tribunal’s reasoning on the survival question does not require detailed examination of the various possibilities. To the extent necessary they are examined later in this judgment in the context of the re-nomination time question.

For the reasons given above I consider that in relation to the survival question charterers’ criticisms of the tribunal’s reasoning lack force. The appeal on Q1 is accordingly dismissed.

My conclusion on Q1 has the consequence that Q2 does not arise. I therefore deal with it more shortly than would otherwise have been the case. In the remainder of this section I do not repeat my broad account of the tribunal’s reasoning in section C above. Reference back should be made to that section before turning to particular points which I discuss below.

As noted in section C4 above, on issue (c)(ii) the tribunal identified a particular question for their consideration. This question was whether, knowing that the current ETA for Batumi was after the (assumed) cancelling date, could charterers first substitute Batumi as the first loading port and then cancel the charterparty under the (assumed surviving) second paragraph of clause 17 on the ground that the vessel would be late arriving there?

The first stage of the tribunal’s reasoning in answer to this question was to discuss the arguments on the suggestion that Tuapse was only ever a provisional nomination. At paragraphs 112 to 114 the tribunal set out the arguments in this way:

112.

The charterers relied upon the fact that Batumi was a port within the original charterparty range. It is clearly established by the authorities that the effect of nominating a port within that range was to make that port, here Tuapse, the contractual loading port and the contractual destination: The Jasmine B [1992] 1 Lloyd’s Rep. 39. In the present case, however, because of the charterers’ right to give a revised order, they said that Tuapse was only ever a provisional nomination; as counsel for the charterers expressed it, it was “…written in pencil”.

113.

Accordingly, they argued, if for their own purposes the owners delayed the vessel’s departure from the previous port or instructed the vessel to slow-steam on the voyage to the nominated port (but in either case, so as to remain able to arrive there before the cancelling date), the owners would be taking a calculated risk that there would not be a revised order of a more distant port. If, in the event, the charterers exercised their contractual right to nominate a more distant port in the range which, owing to the owners’ delay or slow steaming, the vessel could no longer reach in time, the owners could not complain.

114.

The owners regarded that as very un-commercial. Where there is a right to give revised orders, the owners argued, it was not the case after the initial nomination that the vessel ought to have steamed towards the first nominated loading port sufficiently fast to ensure that if there were to be a revised order the vessel would still be able to reach in time any port in the range that might be the subject of a revised order. They said that once a first nomination has been made the shipowner is entitled to treat the loading port so nominated as the contractual loading port and to perform his contractual obligations accordingly and that is the position whether the charterparty does or does not contain a right to give a revised order.

The tribunal set out their conclusions on this aspect on paragraph 115:

We agreed with the owners that the loading port first nominated becomes the contractual loading port. The idea that Tuapse was to be considered as written into the charterparty in pencil only as a provisional nomination is unsatisfactory and there is nothing in the charterparty to support that argument, apart from the presence of clause 24 giving charterers the right to give revised orders. We agree with the owners that it would be un-commercial and unsatisfactory if, following the original nomination of Tuapse, the vessel was obliged not only to proceed there but also to proceed as if any other port within the charterparty range might be substituted by a revised order. In our view, there cannot be different kinds of contractual loading port. Once the loading port is nominated (or the alternative port, if a revised order is given) it is the contractual loading port; there is no intermediate status. The fact that a charterer has the right to revise his orders does not, until that right is exercised, make the original nomination any less the contractual loading port.

On this aspect charterers’ appeal skeleton said that they had never disputed that Tuapse, once nominated, became the contractual loading port. Their argument, which they said had been accepted by the tribunal, was that once there was a re-nomination, the re-nominated port became the contractual loading port in place of the originally nominated port.

As to this, what was accepted by the tribunal in the passage relied on by charterers concerned issue (b). The tribunal were not there considering the “written in pencil” argument. That argument was firmly rejected by the tribunal as set out above.

In later submissions charterers’ suggested that as the present case did not concern slow-steaming it was not necessary to decide whether the “written in pencil” argument was right. Nevertheless, if necessary, they maintained that it was right, relying on an analysis based upon Willmer LJ’s judgment in Johs Thode.

Owners made a threshold submission that if charterers had wished to dispute the tribunal’s reasoning on the “written in pencil” question they were required to seek permission to appeal on the point. Written submissions were lodged on this threshold submission. In my view it is misconceived. What mattered to charterers was the decision by the tribunal which is the subject of Q2. In arriving at that decision the tribunal rejected the “written in pencil” argument. This was no more than a step in their reasoning on the point which really mattered. It would have been of no utility in seeking permission to appeal on it independently of Q2. In so far as it formed part of the tribunal’s reasoning on Q2, the grant of permission to appeal on Q2 entitles charterers to argue the point on that appeal.

That said, however, I am no more impressed by the point than were the tribunal. It gains some support from what was said by Willmer LJ in Johs Thode, but on this aspect he was in a minority dealing with a hypothetical question which the majority considered did not arise. Both Holroyd Pearce and Pearson LJJ in that case gave persuasive reasons for concluding that if clause 3 had been correctly operated the vessel was entitled and bound to proceed to Valencia for orders.

The next stage of the tribunal’s reasoning on issue (c)(ii) was set out in paragraphs 116 and 117 of the reasons:

116.

For their contention that their revised order to proceed to Batumi was valid, notwithstanding that the current ETA for that port was after what they contended was the cancelling date, the charterers relied upon Clark J’s judgment in Ailsa Craig and his formulation of a “reasonable time” within which a nomination must be made. That was a case where the shipowners were already in breach of their obligation to proceed towards the charterparty range of loading ports, so much so that it was debatable whether any nomination of an individual port was required. The cause, therefore, of that vessel’s late arrival, if she had proceeded there, would have been the existing breach of contract by the shipowners; it would not have been the fact that, when the nomination was made, the vessel was unable to reach it in time. The judgment as we read it turns on that question of causation, and does not qualify the underlying duty of co-operation, which requires a charterer to nominate a port in time for the vessel to avoid the risk of cancellation.

117.

In the present case, the circumstances are different. From the time when Tuapse was nominated and became the contractual loading port, the vessel was proceeding in accordance with her contractual schedule, and she continued to do so until the revised order was given. The owners were not in breach of the charterparty at that stage, unless there was a continuing obligation to be prepared to proceed to all other ports in the charterparty loading range, which in our judgment, as stated above, there was not. …

Aspects of these paragraphs which refer to breach, causation and the duty not to impair cancelling date achievability are analysed in later sections of this judgment. For reasons explained below, I consider that the main respect in which co-operation is different is that prior to the re-nomination the vessel has been proceeding in accordance with the original nomination. This is discussed in section F5 below.

The tribunal then set out what it was that charterers would be able to say if they recognised that the nomination of Tuapse was an event which could not be ignored. In paragraphs 117 and 118 the tribunal said this:

117.

…All that the charterers can say is that when Tuapse was nominated there was a possible anticipatory (but non-repudiatory – per Longmore, LJ in The Ailsa Craig [2009] 2 Lloyd’s Rep 371 at paragraph 1) breach of the charterparty by the owners in the sense that, if Batumi had been the original nomination, the vessel’s ETA there would (or might) have been later than the cancelling date. The issue, as we see it, is whether the charterers can rely upon that hypothetical anticipatory breach of the charterparty as the cause of the estimated late ETA Batumi at the time when the revised order was given.

118.

We hold that the vessel’s ability (in the sense described above) to reach Batumi ceased to be relevant when Tuapse was nominated; there was no longer an actual or an anticipatory breach, if there ever was one. …

Charterers submitted that in this passage, and in the passage cited in section F3 above, the tribunal fell into error by (1) thinking that cancellation could only arise for breach, and (2) suggesting that mere inability to reach the first load port in time would suffice to render an original nomination invalid. I do not consider for a moment that the tribunal made either of these errors. As can be seen from paragraph 117 of the reasons, breach only arose as something which charterers might fasten upon as a cause of the vessel, in circumstances after the contract had required the vessel to carry on steaming to Tuapse, being responsible for lateness at Batumi. The suggested error (1) is accordingly based on a misconception. As to the suggested error (2), the passage criticised is no more than shorthand. The tribunal had repeatedly set out elsewhere what was involved in the duty not to impair cancelling date achievability. There is no reason to think that they misunderstood the position in this regard.

It will be seen above that at the start of paragraph 118 of the reasons the tribunal held that the vessel’s ability to reach Batumi (among other alternative ports within the load port range) ceased to be relevant when Tuapse was nominated. In paragraph 118 the tribunal, in the second sentence, described this holding in another way:

… Put another way, the vessel thereafter was proceeding in accordance with her contractual schedule, as she did until the revised order was given.

To my mind this passage links with what had been said by the tribunal on the “written in pencil” question. It emphasises that unless and until a re-nomination was made owners were entitle to proceed on the basis that Tuapse was the first load port. It would be uncommercial to require owners to proceed on any other basis. That being so, it seems to me that the tribunal’s reasoning is compelling: in order to enable the vessel to achieve her cancelling date, the postulated re-nomination duty not to impair cancelling date achievability does not look back to the position prior to the original nomination. It looks at the position in the events which have happened. It might be different if the vessel had not proceeded in accordance with the contract. But where she had done so, the Mackay v Dick duty of co-operation logically requires that charterers may not cancel if the re-nominated first load port is a port for which at the time of the re-nomination the estimated time of arrival was after 1600 hours on the cancelling date.

Finally in paragraph 118 the tribunal set out an alternative way in which the matter could be analysed:

… An alternative legal analysis may be that by their nomination of Tuapse the charterers waived their right to contend that the owners were in breach because the vessel could not have reached Batumi in time, or would have had a late ETA at Batumi if that had been the original nomination, and if those facts were established.

Charterers suggested that this was no more than a tentative analysis. I consider that they are right and that in the present circumstances it is not useful to seek to examine it further.

The tribunal set out a “direct cause” analysis at paragraph 119 of the reasons. It was in this context that the tribunal made the observations in paragraph 120, cited in section E3 above. What was said in paragraph 119 was this:

The causation argument can be tested in this way. If the vessel had proceeded to Batumi and arrived after the cancelling date (if there was one), and it became necessary to identify the cause of that lateness, in our view the direct cause would have been the fact that the order to proceed there was given when the vessel’s ETA was already late, without the owners being in breach of contract, not the remote fact (if it was established) that the ETA was or might have been late if the order had been given earlier, whether or not there was an actual or anticipated breach of contract at that stage.

Charterers objected that this analysis depended upon the tribunal’s alleged erroneous approach to breach. For the reasons given above, however, that objection is misconceived.

Charterers also objected that the analysis assumed absence of a contractual right to nominate a port that could not be reached prior to the cancelling date. I do not agree. What the tribunal was seeking to do was to ask why the vessel was late. It seems to me that their “direct cause” analysis flows logically from their conclusion that prior to the re-nomination the vessel had been proceeding in accordance with her contractual schedule.

For the reasons given above, I conclude that the appeal on Q2 must be dismissed. I have not, in my analysis above, commented on references in earlier cases to there being a need, as part of the duty of co-operation, to imply a term that nomination will be made “within a reasonable time”. The argument has focussed specifically on the particular implied terms set out in section A1 above. For my part, I am inclined to doubt whether it is necessary or helpful to speak of “a reasonable time” in this context. That, however, is not a matter which arises in the present case.

Conclusion

I conclude that the tribunal were right in reaching the conclusions that they did on the survival question and on the re-nomination time question. It has not been necessary, in this regard, for me to examine certain additional arguments which were advanced on behalf of owners. They included the contention that particular rules of interpretation should be adopted because the right of cancellation is akin to a right of forfeiture, or because the standard form wording was drafted on behalf of charterers. They also included a contention that owners gained assistance from what was said in the charterparty in relation to ice and war. I consider it preferable that these and other additional contentions by owners are left over for decision in a case where the outcome may turn upon the issues in question.

I ask counsel to seek to agree on consequential orders.