Ocean Pride Maritime v Qingdao Ocean Shipping

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Ocean Pride Maritime LP v Qingdao Ocean Shipping Co (The “Northgate”)
English Commercial Court: HHJ Richard Siberry QC: [2007] EWHC 2796 (Comm): 27 November 2007

Michael Coburn (instructed by Holman Fenwick Willan) for the Shipowner, Ocean
Rebecca Sabben-Clare (instructed by Middleton Potts) for the Charterer, Qingdao


Under a charterparty that provided that a valid notice of readiness could only be given at the inner anchorage at the port of loading if space was available at the inner anchorage upon the vessel’s arrival, the court held that, on the particular wording of the charter and the circumstances of the case in question, the loading terminal had, by accepting a notice sent when the ship was only at the outer anchorage, even though space was available at the inner anchorage on arrival, waived the charterer’s right to reject the notice as invalid.

The “Shackleford” [1978] 2 Lloyd’s Rep 154 (CA), considered.
The “Mexico 1”
[1990] 1 Lloyd’s Rep 507 (CA), considered.
The “Happy Day”
[2002] 2 Lloyd’s Rep 487 (CA), considered.

DMC Category Rating: Confirmed/Developed

Note contributed by Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), Trainee Solicitor and International Contributor to DMC’s CaseNotes  

The vessel was fixed on 17 November 2005 to carry iron ore from Brazil to China. No charterparty was ever signed by both parties. A dispute arose in relation to the commencement of laytime at the loadport, Guaiba Island Terminal, Sepetiba, where there is an inner and outer anchorage. Notice of readiness (“NOR”) was tendered by the master at the outer anchorage at 05.50 on 17 November 2005. Though there was space for the vessel at the inner anchorage at that time, this was not chosen by the shipowner because it was more expensive than the outer anchorage. Due to congestion, the vessel was unable to berth until 09.35 on 27 November 2005. Loading was completed at 03.57 on 29 November 2007, whereupon the vessel sailed for China.  

There were two issues in the case:

(1)   The precise terms of the charter: the shipowner argued that the charter was fixed on the basis that NOR could be tendered “WIBON, WIPON, WCCON, WIFPON” (“whether in berth or not, whether in port or not, whether customs cleared or not, whether in free pratique or not”), so that the NOR had been validly tendered at the outer anchorage; whereas, the charterer argued that the charter was fixed on the basis that a valid NOR could only be tendered at the outer anchorage if the vessel could not anchor at the inner anchorage; and

(2)   Acceptance, waiver and estoppel for an invalid NOR: in the alternative, the shipowner argued that the charterer had waived the defect and/or was estopped from contending that it was invalid, by reason of the NOR having been accepted by the terminal; whereas, the charterer argued that the terminal could not accept the NOR on the charterer’s behalf and that there had been no clear and unequivocal representation by the charterer and no reliance by the shipowner capable of giving rise to any waiver or estoppel.  

This note focuses primarily on the second issue.  

The terms of the charter consisted of the “main terms” in the fixture confirmation email dated 17 October 2005, which incorporated terms from an earlier charter dated 27 October 2004 [in which the shipowner was not involved] made between the Charterer, as shipowner, and Jinan Iron and Steel Co Ltd, as charterer, for a voyage "from one safe berth, one safe port, Ponta da Madeira, always accessible always afloat, Brazil" to China, which served as the Charterer’s pro forma charter. The “main terms” were based on an earlier fixture which had not involved the Shipowner.  

Clause 6A was agreed in the following terms (which were not in dispute):

On sailing from the preceding port, Master, Owners and/or Charterers shall inform to seller and to seller’s port administration at port of Guaiba Island Terminal, Brazil or CPBS CPBS-COMPANHIA PORTUARIA BAIA DE SEPETIBA, BRAZIL, by telex or fax, the expected time of arrival (ETA) of each vessel.

Such information shall be updated fifteen (15) days, eight (8) days, three (3) days, two (2) days and one (1) day before the vessel’s expected arrival at port of Guaiba Island Terminal, Brazil or CPBS, CPBS- COMPANHIA PORTUARIA BAIA DE SEPETIBA, BRAZIL, or at any time upon seller’s request.

Master, Owners and/or Charterers shall, with the eight (8) days notice, also inform seller about the vessel’s cargo plan and provide the following details:  
(i) arrival and departure drafts;
(ii) air draft (distance from water line to the top of the hatch coamings);
(iii) amount of ballast on arrival and, if in cargo holds, how distributed;
(iv) time required for deballasting after berthing;
(v) loading sequence; and
(vi) information on whether a ‘gas free’ certificate is required or not.”  

Clause 6B (as found by the judge) read as follows:

Notice of readiness (nor) may be tendered after arrival of vessel at the inner harbour area, including the inner anchorage area, of loading port, at any time…whether the vessel is in port or not, whether in berth or not. However, if vessel is compelled to wait for berth at the outer or at the intermediary anchorage area on vessel’s arrival due to unavailability of space at the inner anchorage area, notice of readiness may be tendered after arrival of the vessel at the outer or at the intermediary anchorage area…”

On the shipowner’s case, laytime commenced 12 hours after the NOR was issued and demurrage of US$449,892 was payable; whereas, on the Charterer’s case, laytime commenced when the vessel commenced loading and because the laytime had not expired when loading had completed despatch of US$43,274 was deductible from freight.  

Terms of the Charter

The judge decided that the Charterer’s construction of clause 6B was correct: the charter was fixed on the basis that a valid NOR could only be tendered at the outer anchorage if the vessel could not anchor at the inner anchorage because of congestion there (and, obviously, at the berth itself), whereas, in this case, the vessel could have proceeded to the inner anchorage immediately upon its arrival. Instead, the shipowner had elected to anchor at the outer anchorage in order to save on expense that would otherwise have been payable while at the inner anchorage. It followed that if the Shipowner’s claim for demurrage was to succeed, the Shipowner would need to establish that the Charterer had either waived the invalidity of the NOR or was estopped from contesting its validity.  

Acceptance, Waiver & Estoppel

The judge noted that the ETA notices and other information in clause 6A were to be provided "to seller" (and, in the case of the ETAs, "to seller’s port administration") by "Master, Owners and/or Charterers". As a result, “owners could comply with the provisions of the clause by providing the ETAs and other information directly to the seller.” The judge, importantly, also noted that the seller, shipper and terminal owner (“MBR”) was, in effect, part of one organisation.  

Clause 6B of the charter did not identify the intended recipient of NOR at the loadport or the disport. The judge therefore accepted the Shipowner’s submission that “the Northgate charter contemplated the tender of NOR to MBR/the terminal, as well, no doubt, as to charterers and/or charterers’ agents, and indicated that it was the notification to MBR/the terminal of the vessel’s arrival and readiness to load that was important. It was to the ‘seller and to seller’s port administration’ at the terminal to whom ETAs and (in the case of the ‘seller’) other information pertinent to loading had to be communicated.”  

It followed that, in the circumstances, the judge was “satisfied that a NOR communicated to MBR and/or the terminal, whether by owners/the master, or by Brazshipping as charterers’ agents (having received such NOR themselves from the master/owners), would (if otherwise valid, and subject to any waiver or estoppel) be good NOR for the purposes of the Northgate charter.”  

The judge then considered the authorities in order to determine “whether MBR/the terminal were impliedly authorised by charterers to waive the defect in the NOR tendered to them arising from the fact that the NOR had been tendered when Northgate was at the outer anchorage, although she had not been compelled to wait there for a berth due to unavailability of space at the inner anchorage”.  

As to this, the shipowner relied on the decisions in Surrey Shipping Co Ltd v Compagnie Continentale (France) SA (The “Shackleford”) [1978] 2 Lloyd’s Rep 154 (CA)1 and Glencore Grain Ltd v Flacker Shipping Ltd (The “Happy Day”) [2002] 2 Lloyd’s Rep 487 (CA),2 both of which considered the circumstances in which a third party might be impliedly authorised by charterers to accept an invalid notice of readiness and thereby waive a condition as to the commencement of laytime. In turn, the charterer relied on the decision in Transgrain Shipping BV v Global Transporte Oceanico SA (The “Mexico I”) [1990] 1 Lloyd’s Rep 507 (CA),3 as establishing that, insofar as the shipowner relied on estoppel, the strict elements of estoppel must be made out, which the charterer submitted they were not.  

The judge was of the opinion that “MBR/the terminal, as the intended recipient (or at least the intended primary recipient) of NOR under the Northgate charter, must have been impliedly authorised by charterers to waive any defect in the NOR... The fact that they were not identified in the charterparty terms by name is not a valid ground for distinguishing The Shackleford and The Happy Day... On the contrary, [like Sir David Cairns considered to be the case in The Shackleford] … as a matter of commercial practicality, such an intended recipient of the NOR must have implied authority to waive a condition as to the commencement of laytime.”  

The judge continued: “A waiver of a defect in a NOR will be ineffective unless the recipient knows of the facts which make the NOR defective, as in The Shackleford but not in The Mexico I. It can, however, safely be inferred that the terminal/MBR knew that the vessel was at the outer anchorage - the notices to MBR referred to the vessel’s arrival at Sepetiba Roads, and the terminal will doubtless have had knowledge of which waiting vessels were at the inner anchorage, and which were not. There is no evidence that the terminal or MBR were aware of the charterparty terms, but charterers of course were so aware. Brazshipping’s email of 4 November 2005… states the obvious that charterparty terms vary, and thereby indicates that some charters allow for tender of NOR at the outer anchorage, whilst others do not. In these circumstances, and in line with what Sir David Cairns said in The Shackleford…, if charterers did not communicate the Northgate charter terms to the terminal/MBR and/or give specific instructions that NOR was not to be accepted from the other anchorage unless the vessel was compelled to wait there because the inner anchorage was congested, it seems to me that they took the risk that the terminal/MBR would accept a NOR that could have been rejected under the Northgate charter, and thereby waive charterers’ right to invoke the invalidity of that NOR.”  

The judge concluded that “as it seems to me, an unequivocal representation by the terminal/MBR, as the intended primary recipients of NOR, communicated to owners via Brazshipping - and indeed by Brazshipping on behalf of charterers - that the NOR had been accepted at the time stated, when the terminal would have known (and Brazshipping as charterers’ agents knew) that Northgate was at the outer anchorage. That, on the authorities, is sufficient, in the circumstances, to constitute a waiver of the invalidity of the NOR by reason of its having been tendered when the vessel was at the outer anchorage though not compelled to wait there by reason of congestion at the inner anchorage. As Potter LJ pointed out in The Happy Day (supra), in the case of waiver it is not necessary to go further and prove reliance on the representation.” 

It followed that the Shipowner’s demurrage claim succeeded in full.  

Terms of the Charter
The judgment at paragraphs [15] to [55] is worth reading to appreciate the difficulties caused by parties creating piecemeal agreements, incorporating terms from a number of different sources without providing a final written document or clearly defining which terms are to have precedence in case of conflict. In practice, charterparties of this type represent a considerable litigation risk, even if they initially save time in fixing the charter, given that determining the terms of the charter and its proper interpretation as a matter of contractual construction become subject to many variables/vagaries.

Acceptance, Waiver & Estoppel
The judge has taken a rather pragmatic and commercial view of the circumstances, based on the structure of the NOR provisions of the charter, in order to place the risk of acceptance of an invalid NOR on the Charterer. Such an approach can be justified on the practical grounds that the Charterer, who was privy to the NOR communication could, at any time, have intervened in the process in order to protect its position and avoid a false impression been given to the Shipowner. Had the NOR been promptly challenged, the Shipowner would, as the judge identified, have simply moved the vessel to the inner anchorage and reissued the NOR in order to avoid the risk of laytime failing to commence. That said, the judgment very much appears to revolve around the charter being silent on identifying the party to whom NOR was to be given for acceptance or rejection, so it may not be one of general application to other charters.

Footnotes (summary of judge’s description of the cases cited):

1. In The “Shackleford”, the charterparty provided that NOR at the discharge port, Constanza, was to be given to the receivers, Agroexport, or their agents, Navlomar, after the vessel’s entry at the Custom House, whereupon, on expiry of the prescribed notice period, laytime would commence WIBON, WIPON, WIFPON. The vessel arrived and anchored at Constanza roads and immediately gave NOR, addressed to Agroexport c/o Navlomar, although the vessel had not been entered at the Custom House. Despite this, it was accepted by Agroexport. The owners and master relied on such acceptance of the NOR in not making arrangements to procure a berth at which customs entry could have been obtained. The Court of Appeal dismissed an appeal from the judgment of Donaldson J, who had upheld the decision of the arbitrator to the effect that laytime commenced following Agroexport’s acceptance of the NOR, notwithstanding the charterparty requirement for entry at the Custom House. The Court of Appeal held the acceptance of the premature NOR was within the receivers’ authority and that the receivers would have known that customs entry could not be obtained at Constanza until berthing. There had been no challenge to the arbitrator’s finding that the owners had relied on receivers’ acceptance of the NOR. The judge’s decision, that charterers were estopped by conduct from invoking the fact that the vessel had not been entered at the Customs House as a ground for challenging the validity of the NOR, was accordingly upheld.

2. In The “Mexico I”, NOR to discharge had been given, and apparently also accepted, when the cargo in question was inaccessible, because it was overstowed by cargo carried under another contract. The NOR was invalid, as the vessel was not physically ready to discharge the overstowed cargo, and the acceptance had no effect because it was given on the basis of the master’s implied assurance that the vessel was ready to discharge the cargo, which the charterers did not then know was inaccessible. Owners argued that the NOR took effect when the cargo became accessible, such that a valid notice could then have been given, or when charterers first knew or had the means and knowledge that it was ready to discharge. Charterers conceded that laytime commenced when discharge of the relevant cargo began, but denied it began before then. The arbitrators had decided that the NOR took effect when the cargo became accessible. Evans J had upheld their award on this point. The Court of Appeal, however, rejected owners’ arguments, holding that an invalid NOR did not have any such “delayed action” effect, and that there was no basis for the inference of any waiver, estoppel, or agreement to the effect that no fresh NOR need be given, so that laytime did not commence before commencement of discharge of the cargo in question (as charterers had conceded it did).

3. In The “Happy Day”, the charterparty in question provided that NOR at the discharge port was “to be given to Receivers/Agents during normal local office hours and laytime to start counting at 8 am next working day [WIBON, WIPON]”. The vessel arrived off the discharge port, Cochin, but missed the tide and so was unable immediately to enter the port. The master nonetheless tendered NOR to the receivers’ agents, who endorsed it “received”. The vessel berthed and commenced discharge the following day. Discharging operations occupied nearly three months. Owners claimed demurrage, contending that laytime commenced no later than the commencement of discharge. Charterers argued that the original NOR was invalid because the delay in berthing was due, not to congestion, but to the vessel missing the tide, and that as no further NOR had been given, laytime had never commenced and so they had earned despatch. The Court of Appeal, allowing an appeal from Langley J and restoring the award of the arbitrators, held that, although the original NOR was indeed invalid, and no fresh NOR had been given, the commencement of discharge by charterers amounted to a waiver of the invalidity of the NOR as from that time, such that laytime commenced thereafter in accordance with the notice regime in the charterparty.

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