Glencore v. Goldbeam

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Glencore Grain Limited v Goldbeam Shipping Inc. and Goldbeam Shipping Inc v Navios International Inc

English High Court: Moore-Bick J.: January 2002
Miss Sioban Healy, instructed by Richards Butler, for Glencore
Mr Simon Croall, instructed by Bird and Bird for Goldbeam
Miss Clare Ambrose, instructed by Rayfield Mills, for Navios

Case Note based on an Article in the February 2002 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA

This case, on appeal to the English High Court under section 69 of the Arbitration Act 1996, concerned an invalid notice of readiness, delay caused by the charterers’ breach of contract and its effect on a claim for damages for detention. The case held that (1) in the absence of a valid notice of readiness, laytime could not begin to count; (2) consequently, laytime provisions were irrelevant to the calculation of the detention claim; (3) where a breach of a sub-charter occasioned also a breach of the next charter in the chain, the question whether the damages payable to disponent owners by the intermediate charterers could be recovered by the intermediate charterers from the sub-charterers depended not only on whether the chain of causation was unbroken but also on whether the liability of the intermediate charterer to the disponent owners was in the reasonable contemplation of the sub-charterers at the time of entering the contract.

DMC Rating Category: Developed

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Facts In November 1997, Glencore Shipping entered into a contract of affreightment with Goldbeam Shipping on the Synacomex form for the carriage of a number of grain cargoes from South America to Asia. In May 1998, Goldbeam nominated a vessel, the ‘Mass Glory’, for a voyage with a cargo of soyapellets from Rio Grande in Brazil to ports in China. Goldbeam had chartered the ‘Mass Glory’ on similar terms from Navios International Inc who, in turn, had hired her from the owners.

The first discharging port was Xiamen in China. The vessel entered the port on 14 June but was unable to occupy the berth available because cargo documents were not in order. The master nevertheless gave notice of readiness on 15 June. The problem with the documents was not resolved until 9 August 1998, when the vessel was at last able to enter a berth. Discharge began later that day and was completed on 19 August but no further notice of readiness was given at any time.

The owners under each of the voyage charters, namely Navios under the intermediate charter and Goldbeam under the sub-charter, claimed damages for detention from the charterers, namely Goldbeam under the intermediate charter and Glencore under the sub-charter, for the time lost while the vessel was kept waiting. At arbitration it was held that the delay prior to berthing at Xiamen was caused by Glencore's breach of contract; this was not challenged on appeal.

The issues 
The award was, however, challenged on the question of damages. Here the first issue concerned the running of laytime. Both voyage charters were berth charters. Since the vessel was not prevented by congestion from reaching her berth, it was accepted that the notice of readiness was invalid. The charterers, however, argued that, even in the absence of a valid notice, the vessel was fully at their disposal from the moment it passed the inward inspection at the anchorage at Xiamen and that therefore laytime should run from then, even though she was not technically an "arrived" ship.

The Arbitration 
The arbitrators held that laytime did not start to run at the anchorage at Xiamen, as the vessel was not then an ‘arrived ship’. As a consequence, the laytime exceptions could not apply and therefore, the whole of the time spent waiting at anchorage was to be taken into account in calculating damages for detention.

The arbitrators, however, went on to hold by a majority of 2-1, that laytime nevertheless began to count at the commencement of discharge. Their reasoning was that, were it not for the charterer's’ breach of contract, the vessel would have gone straight to the berth and the notice of readiness given on 15 June would have then been valid. To allow the charterers to claim despatch money or credit for laytime "saved" would, in these circumstances, allow the charterers to benefit from their own wrongdoing /breach of charter.

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1. The Detention Claim 

The Judge referred to Lord Diplock's analysis of the essential nature of the adventure contemplated by a voyage charter in E.L. Oldendorff & Co GmbH v Tradax Export SA (the Johanna Oldendorff) [1974] AC 479). The adventure is divided into four successive stages; the loading voyage, the loading operation, the carrying voyage and the discharging operation. Each must be completed before the next can begin. The carrying voyage ends, therefore, and the discharging operation begins only when the vessel reaches her agreed destination. In this case, the agreed destination was the berth at the port of discharge. In the absence of some provision to the contrary, therefore, the owners could not give notice of readiness and laytime could not begin to run until the vessel had entered a berth.

Clause 6 of the charter provided that laytime was to commence following the giving of notice of readiness "whether the vessel be in berth or not" but clause 37 made it clear that notice of readiness could only be given before reaching the berth if the berth was unavailable due to congestion. In any event, following Bulk Transport Group Shipping Co Limited v Seacrystal Shipping Limited (the Kyzikos) ([1989] AC 1264) the phrase "whether in berth or not" applies only where a berth is unavailable.

Since the carrying voyage had not ended, the owners were not entitled to give notice of readiness and the laytime provisions could not operate (the Angelos Lusis, [1964] 2 Lloyd’s Rep. 28 and the President Brand, [1967] 2 Lloyd’s Rep. 338). Laytime provisions form part of a carefully worked out commercial arrangement, freely entered into by both parties so they should be put into effect according to their terms. The Delian Spirit [1972] 1 QB 103 did not apply in this case because it concerned an ‘arrived’ ship. The arbitrators were therefore correct to find that the notice was invalid and laytime had not started to run.

2. The Running of Laytime
The judge differed from the majority of the arbitrators, however, on the question whether laytime had begun to run on commencement of discharge of the cargo. No further notice of readiness had been given, but the arbitrators – as explained above - had taken the view that it was the charterers’ breach that had caused the notice to be invalid.

The judge, however, could see no basis on which the arbitrators could reach this conclusion. It was not the charterers’ breach that caused the notice to be invalid. It was the fact that the notice had been given prematurely by the owners. There was nothing to stop the owners giving a valid notice of readiness once the ship had reached her berth.

The case stood firmly in line with the authorities. Time could not run (in the absence of waiver or agreement to the contrary) until a valid notice of readiness had been given and there was no basis on which time could start to run "automatically" on discharge (Transgrain Shipping BV v Global Transporte Oceanico SA (the Mexico I) [1990] 1 Lloyd's Rep 507, T. A. Shipping Limited v Comet Shipping Limited (the Agamemnon) [1998] 1 Lloyd's Rep 675, Glencore Grain Limited v Flacker Shipping Limited (the Happy Day) [2001] 1 Lloyd's Rep 754).

Under clause 7 of the contract, the owners agreed to pay the charterers US $6,000 per day despatch money for working time saved in loading/discharging. The owners argued that, if laytime did not run at all, none of the laytime was used and therefore it could not be saved, with the result that no despatch money was payable. This point was not raised before the arbitrators but, in any event, the judge felt it was not a good one.

Read in the context of the laytime provisions, it was clear that a failure to give a valid notice of readiness simply resulted in none of the time allowed being used and the whole of that time being saved, leading to a liability for the payment of despatch for the whole of the allowed laytime.

3. Calculation of Damages
Lastly, an issue arose as to the amount the intermediate owners, Navios, could claim from Goldbeam and the amount Goldbeam could recover from Glencore. Navios was hiring the vessel from its owners at above the market rate and its timecharter was shortly to run out. As a result of the problems at Xiamen, redelivery was delayed, and Navios were obliged to pay additional hire at the contract rate. Could Navios recover these as damages for detention from Goldbeam?

The arbitrators had decided that Navios could recover the additional hire, on the basis that the loss was not too remote. Goldbeam knew from the charter that Navios were "disponent owners", so it was reasonably foreseeable that a) Navios had taken the vessel on timecharter; b) that a delay of 55 days would result in late redelivery and c) that Navios would be liable to the owners for additional hire (Koufos v C Czarnikow Ltd (the Heron II) [1969] A C 350). The judge agreed.

But could Goldbeam claim all this back from Glencore? Provided the chain of causation was not broken, the question, again, was one of remoteness. Could Glencore be reasonably expected to have had in contemplation Goldbeam's liability under a different charter with Navios that would, in the event of delay, result in liability for the whole amount claimed by Navios?

The arbitrators had treated the question as a matter of law and took the view that Goldbeam were entitled to be indemnified in full as long as the chain of causation was not broken (following Stargas SPA v Petredec Limited (the ‘Sargasso’) [1994] 1 Lloyd's Rep 412 and Sacor Maritima SA v Repsol Petroleo SA [1998] 1 Lloyd's Rep 518). But the judge thought this was the wrong approach. The issue depended, in his view, not only on whether Glencore's breach of contract caused Goldbeam to incur that liability, but also on whether the liability was within the reasonable contemplation of Glencore at the time it entered into the contract. Since this aspect had not been considered at arbitration, the judge could not rule on it, and remitted the issue back to the arbitrators.

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