IMT Shipping v. Chansung Shipping (The "Zenovia")

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DMC/SandT/09/09
IMT Shipping and Chartering GmbH v Chansung Shipping Company Limited (The "Zenovia")
English Commercial Court: Tomlinson J: [2009] EWHC 739 (Comm): 8 April 2009
Available on BAILII @ http://www.bailii.org/ew/cases/EWHC/Comm/2009/739.html
Charles Priday (instructed by Sach Solicitors) for the Charterer, IMT
Philip Edey QC (instructed by Reed Smith) for the Owner, Chansung
TIME CHARTERPARTIES: REDELIVERY NOTICES: WAIVER BY ELECTION: PROMISSORY ESTOPPEL: ESTOPPEL BY CONVENTION: IMPLIED TERM: WHETHER CHARTERER ENTITLED TO REVISE NOTICE OF ‘APPROXIMATE’ REDELIVERY DATE FOR ADDITIONAL VOYAGE APPROACHING THE FINAL TERMINAL DATE OF THE CHARTER PERIOD
Summary
In reversing the decision of the arbitrators, the Commercial Court held:

DMC Category Rating: Developed

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

Background
This was an appeal from an award by two London maritime arbitrators (Michael Howard QC and Christopher Moss) in favour of the Owner.

The case concerned the status and effect of a notice of approximate redelivery date and intended port given by a time charterer to an owner pursuant to the requirements of a time charter in amended NYPE form. In essence, the question raised was whether a charterer may subsequent to the giving of such notice revise its plans, consistent nonetheless with redelivery of the vessel within the contractually agreed period (i.e. by no later than the final terminal date of the charter). In reality, the dispute concerned the underlying commercial question of whether a charterer or an owner may take advantage of an unexpected opportunity to fix a vessel in a rising market nearing the time for redelivery.

It was agreed that the vessel had been chartered from the Owner down a line of three back-to-back charters ending with IMT as sub-sub-charterer. All parties had agreed that it would be the Owner and IMT that would deal with the dispute directly.

The relevant redelivery provisions of the back-to-back charters provided as follows:

1. Period – "… minimum 20 September 2007/maximum 22 November 2007";
2. Range – "… hire to continue until the day of her redelivery … on dropping last outward sea pilot one safe port ADEN/JAPAN range …"; and
3. Notices – "… charterers are to give Owners not less than 30 days followed by 20/15/10/7 days notice of approximate redelivery date and intended port thereafter 5/3/2/1 days definite notice of redelivery date and port."

On 5 October 2007 there was given: "approximate notice of redelivery for the MV Zenovia at DLOSP 1 sp China on about 06 Nov 2007 basis agw, wp, wog, uce …". However, on 15 October a further notice was sent to the Owner: "Plse note that we hereby have to revise the date of redelivery to owners to abt Nov 20^th within the range of redelivery." The further notice was given because the performance of the vessel had been such as to leave enough time for one more voyage before the final terminal date.

The Owner did not accept that IMT was entitled to change the expected redelivery date in this way. The Owner asserted on 16 October that it had already fixed the vessel for her next employment and insisted that she be redelivered at the end of the voyage to China. IMT replied that it was acting within its legal rights and had the right to use the full period given by the charter. The Owner withdrew the vessel from service following the completion of the voyage to China and IMT contended that this was a wrongful withdrawal and claimed damages for repudiation.

The arbitrators considered the matter on the basis of waiver by election, promissory estoppel, estoppel by convention and implied term. The arbitrators found in favour of the Owner on the basis of promissory estoppel and implied term. The arbitrators were not invited to convene an oral hearing but were asked to deal with the matter on the basis of written submissions drafted by counsel for IMT and the Owner respectively.

Judgment
‘WP’: ‘Without Prejudice’ / ‘Weather Permitting

The arbitrators had held that the acronym ‘wp’ in the notice of 5 October meant ‘without prejudice’ – neither the Owner nor IMT had contended for this in submissions. The judge was of the opinion that ‘wp’ in the context of other acronyms in the notice (‘agw’, i.e. ‘all going well’, ‘wog’, i.e. ‘without guarantee’ and ‘uce’, i.e. ‘unforeseen circumstances excepted’) was more likely to mean ‘weather permitting’. However, he would not depart from this finding, as the parties had wanted commercial men to deal with this at arbitration and neither party had disputed the finding since the arbitrators’ reasons were published.

The judge did however agree with IMT’s counsel on the basis that ‘wp’ (as meaning ‘without prejudice’) in the context of a 30 day approximate notice would mean the arbitrators "ought to have held that a notice so qualified could not give rise to a promissory estoppel. Such an estoppel is tantamount to a contractual variation or waiver and cannot be based upon a statement made ‘without prejudice’." While the judge indicated that on this ground alone the award was susceptible to being set aside, he did not consider this to be fair without engaging with the underlying arguments due to the importance of the issue. This was especially so as Time Charters (6th edn. @ para. 15.18) notes that case law is yet to decide the legal effect a notice of redelivery may have. (The "tentative" – according to the judge – view of the authors of Time Charters is, among others, that "the gist of the redelivery notice is a statement or promise that there will be no further employment orders under the charter that are inconsistent, when given, with redelivery in accordance with the notice.")

Implied Term

The suggested implied term here would oblige IMT not deliberately to do anything which prevented the approximate date given in the notice of approximate redelivery being met.

Having reviewed the material reasons of the arbitrators on this point, the judge stated: "The requirement of good faith alone would I think ordinarily be likely to act as a constraint upon the more egregious conduct which the arbitrators envisage. Nonetheless, I note that, in company with the learned authors of Time Charters, the arbitrators regard the main purpose of requiring the charterers to give advance notice of redelivery as enabling the owners to plan the ship’s future employment."

On this basis counsel for IMT submitted that the arbitrators’ relevant findings were directed not to the question "whether the suggested term is necessary for the business efficacy of the contract" but rather "to the business convenience of the owners in arranging the future employment of the vessel", i.e. that to be undertaken after the relevant contract has come to an end. The judge agreed and then stated: "Nowhere do the arbitrators address the question whether without the suggested implied term the contract will not work. Manifestly it will."

Counsel for the Owner suggested that perhaps the arbitrators were to be understood as holding that the suggested implied term was nonetheless "so obviously a stipulation in the agreement that the parties must have intended it to form part of their contract". The judge however did not agree and stated: "This is always a difficult argument where, as here, the contract in question is a carefully drafted 33-page document built on a standard form in wide usage over very many years in respect of which the relevant inference has never before been drawn nor, so far as is known, suggested. Furthermore I find it difficult to believe that reasonable parties circumstanced as these parties were would, without more, have agreed to the suggested implied term."

The judge continued: "… in this charter there is provision for the giving of five notices of approximate redelivery, at 30, 20, 15, 10 and 7 days’ notice followed by a further four notices of definite redelivery, at 5, 3, 2 and 1 day’s notice respectively. Each notice must at the very least be given honestly or in good faith. It is not to me at all obvious that the parties would necessarily have agreed that between the giving of a 30 day and a 20 day notice of approximate redelivery the charterer is not at liberty to do anything which prevents the date first given being met. Indeed, I am quite sure that they would not."

The judge noted that "this particular redelivery clause requires each successive notice of approximate redelivery date to give also the intended port of redelivery, from which it may be inferred that it is envisaged that the intended port may change. If the charterers were under the sort of absolute obligation envisaged by the arbitrators, it might be thought necessary to name the intended port only in the first notice."

The judge therefore held that "it is not possible in the present case to imply into the charter a term whereby the charterers’ freedom of action is in some way constrained by reference to an approximate redelivery date given, as required, honestly and on not less than 30 days’ notice. It is simply not possible now confidently to assert what the parties must inevitably have agreed, when they made their contract, had the point then been raised."

Promissory Estoppel

The judge first noted that the arbitrators had concluded that the defences of waiver by election and estoppel by convention failed. IMT’s counsel submitted that the reasons given for the failure of those defences were in fact also fatal to the defence of promissory estoppel.

The judge stated that the defence of promissory estoppel here required:

1. a clear and unequivocal representation by the charterers that they were giving up their strict rights, which in context would mean giving up
    their right to retain the vessel in their employment until 22 November;

2. the promise must be intended to affect the parties’ legal relations and must be understood to be a promise that will be acted upon by the
    promisee; and

3. the promisee must act upon the promise either in the way intended by the promisor in a way which it is reasonable for him to act, having
    regard to the content of the promise, such that it is inequitable for the promisor to insist upon his strict rights.

The judge held that the arbitrators’ findings (reproduced at paragraphs 27 and 28 of the judgment) were amply sufficient to demonstrate that on the facts of the case the defence of promissory estoppel could not succeed.

The judge came to this conclusion on the basis of the following:

1. IMT said nothing from which it could reasonably be inferred that it was abandoning any contractual rights;
2. IMT said nothing from which the Owner could reasonably infer that IMT intended what it said to affect the legal relationship between them;
3. In any event what was said by IMT, either expressly or impliedly, as to its future conduct was far too uncertain to generate an unequivocal
    abandonment of rights; and
4. Furthermore, when the arbitrators came in fact to deal with promissory estoppel, they concluded that the words "without guarantee" were
    "amply sufficient to negative the assumption of any contractual content to the 30 days of the notice, even if the other qualifications were not
    sufficient to do so". (They nevertheless found grounds for a promissory estoppel in other factors.)

Comment
The arbitrators’ decision that ‘wp’ meant ‘without prejudice’ must surely amount to a manifest error of a factual finding. Had the parties properly addressed the issue they would most likely have concluded that ‘wp’ meant ‘weather permitting’ in the context of the meaning of the other acronyms. As the judge himself noted, however, the arbitrators did not have the benefit of economical oral argument from experienced advocates, so would probably not have come to the decision they did if they had also had the same benefit.

Sending a notice of redelivery should equate to an action from which a charterer cannot readily resile when the notice is given for redelivery within the agreed redelivery window. This effectively amounts to a representation to the owner by the charterer of its choice of final voyage, in terms of anticipated duration and intended port of redelivery. A charterer is ordinarily thereby making its final commercial decision of the charter. An owner is almost certain to rely on such a notice for the purpose of agreeing its next fixture, and it is reasonable for him to do so. During the duration of a charter the charterer will have many opportunities to make the most of its commercial decision-making. However, the owner has relatively few commercial decision-making opportunities, making each one more critical. In this light, to deprive the charterer of one commercial opportunity is considerably less troubling than to deny the owner one of only a few – therefore critical – opportunities to make commercial decisions for the long term future employment of the vessel.

It could equally be said that in light of The "Achilleas" [2008] UKHL 48 the law has gone even further in favour of time charterers when addressing redelivery of vessels, to the greater detriment of a fair and economically reasonable balance of rights, risks and rewards between the parties to such contracts. However, the issue raised by the present case is one that can readily be addressed by the clear drafting of redelivery notice clauses by specifying the intended effect of approximate and definite notices of redelivery.

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