P v. A

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DMC/SandT/08/29
P v. A and Another
English High Court: Queen’s Bench Division: Commercial Court: David Steel J.: [2008] EWHC 1361 (Comm): 20 June 2008
Timothy Young, instructed by Thomas Cooper, for the appellant charterers
Nicholas Hamblen QC instructed by Middleton Potts, for the defendant owners
SHIPPING: CONTRACT OF AFFREIGHTMENT PROVIDING FOR SIX VOYAGES: CHARTERERS TO GIVE "30 DAYS’ NOTICE WITH 10 DAYS NOTICE LAYCAN SPREAD: OWNERS "TO NOMINATE VESSEL LATEST 10 DAYS PRIOR FIRST DAY": CHARTERERS GIVE LAYCAN FOR FIFTH VOYAGE: WHETHER CHARTERERS ENTITLED TO CHANGE LAYCAN DATES: WHETHER CHARTERERS IN REPUDIATIORY BREACH BY INSISTING ON THEIR RIGHT TO CHANGE THE LAYCAN DATES
Summary
In this case, the court upheld the majority award of the arbitrators in holding that charterers under a Contract of Affreightment were not entitled to change laycan dates once they had nominated them and that the tribunal was fully entitled to treat their insistence on their right to do so as repudiatory of the voyage in question, since it evinced a clear intention not to be bound by their original nomination.

DMC Category Rating: Confirmed

Background
The claimant charterers and the defendant owners entered into a contract of affreightment ("COA") on the Americanized Welsh Coal Charter form, dated 7 April 2007. The COA was for "6 cargoes each of 70,000 metric tons 10% more or less in Charterers' option of Iron Ore or Coal". The cargo option was dependent on the charterers' choice of loadport. The vessel – in each case ‘TBN’ [to be named] - was to proceed to "Quebec (where to load Iron Ore) or, in the charterers' option, Baltimore (where to load Coal)". The discharge port in either case was Constanza.

The COA did not contain any provision as to when the carriage of the six cargoes was to take place. Clause 23 provided:

" Charterers to give 30 days' notice with 10 days notice laycan spread and Owners to nominate the vessel latest 10 days prior first day."

On 6 September 2007 the charterers gave a laycan of 5/14October for voyage 5, which was to be from Baltimore to Constanza. On 13 September the charterers asked the owners if the laycan could be moved to 21/30 Oct. The owners refused.

On 17 September the charterers again asked the owners to move the laycan for voyage 5, explaining that "the stem for 5/14 has been moved to 21/30 by the shippers because of cargo availability in this port". Owners replied, declining to change the dates, but offering to cancel voyage 5 and to perform voyage 6 on the new dates proposed by the charterers. (Market rates had risen substantially above the freight rate specified in the COA.)

On 20 September the charterers proposed, instead of the voyage Baltimore/Constanza envisaged for voyage 5, that the ship load coal from Newport to Nikolaev. By a message of 24 September, owners maintained their position that a substitute voyage was not acceptable. Owners insisted that the notice given by charterers on 6 September was a binding nomination which could not be withdrawn, and repeated their proposal to cancel voyage 5 and to perform voyage 6 on the new 21/30 October laycan.

On 24 September the charterers insisted that, in circumstances where owners had not yet nominated the loading vessel, they were entitled to move the laycan "in the event of unforeseen events" and, on the same day, the owners said that they were treating the charterers as being in repudiatory breach.

The dispute was referred to arbitration. The tribunal (by a majority) held that, once the laycan notice for the fifth voyage was given on 6 September 2007, it was written into the COA and could not be changed save by agreement, and that the charterers' insistence that they had the right to move the laycan dates amounted to a proposal for a substitute voyage and demonstrated a clear intention not to be bound by the original nomination. Accordingly, the charterers' conduct amounted to a repudiatory breach of the fifth voyage, thereby releasing the owners from any further performance of that particular voyage.

The charterers appealed to the High Court. They submitted that the nomination of the laycan spread was not irrevocable. Only if the owners had nominated a vessel and the same had been duly confirmed by the charterers would the laycan dates be irrevocable, since the charterers would then be estopped from changing the spread. They further submitted that the arbitrators had erred in law in holding that charterers, in purporting to revise the laycan dates, were in repudiatory breach.

As for the owners, they submitted that the nomination of the vessel was as irrevocable as the nomination of the loading port; the requirement for confirmation did not constitute a right of rejection but merely an opportunity for assessing compliance with the express specifications. These nominations were both inextricably entwined with the laycan period; the charterers’ laycan notice set the timing of the voyage together with the load port and cargo; it was then an obligation of the owners to nominate a vessel "latest" 10 days prior to the specified laycan period. Such nominations accordingly became "written" into the contract for the fifth voyage.

Judgment
The judge dismissed charterers’ appeal.

(1) He held that the charterers had no right to move the laycan. The structure of the COA was to define the timing of the six voyages solely by reference to the obligation on the charterers under clause 23 to give 30 days' notice of a 10 day laycan spread. The nomination of the laycan was essential to complete the definition of the parties' obligations in regard to the timing of the fifth voyage, including the date when the relevant vessel had to engage on its approach voyage and the earliest date for tendering NOR. Notice would by definition also identify both the loading port and the cargo particulars into the charterparty. Without these matters being written into the COA, it would be unworkable.

In his judgment, as soon as the notice was given the owners could rely on it. "The idea", he said, "that over the period of 20 days before the nomination of the vessel has to be made the charterers can change the laycan dates as frequently and as substantially as they see fit, or even thereafter up to the stage that an estoppel be clearly established, is commercially unreal and uncertain."

The judge noted that the owners' position was supported by the leading textbook. He quoted from Cooke on Voyage Charters, 3rd Edition, para 4.19, as follows:

"There are, however, some charter provisions under which the notice is intended to be definitive of the parties' rights and where the approach adopted in the time charter cases would be appropriate. For example, a notice served pursuant to a provision which requires one of the parties to give a post-contractual notice defining or narrowing the laycan period would no doubt be held to have the effect of defining the period conclusively."

(2) Accordingly, he held that the tribunal was fully entitled to treat the charterers' insistence on their "entitlement" to move the laycan period as constituting a clear intention not to be bound by their original nomination. From the messages sent by the charterers on 17 and 20 September, the charterers "were evincing an intention not to be bound by an essential term in regards to the fifth voyage".

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