DMC Category Rating: Developed

This case note was contributed by Jim Leighton, BSc (Hons) (University of Plymouth), LLM (Maritime Law) (University of Southampton) and Claims Consultant

Background
The appellant shipowner ("Tidebrook") voyage chartered Front Commander ("the vessel") to the respondent charterer ("Vitol") on an amended Asbatankvoy form that incorporated various Vitol chartering provisions. During the course of the charter, demurrage became due from Vitol to Tidebrook. The dispute concerned the amount of demurrage due.

The material clauses of the charterparty (amendments in italics) were:
[Amended Asbatankvoy clauses]

"5. LAYDAYS. Laytime shall not commence before the date stipulated in Part I, except with Charterer’s sanction…

6. NOTICE OF READINESS. Upon arrival at customary anchorage at each port of loading or discharge, the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the vessel is ready to load or discharge cargo, berth or no berth, and laytime, as hereinafter provided, shall commence upon the expiration of six (6) hours after receipt of such notice, or upon the vessel’s arrival in berth…whichever first occurs… In any event, Charterer shall be entitled to six hours notice of readiness at loading and discharging ports, even if the vessel is on demurrage."

[Incorporated Vitol clauses]

"31. Operational Compliance Clause. Owner shall indemnify Charterer for any damages, delays, costs and consequences of not complying with Charterer’s voyage instructions given in accordance with the Charterparty… The vessel shall not tender Notice of Readiness prior to the earliest layday date specified in this Charterparty and laytime shall not commence before 0600 hours local time on the earliest layday unless Charterer consents in writing.

33. Early Loading Clause. If Charterer permits vessel to tender NOR and berth prior to commencement of laydays, all time from berthing until commencement of laydays to be credited to Charterer against laytime and/or time on demurrage. Saved time to be split 50/50 Owners/Charterers."

The agreed facts and additional matters of common ground were:

• The laycan or "laydays" agreed in the charterparty were 9/10 January 2004 and the laytime allowance was 72 hours;
• Pursuant to Vitol’s orders, the vessel proceeded to Escravos in Nigeria, where she was to load a cargo of oil;
• On 6, 7 and 8 January 2004, Vitol sent emails to Tidebrook, via the brokers, to the effect that they wanted the vessel to tender Notice of Readiness ("NOR") on her arrival at Escravos, and to berth/load as soon as instructed by the terminal on 8 January;
• The vessel arrived at Escravos and tendered her NOR at 0001 hours on 8 January 2004, namely prior to the first day of the laycan, which was 9 January 2004. By 1200hrs that day, she was all fast at her loading berth. Loading commenced at 1648 hours on 8 January and was completed at 0736 hours on 10 January. The vessel sailed from Escravos at 1306 hours on 10 January;
• Demurrage was incurred on the voyage, in respect of which Tidebrook sent Vitol a timely demurrage claim. In their calculation of the laytime used at the port of Escravos, Tidebrook gave Vitol credit for 50 per cent of the time between 1200 hours on 8 January (when the vessel was made all fast at her berth) and 0001 hours on 9 January (being the commencement of the laydays and the time at which Tidebrook considered laytime would otherwise have commenced).

Vitol paid the majority of the demurrage claim. Vitol contended, however, that, pursuant to clause 5 of the standard Asbantakvoy form and additional clause 31, laytime should not start to count prior to 0600 on the first day of the laydays, 9 January 2004. Vitol further contended that they never gave their consent to laytime commencing prior to 0600 hours on 9 January 2004, as required by clauses 5 and 31. Tidebrook contended that such consent was given expressly or impliedly, by the emails sent by Vitol or by loading commencing with the knowledge and consent of Vitol. At first instance HHJ Mackie QC found in favour of Vitol: see [2005] EWHC 2582 (Comm).

Judgment
The leading judgment was given by Rix, LJ, with whom Scott Baker and Buxton, LJJ agreed. Rix LJ stated that the question on appeal was "what is the position, absent contrary agreement, of the charterer who receives an early notice of readiness, orders the vessel to load and does in fact load the vessel, all prior to the commencement of the earliest layday? Is this free loading time? Or does laytime start to run, at the end of the notice period, because the time is in fact used (or intended to be used) for the purpose of loading the vessel?" The answer was subject to clauses 5 and 6 and the alleged effect of Vitol’s clauses 31 and 33.

Clauses 5 and 6
Putting aside clauses 31 and 33 to first construe clauses 5 and 6, Rix, LJ considered that "clause 6 appears to say that, irrespective of loading, time will commence to count at the end of the 6 hour notice period, or when the vessel is all fast in berth, whichever is the earlier. Clause 5, however, says that laytime shall not commence before the earliest layday ‘except with the Charterer’s sanction’. The combination of those provisions, it seems to me, means that the start of laytime under clause 6 is postponed to the beginning of the earliest layday, unless the charterer sanctions otherwise." Subject to authority, Rix LJ was of the opinion that the order or request made by Vitol amounted to a sanction for laytime to commence early, subject to the six hour notice period provision in clause 6. This was because "the charterer is not obliged to commence loading before the earliest layday if he does not want to load, but if he does, he is entitled to, once the vessel is presented as ready to load: and it seems to me that if once he has decided to ask the vessel to load earlier than he, the charterer, was obliged to load, then he has sanctioned the earlier commencement of laytime, the protection of the provision regarding the earliest layday is spent, and clause 6 rules as the clause otherwise governing the commencement of laytime."

Vitol primarily relied upon Pteroti v National Coal Board [1958] 1 Lloyd’s Rep 245 (Com Ct) and The "Happy Day" [2002] 2 Lloyd’s Rep 487 (CA) to argue that authority indicated a contrary conclusion. Rix LJ was of the opinion that none of the authorities assisted Vitol’s submissions as they dealt with different matters and/or were distinguishable on the facts. He stated that the authorities "did not suggest to me that there is any willingness on the part of the courts to view the charterers’ use of a vessel in loading or discharging as being free from the running of laytime, once a notice of readiness has been given and the notice time has run. On the contrary, if a charterer uses a vessel, known to be ready at the time of use, which has been tendered to him by a valid notice of readiness, or by an invalid notice whose invalidity is known, he must expect time to run against him, allowing for any relevant notice time, and subject to any express contrary agreement." He noted that this was the same view held by New York arbitrators: see Cooke et al, Voyage Charters, 2nd ed, 2001, para 56.14.

Clauses 31 and 33
On the facts of the case, Rix LJ indicated that the legal consequences were:

(1) Vitol had clearly waived its right not to be required to load the vessel prior to 9 January (which was not in dispute);

(2) Tidebrook were required, if the vessel was ready, to co-operate in the service of a notice of readiness on arrival (it was not in dispute that, even in the absence of an order or request from Vitol, Tidebrook was entitled to serve a notice of readiness prior to 9 January);

(3) Upon service of her NOR, the vessel was thereupon tendered to Vitol for service in loading the cargo;

(4) It appeared that Vitol’s order to berth and load the cargo was, therefore, a valid voyage instruction within the first sentence of clause 31;

(5) Tidebrook could, therefore, not refuse to berth and load the cargo without being liable to indemnify Vitol for any damages, delays, costs and consequences of not complying with those orders;

(6) The express prohibition, contained in clause 31, on tendering NOR "prior to the earliest layday specified" in the charterparty, which would otherwise have overridden Asbatankvoy’s clause 6 obligation to tender NOR on arrival, had been waived with Vitol’s consent, and, as required by clause 31, that had been done in writing; and

(7) Clause 33 was in active operation, for Vitol had permitted and indeed ordered the vessel "to tender NOR and berth prior to commencement of laydays".

Vitol contended, however, that clause 31 required a further express written consent to the commencement of laytime before 0600 hours on 9 January and that, in addition, the effect of clause 33 was to give Vitol the credit of a further 6 hours in respect of time saved on 8 January, namely, the full period of twelve hours from time of berthing until midnight. Rix LJ was, however, of the opinion that Vitol’s submissions were in error, because:

(1) Clauses 31 and 33 had to be construed as part of a single contract, so were capable of throwing light upon one another;

(2) The charter provisions and the background law combined to indicate that loading following a valid NOR should expect to be done in time that was accountable as laytime, subject to express notice time, exceptions and clear contrary expressions, as the vessel was working for the charterer;

(3) The commencement of laytime was intimately connected with the service of a NOR, which was the trigger for charterers’ accountability for laytime, subject to express contrary provisions (applying The "Happy Day" [2002] 2 Lloyd’s Rep 487 (CA), per Potter, LJ, at [72]), with which clause 6 was consistent;

(4) Once Tidebrook was ordered to berth and to commence loading the vessel on 8 January, in advance of the earliest layday of 9 January, the protection of the earliest layday had gone, with which the construction of clauses 5, 6 and 31 was consistent;

(5) Clause 31 did not require two separate consents, so that once the earliest layday was waived Vitol had consented to the early commencement of laytime, just as would have been the case under clause 5;

(6) Since Tidebrook could not refuse to berth the vessel, on Vitol’s construction they could refuse to allow laytime to commence early, if so requested by Tidebrook;

(7) The interpretation of clause 31 proposed by Vitol was unrealistic and uncommercial, operating as a trap for the unwary, as Tidebrook would not think to refuse Vitol’s orders unless Vitol expressly agreed in writing the early commencement of laytime; and

(8) Clause 33 cuts through clause 6 to answer the query of how time is to count following on from clause 31, providing that the relevant time to focus on was from berthing until the commencement of laydays and that the time thereby saved was to be shared 50/50.

As a result, Rix LJ concluded, in favour of Tidebrook, that "clauses 31 and 33 together make better and more commercial sense if they are construed as providing that time used in loading or discharging, from berthing, is, as one would expect, prima facie to count against the charterers who are using it for their purposes, but is to be credited back to them to the extent that it occurs before the earliest agreed layday. The amendment agreed to this standard Vitol clause was that the ‘saved’ time concerned should be awarded equally to both parties. Thus charterers are credited with only half the time concerned."

Comment
The commercially sensible approach taken by the Court of Appeal is to be commended and constitutes a clear improvement on the technical legalistic approach applied at first instance, which would otherwise encourage unmeritorious linguistic points to be raised in relation to communications that are made between parties to achieve purely practical ends.

The decision additionally indicates (in accordance with the opinion of the majority of New York arbitrators, see Voyage Charters (above), paras 57.2, 57.37 and 57.51-57.56) that when a notice of readiness may be given prior to the earliest layday, the effect is that the notice period may have already elapsed before the earliest layday begins. As a result, a notice of readiness given sufficiently before the earliest layday to enable the notice period to have run before the start of the earliest layday will, subject to contrary agreement, enable laytime to start running against the charterer as soon as the earliest layday begins. The notice period thus acts as a period of grace given to the charterer to prepare the cargo for loading from the time of learning of the vessel’s readiness to load.

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