Different treatment of NOR for cancellation and for laytime purposes. Fine, if that’s what the parties agree.

 

The “strange result” condemned by Roskill J. in The Madeleine [1967] 2 Lloyd’s Rep. 224, namely, that a notice of readiness may be valid for one purpose (avoiding the option to cancel) but invalid for another purpose (the commencement of laytime), can arise if the parties choose to agree upon different regimes. This is what happened in Bilgent Shipping PTE Ltd.and ADM International SARL v. Oldendorff Carriers (The Alpha Harmony) [2019] EWHC 2522 (Comm) – a tale of a chain of two voyage charters, with the same provisions for tender of NOR to commence laytime but with different cancellation clauses. The laycan period under both initially ended on 31 May 2015 but was narrowed to end on 10 May 2015. The vessel tendered notice of readiness by email at 0704 on 10 May 2015 which was a Sunday. The email stated that the vessel had arrived at 0250 – outside normal working hours. Both charters provided for notice of readiness to be delivered between 0800 and 1700 on a weekday and between 0800 and 1100 on a Saturday, with laytime to commence at 0800 on the next working day after a valid notice of readiness had been tendered.  No express provision was made for delivery of a notice of readiness on a Sunday. However, the head charter contained an additional clause dealing with service of NOR that made no reference to service within working hours.

The vessel tendered notice of readiness by email at 0704 on  Sunday10 May 2015. The email stated that the vessel had arrived at 0250. Sub charterers cancelled at 2047 on Sunday 10 May 2015 and head charters followed suit at 0555 on Monday 11 May 2015. The question was whether the cancellations were lawful in circumstances where, although notice of readiness had been tendered before the relevant time on the cancelling date, it had not been tendered during the permitted hours. The arbitration panel in both arbitrations held that the cancellations were not valid.

Teare J allowed the appeal under the sub charter, but dismissed that under the head charter.

Under the sub charter cl16, the cancellation clause  provided: “Should the Notice of Readiness at loading port not be delivered as per Clause 14 by twelve o’clock noon on the 31st day of May 2015, the Charterers or their Agents shall at said hour and at any time thereafter, but not later than the presentation of Notice of Readiness together with the required certificates at said office, have the option of cancelling this Charter Party…” Teare J held that  the words “as per clause 14” meant that the Notice of Readiness must be in accordance with the requirements of clause 14 which required NOR to be served within stated office hours.

By contrast the cancellation clause in the head charter cl.4 provided as follows:

“… Should the vessel’s notice of readiness not be tendered and accepted as per Clause 17 before 2359 on the 30th/31st day of April/May of 2015, the Charterers or their Agents shall at any time thereafter, but not later than one hour after the notice of readiness is tendered, have the option of cancelling this Charterparty. … ”

There were two charter provisions relating to NOR. Clause 17 provided:

“(a) Notice of readiness and Commencement of Laytime See also Clause 70

Notice of vessel’s readiness to load and/or discharge at the first or sole loading and/or discharging port, shall be delivered in writing or by cable/telex/email to Charterers/Receivers (or their Agents). See also Clause 70. Such notice of readiness shall be delivered when vessel is in the loading or discharging port and is in all respects ready to load/discharge in case loading/discharging berth is occupied vessel to be allowed to tender Notice of readiness whether in port or not, whether in berth or not, whether customs cleared to not, whether in free pratique or not.”

Cl.70 contained provisions regarding the start of laytime and the requirement as to service of NOR within stated.

For cancellation purposes, it was cl.17 that was the relevant clause dealing with NOR and under that clause there was no time restriction on the service of NOR. The words in cl.17 “See also Clause 70”, were not sufficient to incorporate in clause 17, and hence in clause 4, the office hours requirement for the delivery of a notice of readiness. The combined effect of clauses 4 and 17 as amended showed, for the purposes of the cancelling clause, that there was no requirement that the notice of readiness be delivered within office hours. Accordingly, for cancellation purposes NOR had been served before the cancelling deadline of 2359 on 10 May 2015 and the head charterers had no option to cancel the charter.

Anti-suit injunction against owners’ third party proceedings against charterers and sub-charterers in Singapore.

 

The Chang Hang Guang Rong [2019] EWHC 2284 (Comm)  is an interesting, recent anti-suit injunction decision by Andrew Burrows QC, soon to become a Judge of the Supreme Court. Cargo claims arising out of the issue of switch bills were brought against the vessel’s owners in the Singapore High Court. Owners sought to pass these on to Clearlake, the charterer, and to Gunvor the sub charterers, through third party proceedings analogous to CPR Part 20 procedure in England. Both parties obtained anti-suit injunctions (ASI) from the High Court in London on the basis of an exclusive jurisdiction clause in the charter with Clearlake and in the bill of lading issued to Gunvor as shipper, although Gunvor denied being a party thereto.

Owners responded by amending their claims in the Singapore High Court, deleting all their contractual claims against Gunvor and relying on tort claims for misrepresentation, and deleting all their contractual claims against Clearlake, save for claims under a Letter of Indemnity, which contained a non-exclusive London High Court jurisdiction clause. Andrew Burrows QC held that there were two grounds for granting an ASI. First the foreign proceedings constituted a breach of the jurisdiction clause in the contract between the parties. An ASI would be granted unless there were strong reasons not to. Second, the foreign proceedings were otherwise vexatious and oppressive. The court would have to be satisfied that England was clearly the more appropriate forum for trial of the action. The ASI in respect of the proceedings against Clearlake fell within the first category and was maintained. Although the LOI provided for London arbitration for small claims this inconsistency was of no consequence as the claims here were not small.

The injunction was also maintained as regards Owners’ claims against Gunvor, now reframed solely as tort claims, which fell within the second category. The bringing of such claims was vexatious and oppressive, in that it circumvented the normal way of passing claims down a charter chain by leap-frogging Clearlake. Owners had manipulated their third party claims to avoid the exclusive jurisdiction clause in the charter. Clearlake, not Gunvor, dealt directly with the owners and the alleged misrepresentation was directly provided to them by Clearlake. There was a very good reason, so as to avoid forum-fragmentation on the same issues, to have all third party proceedings heard in the same jurisdiction (ie England). There was no obvious prejudice to owners in having all the third party proceedings heard in England rather than Singapore. It was not necessary to decide a further issue of whether Clearlake could restrain the tortious claims against Gunvor

Watch your email signature

The definition of what counts as a “signature” isn’t of enormous importance to shipping lawyers most of the time: they don’t tend to deal in real estate or declare themselves trustees of land. But in one case it does matter: guarantees, whether of charter obligations, settlements or any other obligation need to be signed under s.4 of the Statute of Frauds 1677. Imagine you send an email on a client’s instructions guaranteeing a debt. If you type in your name like so — “Best wishes, Barry” — no problem. But what if you just type “Agreed” under the terms of the guarantee, and your email program appends at the foot of the email: “From Barry X at ABC Solicitors LLP. This email is confidential etc etc …”? Signed or not? The Chancery Division last week said Yes in Neocleous v Rees [2019] EWHC 2462 (Ch). A settlement of a real estate dispute was held enforceable in these circumstances under the LP(MP) Act 1989; it seems pretty clear that s.4 cases will be decided the same way. Moral: good news for those wishing to uphold guarantees. And if you are thinking of raising the pettifogger’s defence under s.4, look carefully at your email settings. You have been warned.

 “Anchor aweigh”. No retrospective invalidity of NOR.

 

In London Arbitration 16/19 a vessel was chartered on Gencon form which was amended so that notice of readiness (NOR) could be tendered at any time after the ship’s arrival at an anchorage 150 km downriver from the discharge port with passage time from anchorage to discharge port not to count as laytime. The vessel arrived at anchorage and tendered NOR. When the pilot boarded the vessel was found to have only one anchor available which had not been notified in advance to the port authorities. The pilot would only proceed upriver if the owners would hire an escort tug. The owners declined on cost grounds and decided to replace the second anchor instead. The vessel was sent back to the anchorage to do this and then proceeded back to the pilot station with two anchors and from there proceeded to the discharge port and berthed the following day. The owners claimed laytime started with giving of NOR but as a good will gesture discounted the time from when the vessel first weighed anchor to proceed to the pilot station to when the vessel arrived at the discharge port.

The tribunal accepted charterer’s evidence that  two anchors was a normal requirement for river navigation, and that in a case of a missing anchor it was usual and reasonable for a standby tug to be required. However, when the vessel gave NOR, the absence of a second anchor was not an absolute bar, as the possibility existed of proceeding to the discharge port with tug assistance. When the vessel tendered NOR she was not, therefore, in a condition in itself that necessarily precluded her from completing the contractual voyage. It was owners’ later decision not to employ a standby tug that had that effect. Owners’ decision did not retrospectively invalidate the NOR tendered at a time when the vessel was able to proceed to the discharge port, albeit with tug assistance rather than by having two anchors on board.

Owners’ decision not to proceed with an escort tug, on cost grounds, was appropriately addressed by the exclusion of time in the manner adopted in their calculations.

Maintaining class under a bareboat charter. Condition or innominate term?

 

This was the question before the Court of Appeal in Ark Shipping Company LLC v Silverburn Shipping (IOM) Ltd (The Arctic) [2019] EWCA Civ 1161. In October 2012 a tug was bareboat chartered for 15 years on Barecon 89 form. Clause 9(a) require the demise charterers to “….keep the Vessel with unexpired classification of the class indicated in Box 10 and with other required certificates in force at all times….”. The tug arrived at Astrakhan for repairs and maintenance on 31 October 2017, and the class certificates expired on 6 November 2017, before entering dry dock for repairs, some five years after her last special survey. The Court of Appeal held that the clause was an innominate term and not a condition and therefore did not give owners an automatic right to terminate the contract if it were breached.

Gross LJ gave various reasons for concluding that the term was not a condition. The term in question was not expressed to be a condition, it was not a time clause, and there was no interdependence of the parties’ obligations which weighed so heavily in Bunge v Tradax.           The term was found in the middle of cl. 9A headed “Maintenance and Operation” which set out the distinct but closely connected obligation on Charterers, as to maintaining both the physical condition of the vessel and its class status. The obligations as to the former were not conditions and the structure of cl. 9A, in an industry standard contract, strongly suggested that the term was not to be construed as a condition.

Although cl 9 (A) required Charterers to keep “…other required certificates in force at all times”, this could not be limited, as owners suggested, to the certificates required by class in order to issue the main classification certificate. Charterers’ obligation covered a range of matters, from the trivial to the those of serious consequence. A condition analysis would mean, for instance, that a 15 years’ charterparty could be terminated by Owners if Charterers committed any breach in respect of the certificates required under the BWM or AFS conventions. Breach of the term could result in trivial, minor or very grave consequences, so suggesting that the term was innominate rather than a condition. Although a time charter term that a vessel was in class at the date of delivery was likely to be a condition, per dicta of Rix LJ in The Seaflower, [2001] 1 Lloyd’s Rep. 341, that was not the position with an obligation to maintain class throughout the charter.

Supplytime 2017. Pay now, counterclaim later.

Boskalis Offshore Marine Contracting BV v Atlantic Marine and Aviation LLP (The “Atlantic Tonjer”) [2019] EWHC 1213 (Comm) is the first case to consider Supplytime 2017. A multi-purpose support vessel was chartered by disponent owners, Atlantic Marine, to Boskalis for 21 days on Supplytime 2017 form. Atlantic Marine rendered invoices for hire, accommodation, meals and other services which Boskalis did not pay on the grounds that the largest item in dispute was not due because the vessel was offhire throughout.

Clause 12(e) of Supplytime 2017 provides:
“Payments – Payments of hire, fuel invoices and disbursements for the Charterers’ account shall be received within the number of days stated in Box 24 from the date of receipt of the invoice. Payment shall be received in the currency stated in Box 20(i) in full without discount or set-off to the account stated in Box 23… If payment is not received by the Owners within five (5) Banking Days following the due date the Owners are entitled to charge interest at the rate stated in Box 25 on the amount outstanding from and including the due date until payment is received.
If the Charterers reasonably believe an incorrect invoice has been issued, they shall notify the Owners promptly, but in no event no later than the due date, specifying the reason for disputing the invoice. The Charterers shall pay the undisputed portion of the invoice but shall be entitled to withhold payment of the disputed amount…”
In this case the due date was 21 days.
Sir Ross Cranston, acting as a judge of the High Court has held that clause 12(e) does debar charterers from raising defences against owners’ invoices if and to the extent that they have failed to notify owners that they believed those invoices to be incorrect because of those defences by the due date of those invoices. Clause 12(e) is not a time bar provision. It gave Boskalis a relatively short period of 21 days within which to dispute an invoice and once that period has expired, Boskalis came under an obligation to pay any undisputed sum to Atlantic Marine, whether they were liable for such sums or not, with disputed sums left over to be subsequently resolved. Boskalis’s obligation to pay any undisputed sum to Atlantic Marine was also subject to their right subsequently to challenge their liability for such sums either by requiring an audit under clause 12(g) and a credit (if appropriate) or by way of a counterclaim.

The clause was clear and unambiguous. “A reasonable person with the background knowledge available to the parties at the time of the contract would understand that invoices had to be paid within 21 days of their being received. namely, that charterers are barred from disputing the payment of invoices unless done within the 21 days referred to in the contract.”

If charterers reasonably believed that there was an error in the invoice they could withhold payment of the disputed amount by notifying the owners under the clause within the period agreed in the contract. Charterers also had the audit rights under clause 12 (g) to reclaim amounts paid through accounting-type errors (wrong hire rate, wrong number of meals and so) up to four years ahead, as well as the right bring a counterclaim, for breach of contract or for unjust enrichment, if they had paid sums which they later believed were not properly payable.

“My wife may capture my heart”. Off hire and capture by pirates.

 

Owners time chartered the “Eleni P” on an amended NYPE 1946 form and during a voyage from Ukraine to China the vessel was routed via the Suez Canal and the Gulf of Aden. After transiting the Gulf of Aden without incident she was attacked and captured by pirates in the Arabian sea and released some seven months later.

Owners claimed US$ 4.5 million hire for this period. The Tribunal rejected the claim on the grounds that two additional typed clauses, clauses 49 and 101, excluded it. Owners appealed in respect of the correct construction of each pursuant to s69 of the Arbitration Act 1996. In Eleni Shipping Limited v Transgrain Shipping BV (“The ELENI P”) [2019] EWHC 910 (Comm) Popplewell J held that the appeal succeeded in respect of clause 49, but failed in respect of clause 101.

Clause 49 – Capture, Seizure and ArrestShould the vessel be captures [sic] or seized or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended for the actual time lost […]

Owners contended before Popplewell J that Clause 49 only applied when the Vessel was captured, seized, detained or arrested by any authority or any legal process – it therefore did not apply to capture by pirates. Charterers argued that only the word “arrested” was qualified by the phrase “by any authority or by any legal process” andnot  the word “captured” , and therefore as a matter of ordinary language, the Vessel had been captured.

Popplewell J held that the clause only applied to capture by an authority or legal process, and therefore not to capture by pirates. The words “any authority or any legal process” applied to the whole preceding list of events. To limit it to arrest would be superfluous. The tribunal had stated that ‘capture’ was not something that an ‘authority’ could be involved with. Not so, Popplewell J stating “capture does not necessarily connote the use of force. Unoccupied land or undefended goods may be captured. My wife may capture my heart. I see no difficulty as a matter of the ordinary use of language in the concept of a governmental authority or ruler capturing a vessel.”

Clause 101 – Piracy ClauseCharterers are allowed to transit Gulf of Aden any time, all extra war risk premium and/or kidnap and ransom as quoted by the vessel’s Underwriters, if any, will be reimbursed by Charterers. […] In case vessel should be threatened/kidnapped by reason of piracy, payment of hire shall be suspended. It’s remain understood [sic] that during transit of Gulf of Aden the vessel will follow all procedures as required for such transit including but not limited the instructions as received by the patrolling squad in the area for safe participating to the convoy west or east bound.

Did the suspension of hire only operate if the vessel were threatened or kidnapped by reason of piracy while transiting the Gulf of Aden, as owners argued, or did it operate wherever the Vessel was threatened in the Gulf of Aden or as an immediate consequence of her transiting or being about to transit the Gulf, a charterers argued? The Tribunal had accepted charterers’ argument and so did Popplewell J. The purpose of the Clause was to allocate the risks associated with such trade, not solely within a specifically defined geographical area. Its first sentence allocates the burden of an extra war risk premium and the sentence concerning hire suspension allocates the risk of delay from detention as a consequence of the transit which the first sentence requires.

Accordingly, owners were unable to claim hire for the seven months during which the vessel was held by the pirates.

IISTL Member to present paper at ASDEM’s 14th International Oil Industry Laytime and Demurrage Conference on 16/17 May

 

 

IISTL member Professor Simon Baughen will be presenting a paper “LEGAL ISSUES OF DEMURRAGE AND PUMPING WARRANTIES” at Asdem’s 14th International Oil Industry Laytime and Demurrage Conference on 16/17 May at the Le Meridien Piccadilly Hotel in London.

Pumping warranties are the norm in tanker charters and apply a separate laytime and demurrage regime to the period of discharge, and sometimes to the period of loading as well. They have also generated many disputes between owners and charterers as to how this separate regime operates and how it fits in with the demurrage time bar clauses that are invariably found in tanker charters. Professor Baughen will be looking at the pumping clauses found in oil charterparties from the wide range of additional clauses that are necessary for Asbatankvoy to the standard warranties in widely used modern forms and examining the legal issues they give rise to.

The full speaker line-up and topic list for this event, can be found in Asdem’s brochure which you can download by clicking here.

To register immediately on-line, please click here.

 

 

 

 

 

No deduction from hire clause in time charter means what it says.

In London Arbitration 7/19 the tribunal decided that a clause in a time charter stating ‘Charterers have no right to make any deduction from hire payments… Chrts do not have the right to deduct from hire payment any amounts on alleged under performance, except undisputed off hire” precluded charterers from making deductions from hire by way of equitable set off. The tribunal referred to the unreported decision in Marubeni v Sea Containers Ltd 17 May 1995, in which Waller J said:

“First, in the same way as the words ‘deduction or withholding’ are not terms of art which will always include‘set-off’, they are equally not terms of art which limit their meaning to only covering taxes, levies or duties. Second, the fact that clear words are necessary does not mean that the word ‘set-off’ must be used. The words can be clear from their context. Third, what is said in one contract between other parties in one context, cannot really assist in the construction of another contract between different parties in a quite different context.”

Charterers could not deduct their off hire claims either as these were not undisputed. The charterers had argued that they had not made deductions from hire,but that hire was simply suspended, but that was a distinction without a difference.