P v A and another [2008] EWHC 1361 (Comm)
The Voyage Charterers’ nomination of laycan dates was irrevocable. Owners were entitled to rely on Charterers’ nomination immediately and the nomination could only be amended by agreement, irrespective of whether Owners had nominated a vessel already. Charterers’ insistence on their “entitlement” to change the laycan amounted to a repudiatory breach of the charter because it demonstrated a clear intention not to be bound by its terms, namely the original laycan nomination.
Claimant Charterers and Defendant Owners had entered into a contract of affreightment (on the Americanized Welsh Coal Charter Form) for six voyages from either Quebec (where Charterers would load iron ore) or Baltimore (where Charterers would load coal) to Constanza. The COA did not state when the voyages would take place, or from which of the two loadports, however clause 23 of the COA provided:
“Charterers to give 30 days’ notice with 10 days notice laycan spread and Owners to nominate vessel latest 10 days prior first day…”
In giving notice of the laycan spread, Charterers would nominate the loadport for the particular voyage, and thereby determine the cargo to be loaded, as well as fixing the earliest date on which the vessel could tender a NOR.
The dispute arose out of Charterers’ arrangements for the fifth voyage:
• on 6 September 2007, Charterers notified Owners that the fifth voyage under the COA would be from Baltimore to Constanza and the laycan would be 5/14 October 2007;
• a week later Charterers told Owners that they wanted to move the laycan to 21/30 October 2007 because the shippers could not supply cargo to the loadport within the 5/14 October laycan;
• Owners refused to agree to this change, no doubt influenced by the fact that the freight market had risen since the COA had been concluded, but suggested that the fifth voyage should be treated as cancelled and that the sixth voyage should be carried out with the 21/30 October laycan;
• Charterers resisted this suggestion and instead proposed to substitute for the fifth voyage under the COA an alternative voyage from Newport News to Nikolaev, at the COA freight rate, with a laycan of 5/14 October;
• Owners once again rejected Charterers’ proposal and on 24 September 2007, Owners informed Charterers that they were in repudiatory breach due to their refusal to perform the fifth shipment in accordance with the 5/14 October laycan.
The case was referred to arbitration and the arbitrators found, by majority, that:
• the effect of the Charterers’ notice, dated 6 September, was to define the parties’ obligations under the COA;
• once the laycan notice was given it was deemed to be written into the COA and could only be changed by agreement;
• the Charterers’ insistence that they had the right to move the laycan dates because the shippers could not provide the cargo by 5/14 October amounted to a proposal for a substitute voyage and demonstrated a clear intention not to be bound by the original nomination;
• Owners were entitled to accept Charterers’ repudiatory breach as releasing them from their obligation to perform the fifth voyage.
Steel J was asked by Charterers, on appeal from the Tribunal’s decision, whether (1) the nomination by the Charterers of the laycan spread was irrevocable and (2) the Arbitrators erred in law in holding that the Charterers were in repudiation by purporting to revoke the original nomination.
Charterers’ argued inter alia that the laycan nomination would only have become irrevocable if Owners had nominated a vessel and Charterers had confirmed the vessel (pursuant to the requirements of clause 23 of the COA) on the basis that at that point Charterers would have been estopped from changing the laycan. They further submitted that they were under no obligation to provide cargo within the laycan and that all Charterers had been doing by seeking to put back the laycan was, implicitly, to make clear that they would not exercise their option to cancel pending delivery of the cargo.
Steel J dismissed the appeal and held as follows:
(1) Charterers had no right to change the laycan. Charterers’ nomination of laycan dates, in fulfilment of their obligation under the COA to do so and thereby complete the definition of the parties’ obligations for the particular charter, was irrevocable.
This was in line with The Jasmine B [1992] 1 Lloyd’s Rep. 39, wherein the Court held that in the absence of any special provision to the contrary, once a loadport had been nominated, the charter must thereafter be read as though the nominated port had originally been written into the charterparty, and neither party had the right (or the obligation) unilaterally to change the nomination.
The fact that the nomination is irrevocable is also in keeping with the basic requirement in contract law that for a contract to be valid the parties must have made provision for terms of fundamental importance to the contract, or at least included a mechanism for determining such fundamental terms. In this case, the Charterers’ nomination of the laycan was essential to complete the definition of the parties’ obligations, including the loadport, the cargo to be carried and the earliest date on which the vessel could tender a NOR. Steel J held that without a provision in the COA for these provisions to be written in, the COA would be unworkable. He reasoned moreover that it would be commercially unworkable if the nomination only became irrevocable once a vessel had been nominated (and confirmed, if relevant) because Charterers would be able to alter the laycan repeatedly until that time.
(2) The Tribunal was entitled to conclude that the Charterers’ insistence on their right to change the laycan constituted a repudiatory breach because it evinced a clear intention not to be bound by their original nomination.
(3) Charterers’ submissions before the Court that the effect of their notices addressed to Owners was merely to inform Owners that they would not exercise their option to cancel until 30 October (if at all) were completely inconsistent with the Tribunal’s findings of fact that Charterers had informed Owners that they wanted to change the laycan and believed that they were entitled to do so, or that they wanted to substitute another voyage for the fifth voyage under the COA.
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