UK: THE "ZENOVIA" – Commercial Court Overturns Maritime Arbitration Award Relating To Redelivery Notice: IMT SHIPPING AND CHARTERING GMBH V CHANSUNG SHIPPING COMPANY LTD [2009] EWHC 739 (Comm)

Last Updated: 17 April 2009

This is a shipping dispute that was initially dealt with in arbitration but subsequently appealed to the Commercial Court pursuant to section 69 Arbitration Act 1996. Somewhat surprisingly, given the courts' usual reluctance to overturn arbitration awards except in extenuating circumstances, in this case, Mr. Justice Tomlinson decided the arbitration award should be set aside. However, the judge did qualify his decision by indicating that he had had the advantage over the Tribunal of hearing oral argument from highly skilled counsel, whereas in the arbitration, oral argument had been dispensed with. Mr. Justice Tomlinson expressed the view that had the arbitrators had the benefit of hearing the oral submissions put to him, they would have reached a different conclusion.

Background to dispute

The case involved a time charter in amended New York Produce Exchange Form. There was a chain of charterparties as follows: the owners, CSC, time-chartered the vessel to COSCO, COSCO sub-chartered to WBC, WBC sub-sub-time chartered to IMT. These three time charters were treated by the parties and the arbitrators as being back-to-back.

The earliest and latest permissible redelivery dates for the vessel were treated as being 20 September 2007 and 22 November 2007 respectively. Towards the end of the charter period, IMT sub-chartered the vessel to Oldendorff, who sub-chartered to Noble for a time-charter trip.

On 5th October 2007, Noble gave approximate notice of redelivery "1 sp China on about 04 Nov 2007 basis agw, wp, wog, uce".

The message was passed up the broker chain and the version eventually received by owners gave the redelivery date as 6th November 2007. Subsequently, the charterers decided to squeeze in a further voyage before the contractual redelivery date so they sent out a further notice to owners on 15 October saying "... we hereby revise the date of redelivery to owners to abt Nov 20th within the range of redelivery".

Owners wrote back the following day saying they had already fixed the vessel for her next employment and insisted the vessel had to be redelivered at the end of the voyage to China. Charterers refused and said they had the right to use the full period given by the contract. Consequently, owners withdrew the vessel from the chartered service on 2nd November and charterers contended this was a wrongful withdrawal and claimed damages for repudiation.

The parties in the contractual chain entered into an agreement to submit to the same dispute resolution process and the matter went to arbitration before LMAA arbitrators.

Arbitration

The arbitrators found in favour of owners. They held there was an implied term that where an approximate date of redelivery is given by charterers of a vessel, those charterers are obliged not to do anything deliberately which prevents that approximate date being met.

They also found that the acronym "wp" in the original notice meant "without prejudice" rather than the more obvious "weather permitting". The arbitrators treated the meaning of "without prejudice" in this context as analogous to "without guarantee" (the acronym "wog" meaning "without guarantee" was also contained in the 5th October notice) but decided that those words could not alter the effect of the 30 day notice in any event. Rather, the Tribunal held that there was a promissory estoppel in favour of the owners in that they had refixed their vessel on 15 October with a laycan of 1 – 11 November, having relied on having their ship back in time for the new fixture.

Appeal

The judge felt unable to tamper with the arbitrators' interpretation of "wp" because this aspect of their decision had not been appealed. However, he expressed concern in this regard on the grounds that where the words "without prejudice" are used in commercial communications, this is usually meant to indicate that what is being said cannot be relied on unless the parties subsequently agree that it should. On that basis, the judge said he would be reluctant to uphold a conclusion that a notice of approximate redelivery expressly given without prejudice can without leading to an agreement nonetheless give rise to a promissory estoppel binding the giver of the notice. He was also reluctant to accept that a notice of approximate redelivery expressly given without prejudice generated without more an obligation on the charterer not deliberately to do anything which might prevent the approximate date given therein being met.

Nonetheless, Mr. Justice Tomlinson deemed it appropriate to consider the substance of the arbitrators' arguments beyond the meaning of the acronym. He pointed out that in the charter in question, there was a provision for the giving of five notices of approximate redelivery, followed by a further four notices of definite redelivery. In the judge's view, each notice had at the very least to be given honestly or in good faith. However, this did not mean 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 was not at liberty to do anything which prevented the date first given being met. The judge stated that the very structure of the regime providing for approximate and definite notices under the charterparty militated against any argument that the parties must be bound to have agreed that the giving of the first notice as required, where it was done honestly, constrained the charterers' freedom of action thereafter. As the judge said, it was not possible to confidently assert what the parties must inevitably have agreed when they made their contract, had the point been raised.

As regards promissory estoppel, the judge confirmed that this required a clear and unequivocal representation by the charterers that they were giving up their strict rights, in this case their right to retain the vessel in their employment until 22 November. On the facts of this case, the defence of promissory estoppel could not succeed because the charterers said nothing from which it could reasonably be inferred that they were abandoning any contractual rights.

In conclusion, therefore, Mr. Justice Tomlinson found that the only decision that the arbitrators should have come to was that the totality of the words and conduct attributed to the charterers did not make a clear and unequivocal promise to the owners either that the Noble voyage would be the last employment under the charter or that they would not in the event seek to retain the vessel in their employment until the last permitted date for redelivery, 22 November. Nothing said or done by the charterers amounted to a promise as to what they would do in the future.

The arbitrators' Award was therefore set aside and an award in favour of charterers was substituted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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