Greatship (India) Limited v Oceanografia SA de CV - The Greatship Driti

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DMC/SandT/13/15

England

Greatship (India) Limited v Oceanografia SA de CV (The “Greatship Driti”)

English Commercial Court: Gloster J: [2012] EWHC 3468 (Comm): 5 December 2012

TIME CHARTER: BIMCO SUPPLYTIME 89 FORM: CLAUSE 10(E): RIGHT TO SUSPEND PERFORMANCE FOR FAILURE TO PAY HIRE PUNCTUALLY: WHETHER GRACE PERIOD (ANTI-TECHNICALITY) NOTICE REQUIRED BEFORE EXERCISING RIGHT

Nigel Jacobs QC (instructed by Holman Fenwick Willan LLP) for the Claimant/Owners, Greatship

Yash Kulkani (instructed by Thomas Cooper LLP) for the Respondent/Charterers, Oceanografia

Summary

Owners are not required to give Charterers five banking days’ notice before exercising their right “to suspend performance of any and all of their obligations” under clause 10(e) of the BIMCO Supplytime 89 charter form.

Background

This was an appeal to the Commercial Court from an arbitration award on a question of law. The question was whether Owners were required to give Charterers five banking days’ notice in order validly to exercise their right “to suspend performance of any and all of their obligations” on the proper construction of clause 10(e) of the BIMCO Supplytime 89 charter form.

The clause stated:

“10(e) Payments – [1] Payments of Hire, bunker invoices and disbursements for Charterers’ account shall be received within the number of days stated in Box 23 from the date of receipt of the invoice. Payment shall be made in the contract currency in full without discount to the account stated in Box 22. However any advances for disbursements made on behalf of and approved by Owners may be deducted from Hire due.

[2] If payment is not received by Owners within 5 banking days following the due date Owners are entitled to charge interest at the rate stated in Box 24 on the amount outstanding from and including the due date until payment is received...

[3] In default of payment as herein specified, Owners may require Charterers to make payment of the amount due within 5 banking days of receipt of notification from Owners; failing which Owners shall have the right to withdraw the Vessel without prejudice to any claim Owners may have against Charterers under this Charter party.

[4] While payment remains due Owners shall be entitled to suspend the performance of any and all of their obligations hereunder and shall have no responsibility whatsoever for any consequences thereof, in respect of which Charterers hereby indemnify Owners, and Hire shall continue to accrue and any extra expenses resulting from such suspension shall be for Charterers’ account”

The convention adopted in argument was to add numbers in square brackets to the sub-paragraphs of cl.10(e)for ease of reference.

The dispute arose from instances of non-payment of hire by Charterers during the currency of the charter. Owners purported to suspend the provision of the services of the vessel for non-payment of hire and relied upon what they claimed was their right to do so under part [4] of clause 10(e).

Owners submitted before the arbitrators that, upon its proper construction, clause 10(e) did not contain any express or implied requirement for notice to be given before Owners were entitled to exercise their right to suspend the provision of services under part [4] of clause 10(e). In other words, there was no requirement to give some form of prior notice.

Charterers’ submission was that it was an express or implied requirement of part [4] of clause 10(e) that Owners would give five banking days’ notice of intention before exercising their right to withdraw the vessel from the charter whether permanently or temporarily.

The arbitrators upheld Charterers’ submission on the basis that the period of grace and express notification provision contained in parts [2] and [3] of clause 10(e) governed part [4] but rejected Charterers’ argument that there should be an implied term to that effect.

Judgment

Construction point

The judge, in disagreeing with the arbitrators, held that Owners were not required to give Charterers notice under clause 10(e) before exercising their right to suspend performance of their obligations under the charter.

The judge disagreed with the arbitrators because, if the language in part [4] was looked at in isolation, the words “while payment remains due” clearly and unambiguously suggested that Owners were entitled to suspend performance of their obligations at any time after payment became due and whilst it remained unpaid. Furthermore, there was nothing in the express language of part [4] which required “the giving of notice requiring payment to be made within five banking days under part [3]” or for any period of grace prior to the entitlement of Owners to exercise their right of suspension.

That was to be contrasted with the fact that the charter contained numerous clauses for the provision of notices but part [4] of clause 10(e), in contrast to part [3], contained no such requirement. The judge found it difficult to regard the absence from part [4] of an express reference to notification and a period of grace as an oversight.

In addition, the judge noted that there was nothing in the express wording of either part [4] or part [3] to suggest that the exercise of the rights under part [4] were somehow linked to the giving of notices under part [3]. Part [4] began as a distinct sub-paragraph within clause 10(e) and there were no words linking the notification requirement in part [3] to the right to suspend in part [4].

In contrast to parts [2] and [3], part [4] simply did not contain any reference whatsoever to a period of grace and did not require the giving of notice. There was, therefore, the judge said, no basis for reading part [4] as subject to any obligation to give five banking days’ notice under part [3]. The judge considered that part [4] merely linked the right to suspend performance with the failure to make payment (“while payment remains due”) without any reference to any written notice or period of grace.

The judge accordingly held that, as a matter of language, the wording of part [4] was clear and unambiguous and that there was no scope for any alternative construction. The judge saw no justification for what would, in effect, be a rewrite of the charter, and did not regard a construction of the charter which required no notice to be given before suspending performance to be in any way surprising or unreasonable.

Implied term point

The judge, in agreeing with the arbitrators, saw no grounds to justify implying a term that a notice ought to be given before the exercise of the right to suspend performance, as Charterers had argued. While there was no express term that would rule this out, there was equally no business necessity to imply such a term, because it could not be said that the charter would not work properly without such a notice, since Charterers were already on notice of the right of suspension by the terms of part [4] of clause 10(e).

Comment

The effect of this decision is that Charterers are obliged to pay for the hire of the subject vessel under the charter but may at the same time be deprived of the use of the vessel as a result of their failure to pay hire on time. While this may seem somewhat harsh, there is nothing commercially unfair about there being no obligation to give notice of suspension, when the terms of the charter make clear that failure to pay on time allows suspension of performance.