White Rosebay Shipping v Hong Kong Chain Glory Shipping

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DMC/SandT/13/09

England

White Rosebay Shipping SA v Hong Kong Chain Glory Shipping Limited

English High Court: Queen’s Bench Division: Commercial Court; Teare J; [2013] EWHC 1355 (Comm); 23May 2013

TIME-CHARTERPARTY: CHARTERERS EVINCING INTENTION NOT TO PERFORM: OWNERS AFFIRMED CHARTERPARTY: WHETHER CHARTERERS’ REPUDIATORY CONDUCT CONTINUED: WHETHER OWNERS SUBSEQUENTLY ENTITLED TO TERMINATE

Alex Gunning QC and Elspeth Owens, instructed by Ince & Co LLP for White Rosebay

Philip Edey QC and Alexander Wright, instructed by Wikborg Rein LLP for Hong Kong Chain Glory Shipping

Summary

Where Owners had initially affirmed a charterparty in the face of the Charterers’ repudiatory conduct, they were entitled to terminate if there were evidence that the Charterers had continued to act in repudiation of the charterparty after Owners’ affirmation. The case was remitted to the arbitrators to determine whether there was evidence that the Charterers had so acted.

Case Note contributed by Ervin Tan, B.A. (First Class) Oxon

Background

Claimant owners of the M/V “Fortune Plum”, White Rosebay Shipping, chartered her to respondents, Hong Kong Chain Glory Shipping. Over the period from April 2011 until and including November of that year, Owners experienced increasing difficulties in obtaining the hire due from Charterers and on two occasions successfully exercised a lien on sub-freights.

On or about 13 October 2011, Owners served on the Charterers a statutory notice in respect of outstanding hire, pursuant to the Insolvency Act of the British Virgin Islands. By 7 November 2011, it was clear that the statutory demand had not been met and Owners concluded that the Charterers were not going to make any more hire payments. On 9 November, the vessel arrived at the port of Bayuquan and gave notice of readiness to discharge. On 11 November Charterers instructed the master to proceed to Hong Kong after completion of discharge. On 12 November, Owners told the master that the charterparty was to be terminated and that, on sailing from Bayuquan, the vessel should proceed to a suitable area and there await further instructions. The master passed this message on the Charterers, urging them to pay the outstanding hire.

On 14 November, the vessel completed discharge and sailed from Bayuguan. On that day, Owners informed the Charterers that their conduct showed clearly that they were no longer willing or able to be bound by the charterparty; this amounted to a “repudiatory/renunciatory” breach of the charterparty, which Owners accepted as terminating the charterparty and withdrew the vessel from the Charterers’ service. The Charterers, for their part, insisted that in withdrawing the ship, the Owners were themselves in repudiatory breach of the charterparty. The amount in issue amounted to more than US$4 million.

The claim went to arbitration, where the Tribunal held that, by delaying the actual withdrawal of the ship until 14 November 2011, after they had given notice of termination (through the master) on 12 November, Owners had affirmed the charterparty by allowing the vessel to complete the discharge of the cargo, at the Charterers’ expense. Their withdrawal of the vessel was, therefore, wrongful and their claim was in consequence denied.

Owners obtained leave to challenge the Tribunal’s decision in the High Court.

Judgment

The Owners challenged the conclusions of the Tribunal on three grounds: that it had wrongly decided that a shipowner who has, within a reasonable period, made up his mind to accept a repudiatory breach, must withdraw the vessel immediately; that it wrongly considered that the mere act of discharging could amount on its own to an unequivocal act from which it can be inferred that a shipowner intends to affirm the charterparty; it wrongly considered that Owners were unable to terminate the charterparty where Charterers had continued to evince an intention not to perform the charterparty.

On the first point, the judge could detect no error of law in the approach the Tribunal had adopted. It had found that the Owners were entitled to the period from 7 to 11 November 2011, as a reasonable period in which to make up their minds whether or not to accept the repudiation or to confirm the charterparty. Accordingly, Owners’ compliance with the charterparty during that period could not be regarded as an unequivocal affirmation of it. It was not the case that the Tribunal had said that Owners were required to terminate the charterparty immediately after the expiry of the reasonable period for deciding what action to take. Rather, the Tribunal, having noted that there had been no immediate withdrawal, went on to consider what the Owners in fact did after the expiry of the reasonable time and asked itself whether that conduct was capable of only one construction, namely that Owners had chosen to forgo their right to withdraw the vessel. That was the correct approach.

On the second point, the judge held that the Tribunal was entitled to find that the Owners had affirmed the charterparty by allowing the vessel to remain in the service of the Charterers to complete discharge, in circumstances where the Charterers were contractually bound to bear the expense of that operation. It was the task of the Tribunal, as the finders of fact, having properly directed itself as to the law, to apply the law to those facts and reach a conclusion. The fact that another tribunal might have reached a difference conclusion on the same facts did not entitle the judge to say that the correct application of the law of affirmation to the facts of this case must lead inevitably to only one answer, namely that there had been no affirmation.

On the third point, Owners argued that, in circumstances where the Charterers had continued to renounce the charterparty after Owners’ acceptance of their repudiation on 12 November 2011, Owners were entitled to withdraw the vessel on 14 November. This argument was based on the principle derived from the case of Johnson v Agnew [1980] AC 367.

Mr Edey QC for the Charterers submitted that, in order for the Owners to accept a renunciation after they had affirmed the contract, there must be evidence of words or conduct by the Charterers which clearly demonstrated their continued intention to renounce the contract, notwithstanding its affirmation by the Owners.

The judge accepted this submission. In a case of renunciation or anticipatory breach of contract, (as opposed to a repudiation based upon an actual breach), the tribunal of fact must carefully consider whether there were words or conduct after affirmation which demonstrated that the renunciation was continuing, so that a later acceptance of the continuing renunciation would be a legitimate termination of the contract. The Tribunal had, therefore, erred in saying that it necessarily followed from Owners’ earlier affirmation of the charterparty that the withdrawal of the vessel on 14 November was itself a repudiatory breach of contract by the Owners, in circumstances where it had made no finding of fact that Charterers’ repudiatory conduct had continued during the period from 12 to 14 November 2011.

As a result, the appeal on the continued renunciation point succeeded and the award was remitted to the Tribunal so that it might consider whether Charterers’ renunciation continued after Owners’ affirmation of the charterparty and, if so, whether Owners’ termination of the charterparty on 14 November 2011 was a legitimate termination of the charterparty, rather than a repudiation of it.