Novologistics Sarl v Five Ocean Corporation the "Merida" [2009] EWHC 3046 (Comm)

[2009] EWHC 3046 (Comm)Case No 2009 FOLIO 640
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
AND IN THE MATTER OF AN ARBITRATION CLAIM
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 27/11/2009
Before
MR JUSTICE GROSS
Between
NOVOLOGISTICS SARLClaimantFIVE OCEAN CORPORATIONDefendantthe “MERIDA”DefendantNOVOLOGISTICS SARL Claimant (Charterers)(Respondent in Arbitration)- and -FIVE OCEAN CORPORATION the“MERIDA”Defendant (Owners)(Claimant in Arbitration)
Michael Coburn (instructed by Swinnerton Moore LLP) for ClaimantLawrence Akka (instructed by Mays Brown Solicitors) for DefendantHearing Hearing date: 19 th November 2009
JudgmentMr Justice Gross :INTRODUCTION
[1]This is an appeal by the Claimant (“Charterers”) from a Final Arbitration Award of two very experienced arbitrators, dated 20th April, 2009 (“the award” and “the arbitrators”, as appropriate). The arbitrators held that a voyage charterparty, dated 5th February, 2007 (“the charterparty”), of the vessel, The MV Merida (“the vessel”), entered into between Charterers and the Defendant (“Owners”), was a port rather than a berth charterparty. As is well-known, the primary relevance of this distinction goes to the allocation, as between owners and charterers, of the risk of delay caused by congestion, at load and discharge ports. The arbitrators went on to allow Owners’ claim for demurrage in the amount of US$502,267.24, together with interest and costs.[2]The sole question of law arising on this appeal is whether the arbitrators were right to conclude that the charterparty was a port and not a berth charterparty. Mr. Coburn, for Charterers, submits that they were wrong in law to do so; Mr. Akka, for Owners, defends the arbitrators’ conclusion. I was grateful to both counsel for their helpful and concise submissions.[3]The key underlying facts can be very shortly summarised: i) The charterparty was for the carriage of a part cargo of steel plates, from (put neutrally) Xingang to Cadiz and Bilbao. ii) The vessel arrived at Xingang and tendered a Notice of Readiness (“NOR”) at 04.00 on Saturday the 10th March, 2007. iii) The vessel then anchored, awaiting a berth. iv) A pilot boarded at 17.00 on Friday 30th March and the vessel proceeded to the berth at 17.15; she was “all fast” at 19.50. v) Loading commenced at 21.25 on the 30th March and was completed at 06.00 on the 31st March.[4]Before the arbitrators, in broad terms, Owners contended that the charterparty was a port charterparty; that they were entitled to tender NOR upon arrival at Xingang; that delay thereafter was for Charterers’ account. By contrast, Charterers contended that the charterparty was a berth charterparty; that NOR could not be tendered until the vessel actually berthed; accordingly, that the delay incurred waiting for a berth, was for Owners’ account. As already indicated, the arbitrators decided in Owners’ favour that this was a port charterparty; it is that decision which has given rise to this appeal. For completeness, Charterers argued in the alternative that the delay in waiting for a berth was not due to congestion (as Owners contended) but was caused by Owners’ other cargo commitments. This argument too failed; the arbitrators held that the delay getting into berth was due to congestion. There is no appeal from that decision of the arbitrators.

THE CHARTERPARTY

[5]The charterparty is solely contained in a “recap” which, as the arbitrators observed, somewhat unusually does not refer to a pro-forma.[6]The charterparty included, inter alia, the following terms: “ one good and safe chrts’ berth terminal 4 stevedores Xingang to one good and safe berth Cadiz and one good and safe berth Bilbao [Interposing here, I shall refer to this term, neutrally, as the “opening term”] ….. n.o.r./time-counting as per below c/p terms …. DETAILS TO THE C/P CLAUSE 2 [1] The vessel to load at one good and safe port/one good and safe charterers’ berths Xingang and to discharge at one good and safe port/one good and safe charterers’ berth Cadiz and at one good and safe port/one good and safe charterers’ berth Bilbao. [2] Shifting from anchorage/warping along the berth at port of load and at ports of discharge to be for owners’ account, while all time used to count as lay time. …. CLAUSE 4 At port of load and at port discharge notice of readiness to be given and accepted in writing and only during the period from 08.00 hours to 17.00 hours Mondays to Sundays….. CLAUSE 6 …..At port of load and at ports of discharge time to commence to count at 14.00 hours if written notice of readiness is given during ordinary office hours before noon or at 08.00 hours the next day if written notice of readiness is given during ordinary office hours after noon ” (Note: The numbering of the sub-paragraphs of Cl.2 is added.) [Interposing here, I shall refer to this term, neutrally, as the “opening term”] n.o.r./time-counting as per below c/p terms DETAILS TO THE C/P CLAUSE 2 CLAUSE 4 CLAUSE 6

THE AWARD

[7]The arbitration proceeded on documents; there was no oral hearing.[8]The arbitrators held that the charterparty was to be read as a whole. The arbitrators’ central reasoning appears from the following short passage in the award:
“ 25. We found that Clause 2 clearly provided for a Port charter in that it qualified the wording contained in the terms set out earlier in the recap by referring to both safe ports and berths. Furthermore, Clause 2 provided for shifting time from the anchorage to the berth to count as laytime which we decided must have been on the basis of an ability for the Master to tender a valid NOR upon arrival as indeed occurred. Had this been a Berth charter there would have been no need for such a provision….. ”
[9]For completeness, the arbitrators held that neither cl. 4 nor cl. 6 assisted Owners’ arguments, because both clauses could apply equally to a port or berth charterparty.[10]The arbitrators additionally placed some reliance on a post-contractual e-mail from the agents, which suggested that Charterers did not dispute the validity of the NOR – and, hence, that this was a port charterparty. This matter may be disposed of at once. Mr. Coburn submitted that a post-contractual e-mail of this nature had no legal relevance and could not be relied upon in construing the charterparty. Mr. Akka sought to contend that the e-mail in question provided a pointer as to how commercial men understood the charterparty – but, with respect, he had difficulty in articulating a good ground for taking it into account. Suffice to say that I agree with Mr. Coburn. The e-mail to which the arbitrators referred has no legal relevance and is not to be taken into account in construing the charterparty. I say no more of it.

THE RIVAL CASES

[11]Mr. Coburn, for Charterers submitted, with reference to a number of authorities, that if the opening term stood alone, then it was as clear as it could be that this was a berth charterparty. The opening term served to define the contractual destination. For his part, Mr. Coburn submitted that the opening term formed part of the “main terms” of the charterparty, which prevailed, in the case of inconsistency, over the later terms which amounted to “details”. Cl.2[1] was not, however, inconsistent with the opening term; it did no more than add a safe port warranty and had nothing to do with the contractual destination. In any event, had cl.2[1] stood alone, in Mr. Coburn’s submission, the charterparty would still have been a berth charterparty. If he was wrong and cl.2[1] was inconsistent with the opening term, then the opening term prevailed; the contractual destination was not a mere detail and cl. 2[1] was not apt to bring about a fundamental change in contractual destination. As to cl. 2[2] , the arbitrators had it the wrong way round; this provision as to time spent shifting made sense in a berth, not a port, charterparty; alternatively, cl. 2[2] was neutral.[12]For Owners, Mr. Akka emphasised both the experience of the arbitrators and the caution which should be exercised before overturning their award; he submitted that the Court should not allow the appeal simply because had I been sitting as the tribunal and were that the case, I might have preferred some different construction. The charterparty was to be construed as a whole; there was no difference between the so-called “main terms” (Mr. Coburn’s expression) and the terms as to “details”. If anything, however, cl.2 was more detailed and should prevail, in the case of conflict, over the opening term. In that regard, the opening term was to be seen as a short summary or recital, whereas the second part of the charterparty contained the operating provisions. If cl. 2[1] was intended to do no more than introduce a safe port warranty, it was an odd way to set about it. As to the opening term itself, it was not accepted that it named a berth or that it specified clearly whether the destination was a berth or the terminal; it was further not accepted that the opening term gave Charterers an express option to nominate a berth. As to cl. 2[2], the parties had made sensible express provision for two operations, dealing separately with the costs and time related to shifting and warping. Cl. 2[2] did not advance the time for giving NOR; it assumed that laytime had already begun – that was the meaning of “while”. The arbitrators had not erred; it was odd for this provision to have been agreed if this was a berth charterparty; why should time spent shifting, alone count as laytime? Overall, Mr. Akka submitted, the authorities gave no more than guidance and were of little help; the task was to construe the charterparty. The Court should approach with caution the submission that the arbitrators had erred in doing so.

DISCUSSION

[13]In Kershaw v Kendrick [2006] EWHC 727 (TCC); [2006] 4 All ER 79, Jackson J (as he then was) said this:
“ [57] From this line of authority I derive two principles, which I shall apply in this appeal. (1) The court should read an arbitral award as a whole in a fair and reasonable way. The court should not engage in minute textual analysis. (2) Where the arbitrator’s experience assists him in determining a question of law, such as the interpretation of contractual documents or correspondence passing between members of his own trade or industry, the court will accord some deference to the arbitrator’s decision on that question. The court will only reverse that decision if it is satisfied that the arbitrator, despite the benefit of his relevant experience, has come to the wrong answer.”
[14]Mr. Akka urged me to approach the matter in the light of these principles and I am content to do so, thereby applying a test (if anything) favourable to Owners. I add only that I should not be taken as acceding to all Mr. Akka’s submissions in this regard; as indicated in the course of argument, the present context is not one where the arbitrators’ decision must stand unless it is Wednesbury unreasonable.[15]However, applying the “Jackson” test, I am, with respect, persuaded that, notwithstanding their experience, the arbitrators in this case did come to the wrong answer. If I may say so, the only matter which gave rise to any hesitation on my part, was the experience of the arbitrators. But ultimately, I am driven to the conclusion that they were wrong. In fairness to the arbitrators, they dealt with the matter on documents and so did not have the benefit of the arguments developed before me. My reasons follow.[16]The starting point is the seminal analysis of the essential characteristics and stages of a voyage charterparty, contained in the speech of Lord Diplock, in E.L. Oldendorff v Tradax Export (The Johanna Oldendorff) [1974] AC 479. Lord Diplock spoke (at p.556) of the “adventure contemplated by a voyage charter” involving “four successive stages”:
“ (1) The loading voyage, viz. the voyage of the chartered vessel from wherever she is at the date of the charterparty to the place specified in it as the place of loading. (2) The loading operation, viz. the delivery of the cargo to the vessel at the place of loading and its stowage on board. (3) The carrying voyage, viz. the voyage of the vessel to the place specified in the charterparty as the place of delivery. (4) The discharging operation, viz. the delivery of the cargo from the vessel at the place specified in the charterparty as the place of discharge and its receipt there by the charterer or other consignee.”
As, with respect, neatly expressed in Schofield, Laytime and Demurrage (5th ed.), at para. 3.3:
“Arrival at the specified destination is the point both geographically and in time when the voyage stages end and the loading/ discharging operations begin. ”
Identification of the “specified destination” – whether “berth” or “port” - impacts on the incidence of loss occasioned by delay in loading or discharging, when the delay is due to the place at which the vessel is obliged by the terms of the charterparty to load or discharge her cargo being occupied by other shipping. See further, per Lord Diplock, in The Johanna Oldendorff (supra), at p.555.[17]With this framework in mind, I approach the charterparty on the basis that it is to be read as a whole; thus far at least, I agree with the arbitrators. Moreover, I do not regard any one part of it as enjoying precedence over any other part.[18]Approaching the matter in this way, I start with the opening term. Here, I agree with Mr. Coburn. To my mind, the opening term concisely defines the contractual destinations – both as to place of loading and place/s of discharge. The opening term does so in a manner which, if it stood alone, makes it plain that this is a berth charterparty.[19]In that regard, Mr. Coburn’s submissions enjoy the support of a variety of observations in the authorities, at least of high persuasive force: i) In Stag Line v Board of Trade (1950) 83 Ll. L. Rep. 356, the charterparty provided that the vessel was to “sail and proceed to one or two safe ports East Canada or Newfoundland, place or places as ordered by charterers and/or shippers or so near thereunto as she may safely get”. There was a delay in berthing and owners claimed demurrage. In the course of his judgment (at p. 358), Devlin J observed that the applicable “principle of law” had not been disputed. It was this:
“ …that if the berth at which the vessel ultimately has to load or discharge is named in the charter-party, she is not an arrived ship until she arrives at the berth, and by named in the charter-party I mean either named in it when originally drafted or named in it by virtue of a power of nomination expressly given by the charter-party. If, on the other hand, there is no power of nomination expressly given so that no berth is named therein, and she proceeds to the berth ordered by the charterers merely by virtue of the implied right which the charterers have to select the loading berth, then she becomes an arrived ship when she arrives at the place then named in the charter-party which is the port.”
In the event, Devlin J (as he then was) held that this was a berth charterparty and the vessel was not an arrived ship until she reached the nominated berth, so that owners’ claim failed. ii) In North River Freighters Ltd v President of India (The Radnor) [1955] 2 Lloyd’s Rep. 668, the “Gencon” charterparty provided for the vessel to proceed to “…one safe berth Dairen…and there load a full and complete cargo…”. The decision in the case turned, adversely to charterers, on a clause which provided that “Time lost in waiting for berth to count as loading time”. That clause apart, both Singleton LJ and Parker LJ expressed the view that this was a berth charterparty. At p.675, Singleton LJ said this:
“ …Upon the charter-party, she had to proceed to ‘one safe berth Dairen’. She would not reach her destination until she reached her berth….”

At p. 680, Parker LJ expressed the matter this way:

“ No doubt where the charter is in the form ‘That the vessel shall proceed to….’ a named port ‘and there load at one safe berth,’ the charter is a port charter. The contractual voyage is to the port, albeit that the owners must obey the charterer’s instructions as to the berth nominated by the latter. Here, however, the contractual voyage is not to the port of Dairen, and if necessary I would have held that this is a berth charter…”
At p. 680, Parker LJ expressed the matter this way: iii) The Finix [1975] 2 Lloyd’s Rep. 415 was also concerned with the true construction of a “time lost” clause. In the course of his judgment, Donaldson J (as he then was) put the present matter as follows (at p.422): “ It is well settled that where the destination is a named berth or there is an express right to nominate a berth, the charter is a berth charter-party, i.e., the ship is not ‘arrived’ before she reaches the berth. It is also well settled that where the destination is an area of wider extent, but there is an implied right in the charterer to nominate the berth or other discharging spot, the ship is ‘arrived’ when she reaches the appropriate part of the wider area and not when she later reaches the discharging berth or spot. But there is a realm of uncertainty where the charter-party provides that discharge shall take place at, for example, (a) ‘One safe berth, London’ or (b) ‘London, one safe berth’. The test is undoubtedly whether on the true construction of the charter-party, the destination is London or the berth. My own view is that in case (a) it is the berth and in case (b) it is London. This point arose in The Radnor and Lords Justices Singleton and Parker seem to have inclined to this view.” iv) In The Puerto Rocca [1978] 1 Lloyd’s Rep 252, at p.255, Mocatta J accepted the submission of Mr. Nicholas Phillips (as he then was) that a charterparty containing the destination “one safe berth Seaforth”, was a berth charterparty. v) In The Isabelle [1982] 2 Lloyd’s Rep. 81, Robert Goff J (as he then was) treated it as “plain” from a clause providing for the vessel to proceed with the utmost despatch “…to a berth…as ordered by Charterers in one safe port Algeria…and there load”, that the charterparty was a berth charterparty.[20]Pulling the threads together, in this case: i) First, the opening term is in a form which identifies the destination as the berth. See: The Radnor, The Finix and The Puerto Rocca, supra. The specified destination is not Xingang; it is one “good and safe…berth…..Xingang”. To my mind, that would by itself suffice to make this a berth charterparty, always assuming that the opening term is not overridden by any other provision/s of the charterparty; but matters do not end there. ii) Secondly, on its true construction, the opening term provides expressly for Charterers to nominate the berth at Xingang. As it seems to me, that express right is given to Charterers by the wording “chrs’ berth” in the opening term. On this footing too, the charterparty is a berth charterparty: see, Stag Line v Board of Trade and The Isabelle, supra.[21]Mr. Coburn further submitted that the berth was named in the charterparty, by virtue of the wording of the opening term, “chrs’ berth terminal 4…Xingang”. I am not sure about that and do not rest my decision upon it; it is not clear whether this wording serves to identify the berth or the terminal. That said, the provision probably suffices for Mr. Coburn’s purpose for different reasons - because (at the least) it identifies a place within the port (terminal 4) which the vessel was required to reach before she became an arrived ship. It is not in dispute that the vessel had not reached terminal 4, over the period 10th – 30th March, 2007, so that, if it mattered, Charterers’ submissions as to the opening term would prevail on this ground as well. For completeness, the word “stevedores” in the opening term was (rightly in my view) ignored by both parties; its inclusion appears to have been an error and did not take the argument further, either way.[22]It follows that if matters had rested with the opening term, then the argument is all one way, in Charterers’ favour. However, cl. 2 of the charterparty remains to be considered. I start with cl. 2[1].[23]I am bound to say that if cl. 2[1] has the meaning attributed to it by the arbitrators, then the opening term is deprived of any meaning or purpose. It is, with respect, not simply “qualified”. So far as concerns the contractual destination, it is, on the arbitrators’ construction, negated. Having regard to the structure of the charterparty, that would be odd. The charterparty would have commenced with the opening term, pointing overwhelmingly to it being a berth charterparty. Without more ado, Cl. 2[1] would then have brought about a fundamental alteration and converted the charterparty into a port charterparty. There is no apparent reason why the parties should have done that. Nor could the opening term be preserved as a “summary” or “recital” (as Mr. Akka submitted); on Owners’ construction, cl. 2[1] departs radically from the opening term, rather than simply expanding upon it. No doubt, oddities in structure or unintended consequences must be accepted if there is no alternative but I do not think that is the case here.[24]If instead cl. 2[1] is viewed as introducing a safe port/s warranty and reiterating the safe berth/s warranty, then there is no inconsistency between the opening term and cl. 2[1]. The opening term expresses the contractual destination, germane to the allocation of the risk of delay; cl. 2[1] focuses on a different matter (the safety of the ports and berths) and imposes additional obligations on Charterers. It is true that the opening term would have sufficed to impose a safe berth/s obligation on Charterers, so that the repetition of this obligation in cl. 2[1] was, strictly, unnecessary. But reiteration of that warranty at least avoids argument and gives rise, at worst, to surplusage. For my part, this is the construction of cl. 2[1] which I prefer in this somewhat individual charterparty. It is a construction which is not free from difficulties; but any such difficulties are outweighed by those which are, with respect, attendant upon the construction contended for by Owners and accepted by the arbitrators. If right so far, then, as suggested by the opening term, the charterparty remains a berth charterparty.[25]Pausing there and for completeness: i) The term contained in the opening part of the charterparty, “n.o.r./ time-counting as per below c/p terms” does not assist Owners. It is linked, not to cl. 2 but to cll. 4 and 6 of the charterparty, which, as the arbitrators (rightly) held, are neutral. ii) It is unnecessary to express an opinion on Mr. Coburn’s alternative argument, namely that even had cl. 2[1] stood alone, the charterparty would have been a berth charterparty. iii) Given the variety of matters dealt with in cl.2 of the charterparty – I have only set out extracts from the full clause – there was rightly no suggestion that any conclusion could be drawn as to the true focus of cl. 2[1], based on the matters covered by the clause as a whole.[26]Cl. 2[2] can be taken briefly. My strong inclination is to treat cl. 2[2] as neutral, for the purposes of the present debate. It signifies no more than that the parties have here made express provision for(1) the costs and(2) the time involved in shifting and warping. By so doing, they have sought to prevent disputes arising with regard to these matters. On this view, the presence of cl. 2[2] in the charterparty does not assist either Owners or Charterers.[27]But, if I am wrong about that, then, with great respect, it seems to me that the arbitrators have fallen into further error. It will be recalled that in para. 25 of the award, the arbitrators said that had this been a berth charterparty, there would have been no need for a provision such as cl.2[2]. I regret that I cannot agree. Were this a port charterparty, cl. 2[2] may have been unnecessary insofar as it deals with time counting, in that (provided the anchorage was within the port limits) the vessel would likely have been an arrived ship throughout. But if the charterparty is a berth charterparty, then the provision in cl.2[2] as to time counting does indeed have a real meaning – absent some such or other express provision, no time would have counted prior to the vessel actually berthing.[28]For completeness as to cl. 2[2]: i) As to the apparent oddity of stipulating for shifting time alone to count in advance of berthing, it is perhaps best not to speculate - though there may be some force in Mr. Coburn’s suggestion that the provision is explicable by reference to this being a charterparty for the carriage of a part cargo. At all events, this consideration does not dissuade me from the conclusion I am otherwise minded to reach. ii) I am unable to accept Mr. Akka’s submission that cl. 2[2] assumed that laytime had already begun; on this construction “while” simply introduced wording acknowledging that laytime had already begun to count. I do not think so; as it seemed to me, “while” in cl. 2[2] served to distinguish between the different regimes governing(1) the costs and(2) the time of shifting and warping.[29]For all these reasons, therefore, I am amply satisfied that the charterparty was a berth not a port charterparty. The appeal must therefore be allowed with the consequence, as I understand it, that Owners’ claim for demurrage must fail.[30]I shall be grateful for the assistance of counsel in drawing up an appropriate order and on all matters as to costs.