Page 1
274 of 424 DOCUMENTS
ALPHAPOINT SHIPPING LTD. v. ROTEM AMFERT NEGEV LTD. AND ANOTHER
THE AGIOS DIMITRIOS
QUEEN
S BENCH DIVISION (COMMERCIAL COURT)
[2004] EWHC 2232 (Comm), [2005] 1 Lloyd's Rep 23
HEARING-DATES: 8 OCTOBER 2004
8 OCTOBER 2004
CATCHWORDS:
Arbitration - Award - Demurrage dispute referred to arbitration - Award in favour of charterers - Shipowners applied for leave to appeal on question of law and for remission on ground of serious irregularity - Observations on relationship between applications under Arbitration Act, 1996, ss. 69 and 68.
HEADNOTE:
By a voyage charter-party dated May 6, 2003 on an amended Gencon form the defendant charterers chartered the
vessel Agios Dimitrios to load at Eilat a cargo of phosphate, potash and salt for carriage to Amsterdam. The charter-party provided, inter alia:
Clause 23(b)
At loading port(s) when tendering notice of readiness, vessels
cargo holds and hatch covers shall be clean, dry of loose rust and otherwise ready and suitable to receive the intended
cargo.
Clause 23(c)
If the vessel is found not ready in all respects to load/discharge and/or fails to pass inspection, the actual time lost
from the discovery thereof until the vessel is in fact ready to load/discharge shall not count as lay time. In case the vessel is in berth the charterers may order the vessel to vacate the loading or discharging berth and all time thereby lost and
any expense thereby incurred shall be for owner
s account. All the above is without prejudice to charterers
rights to exercise their option to cancel the charter-party as per cl. 9
Clause 25 (Twelve)
Crew and mechanical failure - time lost at loading and/or discharging port(s) which can be reasonably attributed to
crew and/or ship
s mechanical failure, shall not be counted as laytime or time on demurrage. Any extra expenses incurred thereof to be
borne by the owners.
The vessel arrived at Eilat at 05 12 on May 8, 2003 and the surveyor appointed by the shippers/charterers conducted a superficial visual examination of the vessel
s cargo holds from the main deck. He then indicated that the holds were acceptable and notice of readiness was accepted. Time began to run from 08 00 on May 8, 2003 and the shippers/charterers started to load the vessel with potash on
May 12. At 16 35 on May 21, 2003 the master informed the stevedores that some of the phosphate cargo had got into
the salt cargo. The shippers
inspector, while investigating this problem then noticed that a large quantity of barley was lying on top of the cargoes.
Loading was then suspended and early on the following day the vessel was shifted off her berth to a nearby pier for inspection. It was then found that all the cargo holds were contaminated by barley, which had been the vessel
s previous cargo.
Page 2
[2004] EWHC 2232 (Comm), [2005] 1 Lloyd's Rep 23
Before any more cargo could be loaded at Eilat it was necessary for the crew to clean the barley off the surface of
the cargo that had already been loaded and also to clean barley from the hatch covers and top areas in the holds. The
vessel was not ready to re-commence loading until 12 00 on May 28. She was shifted back to the loading berth at 08 36
on May 29 whereupon loading re-commenced. Loading was completed at 21 30 on June 3.
The shipowners claimed that, given that time began to run when notice of readiness was accepted by the charterers,
laytime expired at 18 01 on May 20, which was the day before the discovery of barley in the cargo. They claimed demurrage calculated on the principle of once on demurrage always on demurrage and gave no allowance for the time
from May 21 to 29 while loading was suspended to clean the holds and cargo. The basis of the claim was that the vessel
did not need further cleaning and that when notice of readiness was given on May 8 the vessel was as clean as was necessary to load the contractual cargo.
The charterers asserted that contamination by barley damaged or would damage the contractual cargo and that the
vessel was, at no material time before suspension of loading, ready to load. They therefore deducted U.S.$56,526 in
respect of demurrage which would have accrued or an equivalent amount of damages in relation to the period of suspension of loading. They relied on the fact that the time lost should not count as time on demurrage because within the
meaning of cl. 25 (Twelve) the time loss could reasonably be attributed to crew failure , i.e. to the omission of the crew
to clean the holds properly before giving notice of readiness to load. Alternatively the charterers submitted that there
had been a breach of cl. 23(b) and they were entitled to damages equivalent to demurrage due to the time lost.
The dispute was referred to arbitration. The primary issues were whether the shipowners were in breach of their
duty to present the vessel with clean holds under cl. 23(b) of the charter-party or whether there had been a failure to
exercise due diligence under art. III, r. 1 of the Hague Rules to make the holds fit and safe for the reception of the cargo.
However, the shipowners also relied on an alternative submission based on an estoppel or waiver of any breach by reason of the charterers
acceptance of the notice of readiness and the shipowners
reliance on that acceptance, thereby permitting the commencement of loading and the consequent contamination of the
cargo with the barley residues.
The arbitrators concluded that the holds had been inadequately cleaned and that consequently demurrage was interrupted. They rejected the shipowners
argument that acceptance of the notice of readiness gave rise to waiver or an estoppel. They further concluded The
Agios Dimitrios Colman, J. Q.B. (Com. Ct.) 24 that all the time from the suspension of loading until completion of
cleaning of the holds and the cargo surfaces should be treated as time lost which should not count as demurrage, either
under the application of a counter-claim for damages (see The Helle Skou, [1976] 2 Lloyd
s Rep. 205) or under the express provisions of cl. 25 (Twelve). They awarded the shipowners only U.S.$4,505.20 instead of the U.S.$56,526.00 claimed.
The shipowners applied (1) for leave to appeal on a question of law under s. 69 of the Arbitration Act, 1996 and (2)
for remission under s. 68 of the Act on the ground of serious irregularity on the basis that the arbitrators had failed to
consider one of the shipowners
submissions relating to their estoppel argument, and had, in addition, taken a point which was their own point, and one
of which the shipowners had had no notice and had had no chance to respond.
(2) on the s. 69 application, leave to appeal would be refused on the basis that even if the relevant threshold test
were no higher than that the Court entertained a serious doubt whether the arbitrators had made an error of law on their
findings of fact stated in the award, no such doubt existed; a fortiori leave had to be refused if the test were whether the
arbitrators
decision was obviously wrong (see par. 3);
(3) in commenting on the relationship between applications under s. 68 and s. 69 of the 1996 Act the Court observed that the philosophy and purpose underlying the s. 69 procedure required the achievement of finality of awards
consistently with the on-going judicial development of English commercial law; the s. 69(3) tests were designed to reflect that philosophy and purpose; s. 69(3)(c) distinguished between cases where the material question of law was one of
general public interest and cases where it was not; a different threshold test was to be applied in the former case from
the latter, but in both cases the test was to be applied to the question of law strictly on the basis of the findings of facts
in the award ; the Court took the findings of fact as an immutable basis for testing the correctness of the arbitrators
decision on the question of law unless the Court took the view that the award did not contain reasons or did not set out
the tribunal
Page 3
[2004] EWHC 2232 (Comm), [2005] 1 Lloyd's Rep 23
s reasons in sufficient detail to enable the Court properly to consider the application or appeal , in which case it could
order the arbitrators to give reasons in sufficient detail under s. 70(3) (see par. 5);
(4) the Court
s function under s. 69 was thus to look exclusively at the award for the purpose of ascertaining whether the threshold
tests under s. 69(3) had been satisfied; it did not go behind what appeared on the face of the award and it was not concerned with the circumstances in which the award came to be made and in particular with whether those circumstances
were such as to amount to serious irregularity which had caused or would cause substantial injustice to either of the parties; s. 68 contained an entirely self-contained procedural regime for dealing with such circumstances (see par. 6);
(5) consequently, the combination in one hearing of applications under both sections involved two quite distinct
processes of judicial analysis; in many cases determination of the s. 69 application for leave to appeal before that of the
s. 68 application might be logically preferable; that was because the determination by the Court of the question whether
there had obviously been an error of law on such facts as had been found or whether there was serious doubt as to that,
would often have a direct bearing on the question whether if there had been the serious irregularity complained of for
the purposes of the s. 68 application such irregularity had given rise to substantial injustice; in each case, it was a matter
for the Court whether the application for leave to appeal should be tried first (see par. 7);
(6) on the facts, no serious irregularity had been disclosed, and the s. 68 application would be dismissed (see pars.
24, 28 and 29).
CASES-REF-TO:
Fox and Others v. P.G. Wellfair Ltd. (In Liquidation), (C.A.) [1981] 2 Lloyd
s Rep. 514; Helle Skou, The [1976] 2 Lloyd
s Rep. 205.
INTRODUCTION:
These were applications by the shipowners Alphapoint Shipping Ltd. (1) under s. 69 of the Arbitration Act, 1996
for leave to appeal an arbitration award substantially dismissing their claim for demurrage against the charterers Rotem
Amfert Negev Ltd. and Dead Sea Works Ltd., and (2) under s. 68 of the 1996 Act for remission of the award on the
ground of serious irregularity.
The further facts are stated in the judgment of Mr. Justice Colman.
COUNSEL:
Mr Dominic Happé for the shipowners; Mr Philip Riches for the charterers.
JUDGMENT-READ:
Friday, Oct.8,2004
PANEL: Colman J
JUDGMENTBY-1: COLMAN J:
JUDGMENT-1:
COLMAN J:
1. This is an application by shipowners under s. 68 of the Arbitration Act, 1996 for the remission of a final award
made on Jan. 14, 2004. By that award the arbitrators, Mr. William Packard (appointed by the shipowners) and Mr. Edward Mocatta (appointed by the charterers) substantially dismissed the shipowners
claim for demurrage in the amount of U.S.$56,526.00 and awarded the shipowners only U.S.$4,505.20.2. The shipowners applied for leave to appeal under s. 69 of the 1996 Act. Mr. Justice Tomlinson directed that the application for
such leave should be heard at the same time as the hearing of the application for remission under s. 68 or otherwise as
the Judge considering the s. 68 application should direct. Applications under s. 69 are normally conducted by means of
written submissions and without oral argument, whereas applications under s. 68 are made orally. I decided that in this
Page 4
[2004] EWHC 2232 (Comm), [2005] 1 Lloyd's Rep 23
case it was appropriate that I should first hear very brief oral submissions in relation to the s. 69 application and that,
having given my decision on that application, I should then go on to hear the oral submissions in respect of the s. 68
application.
3. Having heard the application for leave to appeal, I refused leave on the basis that even if the relevant threshold
test were no higher than that the Court entertained a serious doubt whether the arbitrators had made an error of law on
their findings of fact stated in the award, no such doubt existed. A fortiori leave had to be refused if the test were
whether the arbitrators
decision was obvi- ously wrong.
4. Since the giving of my decision refusing the application for leave to appeal before I went on to hear the argument
on the application for remission under s. 68 gave rise to some dismay on the part of those representing the shipowners
because the brief reasons which I gave explaining the arbitrators
process of reasoning had to some extent anticipated their submissions as to what had to be determined under this s. 68
application, it is right that I should include a comment as to the relationship between applications under the two sections
of the 1996 Act.
5. The philosophy and purpose underlying the s. 69 procedure requires the achievement of finality of awards consistently with the on-going judicial development of English commercial law. The s. 69(3) tests are designed to reflect
this philosophy and purpose. Section 69(3)(c) therefore distinguishes between cases where the material question of law
is one of general public interest and cases where it is not. A different threshold test is to be applied in the former case
(the serious doubt test) from the latter (the obviously wrong test), but in both cases the test is to be applied to the question of law strictly on the basis of the findings of facts in the award . In other words the Court takes the findings of fact
as an immutable basis for testing the correctness of the arbitrators
decision on the question of law unless the Court takes the view that the award does not contain reasons or does not set
out the tribunal
s reasons in sufficient detail to enable the Court properly to consider the application or appeal , in which case it can order the arbitrators to give reasons in sufficient detail under s. 70(3).
6. The Court
s function under s. 69 is thus to look exclusively at the award for the purpose of ascertaining whether the threshold tests
under s. 69(3) have been satisfied. Above all, it does not go behind what appears on the face of the award and it is not
concerned with the circumstances in which the award came to be made and in particular with whether those circumstances were such as to amount to serious irregularity which has caused or will cause substantial injustice to either of
the parties. The Act provides, by s. 68, an entirely self-contained procedural regime for dealing with such circumstances.
7. Consequently, the combination in one hearing of applications under both sections involves two quite distinct
processes of judicial analysis. In many cases determination of the s. 69 application for leave to appeal before that of the
s. 68 application may be logically preferable. This is because the determination by the Court of the question whether
there has obviously been an error of law on such facts as have been found or whether there is serious doubt as to that,
will often have a direct bearing on the question whether if there has been the serious irregularity complained of for the
purposes of the s. 68 application such irregularity has given rise to substantial injustice. In each case, however, it is a
matter for the Court whether the application for leave to appeal should be tried first. There may be cases where the procedural irregularity complained of is of such a kind that it would be logically preferable for the s. 68 application to be
determined first so that, if it succeeds, the award can be set aside or remitted to the arbitrators before leave to appeal is
considered. After all, following remission, the issue of law in question might not eventually arise.
8. The facts can be briefly stated.
9. The defendants chartered from the shipowners the Agios Dimitrios under a voyage charter on the Gencon form
(1984 revision) dated May 6, 2003 to load at Eilat a cargo of phosphate (two grades), potash and salt for carriage to
Amsterdam. There were express terms in the following form:
Clause 23(b)
At loading port(s) when tendering notice of readiness, vessels
cargo holds and hatch covers shall be clean, dry of loose rust and otherwise ready and suitable to receive the intended
cargo.
Page 5
[2004] EWHC 2232 (Comm), [2005] 1 Lloyd's Rep 23
Clause 23(c)
If the vessel is found not ready in all respects to load/discharge and/or fails to pass inspection, the actual time lost
from the discovery thereof until the vessel is in fact ready to load/discharge shall not count as lay time. In case the vessel is in berth the charterers may order the vessel to vacate the loading or discharging berth and all time thereby lost and
any expense thereby incurred shall be for owner
s account. All the above is without prejudice to charterers
rights to exercise their option to cancel the charter-party as per cl. 9
Clause 25 (Twelve)
Crew and mechanical failure - time lost at loading and/or discharging port(s) which can be reasonably attributed to
crew and/or ship
s mechanical failure, shall not be counted as laytime or time on demurrage. Any extra expenses incurred thereof to be
borne by the owners.
10. The vessel arrived at Eilat at 05 12 on May 8, 2003 and the surveyor appointed by the shippers/charterers then
conducted what the arbitrators described as a superficial visual examination of each of the vessel
s seven cargo holds from the main deck . He then indicated that the holds were acceptable and notice of readiness was
accepted. Time began to run from 08 00 on May 8, 2003 and the shippers/charterers started to load the vessel with potash on May 12. At 16 35 on May 21, 2003 the master informed the stevedores that some of the phosphate cargo had got
into the salt cargo. The shippers
inspector, while investigating this problem then noticed that a large quantity of barley was lying on top of the cargoes.
Loading was then suspended and early on the following day the vessel was shifted off her berth to a nearby pier for inspection. It was then found that all the cargo holds were contaminated by barley. The vessel
s previous cargo had been barley. Before any more cargo could be loaded at Eilat it was necessary for the crew to clean
the barley off the surface of the cargo that had already been loaded and also to clean barley from the hatch covers,
beams, air vents and top areas in No. 5 hold, as well as from hatch covers and the top areas in all other holds. The vessel
was not ready to re-commence loading until 12 00 on May 28. She was shifted back to the loading berth at 08 36 on
May 29 whereupon loading re-commenced. Loading was completed at 21 30 on June 3.
11. The shipowners claimed that, given that time began to run when notice of readiness was accepted by the charterers, laytime expired at 18 01 on May 20. This was the day before the discovery of barley in the cargo. They claimed
demurrage calculated on the basis of the well-known principle of once on demurrage always on demurrage and therefore gave no allowance for the time from May 21 to May 29 while loading was suspended to clean the holds and cargo.
The basis of this claim was that the vessel did not need further cleaning and that when notice of readiness was given on
May 8 the vessel was as clean as was necessary to load and carry the contractual cargo. That was, unquestionably, the
main issue of fact before the arbitrators. The charterers asserted that contamination by barley damaged or would damage
the contractual cargo and that the vessel was, at no material time before suspension of loading, ready to load. When
settling the demurrage account they therefore deducted U.S.$56,526 in respect of demurrage which would have accrued
or an equivalent amount of damages in relation to the period of suspension of loading. They relied on the fact that the
time lost should not count as time on demurrage because within the meaning of cl. 25 the time loss could reasonably be
attributed to crew failure , that is to the omission of the crew to clean the holds properly before giving notice of readiness to load. Alternatively charterers submitted that there had been a breach of cl. 23(b) and they were entitled to damages equivalent to demurrage due to the time lost.
12. The primary issues were therefore whether the shipowners were in breach of their duty to present the vessel
with clean holds under cl. 23(b) of the charter-party or whether there had been a failure to exercise due diligence under
art. III, r. 1 of the Hague Rules to make the holds fit and safe for the reception of the cargo. However, the shipowners
also relied on an alternative submission in case it be held that they were in breach of contract in either respect. This alternative case was based on an estoppel or waiver of such breach by reason of the charterers
acceptance of the notice of readiness and the shipowners
reliance on that acceptance, thereby permitting the commencement of loading and the consequent contamination of the
cargo with the barley residues. The charterers were therefore said to be estopped from asserting either breach by the
shipowners or failure by the crew.
13. The arbitrators concluded that the holds had been inadequately cleaned and that consequently demurrage was
interrupted. They rejected the shipowners
Page 6
[2004] EWHC 2232 (Comm), [2005] 1 Lloyd's Rep 23
argument that acceptance of the notice of readiness gave rise to waiver or an estoppel. They further concluded that all
the time from the suspension of loading until completion of cleaning of the holds and the cargo surfaces should be
treated as time lost which should not count as demurrage, either under the application of a counter-claim for damages
(as per The Helle Skou, [1976] 2 Lloyd
s Rep. 205) or under the express provisions of cl. 25 (Twelve).
The shipowners
submissions
14. It is first submitted by Mr. Dominic Happé, on behalf of the shipowners, that there was serious irregularity in as
much as the arbitrators did not consider in their reasons the shipowners
submission that the charterers were precluded from arguing that demurrage should be reduced by operation of cl. 25 or
should be entitled to reduction by way of set off by the operation of an estoppel based on charterers
acceptance of the notice of readiness to load. In this connection it was further argued that the arbitrators had made no
finding in relation to the issue raised by the shipowners that it would be unjust for the charterers to resile from their acceptance of notice of readiness because the shipowners had relied on it in as much as they had started to load and had
then encountered greater difficulty in cleaning partially loaded holds than would have been the case if the holds had
been empty. A report by the shipowners
expert, Mr. Anderson, which was adduced in evidence, but not challenged by the charterers
evidence, was to the effect that the presence of cargo already loaded in the holds inhibited the use by the shippers of
cherry pickers to do the high level hold cleaning, which would have been the most obvious means of cleaning, and
caused the use of long ladders. The arbitrators had made no findings as to whether this had the effect of increasing the
time taken to carry out the cleaning - a matter directly relevant to whether it was open to the shipowners to rely on the
estoppel point.
15. Secondly, the shipowners submitted to the arbitrators that the charterers obtained a benefit from the need to take
the vessel off her berth to carry out hold cleaning which should go to reduce the amount of damages for breach of cl.
23(b) or otherwise. Specifically, the charterers were also charterers of another vessel - Vana - for the loading of another
cargo at Eilat. As soon as Agios Dimitrios was shifted from the berth Vana went into the same berth and started to load,
completing loading a few hours after the Agios Dimitrios cleaning operation had been completed. It was argued before
the arbitrators that the charterers had thereby saved the demurrage which would otherwise have been payable under the
charter-party of Vana had the latter vessel been kept waiting for a berth while Agios Dimitrios loaded.
16. The arbitrators did not accept this submission. At pars. 62-63 of their reasons they said this:
62. With regard to the final - the second - point, there was no doubt that Vana took advantage of the problems
aboard Agios Dimitrios to slip alongside and to use the vacant loading facilities. The owners contended that Vana was
chartered by the same charterers and invited disclosure to that effect. This was not denied by the charterers although we
had in mind that two charterers were involved in the Agios Dimitrios shipment - Rotem Amfert and Dead Sea Works,
and there was no confirmation that both charterers were involved in the fixture of Vana. However, no doubt the charterers incurred costs associated with the cleaning operation, stevedores, etcetera in relation to Agios Dimitrios. These have
not been claimed as damages. Neither have the owners faced any expenses associated with the somewhat complicated
discharge of Hold [num] 5 in Amsterdam.
63. Moreover, the owners appeared to overlook that had Vana not taken advantage of the available, vacant loading
berth, they (the owners) may very well have faced an additional claim for damages by way of the extra cost of laytime
and/or demurrage paid by the charterers to the owners of the delayed Vana during the cleaning period of Agios Dimitrios. We were not, therefore, persuaded that the owners merited a credit by way of Vana.
17. It is submitted by the shipowners that the point taken in par. 63 was the arbitrators
own point and one of which the shipowners had no notice and to which they had no chance to respond. Further, the
arbitrators
view was pure speculation unsupported by any evidence. The shipowners further submitted that, although they had
requested the charterers to disclose the charter-party of Vana, and had by their written submissions invited the arbitrators not to make an award until such disclosure was provided, the arbitrators had ignored this request no disclosure ever
having been given. In this connection Mr. Happé relied on Fox and Others v. P.G. Wellfair Ltd. (In Liquidation), [1981]
2 Lloyd
s Rep. 514 a decision of the Court of Appeal and in particular on a passage from the judgment of Lord Justice Dunn at
pp. 521-522:
Page 7
[2004] EWHC 2232 (Comm), [2005] 1 Lloyd's Rep 23
There are some arbitrations in which the arbitrator is expected to form his own opinion and act on his own
knowledge without recourse to evidence given by witnesses on either side: such as an arbitrator who is to decide as to
whether goods are up to sample, see Mediterranean & Eastern Export Ltd. v. Fortress Fabrics (Manchester) Ltd., (1948)
81 Lloyd
s Law Rep. 401; (1948) T.L.R. 337. But there are other arbitrations in which the arbitrator is expected to receive the
evidence of witnesses and the submissions of advocates and to be guided by them in reaching his conclusion: such as
arbitrations on shipping contracts or on building contracts. In such cases the arbitrator is often selected because of his
knowledge of the trade so that he can follow the evidence in the absence of the other party, and so forth. In the present
case if the defendants had been represented I have no doubt that the plaintiff
s experts would have been cross-examined so as to throw doubt on their findings and on their opinions: and the defendants would have called experts to support the line of cross-examination. The arbitrator would then have been able to
form a judgment based on evidence other than his own.I cannot think it right that the defendants should be in a better
position by failing to turn up. Nor is it right that the arbitrator should do for the defendants what they could and should
have done for themselves. His function is not to supply evidence for the defendants but to adjudicate upon the evidence
given before him. He can and should use his special knowledge so as to understand the evidence that is given, the letters
that have passed, the usage of the trade the dealings of the market and to appreciate the worth of all that he sees upon a
view. But he cannot use his special knowledge or at any rate he should not use it so as to provide evidence on behalf of
the defendants which they have not chosen to provide for themselves. For then he would be discarding the role of an
impartial arbitrator and assuming the role of advocate for the defaulting side. At any rate he should not use his own
knowledge to derogate from the evidence of the plaintiffs
experts without putting his own knowledge to them and giving them a chance of answering it and showing that his own
view is wrong. Such is the way in which we dealt in the pensions cases when a medical expert was himself a member of
the tribunal, see Moxon v. Minister of Pensions, [1945] K.B. 490 and Starr v. Minister of Pensions, [1946] K.B. 345 at
pp. 353-354.
I am afraid that the arbitrator fell into error here. He felt that it was his duty to protect the interests of the unrepresented party in much the same way as a judge protects a litigant in person. But in a case like this I do not think it is the
duty of the arbitrator to protect the interests of the unrepresented party. If the defendants do not choose to turn up to
protect themselves, it is no part of the arbitrator
s duty to do it for them. In particular he must not throw his own evidence into the scale on behalf of the unrepresented
party or use his own special knowledge for the benefit of the unrepresented party at any rate he must not do so without
giving the plaintiffs
experts a chance of dealing with it for they may be able to persuade him that his own view is erroneous.
The estoppel point: Discussion
18. The arbitrators
reasoning leading to the conclusion that time should not count during the period May 21 to 28 while the cleaning operation was in progress may be summarized as follows:
(a) The omission to clean out the barley residue before the giving of notice of readiness was a breach by the shipowners of cl. 23(b): (par. 49)
(b) By accepting that notice of readiness; although the vessel was not ready, the charterers waived its invalidity or
were estopped from asserting it and lay time thereby commenced to run. In reaching that conclusion the arbitrators relied by way of analogy on The Helle Skou, supra, and in particular upon the passage at p. 214 in which Mr. Justice
Donaldson accepted as correct that the charterers were precluded from asserting the invalidity of the notice of readiness
to load in that case. By allowing loading to commence the charterers necessarily permitted time to start running. (par.
51).
(c) By analogy with The Helle Skou, sup., waiver of the invalidity of the notice of readiness to load did not necessarily amount to waiver of the right of the charterers to damages for breach of the shipowners
distinct contractual duty to present the vessel in compliance with an express term of the charter-party requiring the
holds to be clean and fit for the cargo to be loaded. (par. 52).
(d) Just as on the umpires finding of facts in The Helle Skou the acceptance of notice of readiness did not operate as
a waiver of the right to damages for breach of the duty to clean the holds so in this case on its facts the result was the
same. I interpose that this conclusion on the facts was clearly based on the superficial nature of the surveyor
s visual inspection, which was known to the shippers. (pars. 39, 40 and 53).
Page 8
[2004] EWHC 2232 (Comm), [2005] 1 Lloyd's Rep 23
(e) Once time had thereby started to run it would continue unless interrupted under cl. 25 or the incidence of the
claim for damages for breach of cl. 23(b) would by way of set off reduce the claim for demurrage by an amount equivalent to the demurrage that would have accrued had time not been interrupted. (par. 54).
19. In considering the grounds of this application and the arbitrators
reasons it is important to keep very clearly in mind the distinction in the remedies provided by cl. 23(b) and cl. 25. If
there has been a breach of cl. 23(b) by omission of the shipowners to provide clean holds ready and suitable to receive
the intended cargo and notice of readiness is given and accepted by charterers, the question whether the shipowners
have complied with their obligation is not necessarily concluded, for the holds may in truth be unclean and unfit and
that condition may not have been reasonably apparent when the notice of readiness was accepted. Time will then begin
to run and, in the absence of a provision such as cl. 25 which stops it running, it will continue to run until completion of
loading. If in the meantime, there is a delay while the holds are cleaned and the shipowners
breach thereby cured, the charterers will be entitled to damages for that breach which may at least in part be quantified
by reference to the amount of such demurrage as may have occurred. The demurrage in respect of the delay period will
not then be recoverable because the damages due to the charterers would be set off against the demurrage otherwise due
to the shipowners. In such a case the charterers would have the burden of proving their damages claim by establishing
that the relevant period of demurrage time had been incurred, as a matter of causation, by reason of the shipowners
breach, viz, the need to clean the holds.20. Where, however, there is a provision, such as cl. 25, which has the effect of
interrupting or reducing the period of laytime or time on demurrage, the analysis is somewhat different. If the facts provided for in the clause as a ground for the interruption of time are established, time is treated as automatically curtailed
to the extent provided for. The effect of cl. 25 in the present case is thus that if time is lost by reason of the failure of the
crew to perform functions relevant to loading and that causes delay in loading, the period of delay will be deducted from
the used laytime or if the vessel is already on demurrage from the time on demurrage. This clause clearly does not depend on the charterers establishing that the shipowners were in breach by reason of such crew failure, but merely on the
fact of such crew failure and the consequent delay. Further, the process of quantification of the relevant deduction of
time has nothing to do with whether the charterers have suffered a net financial loss due to the crew
s failure. The only relevant currency is that of lost time.
21. Against this background it is clear that it was open to the arbitrators to conclude on the evidence before them
that acceptance of the notice of readiness following the superficial inspection had no greater effect than to represent to
the shipowners that, as far as such inspection disclosed, the vessel
s holds were clean and ready for loading to commence. That, however, was a representation neither that there had been
no breach of cl. 23(b) nor that there had been no anterior crew failure within cl. 25. All that was represented was that, so
far as the charterers were aware, the vessel was ready to start loading. That was enough to start laytime running. Consequently when, upon discovery of the true state of the holds, loading was stopped and charter- ers asserted that the
shipowners were in breach of cl. 23(b) and that the facts also fell within cl. 25, they were not resiling from any previous
representation implicit in their acceptance of notice of readiness.
22. It is thus very clearly demonstrated that the waiver and estoppel submission could never get past the first stage,
namely of establishing that there had been a material representation or promise. That, as I understand it, is the reasoning
expressed in somewhat different words by the arbitrators that led them to their conclusion that time began to run when
notice of readiness was accepted: the charterers would be estopped from asserting that it did not (par. 51). Equally, the
shipowners were bound by their own notice of readiness and they could not assert that time had not begun to run and
indeed never did so.
23. Accordingly, issues of fact going to whether it would be unconscionable to permit the charterers to resile from a
previously asserted representation or promise could simply never become relevant on the facts as found by the arbitrators. By relying on breach of cl. 23(b) and crew failure giving rise to reduction of demurrage under cl. 25 the charterers
were not changing their position and no question of unconscionability could arise. It follows that it was open to the arbitrators to reach their conclusion without consideration of whether the commencement of loading in reliance on charterers
acceptance of notice of readiness had caused cleaning of the holds to become more time-consuming, because of the use
of long ladders, than would otherwise have been the case. They were not under a duty to consider issues of fact which
were not directly relevant to the findings upon which they based their conclusion, even if the parties had adduced evidence on those issues.
24. It follows that no serious irregularity is disclosed on this basis.
Page 9
[2004] EWHC 2232 (Comm), [2005] 1 Lloyd's Rep 23
The Vana points: Discussion
25. It is important to recognize at the outset that both points raised in relation to Vana go to the quantification of
damage caused to the charterers by the shipowners
breach of cl. 23(b). Thus the alleged benefit to the charterers by the saving of demurrage on Vana by being able to load
it ahead of Agios Dimitrios could, if proved, operate to reduce the damages recoverable for breach of cl. 23(b) and consequently the amount of damages available to set off against demurrage caused by the delay. The arbitrators rejected
this submission on the grounds that there was no evidence that both charterers of the vessel - Rotem Amfert and Dead
Sea Works - were also both charterers of Vana. Further the charterers had no doubt incurred costs in relation to hold
cleaning which they had not claimed as damages. Nor were the shipowners subjected to any expenses caused by the
increased difficulty of discharging hold No. 5 at Amsterdam. (par. 62). The arbitrators thus appear to have assumed that
the charterers had incurred increased expenses which would have been equivalent to the benefit they derived from the
accelerated loading of Vana. Further, in par. 63, the arbitrators raised their own point about the shipowners possibly
having faced an additional claim from the charterers for demurrage damages payable by the charterers to the shipowners
of Vana for losses if Vana was not loaded while Agios Dimitrios was being cleaned. On these grounds the arbitrators
rejected the shipowners
claim for credit; they in substance concluded that the evidence did not support a reduction in the charterers
damages.26. The charterers had the burden of proving that their damages for breach of cl. 23(b) were at least equivalent to the demurrage which would have accrued during the cleaning period. By proving the length of the period and the
demurrage rate they adduced prima facie evidence of their loss. It was then for the shipowners to adduce evidence displacing that evidence. However, the reasons contain no evidence relied upon by the shipowners in support of their case
that charterers
losses had been reduced by the earlier loading of Vana. There is no evidence whether demurrage was saved or in what
amount. The arbitrators
reference to the charterers
probable increased costs in relation to cleaning and discharge and, in par. 63, to the possibility of a claim which the
Vana owners might have had against the charterers of Agios Dimitrios, are thus made as countervailing considerations
to the suggestion, unsupported by the shipowners
evidence, that the charterers had derived a benefit from acceleration of Vana loading which would reduce their recoverable damages for breach of cl. 23(b). In substance the reasons show that there was no evidence of any such benefit and
the countervailing considerations, speculative though they certainly were, therefore add nothing to the charterers
position on quantification. The reasons do not sustain any proven case for reduction which falls to be displaced by
those countervailing points raised by the arbitrators. Such points were thus entirely superfluous.
27. It is argued that the arbitrators should not have made an award until the charterers had disclosed the Vana charter-party. However, no formal application for such disclosure was ever made to the arbitrators. Accordingly, the arbitrators were entitled to proceed to their award on the basis that all the evidence which was mutually regarded as material
was before them.
28. In the event I am not persuaded that there was any serious irregularity as submitted or that any of the matters relied upon as such an irregularity caused substantial injustice to the shipowners. As to the latter point, it is necessary to
keep in mind that, even if there had been a serious irregularity relating to the proof of the amount of damages recoverable for breach of cl. 23(b), that would not have given rise to substantial injustice. The reason for this is that the charterers would have been entitled to succeed in displacing the demurrage claim to the same extent as awarded by the arbitrators by reason of the effect of cl. 25. None of the points as to quantum relied upon as giving rise to serious irregularity
go to proof of the charterers
entitlement to rely on cl. 25, for that clause operates regardless of any set-off by way of a claim for damages for breach
of the charter-party, as I have already explained.
29. For these reasons this application under s. 68 is dismissed and the award will not be remitted.
DISPOSITION:
Application dismissed
SOLICITORS:
Jackson Parton; Holman Fenwick & Willan