Alpha Harmony – Tendering of NoR

“ALPHA HARMONY” [2019] EWHC 2522 (COMM)

Does the NoR serve more than one purpose and what happens when they conflict?

 

The Commercial Court has heard two appeals from related arbitrations, pursuant to section 69 of the Arbitration Act 1996.

The appeals concerned cancellation of voyage charterparties on the grounds that a valid NoR had not been given in time.  There was a head and sub-charter, but not on back to back terms.

In both the cancelling date was Sunday 10 May.  The NoR was tendered at 0704 hours on that day.

Under both charters, the NoR could be tendered during weekday office hours, and between 0800 to 1100 on a Saturday. Laytime was to commence at 0800 on the next working day after a valid NoR had been tendered.

Sub charterers cancelled the sub-charter at 2047 hours on Sunday 10 May and head charterers cancelled the head-charter at 0555 hours on Monday 11 May.

The question is whether the cancellations were lawful?  Although the NoR had been tendered before the relevant time on the cancelling date, it had not been tendered during the permitted hours.

In arbitration, both cancellations were held to be invalid.

 

The sub-charter

The Court found reversed the Tribunal’s decision and held that the sub-charterers had been entitled to cancel.

The charter provided as follows:

Clause 14:

“Notification of the vessel’s readiness to load at the loading port must be delivered by mail/fax at the office of Charterers or their agents, between 0800 hours and 1700 hours from Monday to Friday, between 0800 hours and 1100 hours on Saturday, […] Laytime is to commence 0800 hours the next working day…”

Clause 16:

“Should the Notice of Readiness at loading port not be delivered as per Clause 14 by twelve o’clock noon on the 10 May 2015, the Charterers or their Agents […] have the option of cancelling this Charter Party…”

 

The Court accepted the sub-charterers submission that the words in Clause 16, “as per clause 14”, were clear and simple and meant that the NoR had to meet the requirements of clause 14, namely that it had to be tendered within certain hours on a weekday or on a Saturday.

The Court did not agree that there was a tension between clause 16, which provided that if the NoR had not been delivered by noon on Sunday there was an entitlement to cancel, and clause 14, which stipulated that an NoR could not be delivered after 11am on Saturday.

There was no inconsistency between the two clauses.  Clause 16 did not specify the requirements for tendering the NoR, that was done in clause 14.

It would cause uncertainty if, notwithstanding the words “as per clause 14” in clause 16, a notice of readiness could be invalid for one purpose (the running of laytime) but valid for another (the option to cancel). That would be the sort of “strange result” condemned by Roskill J. in, “The Madeleine”.

 

The head-charter

Conversely, the Court upheld the Tribunal’s decision that the cancellation was invalid.

The charter provided as follows:

Clause 4:

“…Should the vessel’s notice of readiness not be tendered and accepted as per Clause 17 before 23:59 on the 10th May of 2015, the Charterers or their Agents shall […], have the option of cancelling …”

Clause 17:

“…Notice of vessel’s readiness […], shall be delivered in writing or by cable/telex/email to Charterers/Receivers (or their Agents). See also Clause 70…”

Clause 70:

“…the Notice of readiness to be tendered within office hours 0800-1700 hours Monday to Friday and 0800-1100 hours Saturday. Laytime to commence at 0800 hours the next working day after valid Notice of Readiness being tendered…”

The head charterers contended that the words in clause 17, “See also Clause 70”, were enough to incorporate the proviso in Clause 70 that the NoR be tendered during office hours into clause 17, and therefore into clause 4.  Because it was not tendered in office hours, head charterers said a right to cancel arose at 23:59 on Sunday 10 May.

Owners argued that clause 4 gave an option to cancel only when no NoR had been tendered “before 23:59” on 10 May. Whilst Clause 17 in the standard charter form required an NoR to be tendered during office hours, the parties had deleted those words from Clause 17.

The words “See also Clause 70” did not incorporate the office hours proviso into clause 17; rather Clause 70 was concerned with laytime and not the option to cancel.

As owners had tendered NoR at 07:04 on 10 May, they said Charterers had no right to cancel.

The Court agreed with the Owners and the Tribunal that the combined effect of the amendments to the standard wording of clauses 4 and 17 was that, for the purposes of the cancelling clauses, there was no requirement that the NOR be delivered within office hours.

Parties in a charter chain should exercise caution if they want their position to be mirrored and either use the same charter down the line or closely check the terms of the charters used to ensure that there is no disparity. There are significant consequences of a wrongful cancellation and when in the middle of the chain a party cannot assume that the same rights of cancellation have accrued.

Please contact the Club in London if you have any queries in relation to this article.