The recent decision in ST Shipping & Transport Inc -v- Kriti Filoxenia Shipping Co SA (2015) clarifies the interaction between two clauses of the BPVOY3 standard form: clause 17 (cancelling clause) and clause 24 (liberty to vary the port or place of nomination).

The relevant facts of the case are as follows. The laycan period under the charterparty was 1 to 3 April 2003. On 28 March, the charterers nominated Tuapse as the first loadport. Three days later, charterers requested ETA for Tuapse and two other ports in the permitted range. These were given on the same day for Tuapse (12:00 on 3 April), Sevastopol (03:00 on 3 April) and Batumi (03:00 on 4 April). Charterers then gave their revised order nominating Batumi as the first loadport. The following day the master confirmed that ETA Batumi was 03:00hrs on 4 April and the charterers gave their notice of cancellation of the charterparty. The owners accepted charterers’ notice as repudiatory breach of the charterparty.

Clause 17 of the charterparty included:

’If it appears to charterers that the vessel will be delayed beyond the cancelling date, charterers may require owners to notify charterers of the date on which they expect the vessel to be ready to load, whereupon charterers shall have the option to cancel this charter and such option shall be declared by charterers within 96 hours […]’.

Clause 24 provided inter alia:

’If after any loading or discharge port or place has been nominated, charterers desire to vary such   port or place, owners shall issue such revised instructions as are necessary at any time to give effect to charterers’ revised orders […]’.

Charterers contended that they had the right to cancel the charterparty even after a variation of their order under clause 24. Owners disagreed. The matter was brought to arbitration.

The arbitrators found that the cancelling provision of clause 17 did not apply where charterers used the liberty given under clause 24. If that were wrong, the tribunal held that charterers could not cancel if the re-nominated first loadport is a port for which at the time of the re-nomination the ETA would be after 16:00hrs on the cancelling date.

The charterers appealed to the court on the following two questions of law:

Q1 - Whether the charterers’ right to cancel the charterparty pursuant to clause 17 survives a re-nomination of the first loadport pursuant to clause 24, and;

Q2 - If charterers’ right does survive a re-nomination, whether charterers are nevertheless not entitled to cancel the charterparty in circumstances where the re-nomination was made at a time when the ETA for the re-nominated port was after the cancelling date.

On both questions the court agreed with the arbitrators and dismissed the charterers’ appeal.

On Q1 the court found that clause 24 did not address what should happen  in relation to the cancellation regime in clause 17 and, had the parties wished to provide for this situation, they could have drafted an express clause. They did not.

The court appreciated that the parties had rival commercial interests as far as the cancellation right was concerned and it did not underestimate the value to charterers of the ability to cancel a charterparty. The court, however, found that this ‘did [not] knock out owners’ rival contentions as to the commercial undesirability  of losing certainty associated with an irrevocable nomination while remaining exposed to cancellation rights’.

Accordingly, the cancellation right under clause 17 did not survive re- nomination under clause 24.

It followed that Q2 did not arise. It was briefly considered and the court dismissed this part of the appeal on the basis of the duty of co-operation between the parties.

This duty was clearly established by the House of Lords in Mackay -v- Dick [1881] in the following terms:

‘…where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees  to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.’

It follows from that principle that a party could not rely on its own breach as a ground for cancellation (Shipping Corp of India -v- Naviera Latesa SA [1976] referred to).

In the present case, the charterers could not cancel if the re-nominated first loadport was a port which the vessel was unable to reach until after the cancelling date.

It is worth noting that this duty of co- operation does not imply that in any circumstances the charterers would have to consult the owners before nominating a loadport. In its review  of the case law the court referred to The Steendiek [1961] which affirmed the principle that charterers’ option is unfettered, irrespective of the owner’s convenience, even if it is known that the vessel cannot reach the named port before the cancelling date.

Comment

In addition to being a useful clarification  of the BPVOY3 Form, this case also serves as a helpful illustration of the construction of contract and the principle that if ‘on construing the contract as a whole, it appears that the parties cannot have intended two clauses to live together […] it is proper to hold that one clause is to prevail over another’ (The Jasmine B [1992]). In this case, commercial considerations appear to have been the key to sway the court’s decision.