In this Client Alert we consider the recent judgment in IMT Shipping and Chartering GmbH v. Changsung Shipping Company Limited, a decision of Mr. Justice Tomlinson in the Commercial Court dated 8th April 2009 on the effect of Redelivery Notices, and in particular whether Charterers are bound by a Redelivery Notice, once given.

Facts

The vessel was chartered on a charterparty in an amended NYPE Form providing for redelivery "minimum 20 September 2007/maximum 22 November 2007" and providing, in Clause 4, that "... hire to continue until the day of her redelivery .... On dropping last outward sea pilot one safe port Aden/Japan range .... Charterers are to give Owners not less than 30 days followed by 20/15/10/7 days notice of approximate redelivery date and intended port thereafter 5/3/2/1 days definite notice of redelivery date and port."

On 5th October 2007 the Charterers gave "approximate notice of redelivery for the m.v. ZENOVIA at DLOSP 1 SP China on about 4th November 2007 basis AGW, WP, WOG, UCE ...".

When the message was passed up the broking chain, the version which was eventually given to the Owners included 6th November as the redelivery date. Owners then refixed the vessel for her next employment, but on 15th October a further message was sent by Charterers to Owners reading: "Please note that we hereby have to revise the date of redelivery to Owners to about November 20th within the range of redelivery".

Owners withdrew the vessel. Charterers claimed that this was a wrongful withdrawal, and claimed damages for repudiation.

Arbitration Award

The arbitrators found in favour of the Owners on two grounds:

  • That it was a term to be implied into the contract that "where an approximate date of redelivery is given by the Charterers of a vessel, those Charterers are obliged not to do anything deliberately which prevents the approximate date being met"; and
  • That there was promissory estoppel in that, in reliance upon the Redelivery Notice, provisional final hire statement and form of hire payment made by Charterers, the Owners had entered into a follow-on charterparty with the effect that the Charterers were estopped from resiling from their earlier Notice.

The arbitrators had found that the particular waiver by election argument made by Owners failed because, inter alia, Charterers had not made an unequivocal representation that they had chosen one of two alternative courses of conduct; there was no unilateral abandonment of rights by Charterers; and the situation was altogether different from those where a true waiver by election can be made.

Commercial Court

In allowing the Charterers' appeal, the Commercial Court has made the following significant findings:

  • The decision by the arbitrators that "WP", in the Redelivery Notice given on 5th October, which was on the basis "AGW, WP, WOG, UCE ..." meant "without prejudice", rather than "weather permitting", had the result that the Charterers were bound to succeed with their claim.
  • No implied term of the type suggested by the arbitrators, or even a modified version of the same, such as that, once a Redelivery Notice is given, "the Charterers should not do further voyages the effect of which would be that the first approximate date given would not be met", or that, once a Redelivery Notice is given it "prevents the Charterers from undertaking additional employment" should be implied into a time charterparty. The very fact that the actual term that should be implied was not at all obvious, was evidence that such a term should not be implied.

The Court thought it significant, in this case, that the particular redelivery clause required each successive notice of approximate redelivery date to give also the intended port of redelivery, from which it could be inferred that it was envisaged that the intended port may change. If the giving of a Redelivery Notice were, in fact, to impose upon the Charterers some sort of absolute obligation, as envisaged by the arbitrators, it might have been thought necessary to name the intended port only in the first notice.

  • The arbitrators had also found that the estoppel by convention argument failed because, inter alia, there was no assumption by Charterers that they had no right to change their mind once they had given the Redelivery Notice and any allegation of a common assumption by Owners was an assumption of the future conduct of the parties, rather than of fact.

Leading on, therefore, to the issue of promissory estoppel, the arbitrators had held that what was required was a clear and unequivocal representation by the Charterers that they were giving up their strict rights, which in this context meant giving up their rights to retain the vessel in their employment until 22nd November. That promise must be intended to affect the parties' legal relationship and be understood to be a promise that will be acted upon by promisee. The promisee must then act upon that promise so that it is inequitable for the promisor to insist on his strict rights.

In this case the Court was of the view that there had been a factual finding that the Charterers had said nothing from which it could reasonably be inferred that they were abandoning any contractual right.

The Court was reluctant to conclude that "a notice of approximate redelivery ...given 'without prejudice' can without leading to an agreement nonetheless give rise to a promissory estoppel" or that it can, without more, create "an obligation on the charterer not deliberately to do anything which might prevent" that date being met.

The Court also held that the words "without guarantee" are capable of qualifying the effect of a representation; that Owners could not extract a promissory estoppel from what the Charterers had in fact said, including the words "without guarantee", whether or not it was in fact an uncontractual notice of redelivery; and that the tentative and qualified nature of the approximate Redelivery Notice could not be ignored when determining whether a representation had been made.

Accordingly the Court held that by the totality of the words and conduct attributed to them, the Charterers did not make to the Owners a clear and unequivocal promise either that the current voyage would be the last employment under the charterer or that they would not, in any event, seek to retain the vessel in their employment until the last permitted date for redelivery, namely 22nd November.

Discussion

It may be possible to take issue with the finding that once there was no estoppel by convention there could be no promissory estoppel, as in the first situation one is considering whether the Charterers have abandoned their rights and in the second whether they have represented that they are giving up their right.

Further, the significance of the arbitrators' finding of fact that "WP" meant "without prejudice" only came to light at the hearing of the appeal. This was a simple error on the part of the arbitrators. In our view it is relatively clear that the acronym, as with the other acronyms, concerned not the effectiveness of the notice itself but the timing of redelivery. Since such acronyms are extremely common, it may be argued that this is a general decision on the legal effect of Redelivery

Notices

In summary, however, in every case, a Redelivery Notice must be given honestly or in good faith, but the Judge found that it was "not to me at all obvious that the parties would necessarily have agreed that between the giving of a 30 day and a 20 day notice of approximate redelivery the Charterer is not at liberty to do anything which prevents the date first given being met".

Implications for Redelivery Notices

It is notable that in the leading text book on Time Charters, reference is made to the purposive intention of the provisions relating to Redelivery Notices, namely to enable the Owner to refix the vessel, and the difficulties that face the Owners if they have, in reliance upon a Redelivery Notice, which Owners subsequently seek to vary, fixed the vessel elsewhere.

For the moment at least, the judgment may encourage Charterers to give redelivery notices headed "without prejudice" so as to prevent Owners from relying upon them if Charterers chose to change their mind, albeit this could potentially expose Charterers to claims for failing to give timely redelivery notices. Equally, Owners are likely to seek to redraft the standard terms of the NYPE Forms, to ensure that redelivery notices can be relied upon.

Permission to appeal was requested, but denied.