London Arbitration 10/14

The vessel was the subject of a voyage charter containing the following at clause 11:

“Any dispute arising from and in respect of this Charter Party shall be referred to and settled by arbitration in London … Any claims must be made in writing within 3 (three) months of final discharge and where this is not complied with, the claim shall be deemed to be waived and absolutely barred.”

Because Charterers took the view that the vessel was not in every way fitted for the voyage, they terminated the charterparty on 24 November 2009 before any cargo was loaded.  Owners alleged that Charterers’ termination was wrongful and purported to accept Charterers’ alleged repudiation on 27 November.  Thus no cargo was ever loaded and therefore there was no discharge.

On 8 February 2010 Owners appointed an arbitrator.  Charterers appointed their arbitrator on 26 February, but without prejudice to the position that they considered the claim to be time-barred.

Owners responded on 1 March 2010 accepting that no claim had been made “in writing” as required by the clause until this date (i.e. 1 March was when Owners first indicated the nature of their claim), but nevertheless contended that clause 11 had no application in circumstances where there had been no “final discharge” (as no cargo had been loaded). Alternatively, they argued that any time should run from the date on which discharge would have been completed if the charterparty had been performed.

Charterers argued that clause 11 did apply, and that the words “final discharge” had to be given some other meaning in the event that discharge of cargo never occurred. They went so far as to say that even if the clause did refer to “final discharge of the cargo”, some broader meaning, encompassing discharge of the contract, should be given to those words. Charterers contended that Owners’ argument as to the hypothetical date of discharge was inconsistent with the purpose of the clause, uncertain, and liable to generate more argument.

The Tribunal held that Owners’ claim was not time-barred.

Clause 11 was clear and unambiguous.  “[F]inal discharge” meant just that – see The Springdale [1963] 1 Lloyd’s Rep. 339.  There was no basis for implying any additional terms or wording. Since no cargo was loaded, there was no final discharge (of cargo) and the clause did not operate.

The drastic nature of the time bar meant that clause 11 had to be read strictly. Very clear wording had been used, and there was no reason to suppose that the parties had intended anything other than the result reached by applying that wording literally.

Insofar as there was any ambiguity because final discharge did not take place, that ambiguity should be resolved against the party seeking to rely on the provision, i.e. against Charterers and in favour of Owners. However, the point did not arise, as the wording of the clause was perfectly clear.

The case emphasises that although time bar clauses (which are intended to provide the parties with certainty) will be upheld, they will nevertheless be construed according to their precise wording. No words or terms will be implied to reflect the parties’ alleged intentions if the express wording does not allow such implication.

Thus care should be taken when drafting time bar clauses, for otherwise the apparent certainty they are intended to provide, may in fact prove illusory.  In this regard, it should be noted that Owners’ alternative argument that time should run from a hypothetical date of completion of discharge was also rejected.