Web Alert: Case Update - P v Q, Q v R, R v S (The Capetan Giorgis)  EWHC 1399 (Comm) - Protecting time in last minute claims
07 December 2018
The parties to the subject proceedings were parties to back-to-back voyage charters based on the Norgrain 1973 form.
All charters included an arbitration clause in Clause 44(2) which read as follows:
'Any claim other than the demurrage claim under this contract shall be notified in writing to the other party and claimant’s arbitrator appointed within thirteen (13) months of the final discharge of the cargo and where this provision is not complied with, the claim shall be deemed to be waived and absolutely barred.'
The MV Capetan Giorgis was loaded with a cargo of distillers grains shipped from USA to China under the voyage charters in the chain. Discharge in China was completed on 16 October.
By virtue of the arbitration clause, the last day for protecting time and commencing arbitration under each charter was 16 November 2016.
On 9 June 2016, without any prior notice, the bill of lading holder initiated proceedings in China (Xiamen Maritime Court) against the head owner in relation to alleged cargo damage.
On 16 November 2016, the sub-time-charterer, Polaris, served notice of claim to Sinochart, the first voyage charterer in the voyage charter chain.
On the same day, at 18:44, after office hours, Sinochart served notice of arbitration to P. P’s office had closed for the day, therefore, P’s operations department only received the notice the following morning, 17 November 2016.
On 17 November 2016, after the time bar had expired, P emailed Q informing them that it had received notice of arbitration, but P did not commence arbitration.
Q, however, appointed solicitors on the same day, 17 November 2016, and subsequently an arbitrator was appointed in relation to the dispute under the charter between Q and R. Accordingly, via an email to R’s brokers, Q notified R of the arbitrator’s appointment and the commencement of proceedings.
Eight (8) days later, on 25 November 2016, P finally appointed its arbitrator and notified Q. It should be noted that it was only on 23 November that P’s operations department notified P’s legal department, which in turn notified the P&I club and became aware of the arbitration clause in the charter.
Finally, R only appointed its arbitrator for its claim against S on 29 November 2016 and served notice of claim and commencement of arbitration on 1 December 2016, fourteen (14) days later.
The claimants P, Q and R, all applied for declarations that:
- their claims against their respective counter parties had been brought in time, notwithstanding the wording of clause 67
- in the alternative, the claimants applied for an order under section 12 of the Arbitration Act 1996 (the Act) extending the time for commencing arbitration.
On the first issue, the judge, Sir Richard Field QC, rejected the argument that the clause had to be read so as not to apply where it was impossible for a claim to be passed on within the stipulated time. He opined that the clause was drafted in clear and unambiguous words and ‘the parties desire the benefits that flow from a literal construction of the time bar…’.
On the time extension issue, two assessments were made:
- whether the circumstances in dispute (ie a party in the charter chain receiving entirely unanticipated claims after business hours on the final day of the limitation period) were beyond the reasonable contemplation of the parties when they agreed the applicable time limit on the charters. The court was satisfied that the circumstances in this case were 'relatively exceptional' and that they significantly contributed to each of the claimants’ failure to comply with the time bar
- whether it would be just to extend time. The court ruled that this element would only be satisfied if the claimants acted 'expeditiously and in a commercially appropriate fashion'.
On the above basis, relief was only granted to Q, who acted expeditiously and commenced proceedings on the same day that it received notice of claim from P, whereas P and R failed the test.
Practical considerations for members
- A period of three (3) days (weekends and holidays included) has been deemed as a reasonable time to pass notice of claim and commence arbitration, if a party wishes to rely on a time extension under section 12 of the Act.
- Where short time bars have been agreed in the charter parties and there is a possibility of a claim that could be passed down the chain, either seek an appropriate time extension from your counterparty or proactively commence arbitration as a protective measure.
- It is of vital importance to always consult your relevant in-house department and the club when presented with unanticipated claims. Even if the deadline under the charter party has passed it may still be possible to pass a claim down the chain by seeking the court’s discretion to extend time by application of s. 12 of the Act.
This article intends to provide general guidance on the issues arising. It is not intended to provide legal advice in relation to any specific query. If in doubt, The Standard Club is always on hand to assist. Members requiring further information on this topic should direct their enquiries to either their usual contact at the club, or to the author(s).