Defective nomination of vessel – may be cured by timeous valid nomination and therefore not amounting to breach of condition
Contract of sale – Ukranian feed corn FOB 1 safe berth/1 safe Ukrainian port, Yuzhny, Odessa or Chernomorsk. (Sale concluded on a rising market – incentive for sellers to cancel).
The general provisions of GAFTA Form 49 were incorporated including the vessel nomination clause which read as follows:
“Nomination of Vessel. Buyers shall serve not less than ………………….consecutive days’ notice of the name and probable readiness date of the vessel and the estimated tonnage required. The Sellers shall have the goods ready to be delivered to the Buyers at any time within the contract period of delivery. The Buyer has the right to substitute any nominated vessel. Buyer’s obligations regarding pre-advice shall only apply to the original vessel nominated. No new pre-advice is required to be given in respect of any substitute vessel, provided that the substitute vessel arrives no earlier than the estimated time of arrival of the original vessel nominated and always within the delivery period. Provided the vessel is presented at the loading port in readiness to load within the delivery period, Sellers shall if necessary complete loading after the delivery period and carrying charges shall not apply. Notice of substitution to be given as soon as possible but in any event no later than one business day before the estimated time of arrival of the original vessel. ….”
The contract included a provision requiring the buyers to provide a copy of the charterparty on request and an 8 day pre-advice clause requiring inter alia the ETA and details of the nominated vessel.
The buyers nominated the “Tai Hunter”. The sellers made their own enquiries and discovered that the vessel’s course was incompatible with the given ETA. The buyers failed to provide the vessel owners’ name or the charterparty. Thereupon the sellers cancelled on the ground that the false nomination constituted repudiatory breach.
In the exchanges prior to cancellation the buyers requested the sellers to nominate the loadport and agents. The sellers failed to do this. Post cancellation, the buyers nominated two other vessels. Sellers persisted in their cancellation.
The parties settled quantum and referred the issue of the lawfulness of the cancellation to arbitration.
The GAFTA Board found that the original nomination was not manifestly false but invalid because the ETA given was not reasonably attainable. This was not, however, breach of a condition and the sellers’ cancellation was premature which gave rise to a claim for damages.
Henshaw J, in an appeal under s68 (serious irregularity) and s69 (point of law – obviously wrong or question of public importance and open to serious doubt) of the Arbitration Act 1996, leave having been given by Teare J, upheld the award.
In paragraph 71 of his judgment he identified (essentially) 4 principles applicable to the s69 appeal: (1) a valid nomination by a stipulated deadline is a condition; (2) a valid nomination is one made honestly and on reasonable grounds; (3) an invalid nomination may be cured by a valid nomination timeously made; (4) an initial nomination may be so absurd that it evinces an intention not to be bound giving rise to the right to cancel (on the facts, this did not apply to the impugned nomination).
Following upon these findings, Henshaw J held that it was not a condition that a charterparty had to be in place on the first nomination (bearing in mind always that the buyers had the right to substitute).
The s68 challenge was directed at the Board’s alleged failure to deal with buyer’s failure to provide a charterparty. In view of the finding of law, such failure could cause no prejudice.
Worthwhile judgment for its copious reference to authority.
Contrast made with the development of the law iro the giving of an ETA which is always a condition.
Useful reference to principle of deference to arbitral awards in paragraph 25:
The Award should be read “in full in a fair and reasonable way and should not be subjected to minute textual analysis. The courts do not approach awards with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults or with the object of upsetting or frustrating the process of arbitration.” (see, e.g., Progress Bulk Carriers Limited v Tube City IMS L.L.C  EWHC 273 (Comm) §13, quoting Pace Shipping Co v Churchgate Nigeria 1 Lloyds Law Rep page 183 § 16).
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