Demise clause – extension of time agreement – estoppel
Palm oil was shipped from two ports in Papua New Guinea to two ports in England.
On arrival, the cargo owners claimed that the oil was contaminated.
The vessel was demise chartered to another company within the same group of companies.
There was a demise clause having the effect that demise charterers were liable on the bills.
Both demise charterers and owners were insured by the same P & I club.
To save the vessel from arrest, a P & I a letter of undertaking was put up. The letter of undertaking made a clear distinction between the owner and the demise charterer of the vessel.
Following upon the letter of undertaking, the solicitor for the cargo owners applied for an extension of time within which to file their claim. This letter was sent by telex. The letter sought an extension of time from the “owners”. The club’s solicitor responded in a telex granting an extension of time on behalf of the “shipowners”. As the party liable was the demise charterer it would serve no purpose to grant an extension of time on behalf of the registered owner.
The solicitor acting on behalf of the cargo owners stated in evidence that she had forgotten about the the demise charterer. When a further extension of time was not forthcoming, she drafted a writ against both owners and demise charterers. Owners denied liability on the basis that they were not a party to the bill of lading and demise charterers raised the defence that the writ was out of time and that no extension had been granted in respect of it.
The court held that the telex exchanges had to be construed in their context and against the surrounding circumstances. The subjective views and intentions of those concerned on each side were irrelevant.
The court held that it was common in shipping circles to refer to demise charterers and registered owners by the generic term “owners”. The term “shipowners” could also be used in this generic sense. Objectively seen, the exchange of telexes had the effect of granting an extension on behalf of the demise charterer, being the entity liable.
In the event that it was wrong in the above analysis, the court held further that the indications were that the club’s solicitors were aware of the mistake on the part of the cargo owner’s solicitor in failing to ask specifically for an extension of time from the party liable ie. demise charterers. There was a duty on the club’s solicitor, in the grant of an extension, to point out to the other side her mistake. In these circumstances, it would be unconscionable for demise charterers to raise the point that it had not consented to an extension of time.
The case seems wrong on the analysis of the telexes. Both parties intended to refer to the registered owner by the use of their word “owner” in the first instance, and “shipowners” in the second instance. This being so, evidence was relevant and should have been admitted to prove what the respective parties truly intended.
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