London Arbitration 20/21

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 NORGRAIN – CHANGE IN DISCHARGE PORT NOMINATION – OWNERS CLAIM FREIGHT FOR TRANSPORT TO FIRST PORT NOMINATED– ESTOPPEL – UNJUST ENRICHMENT

The vessel loaded at Paranagua on 6 June and departed on 7 June for China. Bills of lading for the soybeans cited the discharge port as “CHINA PORTS.”  Communication from the charterer on 20 June stated, “Pls note cargo receivers have nominated Zhoushan (lightering) + Taixing as disports. Agent to be appointed.” However, on 3 July, the owner received a new email from the charterer directing that “…Due to internal needs vessel is directed to Tianjin. Pls urgently provide revised ETA.”

The owner presented a cost comparison detailing change’s potential loss, but the charterer did not acquiesce. The owner sailed to Zhoushan, and invoiced the charterer US$131,154.90, for the discharge at Zhoushan and Taixing. The charterer refused the invoice, maintaining the discharge port was Tianjin.

With no resolution acceptable to both parties, an escrow account was established for the disputed freight charges, and the matter sent to arbitration. The vessel proceeded to Tianjin, arriving on 22 July and beginning discharge on 28 July. 

The relevant charterparty provisions considered were:

“… Disport ½ sbd each ½ sps China

…USD 1.75 pmt extra on entire cargo for … Taixing …

… Declaration of sole/1st disport and cgo breakdown per port, to be done 10 days prior vsl passing Singapore. 

Chrtrs agree to declare disch port asap once they know

…Freight deemed earned on shipment discountless and non-returnable vessel and or cargo lost or not lost.”

The owners contended that the 20 June message clearly nominated Zhoushan and Taixing as discharge ports, and was as binding as if they had been named at chartering; As such, the charterer could not nominate another discharge port. The 3 July email designating Tianjin constituted a breach of charterparty. (The Jasmine B [1992] 1 Lloyd’s Rep 39)

The charterer asserted that since the bills of lading named “China port(s),” changes in port designation prior to final port selection should have been expected. The reason the designation was to come ten days before passing Singapore was to: (i) direct the vessel to such port(s); and (ii) avoid any deviation (and incurring any damages associated with such deviation) from the direct and shortest route to such port(s) after passing Singapore.

By naming Zhoushan and Taixing as discharge ports on 20 June, the charterer effectively declared them as if written into the contract during charter.

In addition, the charterer claimed:

  • There had been a “total failure of consideration” by the owner for attempting to claim freight on a voyage which had not occurred and was consequently not earned. The charterer claimed this was a breach of charterparty and cited section 54 of the Sale of Goods Act 1979 and Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (1942) 73 Ll L Rep 45.
  • Because the owner had discharged at Tianjin, it essentially agreed to a change in charter party, and as such, no freight charges were owed for Zhoushan and Taixing. 
  • The owner was within rights to challenge the orders for Tianjin, continue to Zhoushan, and bring the charter to and seek a quantum meruit for the change of discharge port. When none of these actions were taken, the owner effectively waived the right to claim the breach.
  • The alleged breach incurred no loss to the owner; The owner was estopped from claiming the freight charges held in escrow. 
  • The owner’s demand failed for circuity of action. If the freight were paid to the owner, this would create unjust enrichment, and the charterer could claim the identical amount.
  • Furthermore, if Tianjin had been the first port nominated, there would be no debate over the freight being payable.

The tribunal acknowledged the charter’s umbrage for the owner’s claim to freight for a voyage which did not occur. Nonetheless, the precedent set by The Jasmine B required the charterer to complete a special provision permitting the change of nomination, some form of estoppel, or waiver.

The charterparty clearly stated the charterer would declare the discharge port(s) as soon as it knew of them or within ten days before passing Singapore. By naming Zhoushan and Taixing as discharge ports on 20 June, the charterer effectively declared them as if written into the contract during charter.

Any risk in a change of nomination rested solely with the charterer, and therefore the variation, estoppel, and waiver claims were invalid. Although the owner discharged at Tianjin, this was done under protest, and did not constitute a waiver of rights to claim the freight. The escrow agreement supported this claim and essentially nullified the charterer’s position. 

Further, the tribunal dismissed unjust enrichment claims and failure of consideration, ruling the owner had a right to the freight, regardless of the completion of the voyage.  The charterparty clause stating “… Freight deemed earned on shipment discountless and non-returnable vessel and or cargo lost or not lost…” covered the risk that freight might be charged for a voyage which was not completed.

The tribunal held that the owner was within the charterparty to claim the escrow of freight payable for Zhoushan and Taixing.

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