The ‘Bulk Uruguay’ was chartered by disponent owners, Geden Operations Ltd, to charterers, Dry Bulk Handy Holdings Inc, on an amended NYPE charterparty, which contained a Conwartime 2004 clause and an amended BIMCO Piracy clause. The latter had been specifically amended by deletion of paragraphs (a) and (b), so that the vessel could transit the Gulf of Aden without disponent owners’ consent.
Disponent owners were aware that this ‘GOA OK’ status was of significance to the charterers in fixing business for the vessel. Under the terms of the head charter, however, disponent owners required the consent of the head owners for such GOA transit.
At the time the charterparty was concluded the vessel was still under construction in the Philippines. When the vessel was about to be delivered, charterers informed disponent owners that the vessel’s maiden voyage from the Philippines to the Atlantic would be via the Gulf of Aden, and enquired as to the amount of additional premium that would be payable. Disponent owners sought the permission of head owners who, having initially refused permission for the GOA transit, subsequently granted permission but stressed that this would be a ‘one-off’ permission and would not form a precedent for future voyages. Disponent owners asserted that the charterparty terms required their permission to transit GOA, and advised charterers that their position in relation to giving permission would be dictated by the position taken by head owners.
Charterers took the position that disponent owners’ insistence that prior consent would have to be obtained on each occasion was a repudiatory breach, which they purported to accept as terminating the charterparty. In their turn disponent owners accepted the charterers’ purported termination as a repudiatory breach, and brought a claim for damages.
At arbitration a majority of the tribunal held that on its true construction, the Geden / Dry Bulk charterparty did not make GOA transit subject to disponent owners’ consent. In asserting that permission to transit GOA was subject to the position of head owners, it did not follow that disponent owners had thereby evinced an intention not to perform their obligations under the charterparty, nor were charterers substantially deprived of the whole benefit of the contract. Disponent owners were not in anticipatory breach, charterers were not entitled to terminate, and charterers’ purported termination was itself a repudiation which had been accepted by disponent owners, entitling them to damages of over US$6.5 million.
The charterers appealed. Popplewell J had to consider the correct test for anticipatory breach by renunciation in a situation where a party makes it clear that its ability to perform is wholly dependent on the actions of an independent third party. The two questions which the judge had to consider were:
a) Did disponent owners by their words or conduct evince an intention not to perform, or expressly declare that they would be unable to perform, their obligations under the charterparty?
b) If so, did such refusal have the effect of substantially depriving the charterers of the whole benefit which it was the intention of the parties they should obtain from the contract?
The judge held that there is no principle of law that a party who has made his performance dependent on a discretion to be exercised by a third party is deemed to be evincing an intention not to perform. He rejected charterers’ submissions that, by the very fact of not being back-to-back, disponent owners had put it out of their power to perform the charterparty, and had thereby evinced an intention not to perform. The correct test, he held, involved assessing the likelihood of whether or not head owners would give consent. The arbitration tribunal had concluded that head owners might or might not refuse an order to transit GOA, and that disponent owners had not renounced the contract. As this was a finding of fact, charterers’ appeal under S.69 of the Arbitration Act was dismissed.
Since question (a) was answered in the negative, the judge did not have to decide question (b), but he did observe briefly that the findings of majority of the tribunal supported the factual conclusion that charterers had not been deprived of substantially the whole benefit of the charterparty.
