Voyage charterparty – Shellvoy5 – Arbitration Clause – Mistake in recording the identity of the chartered vessel’s time chartering owner – Whether contract was formed between the parties.

Arbitration Act 1996, Ch. 23, s. 67

67. Challenging the award: substantive jurisdiction

(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court--
(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or
(b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3). (2) The arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the court under this section is pending in relation to an award as to jurisdiction.
(3) On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order--
(a) confirm the award, (b) vary the award, or (c) set aside the award in whole or in part.
(4) The leave of the court is required for any appeal from a decision of the court under this section.

this page was last time updated on: 13-Nov-2012

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Cases referring to this case:

TTMI SARL v Statoil ASA [2011] EWHC 1150 (Comm)

For education purposes only

There was no charter-party drawn up neither signed between the owners and the charterers. During negotiation process the owners’ broker made mistake in the identity of the chartered vessel’s time chartering owner in the recap email mentioning parent company Sempra Energy as the owner instead of its subsidiary TTMI. Recap confirming fixture with all subs lifted recorded that the charterer is "Navion Chartering for and behalf of Statoil ASA" and the time-chartering owner (the "T/C owner") is "Sempra Energy" and that the charter-party form is "Shellvoy 5". The error was not spotted and corrected. Nevertheless the voyage was performed and freight paid by the charterers to the owners in full.

Basis on a fixture recap email the time chartering owners (TTMI) claimed demurrage in sum of US $322,789.06. The single arbitrator struck out the claim on the ground that there was no contract between the owners and the charterers, and therefore there is no arbitration agreement between them. The owners challenged the award pursuant to section 67 of the Arbitration Act 1996, on the ground that the arbitrator erred in his conclusion as to his jurisdiction.

In the High Court Of Justice, Queen’s Bench Division Commercial Court, before Beatson J. 23-25 March 2011.

The learned judge set out the following issues for discussion at para 17:

(1) Did the mistake by the owners’ broker in recording the identity of the chartered vessel’s time chartering owner in the recap email mean that no contract was formed on or shortly before 17 October 2005 because (in the light of the third factual assumption) the owners’ broker had no authority to conclude a charter-party on behalf of Sempra Energy?
(2) Did a contract between the parties come into existence by conduct because the voyage was performed by and the freight paid to TTMI, the time-chartering owners, and not the entity named in the recap email?
(3) Should the recap email be rectified to show the correct time chartering owner? which was fully performed.

On examination of communications between the parties the judge asserted that it is common for charter-parties to be concluded by an exchange of emails or faxes, with the terms being recapitulated in a "fixture recap", and they can be concluded orally and recapitulated. But he was not able to infer that an oral contract made prior to the recap because there was no evidence as to when such a contract was made and there were no references in the documents to any verbal negotiations on the telephone and importantly no evidence that there was an oral contract.

Furthermore, on analysis of case law the learned judge concluded that an important difference between The Rhodian River and The Rhodian Sailor [1984] 1 Lloyd’s Rep. 373 and The Double Happiness [2007] 2 Lloyd’s Rep. 131 cases and this one is that the evidence in both abovementioned cases showed that the charter-party was agreed or substantially agreed before the issue of the name of the time-chartering owner arose. Moreover, in The Double Happiness the name which was subsequently erroneously given to the charterers was of a non-existent entity. This allowed Beatson J to conclude that:

33. Absent evidence of the sort that was present in The Rhodian River and The Rhodian Sailor and The Double Happiness, one is left with the terms of the recap email on 17 October which [wrongly] states that the time-chartering owner "is Sempra Energy" and the statements in Shogun Finance Ltd v Hudson which I have set out at [19], in particular those of Lord Hobhouse of Woodborough and Lord Phillips of Worth Matravers about the position where the identity of a party is specifically identified in the document. Recaps are, in such cases, sometimes described as the charter-party: see, for example, The Epsilon Rosa [2002] 2 Lloyd’s Rep 81 at [23] and [29]; [2003] 2 Lloyd’s Rep. 509 at [31] – [32]. In a case such as this, where the evidence does not enable the court to identify or infer a prior oral agreement, the written document does not fulfil the evidential function of confirming the making of an oral agreement but is in fact the main if not the only expression of the parties’ bargain. The recap, which was the document relied upon by [the owners] before the arbitrator, can for material purposes be regarded as the charter-party.

Accordingly it was held that express terms of the recap email cannot lead to inference that Statoil contracted with the vessel’s disponent owner or the Sempra group company which had instructed brokers to negotiate a sub-charter and therefore no executory contract was created between them on or shortly before 17 October [final recap email date].

On the second issue whether the contract came into existence by conduct the learned judge stated at para 47 that:

47. …objectively viewed, a contract was formed between them. I refer in particular to the combination of the fact that TTMI instructed the vessel to take on Statoil’s cargo, the Notices of Readiness which were accepted on behalf of Statoil’s managing agents identified TTMI as the time charterer, the full performance of the voyage, the demand that freight be paid to TTMI in terms which stated the "total amount due TTMI" and requiring payment to TTMI’s bank account, and the payment of the freight by Statoil to TTMI. The statements of facts were not operative contractual documents. Sempra Energy Trading Corp. was not the company with which Statoil states that it believed it had contracted; it is just another member of the Sempra group of companies, albeit with the word "Sempra" in its name.

48. As to when such a contract was formed, this was when the freight was paid, if not when the first Notice of Readiness identifying TTMI as the time charterer was accepted by representatives of Navion who are Statoil’s managing agents, or when the cargo was loaded…

49. I also reject [the charterers’] submissions that any contract created by performance would not be on the terms set out in the emails dated 17th and/or 26th October 2005 and that the arbitration agreement is insufficiently evidenced in writing for the 1996 Act to apply. As to the first of these, while the detailed terms of the contract are a matter for the arbitrator, both parties proceeded on the basis that the terms recorded in the recapping emails applied and that they were performing the transaction reflected in them. The Notices of Readiness (accepted on behalf of Statoil by its managing agent’s local representatives) refer to the "the terms and conditions of" the recap email "dated 17 October 2005", albeit referring to them as "Charter Party/ Contract". Moreover, the freight invoice refers to a transaction concluded by Navion for and on account of Statoil and the freight was calculated, demanded and paid in accordance with the terms of the recap.

Mr Justice Beatson also concluded that requirements of section 5(3) of the 1996 Act, stating that the provisions of Part I of the Act apply "only where the arbitration agreement is in writing", were satisfied in this case:

51. … I have referred to the reference in the Notices of Readiness to the "the terms and conditions of" the recap email "dated 17 October 2005". Those terms and conditions included an explicit reference to clause 43 of the Shellvoy 5 charter-party form containing the arbitration clause and the notation "OK" against it.

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