Cobelfret Bulk Carriers NV v Swissmarine Services SA

Negotiated terms in a fixture recap prevail over incorporated pro forma terms only to the extent that the provisions are inconsistent. The court must construe the contract as a whole, in its factual and commercial setting, and ask whether the provisions can sensibly operate together. A later provision that qualifies or limits an earlier term is not necessarily contradictory. The shorthand term SHINC may therefore be qualified by an incorporated laytime code excluding Super Holidays, provided the negotiated term retains meaningful operation. An “o/wise” incorporation clause does not prevent incorporation of detailed provisions dealing with a matter addressed generally in the recap.

The owners appealed under section 69 of the Arbitration Act 1996 from a majority arbitral award concerning demurrage and dispatch money under a charterparty for the vessel Lowlands Orchid. The fixture recap provided for discharge at 25,000 metric tons SHINC and incorporated the terms of the Eurosailor charterparty, subject to logical amendment.

The incorporated charterparty stated that discharge was at 25,000 metric tons per weather working day, Sundays and holidays included, but excluding Super Holidays. The central issue was whether that exclusion conflicted with SHINC and whether the detailed laytime provisions were incorporated.

1. The appeal was dismissed. The majority arbitrators had reached the correct conclusion that the fixture recap and clause 63 of the incorporated pro forma charterparty were not in clear, direct and irreconcilable conflict.

2. Where negotiated terms and incorporated pro forma or standard terms coexist, the negotiated terms prevail if inconsistency is established. The relevant inquiry is whether the provisions contradict one another or conflict so that effect cannot fairly be given to both. The contract must be construed fairly as a whole and in its factual and commercial setting, without a predisposition either to find or avoid inconsistency.

3. A provision qualifies, rather than contradicts, another where both can retain operative effect. The fact that a qualification changes the operation of a broadly expressed term, or produces a different result on the facts, does not itself establish inconsistency.

4. The term SHINC addressed holidays generally, but did not prevent the incorporated laytime code from qualifying its operation by excluding Super Holidays. Time remained countable during holidays other than Super Holidays. The recap therefore retained meaningful operation and was not emasculated by clause 63.

5. The words “o/wise as per ‘Eurosailor-CP’” did not restrict incorporation to matters wholly omitted from the recap. A reader would understand that the recap stated the main terms while the pro forma charterparty supplied a comprehensive laytime code, including further qualifications concerning weather working days, shifting and the vessel’s ability to deliver at the specified rate.

6. The arbitrators’ mistaken formulation of the incorporation question and their reference to a brokers’ letter were unfortunate, but did not invalidate the award. Their reasons showed that they had addressed the correct question, and their decision had been reached before relying on the later brokers’ material.

The court reserved costs and whether the matter fell within section 69(8) of the Arbitration Act 1996.

The judgment was an appeal from a majority award of three arbitrators dated 5 May 2009. Permission to appeal was granted by Cooke J. The Commercial Court dismissed the appeal.