Owneast Shipping Ltd v Qatar Navigation QSC

An anti-technicality clause protecting charterers from withdrawal for late hire payment must be construed according to its wording and in light of its forfeiture-protecting purpose. “Absence of intention” to make punctual and regular payment does not ordinarily include recklessness or awareness that late payment is virtually inevitable. Whether an intention to pay late existed is a question of fact. For an underpayment, the relevant intention concerns the regularity of the payment: a notice may be unnecessary where the deduction was made in bad faith, but an objectively excessive deduction made honestly and reasonably may still attract protection. No causal connection is required between the relevant intention and the failure to make payment on time.

The claimant owners appealed under section 69 of the Arbitration Act 1996 from an award made by the majority of an arbitral tribunal in favour of the defendant charterers. The tribunal held that the owners had wrongfully withdrawn the vessel Qatar Star for non-payment of hire.

The charterparty required punctual and regular payment and contained an anti-technicality clause requiring three banking days’ notice where non-payment resulted from specified causes and there was an absence of intention not to pay. The owners argued that the clause did not apply because the charterers had acted recklessly and intended to make an objectively unjustifiable deduction. The two questions were whether recklessness could amount to intention and whether the intended underpayment removed the need for notice.

1. Appeal allowed in part on the second question, but dismissed overall. The owners were not entitled to withdraw without serving the clause 62 notice.
2. “Intention” in clause 62 was an ordinary English word and did not include recklessness. The distinction between intention and recklessness was recognised in R v Lawrence [1982] AC 510, R v Mohan [1976] 1 QB 1, and the commercial authorities concerning the Warsaw Convention formulation. The use of separate words for intention and recklessness in legislation and commercial instruments was a powerful contextual indicator.
3. The clause was a restriction on a forfeiture right. Caution was therefore appropriate before extending its scope, as stated in The North Sea [1997] 2 Lloyd’s Rep 324. Awareness that late payment was virtually inevitable did not itself establish intention.
4. Whether there was an intention not to pay punctually was a question of fact. A conscious decision, made with knowledge of a relevant payment deadline, could support such a finding. On the facts, however, the tribunal majority found serious incompetence rather than an intention to pay late.
5. For underpayments, the relevant question was whether the charterers intended to make an irregular payment. An honest and reasonable deduction could attract protection even if ultimately excessive. A deduction made in bad faith could show an intention to make an irregular payment and remove the need for a notice. The court rejected the tribunal’s view that there had to be a causal connection between that intention and the failure to pay on time.
6. The court followed the legal approach in The Libyaville and regarded clause 62 as intended to protect against underpayments as well as total non-payment. The appeal was dismissed.

• Arbitral tribunal: By majority, the tribunal held that the owners had wrongfully withdrawn the vessel for non-payment of hire. One arbitrator dissented.
• High Court (Commercial Court): Permission to appeal on two questions of law was granted by Teare J. Christopher Clarke J dismissed the appeal.