X v Y

A contractual time-bar clause providing that a claim must be commenced within 12 months of “final discharge or termination” may create two alternative trigger dates. A claim is in time if commenced within 12 months of either date. In a consecutive voyage charter, “final discharge” ordinarily means discharge of the cargo on the voyage giving rise to the claim. The addition of an alternative reference to termination does not displace that established meaning. A court should not add words such as “whichever is earlier” unless the existing wording produces a commercially nonsensical result and the intended alternative meaning can be identified with confidence.

X appealed, with leave, against an arbitration award in favour of Y. The dispute concerned demurrage under a consecutive voyage charter for three voyages and the construction of an arbitration time-bar clause requiring claims to be made within 12 months of “final discharge or termination of this Charter Party”.

Discharge on the first voyage occurred on 8 February 2008. The charter party terminated, for the relevant purpose, on 14 June 2008. Y commenced arbitration on 23 February 2009. The central issues were whether “final discharge” referred to the first voyage or the last voyage, and whether the clause required commencement within 12 months of the earlier or later event, or permitted either alternative period.

1. Appeal dismissed. Y’s demurrage claim was commenced within time because it was made within 12 months of termination of the charter party.
2. In a consecutive voyage charter, “final discharge” means discharge of the cargo on the voyage in respect of which the claim arises. That meaning had become generally accepted and should not be disturbed merely because the clause contained an additional alternative reference to termination. The approach was supported by the objectives of certainty, preservation of evidence and settlement of voyage accounts.
3. The words “final discharge or termination of this Charter Party” provided two alternative trigger dates. The claim was in time if notice was given within 12 months of either event. It was unnecessary and inappropriate to insert “whichever is the earlier” or “whichever is the later”.
4. The clause was a time-bar provision and was to be construed strictly. It had been drafted by X, so the contra proferentem principle was potentially relevant in the event of ambiguity, but the wording was sufficiently clear and the principle was unnecessary.
5. The Arbitrator’s suggestion that termination occurred only when primary obligations were actually performed was not correct. Termination occurred when the last primary obligation fell due, namely when the balance of freight was due. The court did not need to determine Y’s contingent application under section 12 of the Arbitration Act 1996.

High Court (Commercial Court): appeal from the arbitration award dated 12 June 2010. The court upheld the Arbitrator’s conclusion that Y’s claim was in time.