White Rosebay Shipping SA v Hong Kong Chain Glory Shipping Ltd

An innocent party faced with a renunciation is entitled to a reasonable period in which to decide whether to accept it or affirm the contract. During that period, compliance with the contract does not necessarily amount to affirmation. After the period has expired, the question is whether the party’s conduct is capable of only one construction: that the contract is being treated as continuing. The court hearing an arbitration appeal under section 69 must respect the tribunal’s evaluative judgment where the tribunal applied the correct legal principles and the facts admit more than one possible conclusion. If a renunciation continues after affirmation, the innocent party may later accept that continuing renunciation, but the continuing conduct must be examined separately.

The owners of a vessel appealed under section 69 of the Arbitration Act 1996 against an arbitral award concerning a time charterparty. The tribunal found that the charterers had renounced the charterparty by failing to pay hire, but that the owners had affirmed it by allowing the vessel to remain in service to discharge cargo. The owners challenged the tribunal’s approach to reasonable time, discharge and continuing renunciation. The central issue was whether the tribunal had made an error of law, including by failing to determine whether the charterers’ renunciation continued after the alleged affirmation.

1. The appeal on the reasonable-period and discharge points was dismissed. An innocent party is entitled to a reasonable period to decide whether to accept a renunciation. The period depends on the circumstances and may be affected by the time when the party’s obligations fall due. The tribunal was entitled to treat the owners’ decision by 11 November as evidence that no longer period was required.
2. There is no rule requiring immediate termination when the reasonable period expires. The proper question is whether subsequent conduct was capable of only one construction, namely that the innocent party had chosen to treat the contract as continuing. The tribunal was entitled to find that allowing the vessel to remain in service so that the charterers could discharge the cargo at their expense was clear and unequivocal affirmation. Reservations of rights could not protect conduct wholly inconsistent with withdrawal.
3. The court would not substitute its own evaluative conclusion for that of the tribunal. Whether conduct constitutes clear evidence of affirmation involves judgment. Since the tribunal directed itself correctly and another tribunal might reasonably have reached a different conclusion, no error of law was established.
4. The appeal on continuing renunciation succeeded. Where an innocent party has affirmed but the renunciation continues, later acceptance of that continuing renunciation may lawfully terminate the contract. The relevant words or conduct must occur after affirmation and must clearly and unequivocally demonstrate persistence. The tribunal erred in treating a repudiatory breach by the owners as necessarily following from affirmation, without deciding whether the charterers’ renunciation continued.
5. The award was set aside and remitted to the tribunal to determine whether the renunciation continued after affirmation and, if so, whether the owners’ termination was lawful and what damages were recoverable.

This was an appeal from an arbitral award under section 69 of the Arbitration Act 1996, brought with leave of Cooke J. The appeal was allowed only on the continuing-renunciation issue, and the award was set aside and remitted.