BPVOY 5 now in force.

BPVOY5 which is designed for use by BP as charterers came into force on 21 March 2016. The main changes from BPVOY 4 are:

  • an onerous compliance clause in cl 2.2 obliging owners to “comply with all applicable requirements stipulated in respect of zones and/or areas regulated by regional and/or national and/or international authorities.”
  • Clause 9 cuts back any safe port warranty by providing “Charterers do not, in any part of this charter or otherwise howsoever, warrant the safety of any port unless Charterers fail to exercise due diligence to ascertain the vessel can lie safely afloat.” The clause also provides that “Where the Vessel has to (a) take additional measures to keep her safely alongside and/or (b) has to move from a particular location within the port, Charterers will reimburse 50% of additional costs directly incurred by the Owners. If the Vessel has to move from a particular location within the port, Charters will reimburse 50% of the cost of bunkers consumed in shifting from that location and back to any other location.”

To the list of scenarios in cl. 11(4) that count as one half laytime or demurrage is added:

“closure of, or any restriction of operation at, any port of terminal by order of any local authority”, and all delays are now qualified so that they only count as half laytime or demurrage if the delay could not have reasonably have been prevented by charterers or owners

  • Under cl.13 ship to ship transfers are now expressly permitted and Charterers are to provide and pay for all necessary equipment and may at their expense engage supervisors to attend on board the vessel, including a mooring master, to assist the STS Operation.
  • A new exception to laytime and demurrage appears in cl. 15(2). If tanks are inspected and rejected, time used for gas-freeing shall not count towards laytime or demurrage, and laytime or demurrage shall not commence or recommence, until such tanks have been re-inspected, approved by Charterers’ inspector, and re-inerted. Charterers shall reimburse Owners for bunkers consumed for gas-freeing/re-inerting.
  • Under cl. 26 charterers are permitted to order the Vessel to discharge and backload a full or part cargo, with freight to be calculated in accordance with Worldscale for the whole voyage, and all time used in backloading to count as laytime or demurrage, with charterers reimbursing additional port costs and bunkers.
  • Clause 27 provides for a virtual arrival scheme whereby charterers may instruct owners to proceed at a set speed, such that the vessel will reach the discharge port at a particular date and time. Extra passage time is to count as laytime and demurrage.
  • Clause  30  allows for electronic Bills of Lading  to be transmitted using the ESS-Databridge, as an eDoc.
  • Clause 31 provides for blending and commingling. Charterers warrant that any cargoes to be blended shall be stable and compatible and no precipitation of solid deposits in cargo tanks, pipes, pumps or valves will occur;

Charterers shall return to Owners for cancellation all three Bills of Lading issued in respect of the cargoes being blended and Owners will issue replacement Bills of Lading stating the place and date that the blending took place and the nature of the original cargo, the original quantity, and the date and place of loading.

Charterers will be deemed to indemnify Owners against any liability, loss, damage of expense arising out of the blending, commingling and additives, but not if the damage or expense could have been avoided by the exercise of due diligence.

Charterers’ liability is limited to no more than twice the CIF value of the cargo at the discharge port on completion of the discharge. Owners have three years from disconnection of the hoses at discharge port within which to issue a written notice of a claim.

Clause 59 allows charterers to carry up to 15 drums of cargo additive. Time used to load or discharge such drums shall count as laytime or demurrage, unless it happens concurrently with loading or discharging of the cargo.

  • Under cl. 42 owners warrant that the vessel is entered in the Tanker Oil Pollution Indemnification Agreement 2006.

Port or berth charter? Effect of ‘time lost’ provision.

In Freight Connect (S) Pte Ltd v Paragon Shipping PTE Ltd [2016] 1 Lloyd’s Rep 184, the Singapore Court of Appeal has recently considered whether owners can recover for time waiting at berth under a voyage charter. A berth charter was initially concluded but due to delays the charterers requested a replacement vessel be provided. The owners offered a replacement fixture which was accepted. The fixture was a port charter with a time lost clause. The vessel suffered delays in berthing at the loading port. The charterers contended that laytime did not start as NOR could not be given until the vessel berthed and that the time lost clause was inoperative until a valid NOR had been given. The Court of Appeal in Singapore has upheld the decision of the High Court in rejecting both arguments. The second charter was clearly a port charter and in any event the time lost clause operated independently of whether a valid NOR had been given.

Repudiated voyage charters and recoverable damages.

The prima facie measure of damages for repudiation of a voyage charter by charterers is the profit which would have been made by the shipowner on performance of that charter, less any benefit arising from mitigation which needs to be taken into account, such as what the ship earned during the period which would have been occupied in performing the voyage (Smith v M’Guire (1858) 3 H & N 554). However, the shipowner may suffer loss other than loss of profit and this may also be recovered, subject to the rules on remoteness. An example of such a different kind of loss arises when a vessel is redelivered to an owner in the wrong location or when a substitute fixture is completed at a discharge port which is not (or which is some distance from) the discharge port under the contract voyage.

This was the case in The MTM Hong Kong [2016] 1 Lloyd’s Rep 197. After the repudiation the vessel had proceeded on her ballast voyage to South America where she had been due to load under the terminated charter. On arrival there was an unexpected delay of nearly three weeks in fixing a substitute charter. The substitute fixture completed in Rotterdam on 12 April 2011. Had the original charter had been performed, the voyage would have completed on 17 March 2011 and the vessel would then have carried a cargo from the Baltic to the US, followed by a further cargo from the US to Europe. The owners were awarded the profit which the vessel would have earned on the contract voyage and the next two voyages less the profit actually earned on the substitute charter. Males J held that the arbitrators had been correct in awarding this additional head of loss.

Profits remain profits even if given away

“Sir,” said Dr Johnson on one occasion, “there is no settling the point of precedency between a louse and a flea.” To some extent, Teare J’s decision in Glory Wealth Shipping PTE Ltd v Flame SA [2016] EWHC 293 (Comm) recalls this bon mot.

In the heady days of the bull shipping market, Glory Wealth entered into a series of contracts of affreightment with Flame. On the collapse of freight rates, Flame failed to provide the necessary cargoes. Glory Wealth sued. In previous proceedings, we got the answer to one nice contract question: namely, that if you sue for damages following anticipatory repudiation you do have to prove that you could have performed the contract if called on to do so. The background to the present proceedings was slightly different. The debacle referred to above had rendered Glory Wealth essentially insolvent. Seeing this coming and rightly realising that irate Glory Wealth creditors might just consider themselves entitled to seize any monies paid by Flame, the directors of Glory Wealth at an early state conceived a dubious, and possibly illegal, scheme to frustrate those creditors. They executed a document instructing Flame to pay any sums owing to Glory Wealth  to two other companies controlled by them for their own benefit instead.

In the present proceedings for damages against Flame by a pretty undeserving claimant, Flame raised a correspondingly unmeritorious defence. It took the point that because of this arrangement no loss had been suffered by Glory Wealth, since if the contracts had been performed Glory Wealth would not have received any profits anyway. Teare J smartly dismissed this plea. If one was entitled to receive monies, the fact that one might have directed them elsewhere was irrelevant: prospective profits remained an entitlement whatever the prospective profiteer might have done with them. And quite right too.

Disponent owners’ liens on cargo

Can disponent owners lien cargo for sums due under their sub-charter? Dicta in The Clipper Monarch [2015] EWHC 2584 (Comm); [2016] 1 Lloyds’ Law Rep 1, suggests that they can. The sub-charterers, Silver Rock, had failed to pay freight, deadfreight, and demurrage to disponent owners, CCS, and the vessel waited outside Chinese territorial waters. CCS obtained and order to sell the cargo under CPR Part 25.1(1)(c)(v), which provided for the gross proceeds of sale to be held by the claimant’s solicitors to the order of the court and “treated as if subject to the same rights (if any) as [CCS] had in respect of the goods prior to their sale”.

The cargo had been purchased by Silver Rock from Max Coal and sold on to Grupo Minero, the original consignee. Silver Rock found a new purchaser and the vessel berthed to discharge the cargo. The cargo was sold and its proceeds held by CCS’s solicitors pursuant to the High Court’s order. CCS obtained arbitration awards against Silver Rock for sums due under the voyage charter, and against Grupo Minero, claiming as assignee of the head owner’s right to claim an almost identical amount as carrier under the bill of lading. The awards were converted into judgements. His Honour Judge Waksman QC held that the sale proceeds representing the cargo clearly belonged to one of the two judgment debtors and CCS was entitled to the monies as judgment creditor against whichever of them was the appropriate owner.

His Honour Judge Waksman QC then considered, obiter, a second ground on which CCS would be entitled to the proceeds of the sale – by way of its rights on a lien on the cargo which arose prior to the sale. If the cargo was owned prior to sale by Grupo Minero, CCS relied on the voyage charter “lien” clause as incorporated into the bills of lading, CCS having taken an assignment of the carrier’s rights. If the cargo was owned by Silver Rock, CCS relied on the voyage charter “lien” clause as giving it a right with similar effect to a possessory lien, namely a right to procure that the cargo be withheld from Silver Rock by directing the employment of the vessel in its capacity as time charterer.

This second ground assumes that the time charterer has the right, under the employment clause, to direct the shipowner to lien the cargo by not unloading it. Such an order would only be lawful if the shipowner had the right to lien the cargo under the bill of lading, as was the case in The Clipper Monarch. It is worth noting that a similar argument was rejected  in The Mathew [1990] 2 Lloyd’s Law. Rep 323 where Steyn J held that there was no implied term that the time charterers could direct the shipowners to lien cargo.

Speed warranties. “Good weather” need not last for 24 hours (and often doesn’t).

In December 2013 the Ocean Virgo [2015] EWHC 3405 (Comm) was trip chartered on the NYPE form. The charter contained speed and performance warranties on the basis of “good weather/smooth sea, up to max BF SC 4/Douglas sea state 3, no adverse currents, no negative influence of swell”. The charterers claimed damages, alleging that the vessel had failed to meet the warranties. The owner’s response was that for a period to be considered as being admissible “good weather” it had to constitute a period of 24 consecutive hours running from noon to noon. Lesser periods had to be excluded. The tribunal agreed.

However, Teare J. has now held that this constituted an error in law. The charterparty merely referred to “good weather” and contained no words which justified construing good weather as meaning good weather days of 24 hours from noon to noon. The award disclosed a further error of law by stating: “had the AWT report correctly identified the period of admissible ‘good weather’ charterer’s claim would have been restricted to the initial, leg 1, period”. Once a breach was established by looking at performance in good weather the consequential damages claim was assessed by having regard to the whole of the charter period, excluding any periods of slow steaming on charterers’ instructions excluding any periods of slow steaming on charterers’, whatever the weather, as had been stated by Bingham LJ in The Didymi [1988] 2 Lloyd’s Rep. 108 and by Lloyd LJ in The Gas Enterprise [1993] 2 Lloyd’s Rep. 352.

Keep right on to the end (of the charter). No constructive redelivery under bareboat charter.

The termination of a demise charter pursuant to the shipowner’s right of withdrawal is a more complex process than with an ordinary time charter. The charterer still has its crew on board the vessel and some time may elapse before the shipowner is able to retake physical possession of the vessel. In the interim charterers may have entered into commitments with bunker suppliers and with cargo owners, pursuant to bills of lading.

In The Chem Orchid Lloyd’s Law Reports , [2014] 1 Lloyd’s Rep. 520, the High Court of Singapore had to decide whether the bareboat charterer, the “relevant person” who would be liable in personam, was the demise charterer when the cause of action arose, so as to found jurisdiction under s.4(4) of the Singapore High Court (Admiralty Jurisdiction) Act, which is in identical terms to s.21(4) of the UK Senior Courts Act 1981. The Assistant Registrar struck out the writs in rem on the grounds that the charter had been terminated prior to the issue of the writs. Accordingly, the vessel could not be arrested in relation to claims arising in the interim between the notice of termination being given and physical redelivery of the vessel to the shipowners.

The decision has now been reversed by Steven Chong J, [2015] 2 Lloyd’s Rep. 666, who held that the charter had not been validly terminated, but even it had, there was no concept of constructive delivery applicable to the termination of bareboat charters which continue until physical redelivery. Therefore, at the time the in rem writs were issued by the bunker suppliers and the cargo claimants, the vessel was still in the possession of the charterers.

On 20 January 2016 the Singapore Court of Appeal held that it had no jurisdiction to hear an appeal from this decision. [2016] SCGA 04.

 

No loss, no damages: latest from the CA

Christmas reading from the English CA for charterparty buffs and damages enthusiasts. In The New Flamenco [2015] EWCA Civ 1299 , decided a couple of days ago, a cruise ship under time-charter at a highish rate was wrongfully redelivered a couple of years early. That’s OK, said the owners: we’ll just have those two years’ lost profits, please (there being no relevant market). Not so fast, say the charterers. You sold the ship on redelivery for a very tidy sum: had we given her back at the proper time the market would have collapsed and you’d have got many millions of dollars less for her — a figure that dwarfs any profits lost. In fact you should be d****d grateful to us for breaking our contract, since you’re actually a great deal better off than if we’d kept it.

Arbitrators hold for the charterers; Teare J on appeal for the owners. In a rare reversal of Teare J, the CA restore the arbitrators’ decision. Whatever the case where there is a market rate, in non-market cases where the claimant claims on the basis of profits lost, the general British Westinghouse rule applies and any gains resulting are in account. A salutary reminder from Longmore LJ at [29]: “compensation for actual loss is the underlying principle and … in this connection, it is the available market rule that is a gloss on that underlying principle.” Verb sap.

Happy Christmas to all.

AT

NYPE 2015. New rights for owners against defaulting charterers.

On 15 October 2015 BIMCO released their 2015 revision to the NYPE form. It contains the following provisions which will improve owners’ position against defaulting charterers.

Clause 11 dealing with withdrawal has been amended as follows.

  • The grace period no longer refers to ‘oversight, negligence, errors or omissions on the part of the charterers or their bankers’ and now refers simply to a failure to make punctual payment of hire due.
  • Owners are now given a right to damages, if they withdraw the Vessel, for the loss of the remainder of the Charter Party. There are currently two conflicting first instance decisions as to whether owners can claim damages for the loss of the remainder of the charter following the exercise of their right to withdraw. In 2013 in The Astra [2013] EWHC 865 (Comm); [2013] 2 Lloyd’s Rep. 69, Flaux J held that there was such a right as the obligation to make punctual payment of hire was a condition, but in 2015 in Spar Shipping v Grand China Logistics v Spar Shipping [2015] EWHC 718 (Comm), [2015] 2 Lloyd’s Rep. 407 Popplewell J held that there was no such right, as hire was not a condition. The new clause makes it clear that owners do have such a right.
  • The right of owners to suspend performance of their obligations under the charter has been extended. This was first introduced in NYPE 1993 and was not a right which owners would otherwise have, as seen in The Agios Georgis [1976] 2 Lloyd’s Rep. 192. Under NYPE 1993 the right of suspension operated after the expiry of the grace period for as long as hire was outstanding. Hire would continue to run during this period and charterers were to indemnify owners for any consequences resulting from the owners’ suspension of performance, and to pay for any extra expenses resulting from the suspension. NYPE 2015 now provides that the owners’ right of suspension now exists ‘at any time while hire is outstanding’ and deletes the reference to the expiry of the grace period.

Clause 23 dealing with liens has been amended so as to create a lien on sub-hires and sub-freights due to any sub-charterers. This is in accordance with the interpretation of the effect of a lien on sub-freights in cases such as The Cebu [1983] 1 Lloyd’s Rep 302, QB, and The Western Moscow [2012] EWHC 1224 (Comm); [2012] 2 Lloyd’s Rep. The lien on sub-freights and or sub-hires is also extended to deadfreight and demurrage.