Charterparty Provision Capable of Creating A Claim in “Debt” or A Claim in “Damages”? That is the Question!  

Smart Gain Shipping Ltd v. Langlois Enterprises Ltd (The Globe Danae) [2023] EWHC 1683 (Comm)  

If the charterparty contains a clause that indicates that certain expenses are “always at charterers’ time and expense”, does that create a claim in “debt” for the benefit of the owner or claim in “damages” especially if expenses are incurred after the chartered vessel is redelivered? This is an interesting question as in the latter case, the owner needs to prove its loss to be successful in its claim. This was the main contention in the present case.

Facts can be briefly summarized. The Globe Danae was trip chartered to carry metallurgical coke in bulk to Brazil with an estimated duration of 40 to 50 days. The charterparty contained a “hull fouling” clause (cl 86) which stipulated:  

“Owners not to be responsible for any decrease in speed/increase in consumption of the Vessel whether permanent or temporary cause (sic) by Charterers staying in ports exceeding 25 days’ trading in tropical and 30 days if in non-tropical waters. In such a case, underwater cleaning of hull including propeller etc. to be done at first workable opportunity and always at Charterers’ time and expense. After hull cleaning vessel’s performance warranties to be reinstated.”  

On the instructions of the charterer, the cargo was loaded in India but after rejected by intended buyers, the vessel remained in idle, still laden, in tropical water ports in Brazil for 42 days. After the cargo was delivered and contract came to an end, the owners undertook cleaning of the hull and propeller prior to delivering her to next employment. The owners made a claim against the charterers in the sum of US$ 74,506.70 for the loss of time of 2.29 days spent cleaning. The charterers rejected the claim arguing that their obligation to carry out cleaning came to an end on the redelivery of the vessel, so that the only remedy open to owners was damages and to be successful in that claim they had to prove that they suffered loss of hire as a result of hull fouling. The arbitration tribunal held that the owners’ claim was in debt (not merely in damages) for loss of time and they were successful accordingly. The charterers appealed.

The High Court dismissed the appeal. Sir Ross Cranston stressed that it was important to construe the relevant clause (cl 86) in the charterparty in a manner that would make commercial sense. Considering the fact that the charterparty in question was for a single trip, he indicated that the first workable opportunity to clean the hull of the vessel was likely to present itself after the termination of the charterparty (after redelivery).  On that basis, he reached the conclusion that it must have been the intention of the parties with this clause to create an obligation on charterers to undertake such cleaning at the charterparty rate regardless of when it takes place.

To support this reasoning, he drew support from Damon Compania Naviera v. EAL Europe Africka Lime GmbH (The Nicki R) [1984] 2 Lloyd’s Rep 186. This case concerned a charterparty for a roundtrip from Europe to West Africa which included a similar clause: “Charterers to be responsible for damage to the vessel… done by stevedores … all damages… to be repaired after the completion of the voyage at charterer’s expense but in owner’s time provided that such damage does not affect vessel’s seaworthiness.” Stevedores caused damage on the chartered vessel and after the conclusion of the voyage the charterers arranged for repairs at the discharge port. While the repairs took place, over a period of five days, the owners also carried out repair work on the vessel’s damaged engine. The owners claimed hire for the period of repair. Bingham, J, held that where the damage affected seaworthiness, the charterers were responsible for the time spent on repairs at the hire rate whether or not the charterparty had come to an end. It was also held that there was no deduction for engine repairs given that the claim was in debt, based on period of repairs, not on damages for breach of contract (hence additional repairs were irrelevant). Sir Ross Cranston had no doubt that cl. 86 in the present charterparty was analogous to the one in The Nicki R, except that the issue there was stevedore damage rather than marine growth that necessitated hull cleaning.      

Ultimately, this was yet another charterparty case that turned on the construction of a clause in the contract. Few would suggest that the solution reached is not in line with commercial realities. The judgment also serves as a reminder that any clause in a charterparty (particularly in a time and trip charterparty) stating that liability for a particular event/occurrence is “always at charterer’s expense” is likely to extend charterer’s exposure to expenses incurred even after redelivery as a clause of that nature is likely to be construed as one that capable of creating a claim in “debt” rather than a claim in damages.