Category: Trip charter

When do time charterers have to pay hire after redelivery? When there’s the right form of underwater cleaning clause. So held Sir Ross Cranston (sitting as a High Court Judge) in The Globe Danae (Smart Gain Shipping v Langlois Enterprises) [2023] EWHC 1683 (Comm). The clause in question, in a trip charter, provided:

“Clause 86 Hull Fouling

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.”

The issue at stake was whether Owners could claim the hire rate (and related expenses) for the time used in hull cleaning after redelivery, or whether they were confined to a claim in damages for breach of the charterparty. In arbitration the Charterers argued that they were not obliged to carry out cleaning after redelivery of the vessel, and Owners were confined to a claim in damages to put them in the position they would otherwise have been in and were not entitled to the cost of hire since there was no longer an obligation to pay it. The Tribunal rejected these arguments and found for Owners, referring to The Nicki R [1984] 2 Lloyd’s LR 186, which involved a similar clause concerning stevedore damage, as authority for the proposition that the Owners were not required to demonstrate loss of time regardless of whether the cleaning was performed before or after redelivery. If a clause allocates liability for the time to the charterer, the owners do not have to prove any actual loss of time and Owners can claim in debt.

On an appeal pursuant to s.69 of the Arbitration Act 1996, Sir Ross Cranston upheld the award of the Tribunal. First, the words of the second sentence supported the tribunal’s conclusion and the Owners’ construction. Cleaning was to be “always at Charterers’ time”, and that meant  that the Charterers must always pay for the time associated with underwater cleaning. The phrase “at the first workable opportunity” covered both before and after the charterparty. As this charterparty was for a single trip, the first workable opportunity for cleaning following a 25 or 30-day idle period would likely be once the charter had concluded and the vessel had been redelivered.

Had the parties intended for Charterers to compensate the Owners for any “loss of time” resulting from the cleaning, the language of clause 86 could have said this. But the clause used the phrase “always at Charterers’ time”.  The charterparty contained clauses “at Charterers’ time” or similar, and clauses referring to “loss of time” or similar, so that the parties must be taken to have intended that a distinction be drawn between the two phrases. The plain words of the clause therefore supported the Tribunal’s conclusion, The clause required that the cleaning be at the Charterers’ time and expense. The charter did not expressly stating that underwater cleaning must be undertaken before the vessel is redelivered to the Owners.

As to commercial purpose, the rationale of clause 86 was that the vessel needed underwater cleaning because of the Charterers’ orders that it remain idle and must therefore pay for the time and cost of remedying the consequent fouling. The vessel could be redelivered unclean, but then Charterers must compensate the Owners at the hire rate for the time when cleaning is undertaken. This was commercially sensible. What would not be commercially sensible would be to provide the Charterers with an incentive to redeliver the vessel without cleaning, and to evade having to pay hire for the time spent cleaning, unless there was a workable opportunity for that to be undertaken before redelivery.

To conclude, there was no reason not to apply The Nicki R and it was binding.

 London Arbitration 14/23

This is a decision of the tribunal that illustrates the range of express (and implied) terms that are available in standard charter forms for an owner whose ship is damaged or ends up incurring expenses as a result of natural events affecting the area in which the chartered vessel has been directed.   

The vessel was chartered on a trip charter via the US Gulf to China with a duration of about 80 to 90 days on an amended NYPE 1946 form. The vessel arrived at Southwest Pass, Mississippi River on 18 August 2021. The master received a weather forecast indicating that a hurricane would develop in the Central Gulf by the evening of 28 August. He sought urgent instructions from charterers about berthing before the storm’s landfall. On 28 August, when the vessel was still at anchorage, tropical storm Ida hit the region. Throughout 28 and 29 August, the deck log repeatedly reported that the vessel touched the bottom. The ship was ultimately grounded around 7 m from the riverbank as a result of the storm. On 31 August, the vessel, with the assistance of tugs was refloated and re-anchored nearer to the channel. While waiting for berthing, on 12 September, the vessel turned owing to the strong winds and one of the anchor cables was leading under the keel. As a result, the anchor chain fouled and when a berth became available on 21 September, she could not proceed to the berth available. On 24 September, the cables were disentangled with the assistance of two tugboats. After the vessel arrived at the discharged port, she was inspected (an underwater survey) and there was significant evidence of hull fouling but there was no evidence of damage as a result of the bottom touching on the riverbed. 

The owners brought 3 claims to the charterers (which were considered by the tribunal):

1. The cost of refloating, shifting, and re-anchoring the vessel on 31 August (US$ 17, 165.40);
2. The cost of disentangling anchor cables (US$ 12,320) and deduction made from hire (off-hire) for consequential delayed berthing (US$ 118, 738.76); and
3. The cost of inspecting the hull and cleaning on 28 November (US$ 32, 414.82).

     

On (i) the tribunal found in favor of the owner giving several legal reasons:

a) It was the view of the tribunal that the anchorage was not safe as the hurricane was not an abnormal occurrence (it was of an intensity that was within the normally expected bounds for the season in The Gulf of Mexico). Hence, the anchorage did not have the infrastructure or facilities to deal with the events expected (The Eastern City [1958] 2 Lloyd’s Rep- 127 and The Ocean Victory [2014] 1 Lloyd’s Rep 59).

b) The charterer was in breach of the warranty in the charter that the vessel would always be afloat.

c) As the vessel’s anchoring at that location was in compliance with the charterer’s orders, the expenses of the tugs would be recoverable under the indemnity implied in cl 8 (employment order).      

The owner was also allowed to recover all sums claimed under (ii) on several grounds: 

a) The cost of entangling the anchor cables (US$ 12,320) was allowed as this was deemed to be an expense arising from the unsafe nature of the anchorage place. 

b) The vessel was also deemed to be on hire for the period because of the same reasoning so the charterers were held to be in error for making a deduction from hire for the time lost when berthing the vessel. (This is very much in line with the legal authority pointing out that charterers cannot put a ship off-hire in circumstances when the loss of time is caused by events for which s/he is responsible (The Laconian Confidence [1997] 1 Lloyd’s Rep 139).  

It is worth noting that the charterers’ alternative argument that the fouling of the cables was the result of the master’s negligence (e.g. failing to implement any or any adequate steps or procedures appropriate to the technical specifications and characteristics of the vessel) failed on evidence but it was also pointed out by the tribunal that owners were not responsible for loss or damage resulting from master’s negligence by virtue of Article IV, rule 2(a) of the Hague Visby Rules incorporated into the charter as a result of the Clause Paramount. 

The owner’s claim for hull fouling (iii) was based on cl 100 of the charterparty which stipulated that:

“Where the vessel remains at anchorage, in port, or idle for a period exceeding 25 consecutive days (whether in tropical waters or not) in compliance with Charterer’s instructions, and this causes fouling of the hull or underwater parts, Owners shall not be responsible for such fouling or any vessel underperformance caused by such fouling. Charterers to arrange, before redelivery, the vessel’s underwater hull area to be inspected and cleaned, if necessary. The cost of cleaning the hull or underwater parts, and the time spent doing so, shall be for the charterer’s account.”     

The charterers argued that cl. 100 applied only to prolonged stays in salt water, and not freshwater as in the Mississippi River (although there is no authority on this issue this is in practice deemed to be the correct assumption). To demonstrate that hull fouling could have happened when the vessel was at anchorage, the owner submitted an article from a US news outlet which reported drought conditions had resulted in near-record low water levels in the Mississippi and, as the flow in the river dropped, it lost its ability to keep salt water from the Gulf of Mexico at bay. The tribunal refused to rely on this article to sustain the argument that the degree of salinity necessary to support the relevant maritime organisms had developed in the Mississippi River. Even though the tribunal did not expressly rule on the issue, their reasoning indicates that they accepted the submission of the charterers that the ship’s bottom cannot be fouled in freshwater environments. On that basis, the owner’s claim for the cost of inspection and cleaning (iii) failed.   

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.