Performance warranty not qualified by fair wear and tear.

In The Coral Seas (Imperator I v Bunge SA) [2016] EWHC 1506 (Comm), owners were faced with a claim by time charterers for underperformance on their speed warranty. Their defence was that the underperformance was due to fouling after waiting in warm water ports to which the vessel had proceeded pursuant to charterers’ orders. They relied on the following statement of principle in Wilford on Time Charters. Time Charters 7th Ed. (2014) paragraph 3.75 as follows:

“Where the owners give a continuing undertaking as to performance of the ship, and the ship has in fact underperformed, it is a defence for the owners to prove that the underperformance resulted from their compliance with the charterers’ orders: see The Pamphilos [2002] 2 Lloyd’s Rep. 681 per Colman J., at page 690. In that case, the ship’s failure to achieve the promised performance resulted from marine fouling, which was in turn the result of the owners’ complying with the charterers’ order to wait for 21 days at a tropical port.”

Phillips J rejected their argument. The Wilford proposition was too widely stated. Colman J’s decision in The Pamphilos was in the context of refusing leave to appeal under s.69 of the Arbitration Act, and only reported because the application for leave was dealt with at the end of a judgment on an appeal under s.68. Furthermore the details of the performance warranty were not given.

Phillips J held that where a vessel has underperformed, it is not a defence to a claim on a continuing performance warranty for the owners to prove that the underperformance resulted from compliance with the time charterers’ orders unless the underperformance was caused by a risk which the owners had not contractually assumed and in respect of which they are entitled to be indemnified by the charterers.

The lesson for owners trading to warm water ports is to modify the performance warranty to exclude it in respect of voyages after the Vessel has been waiting in warm water ports,