Scope of owners’ obligation to proceed to load port with utmost despatch

“CSSA Chartering and Shipping Services SA v. Mitsui OSK Lines Ltd (Pacific Voyager) [2017] EWHC 2579 (Comm)”

In this case, the Commercial Court considered a novel point in respect of owners’ obligation under the terms of a voyage charterparty to commence the approach voyage and get the vessel to the load port within a reasonable time. Relying upon and extending the 1935 Court of Appeal decision in Monroe Brothers Limited v. Ryan (“Monroe”), the Court concluded that the obligation is an absolute one.

It is well-established that if an owner does not get the chartered vessel to the delivery place within the laycan, then the charterer usually has the right to cancel the charterparty. The Pacific Voyager deals with the effect of not commencing an approach voyage to the port in sufficient time.

The background facts

The vessel was under a voyage charter on the Shellvoy 5 form dated 5 January 2015 to the Claimant Charterers (“the Charterers”) for a voyage from Rotterdam to the Far East.

At the time of the fixture, the vessel was laden with cargo under a previous charter where final discharge was due to take place at the port of Le Havre. While under the previous charter, the vessel suffered damage attributed to contact with a submerged object and she developed a starboard list. There was no suggestion that the vessel or the Owners were in any way at fault.

The cancellation date under the new fixture was 4 February 2015. The Owners informed the Charterers that the vessel was due to drydock on 8 February for repairs and that those repairs would take months. On 6 February, therefore, the Charterers terminated the charterparty and then brought a claim for damages.

The charterparty terms

The charter was on Shellvoy 5 terms with agreed amendments, including the following:

Clause 3

“…the vessel shall perform her service with utmost despatch and shall proceed to Rotterdam and … load a full cargo…”

The fixture recap also provided details of the anticipated timetable (ETAs) for completion of the final discharge voyage in place at the time.

The parties’ arguments

By way of background, in this case the Owners gave no ETA at the loading port nor any date of expected readiness to load. However, the charter contained a laycan range and the usual express power vested on the Charterers to terminate if the vessel did not arrive by the specified cancelling date. The option to terminate brings the charter to an end, but confers no right to damages.

The Charterers sought to rely upon the Court of Appeal judgment in Monroe.

In that case, the Court of Appeal held that where a voyage charter contains an obligation on an owner to proceed with all convenient speed to the load port and gives a date when the vessel is expected to start loading, owners have an absolute obligation to commence the approach voyage by a date when it is reasonably certain that the vessel will arrive at the load port and commence loading on or around the expected readiness to load date (the “Monroe obligation”). Later authorities extended this type of absolute obligation in cases where the charter provides an ETA.

In this case, the Charterers sought to extend the Monroe obligation to apply where there is no ETA provision, but merely a cancelling date. Accordingly, the Charterers contended that the Owners had an absolute obligation to commence the approach voyage by a date when it was reasonably certain that the vessel would arrive at the loading port within the laycan period and, in any event, before the cancelling date.

The Owners rejected the Charterers’ argument and contended that, in the absence of a loadport ETA, the obligation to proceed with utmost despatch by the cancelling date was merely one of due diligence.

The Commercial Court decision

The Court found in favour of the Charterers. In summary, the Court reached the following conclusions:-

(a)  The obligation requiring the vessel to commence the voyage with utmost despatch is absolute. In the absence of an ETA, the Clause 3 obligation attaches at a particular point in time, which must be a reasonable time and which is determined by the charterparty provisions.

(b)  In this case, the charterparty provided a cancelling date – not an ETA in respect of the vessel’s estimated arrival at the load port. However, the charter contained ETAs that the Owners were prepared to give in relation to the ETA of the vessel at the intermediate ports for the cargo operations of the previous voyage, including her final discharge at Le Havre. The Court found that the intermediate port ETAs were equivalent to an ETA of arrival at the load port for the purpose of deriving a time at which the vessel could be expected to commence her approach voyage and come under an obligation to proceed with utmost despatch.

(c)  Going a step further, the Court noted that even if there were no ETAs for the intermediate voyage, the underlying differences between a cancelling date and an ETA were not sufficient to treat them differently for the purpose of the Monroe obligation. Therefore, the Court concluded that an obligation to commence the approach voyage by reference to a laycan period in the charter stands as absolute.

On the basis of the above, the Court concluded that the Owners had an absolute obligation to commence the approach voyage and get the vessel to the load port within a reasonable time.

Comment

This case develops the position with regard to rights of cancellation and to the effect of an ETA for the purpose of identifying the starting time of an owner’s obligation to commence the approach voyage. It is not yet known if the case will go to appeal, but meanwhile we would recommend that, to avoid complications in similar cases, it is advisable for parties to ensure that they draft their contracts with sufficient clarity to achieve the desired result – and, in particular, in this context, to make explicit reference to the expected time of arrival.

Soruce : InceLaw