The English High Court has issued useful guidance for underperformance disputes, which are commonplace these days under time charters for dry bulk carrier vessels.
The background facts
The vessel was trip time chartered under the NYPE form and performed a ballast voyage (at two different ordered speeds, during two legs) from China to Canada and a voyage carrying coal from China to South Korea.
The Charterers alleged underperformance worth USD 263,832.00 based on reports by AWT.
The vessel’s speed and consumption performance capability was warranted by reference to “good weather/smooth sea, up to max BF SC 4 / Douglas sea state 3, no adverse currents, no negative influence of swell”. It was agreed that the first two criteria referred to a wind speed up to Beaufort Force 4 (16 knots) and a sea state of up to 1.25 meters.
The sole arbitrator concluded that there was no admissible ‘good weather’ during either voyage and dismissed the Charterers’ claim on the following grounds:
- Two of AWT’s ‘good weather’ periods during the first leg (14 hours and 16 hours) were inadmissible because each was less than 24 consecutive hours, running from noon to noon.
- AWT’s third (8 hour) ‘good weather’ period was not ‘good weather’ because the wind was Beaufort Force 5 and the sea wave height exceeded 1.25 metres; and AWT’s fourth (23 hour) ‘good weather’ period was not ‘good weather’ due to 1.8 metres of adverse swell.
- Had AWT’s ‘good weather’ periods been correct, a ‘good weather’ analysis – and therefore the Charterers’ claim – would have been restricted to the first leg because AWT’s ‘good weather’ during the second leg (5.51% of the duration of the leg) was insufficiently short to be representative of the second leg.
- Of AWT’s 27 hours of ‘good weather’, 6 hours were not ‘good weather’ because of adverse swell; 3 hours were inadmissible because the vessel likely slow steamed in shallow water during that time as she approached the land; and the remaining 18 hours were inadmissible because they were less than the required 24 consecutive hours (running from noon to noon) and they were insufficiently short (5.336%) to be representative of the laden voyage.
The Charterers appealed to the High Court on the basis that the arbitrator had made various errors in law.
The Commercial Court decision
The Judge held that there could be no appeal against the arbitrator’s exclusion of the ‘good weather’ during the ballast voyage/second leg and during the laden voyage on the basis that they were insufficiently short to be representative, because this was not a question of law – it went to how the arbitrator assessed the evidence (which was a matter for him).
However, the Judge agreed with the Charterers that the arbitrator had erred in law in two respects:
- He was mistaken in finding that 24 consecutive hours (from noon to noon) were required for a period to constitute admissible ‘good weather’, because the charter party clause did not require this. The Award was remitted to the arbitrator for him to consider whether the 14 hour and 16 hour periods of ‘good weather’ during the ballast voyage/first leg were sufficient to be representative – and, if so, in accordance with the the Didymiand the Gas Enterprisedecisions, apply that performance breach to the remaining leg/voyage (excluding slow steaming periods on the Charterers’ instructions) to quantify the Charterers’ underperformance claim for the whole of the charter period.
- He was also mistaken in holding that the performance warranties were limited to ‘good weather’ such that the Charterers’ claim would (if AWT’s ‘good weather’ periods were correct) have been limited to the ballast voyage/first leg. If the arbitrator had been saying that no ‘good weather’ meant that a performance breach could not be established, this would have been unobjectionable. However, the arbitrator was altogether failing to apply the ‘good weather’ extrapolation approach which, in the Judge’s view, was possible in the manner outlined above.
The Judge’s decision is a timely reminder that if parties intend for ‘good weather’ in a charterparty performance clause to consist of 24 consecutive hours (running from noon to noon), the clause must say so.
As to his ruling that a breach of the performance warranty during the ballast voyage/first leg (if found by the arbitrator upon a remission of the Award) should be applied to the second leg and to the laden voyage, this assumes that such extrapolation was possible despite the fact that different performance warranties apply to the other leg/voyage. However, this leaves open the question as to what should follow if a tribunal feels unable to extrapolate a breach of a performance warranty (by reference to ‘good weather’) during one voyage to other voyages to which other performance warranties applied. Ultimately this will be a technical, evidential question.
Finally, whilst the Judge commented, obiter dictum, that it may be that a performance breach can be established other than by way of ‘good weather’ extrapolation, as suggested in Time Charters (7th ed.) § 3.68, it should be noted that the submission in Time Charters was merely that this may become possible if/when weather date and performance modelling becomes more sophisticated and accurate – so as to allow breach and loss to be established in a single analysis. Therefore, this non-binding comment by the Judge may need be treated with caution.
Source: Reproduce from Evangelos Catsambas and Stavroula Mylona