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When is an owner obliged to commence the approach voyage to the loadport?

29.11.2018 Shipping

Max Cross

Max Cross Partner

Ruaridh Guy

Ruaridh Guy Senior Registered Foreign Lawyer (England & Wales)

CSSA Chartering and Shipping Services SA v. Mitsui OSK Lines Ltd (Pacific Voyager) [2018] EWCA Civ 2413

The Court of Appeal has recently given its decision in this case, which will be of interest to all those involved in the chartering of vessels on a voyage basis. The Court of Appeal upheld the Commercial Court decision and found that the Owners’ failure to commence the approach voyage to the loadport by a particular date was a breach of the charterparty, notwithstanding that the charterparty did not give an ETA or Expected Ready to Load date.

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, pursuant to which final discharge was due to take place at the port of Le Havre/ Antifer. While under the previous charter, the vessel suffered damage attributed to contact with a submerged object. 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 of around US$ 1.2m.

The charterparty terms

The charter was on an amended Shellvoy 5 form, 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 for completion of the previous charterparty:

“ETA SUEZ CANAL 10 JAN, 2015 (TRANSIT)
ETA SIDI KERIR 12 JAN, 2015 (RE-LOADING)
ETA ANTIFER 25 JAN, 2015 (DISCHARGING)

ALL ABOVE BSS IAGW/WP”

The charterparty did not give an ETA or Expected Ready to Load (“ERTL”) date at the loadport, Rotterdam.

The issue

In summary, the dispute was whether the Owners’ failure to commence the approach voyage by a particular date was a breach of the charterparty.

It is well established that, where a voyage charter contains both an “utmost despatch” provision and an ETA or ERTL, there is an absolute obligation on the owners to commence the approach voyage by a date when it is reasonably certain that the vessel will arrive at the loadport on or around the ETA or ERTL. It has not previously been clear whether there is such an obligation where, as here, a charter contains no ETA or ERTL.

The Commercial Court decision

The Court found in favour of the Charterers, stating that there was an obligation on the Owners in this context to proceed to the loadport at a particular time. That obligation was an absolute one, not a due diligence obligation. The exact time at which the obligation arose was to be determined by looking at the charterparty as a whole. Here, the ETA at Antifer could be used to derive a time at which the vessel would be expected to commence the approach voyage.

The Court also expressed the view that, even if the ETA Antifer had not been present, it would have been possible to look at the cancelling date under the charterparty and then work backwards from there to establish when the obligation to begin the approach voyage arose.

The Court of Appeal decision

The Court of Appeal upheld this decision and rejected the Owners’ appeal.

The Court of Appeal identified the utmost despatch obligation as an important one, which is intended to give comfort to charterers. Without a particular time at which the obligation attaches, it would be meaningless. From there, the only issue is how exactly one establishes that time, in circumstances where no ETA or ERTL at the loadport has been stated.  In that regard, the Court of Appeal approved the judge’s approach of looking at the itinerary given for the previous voyage and working forwards from there. The Court of Appeal emphasised that there would be little other reason for this itinerary to be included – it would not otherwise be of interest to the Charterers.

The Court of Appeal echoed a point made in previous cases that owners will need to use very clear words indeed if the risk of problems such as that which occurred is to be shifted onto charterers.

Finally in this respect, the Court of Appeal cast doubt on the idea, referred to above, that it would be permissible to take the cancelling date and work backwards if no itinerary for the previous voyage were included. These comments are not binding, but would clearly be relevant if this issue were to arise in future.

Comment

The Owners have sought leave to appeal this decision to the Supreme Court. If leave is granted, we will report on the Supreme Court decision in due course. Pending that, charterers can still best protect themselves by including an ETA at the loadport or ERTL date, rather than relying on an itinerary from a previous voyage.

From owners’ perspective, the decision emphasises that they bear the risk of things going wrong in the time between a fixture being concluded and the approach voyage beginning.  As mentioned above, shifting this risk onto charterers will require very clear words. However, such clear words would be unusual and very possibly commercially unacceptable.

Article authors:

Max Cross Ruaridh Guy