Minerva Navigation v Oceana Shipping - the Athena

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DMC/SandT/14/01

England

Minerva Navigation Inc v Oceana Shipping AG; Oceana Shipping AG v Transatlantica Commodities S.A. The MV “Athena”

Court of Appeal; Tomlinson, Lewison and Underhill LJJ; [2013] EWCA Civ 1723; 17 July 2013

TIME CHARTER ON NYPE FORM 1946: OFF-HIRE CLAUSE 15: WHETHER “LOSS OF TIME” MEANS NET LOSS OF TIME IN THE SERVICE IMMEDIATELY REQUIRED OR IN THE OVERALL CHARTER SERVICE

Mr Richard Lord QC, instructed by Holman Fenwick Willan LLP, for Minerva Navigation Inc, Owners

Mr Michael Nolan, instructed by W Legal Limited, for Transatlantica Commodities S.A., Charterers

Summary

The Court of Appeal allowed Owners’ appeal and reversed the decision of Walker J in the High Court. It held that, in determining whether a vessel was off-hire, the Court need only inquire into the service immediately required of the vessel at the time of the off-hire event. It was not necessary to enquire into “the chartered service” as a whole or the entire maritime adventure.

Case Note contributed by Ervin Tan, B.A. (First Class) Oxon., based in Singapore.

Background

The Vessel was chartered on a modified NYPE 46 form by Minerva Navigation Ltd (“Owners”) to Oceana Shipping AG (“disponent Owners”), and by Oceana Shipping AG to Transatlantica Commodities S.A. (“Charterers”) on materially identical terms.

Clause 15 provided in pertinent part that “…in the event of loss of time from... default of master... or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost”.

The Vessel was to carry a wheat cargo from Russia to Syria. Due to a dispute with the Syrian receivers, Charterers ordered the Vessel to discharge at Benghazi instead. The bills of lading had to be switched and Owners refused to discharge the cargo in Benghazi until the original bills were returned.

During this dispute, the Vessel stopped in international waters off Benghazi on 19 January 2010 and did not proceed to Benghazi until 30 January 2010. For unrelated reasons, the Vessel only berthed on 3 February 2010, after the bill of lading problems had been resolved, and completed discharge on 18 February 2010. Charterers claimed hire paid and expenses incurred for the period 19 - 30 January 2010 from Oceana Shipping AG, the disponent Owners, who made a similar claim against the head Owners.

Separate references to arbitration were made, in which the claimants were successful. The decision to stay within international waters from 19 - 30 January 2010 constituted “default of master”, which caused the Vessel’s delayed arrival at Benghazi and the consequent loss of time.

The arbitrators found as a fact that the Vessel would in any case have only been able to berth on 3 February 2010, but held in favour of the Charterers: “Whether the same time would have been lost for other reasons had she proceeded directly to Benghazi is irrelevant to a claim under the off hire clause. The time was lost in relation to the service immediately required of her and that is sufficient.” Owners obtained leave to appeal on a question of law in relation to this finding, and disponent Owners dropped out of the proceedings after leave to appeal was obtained.

In the High Court, Walker J held that the essential question was whether “time thereby lost” applied to a period of time where Charterers did not have the service immediately required of the vessel but nevertheless did not suffer any net loss of time as measured across “the chartered service” as a whole or the entire maritime adventure. Charterers appealed.


Judgment

Tomlinson LJ, after considering the authorities [fn.1], held that Clause 15 “is concerned to identify an actual period of real time during which time is being lost, not an identifiable length of time by which “the chartered service” or what the judge sometimes called “the charter service overall” can be said to have been delayed” [fn.2]. There are four reasons for this conclusion.

First, this conclusion was the “natural construction of the language” of Clause 15 [fn.3].

Second, Tomlinson LJ also relied on “sound practical reasons” for declining to construe “time thereby lost” as net loss of time over the entire maritime adventure. The Court of Appeal's approach “avoids intricate calculations, enabling the parties to know where they stand without having to wait on events subsequent to the period of inefficiency” which is “a consideration of prime importance bearing in mind the remedies available to the owners in the event that payment of hire is not made punctually” [fn.4].

Third, the alternative method of construing “time thereby lost” as meaning net loss of time under the “charter service overall” is flawed: “The use of the word “overall” begs the question what are the beginning and the end points of what is being measured. Without more, “the charter service overall” would seem to be a reference to the entirety of the service to be performed under the charter” but “[i]t is immediately apparent that, quite apart from the fact that there is no justification in the wording for the adoption of this approach, it would lead to precisely those intricate and speculative enquiries which were deprecated both by this court in Vogemann v Zanzibar and by Robert Goff J in The Pythia [fn.5].”

Assessing time lost by reference to “the chartered service overall” would also “give rise to the distinct possibility that the same triggering event could give rise to different consequences in terms of off-hire in back to back charterparties of differing length” [fn.6]; a result neither principled nor supported by authority.

Fourth, the Master's “arbitrary action has resulted in the upsetting of the normal allocation of the risk of delay”. In an ordinary case, “a vessel drifting at sea without proceeding to the port during a period when the vessel would otherwise have been awaiting a berth will have the result that the charterers are unable to start time running against their sub-charterers and the same will ordinarily be true as between sellers and purchasers” [fn.7]. Hence the judge's notion of the charterers gaining a “windfall” in the event that the vessel is off-hire during the drifting period is “wholly illusory”. The peculiar facts of this case may in fact create a “windfall”, but that is no reason to lay down a general rule which would otherwise upset the normal allocation of risk of delay.


Footnotes

1. Hogarth v Miller [1891] AC 48; Vogemann v Zanzibar Steamship Co Ltd (1902) 7 Com Cas 254; and Sig Bergesen DY & Co and Others v Mobil Shipping and Transportation Co (The “Berge Sund”) [1993] 2 Lloyd's Law Reports 453.

2. At [27] of the judgment.

3. At [27] of the judgment.

4. At [27] of the judgment.

5. [1982] 2 Lloyd's Rep 160, at [34] of the judgment.

6. At [34] of the judgment.

7. At [34] of the judgment.

8. At [36] of the judgment.