CSSA Chartering and Shipping Services v Mitsui O.S.K. Lines - The Pacific Voyager

From DMC
Jump to: navigation, search

DMC/SandT/18/01

England

CSSA Chartering and Shipping Services S.A. v Mitsui O.S.K. Lines Ltd (The “Pacific Voyager”)

English Commercial Court: Popplewell J: [2017] EWHC 2579 (Comm): 18 October 2017

John Russell QC (instructed by Clyde & Co LLP) for CSSA

Stewart Buckingham (instructed by Kennedys Law LLP) for Mitsui

VOYAGE CHARTER: SHELLVOY 5 FORM: WHETHER OBLIGATION ON OWNER TO GET THE VESSEL TO THE LOADING PORT WITHIN A CERTAIN TIME: WHETHER SUCH AN OBLIGATION IS ABSOULTE OR ONLY ONE OF DUE DILIGENCE: WHETHER LAYCAN EQUIVALENT TO AN ESTIMATED TIME OF ARRIVAL OR READINESS TO LOAD DATE

An appeal on this judgment is to be heard by the Court of Appeal later in 2018.

Summary

Where a charterparty provided for a vessel to perform the chartered service with utmost dispatch and contained an express obligation to proceed to the port of loading, there was an absolute obligation on the vessel to commence her approach voyage to the loading port by a date when it was reasonably certain that the vessel would arrive at the loading port on or around the expected readiness to load date or, alternatively, prior to expiry of the laycan. This was so, even where, as in this case, the charterparty contained no estimated time of arrival at the loading port nor any date of expected readiness to load and included instead only an estimated timetable relating to the previous voyage.

Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor of England & Wales, and International Contributor to DMC’s Case Notes

Background

The disponent owners (“Owners”), Mitsui, chartered the vessel, “Pacific Voyager”, on a Shellvoy 5 form to the charterers (“Charterers”), CSSA, for a voyage from Rotterdam to the Far East, at a time when the vessel was laden with another cargo under a previous charter. That cargo was due for discharge in Egypt shortly after the charterparty in this case had been concluded.

Whilst transiting the Suez Canal, the vessel suffered rapid water ingress and developed a list, with the cause being attributable to contact with submerged dredging equipment, and no apparent fault being attributable to the vessel or Owners.

An underwater survey confirmed the vessel had to discharge her cargo and perform a drydocking to repair the damage before she could perform any further voyages. The repair work, according to Owners, was expected to take months. They duly informed Charterers of the situation and, in consequence, Charterers exercised their right to cancel the charterparty.

Charterers brought a damages claim for USD1.2m on the basis that, despite Owners having given no estimated time of arrival at the loading port nor any date of expected readiness to load, the Monroe (fn.1) obligation (being an absolute obligation to commence the approach voyage to the loading port by a date when it is reasonably certain that the vessel will arrive at the loading port on or around the estimated time of arrival or expected readiness to load date) arose by reference to the cancelling date.

Owners disputed that any such absolute obligation existed in this charter, as the lack of estimated time of arrival or expected readiness to load date meant no such implication was to be made. They contended instead that their obligation was to use due diligence to ensure the vessel commenced the approach voyage by such date, based on The “Democritos” (fn.2).

Judgment

The judge highlighted that the Monroe obligation (originally formulated in circumstances where the owners had agreed to perform an intermediate charter after entering the subject charter) has been applied in a number of circumstances:

(i) Where the owners’ obligation was simply to proceed to the loading port without any reference to speed or despatch, it being implied that such obligation is to be performed with all convenient speed or utmost despatch (fn.3);

(ii) Where the owner had given an estimated time of arrival at the loading port, rather than of expected readiness to load (fn.4);

(iii) Where the vessel was at the time of the charter still performing her previous service (fn.3) to the knowledge of the parties (fn.5).

The judge further identified four key issues that formed the background to the decision to be made in this case:

(1) The owners and the charterers under a voyage charter have conflicting interests in relation to contractual terms governing the timing of the arrival of a vessel at the loading port;

(2) The issue turns in every case upon the particular charter terms agreed between the parties, because the issue is one of contractual allocation of risk between these conflicting interests;

(3) A cancelling clause provides some protection for the charterers, but it does not comprise a promise by the owners that the vessel will arrive by the cancelling date; the only remedy it affords to charterers, if the vessel does not arrive by that date, is that of bringing the charter to an end;

(4) The chartered service begins with the approach voyage to the loading port. The charter terms apply to that period, including the exceptions and limitations on the owners’ liability for delay or mishaps but, by contrast, the employment of the vessel in other services prior to the chartered service is not the subject matter of the parties’ bargain.

Having considered the charter terms agreed, the parties’ submissions, and undertaken a detailed consideration of the case law, the judge determined the following:

(A) The rationale for imposing the Monroe obligation is the combination between the expected date of arrival or readiness, and the term requiring the vessel to use all convenient speed or utmost despatch to proceed to the loading port, although the judgment in Monroe does not spell out why that is so.

(B) The judgment of Devlin J in The “North Anglia” explained that the obligation to proceed to the loading port with all convenient speed must arise at a particular identifiable time, with the obligation being fashioned to coincide with the commencement of the chartered service, being the approach voyage.

(C) Where that time is not agreed as a fixed date, the process must start within a reasonable time of the charter date, by reference to Tarrabochia v Hickie (fn.6). What is a reasonable time is governed by the other charter terms and depends on what they contemplate as the time when loading will take place.

(D) The obligation is an absolute one for two reasons. First, the date at which the obligation to proceed to the loading port arises is one which the parties need to be able to identify with reasonable certainty. Second, the date when the approach voyage is to start marks the point at which the parties have bargained for the allocation of risk and responsibility for delays and other contingences by the application of the charter terms.

(E) For those reasons, Owners’ submissions faced a number of difficulties. First, The “Democritos,” which concerned a time charter, provided no authority or guidance as to the arrival terms to be implied into a voyage charter. That was a case in which the commencement of the time-chartered service depended upon arrival at the loading port. There was, therefore, no part of the chartered service comprising the approach voyage, as there usually is in voyage charter cases, and no express duty to proceed to the loading port with utmost despatch. This is a critical distinction, because The “Democritos” implied term would be inconsistent with the express terms of most voyage charterparties, including the one in this case, in which there was an express obligation to proceed to the loading port.

Second, the implied term contended for was not the same as The “Democritos” implied term; it differed in two respects. The “Democritos” implied term was aimed at the time of arrival at the loading port, whereas the current issue concerned identification of the moment when the duty to proceed with utmost despatch to the loading port commences, a different and prior event; fulfilment or breach is measured by reference to a different point of time. Moreover, the term alleged differs from The “Democritos” implied term in that it concedes an absolute obligation once the duty to commence the approach voyage arises.

Third, a term of the kind contended for would give rise to unacceptable commercial uncertainty.

(F) Accordingly, the judge decided that, as in each of the voyage charter cases cited, there was in this charter an absolute obligation on Owners to commence the approach voyage, when the obligation to proceed to the loading port attaches, at a particular point of time, with that time to be a reasonable time, with the identification of when is reasonable falling to be determined in the light of the other charter terms.

(G) Alternatively, the judge decided that there was an absolute obligation to commence the approach voyage by a date when it was reasonably certain the vessel would arrive at the loading port by the cancelling date as - although there are differences between a cancelling date and an estimated arrival date - they are not sufficient to treat them differently for the purposes of the Monroe obligation.

Comment

Whilst there might be some grounds for saying that this judgment provides a logical extension to the circumstances where the Monroe obligation has previously been held to apply, its correctness can also be questioned.

As some of the key features for the application of the Monroe obligation were missing in this case and given that a laycan is no more than a contractual right of cancellation without the need to prove any fault, determining the start point for the application of the obligation is not straightforward when reasonable certainty is desirable for commercial purposes. In that the parties could have chosen a conventional formulation, had they so wished, to achieve that result, this judgment could instead be viewed as going beyond, rather than simply giving effect to, the charter terms that were agreed.

As this judgment is under appeal and due to be heard by the Court of Appeal in October 2018, clarification should be handed down later this year.

Footnote 1: Monroe Brothers Ltd v Ryan [1935] 2 KB 28 (CA)

Footnote 2: Marbienes Compania Naviera S.A. v Ferrostaal A.G. (The “Democritos”) [1975] 1 Lloyd’s Rep 386 (QBD); [1976] 2 Lloyd’s Rep 149 (CA)

Footnote 3: Louis Dreyfus & Co v Lauro (1938) 60 Lloyd’s Rep 94

Footnote 4: Mitsui O.S.K. Lines Ltd v Garnac Grain Co. Inc. (The “Myrtos”) [1984] 2 Lloyd’s Rep 449

Footnote 5: Evera S.A. Commercial v North Shipping Company Ltd (The “North Anglia”) [1956] 2 Lloyd’s Rep 367

Footnote 6: Tarrabochia v Hickie (1856) 1 H & N 183