NYK Bulkship (Atlantic) v Cargill International - The Global Santosh - Court of Appeal
NYK Bulkship (Atlantic) NY v Cargill International SA, The “Global Santosh”
Court of Appeal; Gross LJ, Gloster LJ, Sir Burnton;  EWCA Civ 403, 8 April 2014
Timothy Young QC (instructed by Maritime Law Office Skinitis) for NYK Bulkship (Atlantic) NY, Owners
Andrew W Baker QC and Daniel Bovensiepen (instructed by Holman Fenwick Willan LLP) for Cargill International SA, Charterers
OFF-HIRE CLAUSE RE DELAY ARISING FROM ARREST OF VESSEL: WHETHER SUB-CHARTERERS AND RECEIVERS WERE ‘AGENTS’ OF THE CHARTERERS: WHETHER THE PERSONAL ACT, OMISSION OR DEFAULT TO WHICH CLAUSE REFERRED MUST HAVE OCCURRED DURING PROVISION OF RELEVANT SERVICES
The critical Clause 49 read: “Should the vessel be captured or seizured (sic) or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents…”
The Court of Appeal upheld the decision of Mr Justice Field at first instance, finding that the proviso to Clause 49 could apply in the circumstances of this case (with the result that the vessel’s arrest might not put her off-hire), and remitting the factual decision to the Tribunal. However, unlike Field J, the Court of Appeal did not limit the proviso to Clause 49 to acts or omissions occurring during the delegate’s performance of the delegated task. For the note on Field J’s decision at EWHC 30 (Comm), click here [].
This note has been contributed by Justin Gan Boon Eng, LLB (Hons) (NUS), a Registered Foreign Lawyer (Singapore) in Hong Kong
The Vessel was chartered on a modified NYPE 46 form by NYK Bulkship (Atlantic) N.Y. (“Owners”) as disponent owners to Cargill International S.A. (“Charterers”), and ultimately chartered to Transclear S.A. (“Transclear”). The Vessel carried a cement cargo which Transclear had sold to IBG Investment Ltd (“IBG”) C&F free out; IBG was responsible for unloading and would pay demurrage to Transclear if unloading were delayed. Unloading (at Port Harcourt, Nigeria) was delayed partly due to the breakdown of IBG’s unloader. Transclear arrested the cargo to secure its demurrage claim. By error, the Court order arresting the cargo also directed the arrest of the Vessel. Charterers, in reliance upon cl.49, put the Vessel off-hire for the period she was under arrest. Field J had held that the word “agents” extended to delegates of the Charterers’ responsibilities under the charter, i.e. sub-charterers, receivers, etc., regardless of the precise contractual relationships between each. (This was not challenged on appeal.) However Field J limited Clause 49’s applicability to a “personal act or omission or default” occurring during the delegate’s performance of the delegated task, and therefore considered that only the acts of IBG were relevant to Clause 49:
(a) When Transclear (the end-charterer) arrested the cargo (and by mistake, the vessel), it was not performing any responsibility delegated to it by Charterers – Transclear had a demurrage claim against IBG but Charterers did not.
(b) IBG (the receiver) failed to unload the cargo within the laydays and/or pay demurrage or furnish security. Field J considered that IBG was Charterers’ delegate of the obligation to unload, and that IBG’s failures potentially “occasioned” the vessel’s arrest – he remitted the question of causation to the Tribunal.
Charterers appealed: Clause 49 applied only to a “personal act or omission or default” occurring during the delegate’s performance of the delegated task, but in this case, there was a mis-match between Charterers’ obligation (to perform all cargo handling) and IBG’s obligation (to unload the cargo within the laydays). Further, Charterers did not have to ensure that third parties did not prevent cargo-handling operations.
Owners cross-appealed: Clause 49 was not limited to acts or omissions occurring during the delegate’s performance of the delegated task. Further, if so, remittance to the Tribunal was unnecessary as “occasioned by” is very broad and IBG’s failures had caused legal action resulting in the vessel’s arrest.
The Court of Appeal agreed with Owners’ interpretation of Clause 49, but remitted the question of causation to the Tribunal.
The Court of Appeal (Gross LJ) referred to the focus on commercial consequences and business common sense stated in Rainy Sky SA v Kookmin Bank  UKSC 50. It found that Clause 49 was not limited to acts or omissions occurring during the delegate’s performance of the delegated task (in consequence rejecting Charterers’ primary argument on appeal):
(1) Clause 49 contained no such limitation. Further since “agent” in Clause 49 was to be read broadly as “delegate”, it was immaterial that sub-charterers and other parties captured by the proviso to Clause 49 were not Charterers’ agents in the strict sense of undertaking a particular charter obligation for Charterers.
(2) Such limitation would require an artificial exercise of matching obligations between different contracts, e.g. sub-charter and sale contract, which should be avoided.
(3) This reading allowed a broad division of responsibility under Clause 49, in a manner consistent with the commercial context (where Owners were not involved in Charterers’ subsequent sub-charters of the vessel, or the dispute between the end-charterer and receiver).
Applying this approach, the acts and omissions of both Transclear and IBG had to be considered to determine whether either, or both, “occasioned” the vessel’s arrest. As the Tribunal had not rendered a decision on the point, Field J’s decision to remit the matter to the Tribunal was upheld.