Navision Shipping v Precious Pearls & Conti Lines v Navision Shipping - The Mookda Naree
Navision Shipping A/S v Precious Pearls Ltd & Conti Lines Shipping NV v Navision Shipping A/S (The “Mookda Naree”)
English Commercial Court: Andrew Baker J:  EWHC 558 (Comm): 10 March 2021
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2021/558.html
Nevil Phillips (instructed by Birketts LLP) for Navision (Disponent Owners/Charterers)
Timothy Young QC (instructed by Stembridge Solicitors Ltd) for Precious (Head Owners)
Nigel Cooper QC (instructed by Lax & Co LLP) for Conti (Sub Charterers)
TIME CHARTER: ASBATIME FORM: VESSEL ARRESTED IN WEST AFRICA FOR CARGO CLAIM RELATED TO SHIPMENT OF SUB-SUB-CHARTERERS ON A DIFFERENT VESSEL: WHETHER VESSEL OFF-HIRE BY REASON OF ACT OR OMISSION OF SUB-CHARTERERS (CLAUSE 47): WHETHER VESSEL OFF-HIRE UNDER WEST AFRICAN CARGO CLAIM CLAUSE (CLAUSE 86): SECTION 69 APPEAL ON POINT OF LAW UNDER ARBITRATION ACT 1996
In its judgment in this case, the High Court dealt with appeals against two arbitration awards, the first between Head Owners, Precious, and their charterers, Navision, and the second between Navision, as disponent owners, and Conti, as sub-charterers. Conti, in their turn, had sub-sub-chartered the vessel to a French wheat trader, Cerealis.
The appeals arose out of the same set of facts and both the head charter and the sub-charter, which were on the ASBATIME form with rider clauses, contained an off-hire clause 47. Under this clause, the vessel was put off hire inter alia upon her being detained or arrested by any legal process, until the time of her release, " unless such … detention or arrest [was] occasioned by any act, omission or default of the Charterers and/or sub-Charterers and/or their servants or their Agents. " It was common ground that, in the context of both time charters, Cerealis was a " sub-Charterer " within the clause 47 proviso. The High Court held that, under that proviso, the vessel remained on hire, because her detention was occasioned by Cerealis’s omission promptly to deal with or to secure a third party’s cargo claim in respect of a Cerealis cargo carried on another vessel.
Further, the head charter (but not the sub-charter) contained a clause 86, under which Navision were responsible for third party cargo claims arising in West Africa and for putting up security to release the vessel from arrest, the vessel remaining on hire in the meantime. The High Court held that this clause did not apply as it was only concerned with West African cargo claims occurring under the head charter and related to that vessel.
Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor of England & Wales, LMAA Supporting Member and International Contributor to DMC’s Case Notes
Precious time-chartered their bulk carrier “Mookda Naree” to Navision, who sub time-chartered the vessel to Conti, who voyage chartered her to Cerealis, a French wheat trading company, for a voyage from Novorossiysk, Russia, to Conakry, Guinea, where about 10,700 mt of milling wheat was to be discharged.
The vessel was arrested after her arrival at Conakry on 15 December 2018 and remained under arrest until 12 January 2019, at the instance of a local company, SMG, that had a short discharge claim against Cerealis under a sale contract related to a prior shipment of wheat on a different vessel, “Supertramp”. Both the head charter and the sub-charter included clause 47, under which the vessel was to go off-hire upon her being detained or arrested by any legal process, until the time of her release, "unless such … detention or arrest [was] occasioned by any act, omission or default of the Charterers and/or sub-Charterers and/or their servants or their Agents.” It was common ground that, in the context of both time charters, Cerealis was a "sub-Charterer" within the clause 47 proviso. The disputes between Precious, Navision and Conti were referred to arbitration and the Tribunal held that the clause 47 proviso applied, so that the vessel was not off-hire after 1200 hours on 17 December 2018, because her detention under arrest thereafter was occasioned by Cerealis’s failure promptly to deal with or to secure the claim so as to procure the vessel’s release.
Further, additional clause 86, which was only included in the head charter, provided that: “When trading to West African ports Charterers to accept responsibility for cargo claims from third parties in these countries (except those arising from unseaworthiness of vessel) including putting up security, if necessary, to prevent arrest/detention of the vessel or to release the vessel from arrest or detention and vessel to remain on hire.”
The Tribunal held that the material words in clause 86 applied, not being limited, in their view, to claims concerning cargo carried by the vessel under the head charter, and so, for that reason also, but under the head charter only, the vessel was not off-hire, indeed she was on-hire for the entire period of the arrest.
Conti and Navision appealed to the High Court on questions of law related to the reasons for the Tribunal’s awards, under which Navision had USD266,946 and damages to be assessed, plus interest and costs, awarded against it in the head charter reference, and Conti had USD419,199, plus interest and costs, awarded against it in the sub-charter reference.
The Judge first outlined the key facts (above), noting that Conti had to prevail on the clause 47 appeal to succeed, whereas, for it fully to succeed, Navision would have to prevail on both the clause 47 and the clause 86 appeal. The Judge then identified and reformulated the questions on appeal as being:
(A) Whether the tribunal misconstrued clause 47 in saying that the proviso applied on the facts of this case?
(B) Whether SMG’s claim against Cerealis for short delivery of the “Supertramp” cargo was a “cargo claim” within clause 86?
Having then considered and summarised the respective parties’ arguments on the appeals, and reviewed the Tribunal’s reasons, the Judge noted that Cerealis was not aware of the intended arrest but found out about it shortly thereafter, such that the vessel should have been released by 1200 hours on 17 December 2018 at latest, had Cerealis acted reasonably. The Judge then turned to address the merits.
(A) Clause 47
The Judge noted that the Tribunal’s approach to clause 47 accorded with that taken by the Supreme Court in The “Global Santosh” (fn.1). The construction of the proviso itself was approached on the basis that its purpose was to keep the vessel on hire, where the detention or arrest could be said to be the responsibility of the time charterer, or a sub-charterer.
By way of analysis, the Judge concluded that The “Global Santosh” did not decide that the proviso for the clause relevant in that case (which did not extend to acts, omissions or defaults of sub-charterers) was confined to acts, omissions or defaults in the course of the performance of the time charterer’s obligations.
Against that background, the principal argument of Conti and Navision was that, as a matter of language, the phrase “act or omission or default of … sub-Charterers” connoted, and was confined to, conduct in breach of a contractual obligation under the sub-charter in question. However, in the Judge’s view, it did not, and was not so confined. He agreed with the Tribunal that inaction in circumstances where a sub-charterer should reasonably have appreciated that it would be expected to act is naturally and fairly characterised as a failure to act, namely, an omission.
Further the Judge noted that it was a conclusion of fact with which he could not interfere. However, as it happened, he regarded it as unsurprising that the Tribunal held that Cerealis should have realised that it ought to deal with SMG’s claim – which was a claim against Cerealis alone but which had resulted in the arrest of “Mookda Naree” – because Cerealis was her sub-charterer and was therefore likely to detain her unless it did something promptly about the arrest.
Accordingly, the Judge held, in dismissing the clause 47 appeal, that there was no error of law in the Tribunal’s conclusion that the detention of the vessel under arrest after 1200 hours on 17 December 2018 was occasioned by Cerealis’s failure to act as it ought reasonably to have acted to deal promptly with the claim being made against it by SMG, that being an "act or omission or default of … sub-Charterers" within the meaning of the proviso to clause 47 of both charters.
(B) Clause 86
The Judge noted that the arguments of Precious and Navision focused on the width to be given to the phrase “cargo claims” within clause 86, with the Judge being persuaded that the arguments of Navision were to be preferred.
As the Judge highlighted, the definition of “cargo claims” under the Inter-Cub Agreement, incorporated into the head charter by clause 43 (fn.2), did not explicitly limit such claims to those concerning cargo carried or ordered to be carried under the charter. However, under clause 102 (fn.3), which was strikingly similar to clause 86 but referring only to bagged cargoes, it was obvious that “cargo claims” referred only to claims relating to the bagged cargoes traded to West Africa that were the subject matter of the clause. Accordingly, in reading the head charter as a whole, the Judge considered that the language of clause 86 was to like effect as that of clause 102, but not limited only to bagged cargoes.
While the Judge considered the Tribunal were correct to identify certain basic features of clause 86 that might have influenced its proper construction, they were, in his judgment, wrong to see any of those features as pointing in Precious’ favour, let alone decisively. The Tribunal’s correct appreciation that clause 86 (like clause 102) was linked to, and a carve-out from, clause 43, was telling. It was no more than the logical consequence of that linkage to say that clause 86, like clause 102, was concerned with the same universe of claims as was clause 43, namely, claims concerning cargoes carried or ordered to be carried pursuant to the charter, a limitation that was so obvious as not to need spelling out.
Accordingly, the Judge found that the Tribunal was wrong to consider that clause 86 of the charter applied under the circumstances when the head charter was construed as a whole, which meant that Navision’s appeal succeeded in part only.
This judgment provides a helpful dissection of The “Global Santosh” and a reminder of the need to determine the true interpretation of a contract by considering it as a whole in the light of the material factual matrix of the case.
As the Judge pointed out, the lack of reference to “sub-charterers” in The “Global Santosh” case had led to a decision based on an analysis of the sub-charterer acting as agent of the time charterer. That necessarily limited the attribution of acts to the time charterer based on their obligations under the time charter, where the act of sub chartering itself could not sensibly be said to have occasioned the arrest.
Therefore, the owner in The “Global Santosh” had to show that what the sub-charterer did was to be regarded as an act, omission or default of an agent of the time charterer. Hence, the decisive consideration in that case was whether what was done to occasion the arrest of the vessel was part of the vicarious performance by the sub-charterer of the time charterer’s clause 8 responsibility for cargo discharge operations. The majority in the Supreme Court concluded that it was not. But that contextual limitation was not applicable in the present case because of the material amendment to the wording of the relevant clause.
Footnote 1:  UKSC 20
“Clause 43: P & I Club
Cargo claims as between Owners and the Charterers shall be governed by, secured, appointed and settled fully in accordance with the provisions of the Inter-Club New York Produce Exchange Agreement 1996 (as amended 2011), or any subsequent modification or replacement thereof...”
Footnote 3: “Clause 102:
... When trading to West African ports with bagged cargoes Charterers to accept full responsibility for cargo claims from third parties in these countries (except those arising from unseaworthiness of vessel) including putting up security, if necessary, to prevent arrest/detention of the vessel or to release the vessel from arrest or detention.”