Osmium Shipping v Cargill International - The Captain Stefanos
Osmium Shipping Corporation v Cargill International SA (The “Captain Stefanos”)
English Commercial Court: Cooke J:  EWHC 571 (Comm): 13 March 2012
TIME CHARTERPARTY: ARBITRATION ACT 1996 SECTION 69 APPEAL: AMENDED NYPE (1946) FORM INCORPORATING CONWARTIME 2004: WHETHER VESSEL WAS OFF-HIRE DURING PERIOD OF HIJACKING BY SOMALI PIRATES: WHETHER RIDER CLAUSE PROVIDING FOR OFF-HIRE DURING “CAPTURE/SEIZURE” WAS QUALIFIED BY THE PHRASE “BY ANY AUTHORITY”: WHETHER CONWARTIME 2004 CLAUSE QUALIFIED OFF-HIRE RIDER CLAUSE
David Bailey QC and Peter MacDonald Eggers QC (instructed by Holman Fenwick Willan LLP) for the Claimant, Owners
John Russell (instructed by Clyde & Co LLP) for the Defendant, Charterers
An off-hire rider clause which included “capture/seizure”, set within the context of the charter as a whole and in all the material circumstances of the case, placed the chartered vessel off-hire during a hijacking by Somali pirates and the incorporation of the Conwartime 2004 clause into the charter made no difference to this outcome.
Case note by Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), Solicitor of England & Wales, Foreign Qualified Lawyer (Practising Foreign Law) in Singapore, Associate at Hill Dickinson LLP and International Contributor to DMC’s CaseNotes:
The agreed facts were as follows:
Owners and Charterers entered into a charterparty on an amended NYPE (1946) form dated 28 August 2011 in respect of the Panamax bulk carrier "Captain Stefanos". The vessel was to undertake a laden voyage from South Africa to continent/Mediterranean (intention Italy).
On 29 August 2008, Charterers sent voyage orders to Owners, ordering the vessel to carry a cargo of coal from Richards Bay, South Africa to Brindisi, Italy and stating that the vessel "will be routed via Suez Canal".
On 2 September 2008, the vessel was delivered into Charterers' service.
On 13 September 2008, the vessel arrived at Richards Bay, loaded a bulk coal cargo of 61,292 MT and subsequently departed on 14 September 2008, proceeding as instructed by Charterers to her destination via the Suez Canal. In order to transit the Suez Canal, the vessel had to sail through the Indian Ocean and thus off the eastern coast of Somalia.
On 21 September 2008, the vessel was hijacked by pirates off the coast of Somalia. On 6 December 2008, the vessel was released by the pirates after Owners paid a substantial ransom.
The vessel thereafter proceeded to ports of discharge in Croatia and the East coast of Italy and was then re-delivered by Charterers to Owners at Malta Bunkering Anchorage 0n 5 January 2009.
The question of law on appeal was:
Whether or not, on the agreed facts, the vessel was off-hire between 21 September 2008 and 6 December 2008 whilst subject to the hijacking?
Among other terms, the charter incorporated Conwartime 2004 and, most importantly, included a rider clause dealing specifically with off-hire (clause 56) which stated:
“Should the vessel put back whilst on voyage by reason of any accident or breakdown, or in the event of loss of time either in port or at sea or deviation upon the course of the voyage caused by sickness of or accident to the crew or any person onboard the vessel (other than supercargo travelling by request of the Charterers) or by reason of the refusal of the Master or crew to perform their duties, or oil pollution even if alleged, or capture/seizure, or detention or threatened detention by any authority including arrest, the hire shall be suspended from the time of the inefficiency until the vessel is again efficient in the same or equidistant position in Charterers' option, and voyage resumed therefrom. All extra directly related expenses incurred including bunkers consumed during period of suspended hire shall be for Owners' account."
In essence, the point in dispute turned on the construction of the words "capture/seizure" in clause 56, in the context of the clause and the charter as a whole. Owners submitted that those words were qualified by the further words "by any authority" and that pirates did not constitute such an authority. Charterers said that the words "capture/seizure" were unqualified and a seizure by pirates was an off-hire event.
The parties were agreed on the principles to be applied in construing the charterparty:
(1) Hire is payable continuously unless Charterers can bring themselves within an exception, the onus being on the Charterers to do so.
(2) Doubt as to the meaning of exceptions is to be resolved in favour of Owners.
(3) Otherwise, the approach is to look at the words used in the clause in question and to construe them in the context of the clause itself and the charterparty as a whole.
In relation to the latter point, Owners further submitted that the charter, taken as a whole, particularly when regard was had to Conwartime 2004, placed the risk of piracy upon Charterers and that the off-hire clause had to be read with this business purpose and allocation of risk in mind.
The difficulty about Owners’ approach, said the judge, was that the off-hire provisions of a charter do not necessarily, nor indeed usually, tie in with the provisions of the charter which relate to breach of obligation by one party or the other. It was also to be borne in mind that standard form charters are often used with a series of "add-on" special clauses which do not always fit together immaculately or happily. Where there are one or more clauses which deal with off-hire events, they must clearly be looked at together and reconciled but where the charter provides for off-hire in some provisions and charter obligations and remedies for breach in others, the focus must inevitably be upon the off-hire clauses when determining whether an off-hire event has occurred.
Looking to clause 56, the judge was of the view that the initial search must be for the ordinary and natural, or conventional, meaning of the language used, in the context of the agreement, the parties' relationship and all the relevant facts surrounding the transaction, so far as known to the parties. The primary source for understanding what the parties meant was the language used by them in the charter, interpreted in accordance with conventional usage, with regard to the particular words used and the grammatical structure and syntax of the clause in question.
The judge considered that the wording used, the structure of the clause, its punctuation and its grammar all clearly supported Charterers’ submissions. The judge consequently held that when regard was had to the various events of off-hire which were set out, the use of the word "or", the linkage of "capture" with "seizure" by the use of an oblique stroke, and the positioning of the commas, the clause clearly set out that it was only "detention or threatened detention" which was qualified by the expression "by any authority". The words "capture/seizure" were therefore free standing and constitute a separate head of off-hire.
Turning to Conwartime 2004, Owners sought to construe its terms such that compliance with pirate’s orders must be deemed not to be a deviation but instead due fulfilment of the service required at the time, with the consequence that the off-hire clause was not engaged at all, placing all risks of piracy on Charterers. The judge considered that this clause could not bear such an interpretation; in his view, this clause related to the performance of the charter and to breach and only dealt with war risks and piracy in that connection, without any effect at all on the entirely distinct subject of off-hire.
The judge therefore concluded that nothing in clause 56, nor in the charter as a whole, provided contra-indications to what, to the judge’s mind, was the plain and obvious meaning of the words used in clause 56. Charterers' construction did not turn simply on a comma but upon the whole language of clause 56, its grammatical form and the usage of the word "or" throughout it, in a purposeful manner. The comma was significant and Owners’ construction sought to ignore that, as well as the other factors to which the judge referred. Consequently, the judge dismissed Owners’ appeal.
This is the latest in a line of recent interesting judgments developing the law in relation to the commercial consequences of piracy in the time charterparty context.
The present case is a useful illustration of a suggestion made in The “Saldanha” (fn.1). In that case the judge held that a vessel is not off-hire pursuant to the standard clause 15 of the NYPE form due to hijacking by pirates. The judge in that case did however go on to suggest that such a result could be achieved through proper drafting. While that case was not applicable in the present case, given the express terms of clause 56 (“capture/seizure”), the present case does confirm that proper drafting can place the vessel off-hire during hijacking by pirates.
This judgment provides a useful insight into how war clauses with a piracy element relate to off-hire clauses and will assist with consideration of if, how and to what extent pure piracy clauses, such as those of Bimco and Intertanko, will be of significance when in contention in future piracy related off-hire disputes.
Footnote 1:  EWHC 1340 (Comm),  1 Lloyd’s Rep 187.