Quiana Navigation v Pacific Gulf Shipping (Singapore) - The Caravos Liberty
Quiana Navigation SA v Pacific Gulf Shipping (Singapore) Pte Ltd (The “Caravos Liberty”)
English Commercial Court: Cockerill J:  EWHC 3171 (Comm): 21 November 2019
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2019/3171.html
Robert Bright QC and Henry Moore (instructed by Norton Rose Fulbright LLP) for Quiana (Owners)
Karen Maxwell (instructed by MFB Solicitors) for Pacific Gulf Shipping (PGS) (Charterers)
TIME CHARTERPARTY: WITHDRAWAL OF VESSEL FOR NON-PAYMENT OF HIRE: BIMCO NON-PAYMENT OF HIRE CLAUSE: WHETHER LAWFUL TO WITHDRAW VESSEL FOR NON-PAYMENT OF HIRE THAT FELL DUE ON AN EARLIER DATE: ARBITRATION ACT 1996 SECTION 69 APPEAL ON POINTS OF LAW
In dismissing Owners’ appeal on a point of law against an arbitration award, the High Court held that, in the first sentence of the BIMCO Non-Payment of Hire Clause, the phrases “the hire” and “the payment due” referred only to the amount of hire that fell due for the first time on such due date. They do not refer to any hire that first fell due on an earlier date, even if it remained overdue on the instant due date.
As a result, as the arbitral tribunal had held, Owners were in renunciatory and/or repudiatory breach of the charter when they withdrew the vessel from Charterers’ service for non-payment of hire that had fallen due on an earlier due date (despite that hire having been wrongfully withheld at that earlier date).
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
Under a time charter of the “Caravos Liberty”, Charterers short-paid an instalment of hire of USD130,652 due on 11 July 2017, wrongfully withholding USD8,015.40 from what was due. But Owners did not serve an anti-technicality notice at that time or take any adverse action against Charterers in respect of the short payment.
When hire again fell due on 10 August 2017, two advance hire instalments later, Owners served an anti-technicality notice and, despite Charterers paying in full the then due advance hire instalment of USD130,652, Owners gave notice of withdrawal to Charterers and withdrew the vessel from their service for non-payment of the USD8,015.40 that had fallen due in July and remained unpaid.
Pursuant to the dispute resolution agreement in the charter, a London arbitral tribunal heard the dispute and decided against Owners, based on the BIMCO Non-Payment of Hire Clause wording, despite accepting that the USD8,015.40 earlier due had been wrongfully withheld by Charterers. Owners appealed to the High Court on a point of law concerning the true construction of the BIMCO clause.
The judge first summarised the material facts (above), referred to the relevant time charter clause (fn.1), and stated that the essence of the appeal was whether the BIMCO clause is engaged in circumstances where:
(1) There was a short payment on the 4th payment date (11 July 2017);
(2) Owners objected, but did not serve an anti-technicality notice within the 24-hour period allowed under the clause;
(3) The payments made on each of the 5th and 6th payment dates equated to 15 days’ worth of hire, but did not make up the shortfall; and
(4) Owners served an anti-technicality notice, and then withdrew, on the basis of that shortfall, in the context of the payment due on the 6th date (10 August 2017).
Having heard the parties’ submissions, the judge began by considering the natural meaning of the words used in the clause.
The judge was of the view that the use of the phrase “the hire”, particularly when taken with the identification of a single “due date” (which phrases were naturally to be read together), provided an initial indicator in favour of the right to withdraw being tied to only a particular (single) hire instalment.
This was the more so, thought the judge, where, as Charterers had pointed out, each claim for an instalment of hire under a time charterparty is a separate cause of action (fn.2). It was therefore, in the judge’s view, not a natural use of language to say that, in relation to the sum not paid in respect of the fourth hire payment, its “due date” was the date for payment of the sixth hire instalment.
In attempting to avoid this problem, Owners argued that to some extent because of the accounting (as the hire statements were “rolled-up” documents, i.e. setting out previous hire instalments as well as the current one and setting out a running account of sums due), whatever hire fell due or was owing and payable became so on that date, hence transforming the due date into a date applicable to the historic hire. However, this was an artificial approach in the judge’s view, because as regards the historic hire no due date could be created by “rolled up” hire statements, and they would not, for example, have prevented Owners from commencing proceedings to recover the hire before the date for the sixth instalment.
As such, the wording here, considered the judge, much more naturally reflected and reinforced the necessary connection between the relevant hire instalment and the (single) due date. It also prescribed conditions for withdrawal that simply could not be satisfied in respect of historic arrears.
Owners’ argument also impermissibly elided the very real distinction between the continuing entitlement to recover hire as a debt and the independent contractual entitlement to withdraw. The distinction and the existence of the other rights was a significant factor, in the judge’s view. A right to the hire as a debt arose automatically and was not particularly easily lost. But the right to withdraw was a “nuclear” option; it is hedged about by careful contractual requirements and, as the case law makes clear, it can be easily lost.
The judge also noted that the four parts of the BIMCO clause were plainly designed to operate as a coherent whole (for example indemnities cover both suspension and withdrawal), which counteracted any suggestion that sub-clause (b) could have a different focus from sub-clause (a).
Finally, while Owners raised a number of arguments about the commercial context, the judge considered that the more commercially uncomfortable results came from Owners’ arguments. That produced a result where, far from offering a scheme involving speedy certainty, late hire could be a basis for withdrawal possibly for a period of years – but only at the time of some later, completely distinct, payment. That was a solution, thought the judge, which lacked logic or commercial coherence.
Accordingly, the judge dismissed Owners’ appeal, as a result of which they were, as the tribunal had held, in renunciatory and/or repudiatory breach of the charter for having withdrawn the vessel wrongfully from Charterers’ service.
The judgment is no doubt correct in view of the clear language used in the clause. Owners retained other options to pursue the amount earlier withheld but they did not have the immediacy of the “nuclear” option of withdrawal.
The judgment therefore speaks to the need to take prompt action when a deduction from hire is first made, if the right to withdraw or to suspend performance as a retaliatory response is to be preserved and exercised.
In many cases, exercising the right to withdraw may not be desirable but when lesser yet potentially effective rights like suspending performance depend on giving prompt notice then acting quickly can make other valuable options available.
The effect for which Owners argued can be achieved if the wording of the BIMCO clause is amended so that the rights under it exist at any future advance hire instalment due date in respect also of any other amount due under the charter but not paid earlier.
Footnote 1: “Clause 37
BIMCO Non-Payment of Hire Clause for Time Charter Parties
[a] If the hire is not received by the Owners by midnight on the due date, the Owners may immediately following such non-payment suspend the performance of any or all of their obligations under this Charter Party (and if they so suspend, inform the Charterers accordingly) until such time as the payment due is received by the Owners. Throughout any period of suspended performance under this Clause, the Vessel is to be and shall remain on hire. The Owners’ right to suspend performance under this Clause shall be without prejudice to any other rights they may have under this Charter Party.
[b] The Owners shall notify the Charterers in writing within 24 running hours that the payment is overdue and must be received within 72 running hours from the time hire was due. If the payment is not received by the Owners within the number of running hours stated, the Owners may by giving written notice within 12 running hours withdraw the Vessel. The right to withdraw the Vessel shall not be dependent upon the Owners first exercising the right to suspend performance of their obligations under this Charter Party pursuant to sub-clause (a). Further, such right of withdrawal shall be without prejudice to any other rights that the Owners may have under this Charter Party.
[c] The Charterers shall indemnify the Owners in respect of any liabilities incurred by the Owners under the Bill of Lading or any other contract of carriage as a consequence of the Owners’ suspension of and/or withdrawal from any or all of their obligations under this Charter Party.
[d] If, notwithstanding anything to the contrary in this Clause, the Owners choose not to exercise any of the rights afforded to them by this Clause in respect of any particular late payment of hire or a series of late payments of hire, this shall not be construed as a waiver of their right either to suspend performance under sub-clause (a) or to withdraw the Vessel under sub-clause (b) in respect of any subsequent late payment under this Charter Party.”
Footnote 2: The “C” and “J”  2 Lloyd's Rep. 601