Smart Gain Shipping Co v Langlois Enterprises - The Globe Danae

DMC/SandT/23/08

England

Smart Gain Shipping Co Ltd v Langlois Enterprises Ltd (The “Globe Danae”)

English Commercial Court: Sir Ross Cranston, sitting as a High Court Judge: [2023] EWHC 1683 (Comm): 5 July 2023

Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2023/1683.html

Nigel Jacobs KC (instructed by Winter & Co Solicitors LLP) for Smart Gain Shipping (Charterers)

Stewart Buckingham KC and Tom Nixon (instructed by Ince & Co) for Langlois Enterprises (Owners)

TIME CHARTER: ONE TIME CHARTER TRIP: HULL FOULING CLAUSE: VESSEL REDELIVERED WITH FOULED HULL AFTER PROLONGED STAY AT DISCHARGE PORT IN TROPICAL WATERS: WHETHER OWNERS ENTITLED TO CLAIM AS A DEBT THE TIME USED TO CLEAN HULL AT NET HIRE RATE OR CONFINED TO A CLAIM FOR DAMAGES FOR ANY LOSS OF USE OF THE VESSEL: APPEAL ON QUESTION OF LAW PURSUANT TO SECTION 69 OF THE ARBITRATION ACT 1996

Summary

In upholding a final arbitration award made in Owners’ favour, which awarded as a debt the time used to clean the vessel’s hull and propeller at the hire rate after her redelivery from a time charter trip consisting of one laden leg, the High Court held that Owners were not confined to a claim in damages, which would have obliged them to prove a loss of time in the vessel’s use, because the hull fouling clause required the “underwater cleaning of hull including propeller etc. to be done at first workable opportunity and always at Charterers’ time” (emphasis added).

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

Background

Owners (as disponent owners) let the bulk carrier “Globe Danae” to Charterers on an amended NYPE form for a time charter trip consisting of one laden leg, to carry a cargo of metallurgical coke in bulk via India to Brazil, the duration to be about 40-50 days.

The charter, which was subject to English law and LMAA arbitration in London, provided for the vessel to be on hire from delivery until her redelivery, in good order and condition, fair wear and tear excepted and for the master to prosecute the voyage with utmost despatch and to be under Charterers’ employment orders. It also included the following hull fouling provision (clause 86):

“Owners not to be responsible for any decrease in speed/increase in consumption of the Vessel whether permanent or temporary cause [sic] by Charterers staying in ports exceeding 25 days trading in tropical … waters. In such a case, underwater cleaning of hull including propeller etc. to be done at first workable opportunity and always at Charterers’ time and expense. After hull cleaning vessel’s performance warranties to be reinstated."

The vessel was delivered to Charterers on 10 June 2021. After proceeding to Haldia and loading the cargo, the vessel proceeded to Brazil. The intended receivers rejected the cargo. The vessel remained idle in a laden state in a tropical water port in Brazil for at least 42 days, thereby engaging clause 86.

The vessel was redelivered to Owners following completion of discharge at Acu, Brazil, at 1400 hours on 4 September 2021, without the Charterers undertaking cleaning of the hull, despite Owners' requests. The vessel's subsequent fixture required her to sail to Tubarao, where she arrived on 9 September 2021. Owners therefore undertook underwater cleaning of the vessel’s hull and propeller for a period of about 30 hours, between 9 and 11 September, before the vessel was delivered under her next employment, on 16 September 2021.

Owners claimed the sum of USD74,506.70, mainly comprised of loss of time (2.29 days) spent cleaning at the hire rate (UD55,103.13) and related costs. The arbitral tribunal appointed found in Owners’ favour. Permission to appeal was given to Charterers by the High Court on the following question of law:

“If a clause in a time charterparty provides for underwater cleaning will [sic] be done at the charterers' time, does that provision give rise to a claim in debt (so that if the owners undertake cleaning after redelivery, they can claim for the cleaning time even if they have not suffered a loss of time)?”

Charterers’ case was that clause 86 was intended to operate during the charter, to give Owners a claim for hire in respect of the time taken for any underwater cleaning (if hire was unpaid). However, with hull cleaning after redelivery of the vessel, Owners’ claim was confined to damages for loss of time – for example, by proving that the cleaning prevented the vessel being further chartered – and not the claim in debt which would be the case if the vessel had remained on hire.

Owners’ case was that clause 86 meant what it said: cleaning was to be “always at Charterers’ time”. That must mean that Charterers must always pay for the time associated with the underwater cleaning. The premise of clause 86 was that the fouling of the vessel had been caused by Charterers’ employment orders, to remain idle, and so they were to pay for the time and cost of remedying it.

Judgment

Having introduced and set out the background to the dispute, including the terms of the charter and the material facts of the case, the Judge noted that the crux of the tribunal’s rationale for their decision was that, despite certain aspects of clause 86 being ambiguous, overall it was quite clear from the language of the clause that its intention was to assign the risk of fouling to Charterers and to make them responsible for the time and cost of remedial action whilst suspending the vessel’s performance warranties in the meantime.

On that basis, and in reliance on The “Nicki R” (fn.1), the tribunal held that clause 86 imposed an obligation on Charterers to arrange underwater cleaning at the first workable opportunity at their time and expense at the charter hire rate, regardless of when the vessel was redelivered, and that that obligation gave rise to a claim in debt, such that Owners did not need to prove a loss of time.

Having addressed the award, the Judge reminded himself of the relevant principles of contractual construction, as encapsulated in The “Ocean Neptune” (fn.2), summarised Charterers’ submissions, and then proceeded to discuss the basis on which he concluded that Charterers’ appeal should be dismissed.

The words of the second sentence of clause 86 supported the tribunal’s conclusion and Owners’ construction, thought the Judge, because cleaning was “always at Charterers’ time”. That must have meant that Charterers must always pay for the time associated with underwater cleaning. To the Judge’s mind, the word “always” must be given effect and could not have the limited ambit (applicable only before redelivery) that Charterers suggested.

As to the phrase “at the first workable opportunity”, the Judge considered it covered both during and after the charter. Given that this charter was for a single trip, the first workable opportunity for cleaning following a 25 or 30-day idle period would likely, in the Judge’s view, have been once the charter had concluded and the vessel had been redelivered to Owners.

The charter contained clauses “at Charterers’ time” or similar, and clauses referring to “loss of time” or similar, and so the Judge considered that the parties must be taken to have intended that a distinction be drawn between the two phrases. Accordingly, the plain words of clause 86 support the tribunal’s conclusion; that was despite the crucial words, in the second sentence of clause 86, being rather inappropriately located between its other provisions.

There was also nothing in Charterers’ submission regarding the practical context that they could not undertake underwater cleaning after the vessel was redelivered. That, said the Judge, was for the simple reason that clause 86 did not require Charterers to undertake the underwater cleaning themselves.

If the vessel were returned uncleaned, it was likely that Owners would endeavour to clean her before her new employment, considered the Judge, since there would otherwise be a breach of warranty to the new charterers. That met Charterers’ argument about Owners receiving a windfall, if the vessel were cleaned under a new fixture. The Judge thought it more likely in practice that Owners would postpone a follow-on fixture until the vessel was cleaned because of the potential breach of warranty (which would avoid a windfall).

As to commercial purpose of clause 86, the Judge considered that the vessel needed underwater cleaning because of Charterers’ orders that she remain idle, and so Charterers must therefore pay for the time and cost of remedying the consequent fouling. The vessel could be redelivered unclean, but in that case Charterers must compensate Owners at the hire rate for the time when cleaning was undertaken. All that was commercially sensible, to the Judge’s mind. What was not commercially sensible, in the Judge’s view, would be to provide Charterers with an incentive to redeliver the vessel without cleaning, and to evade having to pay hire for the time spent cleaning, unless there was a workable opportunity for that to be undertaken before redelivery.

Regarding the concept of the first workable opportunity, the Judge considered that the reality was that it would turn on the operations of the vessel, and neither Charterers nor Owners would always be able to choose when it occurred.

As to The “Nicki R”, the Judge noted that clause 49 was analogous, rather than identical, to clause 86 in the present case; the former divided the responsibility for remedial work on the vessel between charterers and owners depending on whether the damage affected the vessel's seaworthiness, whereas under the latter responsibility was always with Charterers. Bingham J held that where clause 49 required that repair be “at charterer’s expense”, it meant a claim for hire in debt at the charter hire rate, not a claim in respect of time lost or damages, even though the repairs took place after completion of the contractual trip and concurrently with owners’ engine repairs. As such, the Judge considered the tribunal was correct that The "Nicki R" lent support to its conclusion.

Finally, on the two reported London arbitration awards on which Charterers relied (fn.3), the Judge considered that it was difficult to discern their full import, given they were brief reports. The one report was quite a different case, and the clause in the other report obliged charterers to arrange cleaning. The bottom line was that neither report gave reason not to apply The “Nicki R”.

Comment

This judgment is an interesting example of the difficulties that can arise in grappling with a clause in a time charter trip on the allocation of the time, risk and expense of fouling, inspection and cleaning of a vessel’s hull and propeller during and (in this case, unusually) after its performance where, as the Judge accepted, the clause was “not as straightforward as one might like”.

The Judge might helpfully have added that it is important to understand the wider context properly, to avoid an abstract and literal interpretation of the language used in one clause (as incorporated from a significantly different context – a long-term period time charter – without logical adaptation) viewed as at the time when the time charter trip was agreed, rather than holistically and with a shrewd eye on the material facts and the contract as a whole.

With all due respect to the Judge, his conclusion is open to serious doubt because, amongst other reasons:

(1) The usual time to clean a laden vessel that has become fouled whilst idle at a port of discharge is before the cargo is discharged, as is often done, because the fouled hull sides can be reached, but cleaning in ballast means the fouling on the hull sides cannot be fully reached by divers during in-water cleaning;

(2) The crucial words, in the second sentence of the clause, being “rather inappropriately located”, as the Judge accepted, between the first and the third sentences of the clause, is a sure sign of the second sentence not extending beyond redelivery: the first and third sentences only related to considerations during the performance of the charter, with Owners not being responsible for underperformance due to fouling (the first sentence) and the performance warranties not applying again until after cleaning (the third sentence);

(3) The time, risk and expense involved with foreseeable fouling arising during the performance of a time charter (such as from a prolonged idle stay in a tropical waters port) is on owners’ account, as per The “Kitsa” (fn.4), and amounts to reasonable wear and tear under clause 4 of the NYPE form on redelivery absent a clause that fully displaces the common law position; and

(4) The “Nicki R” is “analogous, rather than identical”, as the Judge accepted, so is not on all fours with this case with, amongst other things, the clause in that case explicitly requiring the repairs to be undertaken “after completion of the voyage”, which is clear and prescriptive compared to “always” in this case, particularly when Charterers, as the Judge accepted, did not need to undertake cleaning and there was no obligation for the vessel to have been cleaned before redelivery.

Footnote 1: [1984] 2 Lloyd’s Rep. 186, the relevant stevedore damage clause materially read:

“Charterers to be responsible for damage to the vessel … done by stevedores … all damages … to be repaired after completion of the voyage at charterer’s expense but in owner’s time provided that such damage does not affect vessel’s seaworthiness.”

Footnote 2: [2018] 1 Lloyd’s Rep. 654, [8]

Footnote 3: London Arbitration 1/19, LMLN 17 January 2019 and London Arbitration 29/22, LMLN 2 September 2022

Footnote 4: [2005] 1 Lloyd’s Rep. 432 – see DMC’s Case Note of the judgment at https://archive.onlinedmc.co.uk/action_navigation_v__bottiglieri.htm