Toakas Navigation v Komrowski Bulk Shipping: Kent Line v Solym Carriers - The Paiwan Wisdom
TAOKAS NAVIGATION SA v. KOMROWSKI BULK SHIPPING KG (GMBH & CO); KENT LINE INTERNATIONAL LTD. v. SOLYM CARRIERS LTD THE MV “PAIWAN WISDOM”
English High Court; Teare J;  EWHC 1888 (Comm); 11 July 2012
Robert Bright QC (instructed by Reed Smith LLP) for the Owners, Taokas Navigation SA.
Christopher Wood (of Winter Scott LLP) appearing for the Charterers, Komrowski Bulk Shipping KG (GmbH & Co)
Charlotte Tan (instructed by Holman Fenwick Willan LLP) for the Sub-Charterers, Kent Line International Ltd
Malcolm Jarvis (instructed by Stockler Brunton) for the Sub-Sub-Charterers, Solym Carriers Ltd.
CONWARTIME 2004: OWNERS’ LIBERTY TO REJECT VOYAGE ORDERS: MATERIAL INCREASE IN RISK BETWEEN CHARTERPARTY DATE AND DATE OF ORDER NOT REQUIRED: CONTRACTUAL INTERPRETATION
On an appeal under Section 69 of the Arbitration Act 1996, Teare J decided that the owners’ liberty to reject voyage orders if the vessel, cargo, or crew, “in the reasonable judgment of the Master and/or the Owners, may be, or are likely to be, exposed to War Risks” under the CONWARTIME 2004 clause is not dependent on there being a material increase in risk between the time of contracting and the time the voyage order is given.
This case note is contributed by Justin Gan Boon Eng, LLB (Hons) (NUS), an advocate and solicitor of the Singapore Bar.
The MV “PAIWAN WISDOM” was fixed on a string of three materially identical back-to-back charters on amended NYPE 93 forms incorporating the CONWARTIME 2004 clause. The “War Risks” encompassed by the CONWARTIME 2004 clause included “acts of piracy”. The charterparties’ trading limits excluded Eritrea, Ethiopia, and Somalia but permitted passage in the Gulf of Aden.
The ultimate charterer Solym Carriers Ltd (“Solym”) ordered the vessel on a voyage from Hoping, Taiwan to Mombasa, Kenya. Owners rejected these orders before loading commenced pursuant to the CONWARTIME 2004 clause, citing concerns over the increasing severity of piracy in the Indian Ocean / off East Africa. Solym fixed a substitute vessel for the voyage at a cost of US$815,000.
Arbitrations took place along the charter chain, with the intermediate charterers passing on the positions taken by Owners and Solym.
Owners were successful before the majority of the arbitrators and before Teare J.
Solym argued that Owners were not entitled to rely on CONWARTIME 2004 because there had been no material increase in risk between the time of contracting and the voyage order, i.e. Owners had agreed to undertake the risk of piracy existing at the time of contracting. This was supported by the trading limits expressly (i) including the Gulf of Aden and (ii) excluding Eritrea, Ethiopia, and Somalia but not Kenya, which indicated that Owners were aware of piracy risks in the area but had chosen not to exclude Kenya, thereby accepting the risk of piracy on voyages to Kenya.
In doing so, Solym relied upon The Product Star (No.2),  1 Lloyds Rep 397 (CA), which established that Owners could not reject a voyage order if Owners had accepted the war risk entailed by that voyage when contracting unless there was a material increase in risk thereafter.
Teare J disagreed. First, CONWARTIME 2004 did not require a material escalation in war risk since the time of contracting. Secondly, the express inclusion of Gulf of Aden within trading limits meant only that Owners could not refuse orders to pass through the Gulf of Aden, where there were naval forces and a convoy system. However (not expressly stated in the judgment but implied), that did not mean a failure to exclude Kenya from trading limits meant that Owners undertook the risk of piracy on voyages to Kenya. Thirdly, on the facts Owners were not aware when contracting that the vessel was likely to be employed on voyages to Kenya. Fourthly, there was express provision for charterers to reimburse Owners for all additional war risks premiums incurred.
In distinguishing the Product Star, the judge said: “22. … The Product Star (No 2) was a case in which both the factual matrix and a specific term regarding the payment of war risk insurance by the charterers for the very place to which the vessel was ordered enabled the court to reach the conclusion it did. By comparison with that case there is, in the present case, as the arbitrators noted, no suggestion that the owners were aware, when entering the charterparty, that the vessel was likely to be employed on one or more voyages to Kenya. Further, there is no equivalent of clause 50 which provided for the payment by the charterers of war risk premium in respect of trading, in particular, to Ruwais in the UAE.”
Leave to appeal was denied.
The Paiwan Wisdom is a good illustration of the basic principles of contractual interpretation. First, Teare J studied the wording of the clause in question – there was no requirement for a material escalation of risk. Second, Teare J studied the other charterparty clauses – charterers were to pay for additional war risk premiums (indicating that charterers undertook additional war risk). Third, Teare J considered the circumstances known to the parties when contracting – Owners did not know that the vessel was likely to voyage to Kenya (and therefore could not be said to have undertaken the risk).
Fn.1 War Risks Clause for Time Charters, 2004 (Code Name: CONWARTIME 2004)
(a) For the purpose of this Clause, the words:
(i) "Owners" shall include the shipowners, bareboat charterers, disponent owners, managers or other operators who are charged with the management of the Vessel, and the Master; and
(ii) "War Risks" shall include any actual, threatened or reported: war; act of war; civil war; hostilities; revolution; rebellion; civil commotion; warlike operations; laying of mines; acts of piracy; acts of terrorists; acts of hostility or malicious damage; blockades (whether imposed against all vessels or imposed selectively against vessels of certain flags or ownership, or against certain cargoes or crews or otherwise howsoever); by any person, body, terrorist or political group, or the Government of any state whatsoever, which, in the reasonable judgement of the Master and/or the Owners, may be dangerous or are likely to be or to become dangerous to the Vessel, her cargo, crew or other persons on board the Vessel.
(b) The Vessel, unless the written consent of the Owners be first obtained, shall not be ordered to or required to continue to or through, any port, place, area or zone (whether of land or sea), or any waterway or canal, where it appears that the Vessel, her cargo, crew or other persons on board the Vessel, in the reasonable judgement of the Master and/or the Owners, may be, or are likely to be, exposed to War Risks. Should the Vessel be within any such place as aforesaid, which only becomes dangerous, or is likely to be or to become dangerous, after her entry into it, she shall be at liberty to leave it.