Bulk Ship Union v Clipper Bulk Shipping - The Pearl C
Bulk Ship Union SA v Clipper Bulk Shipping Limited (The "Pearl C")
English High Court: Popplewell J.: 26 June 2012  2 Lloyd’s Rep. 533
Mr J Passmore, instructed by Jackson Parton, for the Owners, Bulk Ship Union
Mr C Friday, instructed by Winter Scott LLP, for the Charterers, Clipper Bulk Shipping
TIMECHARTER ON NYPE FORM: SLOW STEAMING: WHETHER A BREACH OF ‘UTMOST DESPATCH’ OBLIGATION: WHETHER VESSEL OFF-HIRE BY REASON OF DEFAULT OF MASTER: WHETHER PARTIAL INTERRUPTION IN SERVICE SUFFICIENT TO TRIGGER OFF-HIRE CLAUSE
In this case the Court held that, where the evidence pointed to the vessel having slow steamed, arbitrators were entitled to hold that the Owners were in breach of their obligation to proceed with the utmost despatch and that the vessel was off-hire.
This Case Note is based on a note by Neil Henderson , a barrister at Stone Chambers, Gray’s Inn, London, and Tom Burdass, an associate solicitor with the London firm of Campbell Johnston Clark.
The owners, Bulk Ship Union SA ("Owners"), had chartered their vessel The Pearl C to Clipper Bulk Shipping Ltd ("Charterers") on an amended NYPE form for a period of about 9 to 12 months. The Charterers withheld hire for alleged underperformance, contending: (1) that the vessel had failed to proceed with the utmost dispatch in breach of clause 8; and (2) that the Charterers were entitled to deduct the time lost due to slow steaming under the first part of the off-hire clause, clause 15, which was amended from the standard NYPE off-hire clause. The dispute was submitted to arbitration in London.
The charterparty contained a performance warranty of about 13 knots (in ballast and laden) in good weather conditions. That warranty applied only on delivery and was not a continuing warranty. The Tribunal held that there was no breach of the on-delivery performance warranty and rejected the Charterers' argument that the vessel had not been maintained during the time charter.
The charterparty incorporated the Hague Rules, including Article IV Rule 2 “Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from: (a) act, neglect or default of the master, mariner ... or the servants of the carrier in the navigation or in the management of the ship”.
In order to assess whether the vessel had complied with the due despatch obligation in clause 8 of the charterparty and whether there had been a net loss of time under clause 15, the Tribunal compared the vessel’s actual speed with the warranted speed. The Tribunal held that there had been a breach of clause 8 and a net loss of time under clause 15.
The Owners appealed.
On appeal under Section 69 of the Arbitration Act 1996 the Owners contended that, in relation to clause 8, by using the performance warranty as the benchmark against which the requisite level of utmost dispatch and any loss of time was measured, the Tribunal had erroneously converted the performance warranty from one which applied at the time the vessel was delivered into the charterparty, into a continuing performance warranty which applied throughout the course of the time charter.
The Owners also contended that the Tribunal had failed to apply Article IV Rule 2(a) so as to exempt the Owners from any liability which they might otherwise have been under for breach of clause 8.
In relation to the off-hire clause, the Owners submitted that the same mistake of measuring performance by reference to the speed in the performance warranty, had led the tribunal to the erroneous conclusion that there had been an off-hire event, namely an error of the Master or crew, and to an erroneous conclusion that there had been a net loss of time. The Owners also contended that underperformance resulting in reduced speed could not fall within the first part of clause 15 because reduction in speed was exclusively governed by the second part of the clause; and the second part of the clause was not engaged because the Tribunal did not find any defect in, or breakdown, of the vessel's hull, machinery or equipment.
Popplewell J held that there had been no error by the Tribunal in using the warranted speed as the benchmark against which to assess whether the vessel had proceeded with utmost dispatch. The Judge also held that the Tribunal was correct to reject the Owners’ reliance upon Article IV Rule 2(a) of the Hague Rules: the Tribunal had correctly referred to The Hill Harmony  1 Lloyd's Rep 147 and had identified the dichotomy between a breach of clause 8 which involved a deliberate decision not to proceed with utmost dispatch (to which the Article 4 Rule 2(a) exception did not apply), and a negligent error in the navigation or management of the ship concerning a matter of seamanship, to which the exception did apply.
As to off-hire, the judge held that, contrary to the decision in Ocean Glory Compania Naviera SA v A/SPV Christensen (the “Ioanna”)  2 Lloyd’s Rep 164 – where the wording of the off-hire clause differed from that in the present case - a claim for loss of time arising from deliberate slow steaming qualified as “default of Master” and entitled the Charterers to put the vessel off-hire for the additional time by which the service had been extended.
The submission that the first part of Clause 15 was confined to claims which give rise only to a total interruption of the service was erroneous. That first part was a ‘net loss of time’ clause and apposite to apply to periods of partial interruption of the service in the sense of events interfering with the full working of the vessel sufficient to delay the service.
The Pearl C is a potentially important decision in that it identifies the performance warranty in the vessel’s description as the relevant yardstick against which the slow-steaming can be measured. The Court approved the approach taken by the Tribunal whereby they decided that deliberate slow steaming was the only reasonable explanation in the absence of any obvious mechanical problem, adverse weather or other reason for the slow performance of the vessel.
In the circumstances (i) where the absence of a good explanation for poor performance may be sufficient to establish a claim for breach of clause 8 or a claim for off-hire and (ii) the general prevalence of slow-steaming, the decision of The Pearl C indicates that an owner who chose to steam more slowly for commercial or other will not be able to hide behind a performance warranty which applied only upon delivery.
What should such an owner do to avoid such claims?
As a result of the incidence of slow-steaming in the market, BIMCO has developed standard form slow-steaming clauses for both time and voyage charterparties. Both clauses provide owners with a two-fold protection: an express recognition that slow-steaming in accordance with orders (whether given by charterers or owners) will not amount to a breach of the utmost/due dispatch obligation; and an obligation on the charterer to ensure that the terms of bills of lading permit slow-steaming and that charterers will indemnify owners for liabilities arising from claims for breach of the obligation to proceed with utmost and/or due dispatch.
If an owner wishes to implement, or continue to operate, a policy of slow-steaming, then a transparent approach is likely to be the best. The decision of The Pearl C reinforces the point that owners would be well-advised to press for the inclusion of the BIMCO slow-steaming clause in either its time or voyage charterparty form in all their future fixtures.