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Liability for commencement of approach voyage under voyage charters - absolute?

25 October 2017. Published by Stuart Shepherd, Partner

A recent judgment of the Commercial Court examines a novel point in respect of the obligation on an owner under a voyage charter to get the vessel to the load port when the charter contains a cancelling date but no expected readiness to load date or load port ETA.

It is well established that where a voyage charter contains (a) an obligation on owners to have the vessel proceed with all convenient speed to the load port, or a similarly expressed obligation, and (b) gives a date when the vessel is expected to arrive at the load port or to be ready to load, there is an absolute obligation (as opposed to a due diligence obligation) on the owner to commence the approach voyage by a date when it is reasonably certain the vessel will arrive at the load port on or around the expected readiness to load date. But until the recent decision of Popplewell J.  in CSSA Chartering and Shipping Services S.A. v Mitsui O.S.K. Lines Ltd [2017] EWHC 2579 (Comm) there was no authority which directly addressed the not uncommon position when there is no load port ETA or expected readiness to load date but just the usual cancellation clause permitting the charterer to cancel the charter if the vessel is not at the load port ready to load by the cancelling date stated in the charter.

As recognised by the editors of Cooke on Voyage Charters the date by which a chartered vessel will arrive at the load port is of vital importance to a charterer. This is particularly so in the case of commodity traders who usually have obligations under their sale contracts to ship the goods within a limited date range when a failure to ship in time may cause loss or result in them incurring liabilities under their sale contracts. In that context the right to cancel the charter provides the charterer with no right of recourse in respect of such loss or liability  and  it is often too late by the time the right to cancel arrives to find a substitute vessel to load within the applicable time frame. When a vessel is late or simply does not turn up at all what the charter wants is a remedy as against the owner in terms of a claim for damages for breach of the charter.

In the context of late arrival or a failure to arrive there are two obligations the breach of which may give rise to a right of recovery as against the owner. First, there is the obligation on the owner, whatever its precise terms, as to the timing of the commencement the approach voyage and second, the obligation to proceed to the load port once the approach voyage had been commenced. The first obligation arises before the vessel enters service under the charter and the second only once the vessel is in service under the charter; that service commencing on commencement of the approach voyage. As a matter of analysis of the allocation of risk between the parties, the approach of the courts has been to impose on the owner an absolute obligation to commence the approach voyage in time. This contrasts with the lesser obligation to exercise due diligence which will usually apply, by virtue of typical voyage charter terms, to the obligation to proceed to the load port once the vessel has commenced her approach voyage. 

The facts of the case 

The charter in the above case was for a voyage from Rotterdam to the Far East. At the time the fixture was concluded the vessel was laden with a cargo under a previous charter to be discharged in Egypt, south of the Suez Canal. The vessel was scheduled then to go to Alexandria to load a part cargo and thence to Antifer, Le Havre for final discharge before sailing to Rotterdam. The charter contained various ETAs in respect of this schedule culminating in an ETA Antifer of 25 January 2015. The cancellation provision in the charter permitted the Charterer to cancel the charter if the vessel was not ready to load  at Rotterdam by 2359 on 4 February 2015 (the cancelling date). There was no estimated readiness to load date or ETA Rotterdam in the charter.

Whilst transiting the Suez Canal the vessel suffered a rapid ingress of water which was attributed to contact with a submerged object. There was no suggestion that the Owner was in any way at fault for what happened. As a result the vessel had to be dry-docked for repairs which were estimated to take a number of months. The Charterer cancelled the charter on 6 February and claimed damages from the Owner (which were agreed as to quantum at US$1,202,812.50) on the basis that the Owner was in breach of an absolute obligation to commence the approach voyage to Rotterdam by a date when it is reasonably certain the vessel would arrive there by the cancelling date. The Charterer argued that the cancelling date was to be treated as equivalent to an expected readiness to load date. Given the planned itinerary of the vessel the approach voyage was not to commence until after discharge at Antifer and so the vessel plainly failed to commence the approach voyage in time; indeed never commenced it.

In the alternative the Charterer said (adopting, it would appear, an unpleaded case which was "suggested in argument" at trial) that on a proper construction of this charter, and in particular the express arrival ETA at Antifer of 25 January, the vessel had to commence her approach voyage to Rotterdam within a reasonable time to allow for discharge at Anifer after 25 January. There is no finding as to what that date would have been because on any basis the vessel didn’t commence that approach voyage in time.

The Owner argued that the neither the laycan nor the cancelling date was equivalent to an expected readiness to load date and there was no estimate as to the estimated arrival date to be otherwise derived from the charter terms. What the Owner said was that their obligation was limited to exercising due diligence to commence the approach voyage by a date which could reasonably be expected to get the vessel to the load port by the cancelling date.

The Court's findings

The Court had some sympathy with the Owner's case that the cancelling date was not the same as an ETA and Popplewell J. said that "I do not regard the cancelling date as the critical term which informs the question of what is a reasonable time at which" the obligation to proceed to the load port attaches. In the Judge's view the key provisions in determining the date by which the vessel had reasonably to commence the approach voyage were the ETAs for the intermediate ports on the previous voyage; in particular the ETA for the arrival at Antifer. In this respect the Judge concluded:

"The Owners gave intermediate port estimates which involved the Vessel arriving at Antifer on 25 January 2015 for final discharge of her previous cargo. Such estimate carries with it an estimate that she would take a reasonable period after arrival at Antifer to complete discharge. She was bound thereafter to embark on the chartered service. It is therefore the end of that additional period of reasonable discharging time that the Owners gave as an estimate of the expected commencement of the approach voyage and of the chartered service. In my judgment that is the time at which the Owners were under an absolute obligation to commence the relatively short approach voyage to Rotterdam, namely at the end of a reasonable discharging period for the Vessel if she were to arrive for final discharge at Antifer on 25 January 2015."

Fortunately, the Judge did not leave it there but went on to record his views on the question of much greater general importance of what the position is when there is a cancelling date but the charter contains no load port ETA or any other ETAs from which it is possible to derive a date by which the vessel should commence her approach voyage. As to that Popplewell J. said:

"In those circumstances I would have accepted [Charterers' counsels'] argument that there was an absolute obligation to commence the approach voyage by a date when it was reasonably certain that the Vessel would arrive at the loading port by the cancelling date. Although there are differences between a cancelling date and an estimated arrival date, they are not sufficient to treat them differently [for the purpose of determining the Owners' obligation in respect of commencement of the approach voyage]"

As a result the Court held the  Owner in breach and awarded the Charterer the agreed damages of approximately $1.2m.

Comment

It is a little surprising that the issue of whether one can equate the usual charterparty cancelling date with a load port ETA for the purposes of determining an owner's obligation to proceed to the load port has not been judicially considered before. It may well be that those involved in previous such disputes have accepted the tentative views expressed by the editors of Voyage Charters which correspond with Popplewell J.'s conclusions in this case.

On the basis that, as Popplewell J. observed, the risk of delay in the commencement of the approach voyage, as opposed to the performance of the approach voyage itself, should logically fall, and traditionally does contractually fall, on owners the Court's conclusions in this case are welcomed. If a cancelling date were not to be regarded as providing a sufficient indication as to the expected readiness of the vessel then in cases where all you have is a cancelling date the charterer would be obliged to run the risk of delay in the commencement of the approach voyage over which he has no control. That would, it is suggested, be an unsatisfactory state of affairs.