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Court considers whether vessel remained on hire during period of arrest – what a difference a word makes

Insights / / London

Navision Shipping A/S v. Precious Pearls Ltd and Conti Lines Shipping NV v. Navision Shipping A/S (m.v. Mookda Naree) [2021] EWHC 558 (Comm)

The Court has upheld an arbitral decision that a sub-charterer’s failure to take action in response to a claim that resulted in the arrest of the chartered vessel meant that the vessel remained on hire. 

However, in circumstances where the head charter provided for charterers to accept responsibility for cargo claims from third parties when trading to West African ports, the Court found that this liability was limited to cargo claims brought under that charter and in respect of this vessel only. The arbitrators had come to the opposite conclusion.

The background facts

In December 2018, the MV Mookda Naree called at Conakry, Guinea to discharge a cargo of wheat.  The call was pursuant to a head charter between Precious Pearls Ltd (“Owners”) and Navision Shipping A/S (“Navision”) as charterer, a sub-charter between Navision and Conti Lines Shipping NV (“Conti”), and a sub-sub-charter between Conti and Cerealis.

The vessel was arrested at Conakry by SMG, who alleged short delivery of a consignment of wheat that they had bought from Cerealis. SMG’s cargo had, however, been shipped on another vessel. The cargo on board the Mookda Naree was destined for a different Cerealis buyer.

On 15 December 2018, Cerealis became aware of the arrest, but took the view that it was wrongful and denied any liability for the claim or for any loss of time resulting from the arrest. The Owners’ subsequent attempts to get the vessel released were unsuccessful, until a guarantee (funded by Cerealis) was provided on 11 January 2019. The vessel was released the following day and Cerealis subsequently settled SMG’s claim.

The arbitration proceedings

Navision and Conti treated the vessel as being off-hire from 12.00 hours on 15 December 2018 until 1900 hours on 12 January 2019 under the respective charters. In arbitration, the tribunal considered the relevant terms of the charters.

The head charter and sub-charter were on the Asbatime 1961 form with additional clauses. They provided at clause 43 for cargo claims as between owners and charterers to be governed by the Interclub Agreement (ICA). Clause 47 was the “capture, seizure, arrest” clause, which put the vessel off hire inter alia upon her being detained or arrested by any legal process, until the time of her release, "unless such … detention or arrest [was] occasioned by any act, omission or default of the Charterers and/or sub-Charterers and/or their servants or their Agents." It was agreed that, in the context of both these time charters, Cerealis was a "sub-Charterer" within the clause 47 proviso.

The tribunal found that, on becoming aware of the arrest of the vessel, Cerealis should have appreciated that it would be expected to deal with SMG's claim, and that if Cerealis had acted promptly to settle or secure SMG's claim, the vessel would have been released by 12:00 hrs on 17 December 2018 (allowing 24 hours or more for security to be provided and for the arrest to be lifted). The arbitrators concluded that Cerealis' inaction in those circumstances was an “omission …of … sub-Charterers …" within the meaning of clause 47. Therefore, from 12:00hrs on 17 December 2018 until release, the vessel remained on hire. 

Clause 86 was a trading exclusions provision which was contained in the head charter but not the sub-charter. It provided inter alia that:

“When trading to West African ports Charterers to accept responsibility for cargo claims from third parties in these countries (except those arising from unseaworthiness of vessel) including putting up security, if necessary, to prevent arrest/detention of the vessel or to release the vessel from arrest or detention and vessel to remain on hire.”

The tribunal concluded that “cargo claims” in clause 86 was not limited to claims in respect of cargoes carried under the head charter or any other contract of carriage entered into in relation to the goods carried on board that vessel. It extended to SMG’s claim in respect of a cargo shipped under another vessel. Therefore, the vessel remained on hire for the entire period of arrest.  

The Commercial Court decision

On appeal, the Court agreed with the tribunal’s first finding but disagreed with the second.

The Court confirmed that the acts and omissions referred to in clause 47 were not confined to breaches of obligations under the charter in question. Cerealis’ inaction, in circumstances where it should reasonably have appreciated that it was expected to act, was an omission by the sub-charterers which occasioned all but two days of the period of detention and so the vessel was not off-hire for that time. 

On the construction of clause 86, however, the Court allowed the appeal. Clause 43 provided for cargo claims to be apportioned in accordance with the ICA. While it did not expressly say so, clearly the clause was limited to claims concerning cargo carried under the relevant charter because the ICA applied only to claims under contracts of carriage authorised under the relevant charter. In the context of a time charter and provisions concerning responsibility for third-party claims, a reference to cargo claims naturally connoted claims concerning cargoes carried or ordered to be carried pursuant to the time charter. On that view, what was meant was cargo claims arising out of the chartered employment.

Applied to clause 86, this meant that the charterer accepted responsibility for cargo claims arising out of the carrying of cargo from or to West African ports pursuant to that charter. While clause 86 supplanted clause 43 for West African trading, it was of a similar nature to clause 43 and its language did not suggest that it should be interpreted differently. As a result, SMG's claim, though it related to a cargo that had been carried to a West African port, was not a cargo claim within clause 86 because it did not concern Mookda Naree's West African trading pursuant to the head charter but a different vessel altogether. It was, therefore, not a claim within Navision's responsibility under clause 86, any more than it would have been a claim to be dealt with under the ICA pursuant to clause 43 in the absence of clause 86.

Consequently, Navision’s appeal succeeded to the extent that the vessel was off-hire until the proviso bit from 1200 hours on 17 December 2018 and the arbitrators were wrong to find that Navision was liable for damages for breach of clause 86.

Comment

The Court highlighted that a “capture, seizure, arrest” clause should be construed in the context of its purpose, namely to protect the interests of a time charterer by ensuring that a vessel will be off-hire where she is detained or arrested for reasons that have nothing to do with the charterer or its agents or servants. However, as always, much will depend on the construction of the specific wording of the clause.

In that regard, it appears that clause 47 had been drafted with the Supreme Court decision in the Global Santosh [2016] in mind. The relevant off-hire provision, in that case, was confined to the actions and omissions of the charterers themselves, or their agents, and did not extend to sub-charterers. As a result, the Court had been required to consider whether a party responsible for the arrest of the ship should be treated as the charterers’ agent in that context. If so, the vessel would remain on hire. On the facts of that case, the question was answered in the negative and the charterers were able to claim that the vessel was off-hire during the period of arrest. The addition of the word “sub-Charterers” to clause 47 avoided that result in this case.  

Joanna Steele

Joanna Steele Partner

Clare Birchenhough

Clare Birchenhough Associate

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