The “ATHENA”: Reversal of the Commercial Court’s Interpretation of Clause 15 Nype 46

Background

The Vessel was chartered on an amended NYPE 46 form, and sub-chartered on materially identical terms. Clause 15 provided that “in the event of loss of time from… default of master…preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost…”(amended words underlined).

Following a refusal of cargo (due to alleged contamination) at Syria, the master was ordered by Charterers to proceed to Novorossiysk, which being the port of origin of the cargo was the only route permitted under Syrian law, and then to Benghazi once she was out of Syrian national waters. However, on Owners’ orders, the Vessel instead drifted off-course in international waters outside Libya for 10.9 days.

Charterers commenced arbitration claiming hire, among other expenses, during the drifting period on the basis that the Vessel was off-hire under the provisions of clause 15.

Arbitration

The arbitrators found that in order for hire to be recoverable under the off-hire provisions of clause 15, Charterers needed to demonstrate that there had been a default by the master, which had in turn caused an immediate loss of time.

The tribunal held that the Vessel would not have been able to berth at Benghazi any earlier than it did even if it had proceeded there directly.

However, it was held that the default of the master had caused an immediate loss of time and that the claims succeeded regardless of whether time would have been lost in any event.

Appeal to Commercial Court

On appeal to the High Court, Owners argued that the arbitrators had not considered whether the loss of time constituted a net loss of time in the performance of the charter.

The appeal was allowed, with the Court deciding that there were two questions to answer:

1. Was clause 15 engaged?

2. What were the consequences of that engagement?

In answering the first, the clause was engaged when the cause of the problem prevented the full working of the Vessel AND the cause was a “prescribed cause”; next, one had to ascertain what it was that the clause specified should happen in the event that the above conditions were met.

In the case, the focus was on the Vessel’s ability to perform the service immediately required of her.

The Commercial Court held that it was not sufficient for Charterers to show merely that there had been an immediate loss of time in performing the charter service; they had to show that there had been a net loss of time to the service (i.e. the whole time charter). It was noteworthy that this decision ascribed a different meaning to clause 15 NYPE from the equivalent Baltime and Shelltime clauses.

Appeal to Court of Appeal

Charterers appealed to the Court of Appeal, which reversed the decision below, ruling that the arbitrators had been correct in their award.

The Court based its decision on the preceding authorities and the need for commercial parties to be able to determine at the conclusion of an off-hire event what time had been lost in consequence of that event so that it could be deducted from the next instalment of hire. It held that the correct interpretation of clause 15 was the service immediately required of the vessel, and not the service required as a whole. (The Westfalia and The Berge Sud followed, The Pythia approved).

Conclusions

The decision of the Court of Appeal brings NYPE 46 into line with the equivalent Baltime and Shelltime clauses.

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Minerva Navigation Inc v Oceana Shipping AG, Oceana Shipping AG v Transatlantica Commodities SA, “The Athena” [2013] EWCA Civ 1723

(Thomas Cooper acted for Oceana Shipping AG)

This article is filed under:  Industry news

About the contributor

  • Rebecca Crookenden Solicitor

    Rebecca is a solicitor in the shipping and international trade group in the London office. She is also a member of the Dispute Resolution Group.

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