In Minerva Navigation Inc v Oceana Shipping AG (The “Athena”), the Commercial Court considered the nature of the loss of time which Charterers were required to prove in order to bring the vessel within the off-hire provisions of an amended NYPE 46 charterparty.
Clause 15 of the charterparty provided as follows (with amendments from the standard form clause underlined):
“… in the event of loss of time from … default of master … or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost … and all extra expenses directly incurred including bunkers consumed during period of suspended hire shall be for Owners’ account…”
The vessel had loaded a cargo for discharge in Libya. Due to issues with the bills of lading, Charterers ordered her to anchor “at road port Benghazi” and await further instructions. In the event, the vessel stopped in international waters around 50 miles from Libya and drifted for 11 days.
Following discharge, Charterers commenced arbitration claiming hire, bunkers and CVE expenses during the drifting period. Three alternative bases for the claim were put forward, one of which was that the vessel was off-hire under the provisions of clause 15.
The Tribunal held that the sums claimed were recoverable under the off-hire provisions in clause 15. They found that at the start of the drifting period the vessel was obliged to continue to proceed to Benghazi, and wrongfully failed to do so until the end of the drifting period. In their award, the Tribunal stated:
“… all [charterers] need to do in respect of their claim under the off-hire clause is demonstrate that there was a default on the part of the Master (which we have already accepted there was) and that in consequence, there was an immediate loss of time … the time was lost in relation to the service immediately required of her and that is sufficient.”
Owners appealed, referring to Time Charters which states that “loss of time” can refer to both “loss of a period of service” and “delay to the progress of the adventure”. Owners submitted that Charterers had to show a loss of time in both of these senses, because clause 15 as amended was a “net loss of time” clause.
The Court considered the true meaning of clause 15, which focused on the vessel’s ability to perform the service immediately required of her. The clause would not be engaged until there was a service immediately required which, due to a cause falling within clause 15, she did not fully perform. Once the clause was engaged, there would be a “period of suspended hire”.
The parties agreed that Charterers were precluded from claiming as off-hire any amounts in respect of delay arising after the vessel was fully efficient for the service immediately required. The question was whether time during the period in question had been “thereby lost” if Charterers could show that the service immediately required had been delayed, but could not show that there had been a net loss of time in performing the charter service overall by reason of a clause falling within clause 15.
Referring to previous authorities (The Pythia, The Berge Sund etc), the Court allowed Owners’ appeal. It found that clause 15 only allowed Charterers to deduct time for the duration of the off-hire event to the extent that there was a net loss of time to the charter service.
Determining whether an off-hire clause is a “period” or “net” clause requires a close analysis of the clause in question, in conjunction with the relevant facts. The interpretation of such clauses may well not be clear cut, and this often leads to disputes. Parties should ensure that they fully understand the hire and off-hire provisions and the consequences of any breach of those provisions, as they are key to the effective performance of the charterparty.