The Court of Appeal has reversed the first instance decision in Minerva Navigation Inc v Oceana Shipping AG (The “Athena”).
The vessel was chartered on the NYPE 46 form. Clause 15 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.
Findings by the Arbitration Tribunal and the Court at First Instance
The Tribunal held that the sums claimed were recoverable under the off-hire provisions in clause 15. Charterers needed to prove a cause which fell within clause 15, and an immediate loss of time as a consequence of that cause. It was sufficient for time to be lost in relation to the service immediately required of the vessel.
Owners’ successfully appealed this decision. The court 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. It was not sufficient for Charterers to show that the service immediately required had been delayed, if there was no net loss of time in performing the charter service overall by reason of a clause falling within clause 15.
For more detail on the Tribunal’s and first instance Court’s findings, please see our previous blog post on this case.
The Court of Appeal allowed Charterers’ appeal and agreed with the Tribunal.
Clause 15, and off-hire clauses in those terms, were concerned with the service immediately required of the vessel, and not with the chartered service as a whole or the entire maritime adventure. Central to the clause was the period during which the full working of the vessel was prevented. The “full working of the vessel” referred to the vessel’s ability to do what it was immediately required to do (following The Westfalia and The Berge Sund).
It was the service immediately required of the vessel which must be referred to when determining whether and to what extent there was a loss of time. Whether the same amount of time would have been lost for other reasons at another stage of the chartered service was irrelevant.
Where the clause was concerned with the service immediately required, it had to be possible at the conclusion of the off-hire event to determine what net time had been lost in consequence of the event. No regard could be had to events occurring after the end of the off-hire event.
The Court of Appeal based its decision on a line of previous authorities, including The Westfalia, The Berge Sund, The Pythia and The Ira. As such, this decision can be seen as bringing the interpretation of NYPE clause 15 back in line with the previously accepted view.
The Court was also conscious of commercial parties’ need for certainty and for a realistic method of dealing with off-hire. It felt following the first instance decision would have led to the need for “intricate and speculative” enquiries as to the course of events, which could not be conducted, or at least finalized, before charterers were obliged to pay the next hire installment, from which it would usually expect to deduct accrued off-hire.
The question of exactly how time off-hire is to be calculated is a common one, and parties often differ as to the answer. This case provides further certainty as regards interpreting one of the most widely used off-hire clauses. It also indicates that the courts will bear the commercial parties’ needs in mind when interpreting such clauses.