London Arbitration 1/14

The subject vessel, a new build which had just entered service, was chartered on an amended NYPE form for one time charter trip.

Clause 29 of the charter, dealing with speed and consumption, provided as follows:

“Speed ballast/laden about 15/14 knots on about 39.5 metric tons IFO 380 … Eco-speed ballast/laden about 13/12.5 knots on about 26/27 metric tons IFO 380 … Port consumption about 2.5 metric tons IFO … The vessel consumes MDO when entering/leaving ports, during manoeuvring and sailing in confined and/or shallow waters, rivers, canals, heavy weather, restricted visibility, stopping and starting engines, during ballast operations, cargo hold cleaning etc… Bunker and specification is RMG 35 (net calorific value of 10200 KCAL/KG).”

Owners claimed for a balance of account. Charterers counterclaimed on the basis that the vessel had overconsumed IFO and MDO in port, and MDO at sea during hold cleaning.

The Tribunal held that the charter did not contain an express continuing warranty of consumption, and clause 29 applied at the latest at the time of delivery. However, this was a relatively short time charter trip. As such, the vessel’s consumption in performing the charter service could be good evidence of its capability at the time of delivery.

The alleged overconsumption related to time spent at four ports. The first was the first port of call after delivery. As a result the Tribunal held that although there was no continuing warranty of consumption, the vessel’s consumption there could be considered to reflect its capability at the time of delivery. Owners were unable to explain the discrepancy between the warranted and actual consumption. The difference pointed to the vessel being unable to meet its warranted in port consumption at the time of delivery. The Tribunal applied similar reasoning for the subsequent three ports. Charterers’ claim was allowed for all four ports. Adjustments to the calculations, including allowing a 5% tolerance for the term “about”, meant that they recovered in a lower amount for each port.

As regards the hold cleaning, the Tribunal held that the charter imposed clear obligations on Owners as regards the required state of the vessel’s holds on delivery. Charterers could not, as Owners alleged, be obliged to make the holds ready between delivery and arrival at the first loadport in order to load their own cargo, but then be entitled to place the vessel off-hire if the holds failed an inspection. Charterers were, therefore, entitled to recover for the MDO consumed during hold cleaning.

This case is a good example of a Tribunal using a vessel’s performance during the charter service as evidence of its condition and capability on delivery. The specific circumstances were clearly relevant. The vessel was a new build, this was a short trip time charter, and the overconsumption occurred very shortly after delivery. Such reasoning would not be applied in every case. However, it is clear that a Tribunal will take into account the surrounding circumstances and all relevant facts in determining whether there has been a breach of the consumption warranty.