The Pacific Voyager [2017] EWHC 2579 is a Commercial Court decision about which a number of articles have been written over the last week. It considers the often neglected approach voyage;  identifying the moment when the duty to proceed with utmost despatch to the loadport arises under a voyage charter; and whether that obligation is an absolute one or one to exercise due diligence.

In Monroe Brothers Limited v Ryan [1935] 2 KB 28, the Court of Appeal held that “where a voyage charter contains an obligation on an owner to proceed with all convenient speed to the loading port and gives a date when the vessel is expected to load, there is an absolute obligation on the owner to commence the approach voyage by a date when it is reasonably certain that the vessel will arrive at the loading port on or around the expected readiness to load date” (and also that the exceptions in the charter only apply once the approach voyage is commenced). The decision in the Pacific Voyager extends this beyond the situation where there is an ETA in the charter (so as to give a reference point to the estimated date that the parties must have intended the obligation to proceed to the loading port with all convenient speed to attach), to one where there is an agreed laycan / cancelling date.

This is an interesting development as although there have been indications to the contrary (see below), the cancelling date has generally been understood to be no more than a trigger for charterers’ termination option, the exercise of which confers no right to damages.

On the fact of this case, the charter also contained ETAs which Owners gave re the estimated time of arrival of the Vessel at the intermediate ports for the cargo operations on the previous voyage, all subject to the usual “IAGW / WP” provisions.

But the judge held that even without the ETAs for the intermediate ports he would have held that there was “an absolute obligation to commence the approach voyage by a date when it was reasonably certain that the Vessel would arrive at the loadport by the cancelling date”. Whilst accepting the differences between an ETA and a cancelling date, the judge held that they could be treated as being the same for the Monroe obligation – they both represent the expectation of the parties as to when the vessel will arrive at the loading port.  The judge held that a cancelling date is also the parties’ anticipated time of arrival at the loading port and so defines the owners’ obligations in relation to such time of arrival.

If one looks at the textbooks on this, as the judge did, it can be seen that Voyage Charters alludes to this approach: 4.12: It is unclear whether, under those charters which do not contain any “expected ready” date or “estimated time of arrival” but merely a cancelling clause, the owner is under an obligation to commence the approach voyage in such time that the ship, if proceeding normally, will be able to meet the cancelling date. The reasoning in the decisions on the “expected ready” provision suggests that such an obligation probably does arise, and this view has been adopted by London arbitrators.

The arbitration referred to is London Arbitration 15/93 in which the original cancelling date under a charter was not met and an addendum was drawn up substituting another vessel on the same terms and conditions. Clause 1 of the charter provided: Loading port(s) 1. That the said vessel, being tight, staunch and strong, and in every way fitted for the voyage shall with all convenient speed proceed to 1_2 safe berth(s) 1 safe port US Gulf including. . . . It was held that the owners’ argument that for clause 1 to be an absolute obligation there had also to be an ETA in the charterparty would be rejected. If that argument were correct, it would result in the illogical position that the obligation to sail would be absolute in cases where an ETA was stated in the charterparty but only qualified, i.e. subject to due diligence by the owners, when an ETA was not. Accordingly, the obligation in clause 1 was an absolute one.

What does this mean for Owners / Charterers?

  • A laycan / cancelling date provision can give rise to the absolute obligation referred to in Monroe, and an exposure for damages if it is not met.
  • Owners cannot be complacent that the effect of missing the cancelling date will simply be termination of the charter with no exposure for damages.
  • This may make it more difficult for Owners to retain flexibility with regard to fixing intermediate voyages.
  • In each case the issue, being one of contractual allocation of risk, will turn upon the particular terms agreed between the parties.
  • Other articles have said that Charterers should still seek an ETA in the charter terms so as to ensure that they fall within Monroe. Like Owners, Charterers need to consider the construction of the contract as a whole, and where that leaves them, but the decision will be generally welcomed by them.

Permission to appeal was granted, and we can therefore expect further developments.