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England’s Supreme Court hands down significant “off-hire” judgment

A team of HFW lawyers led by Partner Brian Perrott, including Associates Alice Marques and Lee Forsyth, successfully represented Cargill International SA (Cargill) in relation to a dispute dating back to 2008 that focuses on the construction of an off-hire provision in an amended NYPE form, which itself allocates the risk of delay between owners and charterers. Brian Perrott said "We are delighted that Cargill's faith in its case and its legal team proved well placed".

On 11 May, in a judgment of some significance, Head Charterers Cargill have won in the English Supreme Court, reversing previous Court findings, that a vessel arrested by a sub-sub-charterer in relation to a sale contract demurrage dispute fell within an off hire proviso or exclusion. The Supreme Court found that the arrested vessel WAS Contractually off-hire and Cargill was not obliged to pay charter hire. The arbitrators original majority decision in Cargill's favour was restored.

Commenting on the judgment, Brian Perrott said: "The question of whether owners or time charterers bore the burden of the vessel's (mistaken) arrest, that is, whether the vessel was off-hire or not, is crucial to any owners or charterers in the business. The Supreme Court recognised the difficulty of the issue, but ultimately preferred the reasoning and conclusions of the original London arbitrators that the mistaken arrest of the vessel could not be regarded as having been occasioned by the time charterer's agents in the sense the wording was used in the off-hire clause.”

Background

Under a charterparty on an amended NYPE form, NYK Bulkship (Atlantic) N.V (NYK) time-chartered the MV GLOBAL SANTOSH to Cargill International SA. In turn, Cargill had sub-chartered the vessel to Sigma Shipping Ltd. Transclear SA (Transclear), who were assumed to be a sub-voyage charterer, sold a cargo of cement to IBG Investment Ltd (IBG) and IBG were named as the notify party on the bill of lading. In accordance with the contract of sale, IBG were responsible for unloading the cargo and were liable to Transclear for any demurrage incurred as a result of delays incurred in the discharge of the cargo. The cargo was to be discharged at Port Harcourt, Nigeria. After suffering delays as a result of congestion, once the vessel was finally called to berth, she was sent back to anchorage because Transclear had obtained an arrest order against the cargo for a demurrage claim against IBG. By mistake, the vessel had also been named in the arrest order. As a result of the arrest order, the cargo could not be unloaded from the vessel.

Cargill, as time-charterers, withheld hire from NYK for the period of time the arrest order was in place in accordance with the following clause in the charter party:

49. Should the vessel be captured or seizure (sic) or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents. Any extra expenses incurred by and/or during the above capture or seizure or detention or arrest shall be for Owners' account.

NYK took the view that the proviso "unless such…arrest is occasioned by any personal act or omission or default of the Charterers or their agents" applied and that hire continued to be payable during the duration of the arrest order.

An LMAA Tribunal found in favour of Cargill but the High Court and the Court of Appeal determined that the obligation to pay hire did in fact continue following the arrest order, subject to questions of causation.

The shipping industry has now received clarification on the meaning of 'charterers' agents'. Brian Perrott said "It is an important case for the shipping community”.

For further information please contact: Tania Phayre, Head of Marketing, on +44 (0)20 7264 8546 or email tania.phayre@hfw.com

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