Saturday, September 23, 2023

The DIVINEGATE [2022]: Slow steaming-hull fouling-currents-performance methodologies

The Background

  1. This is the trial of a claim and counterclaim arising under a trip time charter dated 18 September 2019 of a bulk carrier called “DIVINEGATE” during her voyage via the Baltic Sea to the Mississippi River in the USA. The cargo was loaded in Riga and discharged in New Orleans.
  2. The Vessel was delivered into the Charter party at Rotterdam at 0700 on 21 September 2019, and the trip covered (and hire was payable for) the ballast leg from Rotterdam to Riga, and then the laden leg from Riga to New Orleans. The Vessel was redelivered to the Claimant at 0415 on 3 November 2019.
  3. It is common ground that the Defendant’s instructions were for the Vessel to steam at eco-speed on the laden voyage.
  4. The Claimant, as disponent owner, claims outstanding hire, bunkers and some expenses while the Charterers (defendant) seeks deductions from hire and also claims damages for breach of charter regarding the Vessel’s performance. It also makes a separate counterclaim as damages in tort (this is not discussed in this post).
  5. The court made directions for ADR at an early stage and both parties expressed disappointment at the matter going to trial, pursuant to clause 92 of the charter party.

The Claimant’s claim

  1. The Claimant’s claim is for payment of outstanding hire, bunkers and some expenses totalling some US$99,982.79. It alleges that this sum is contractually due to it on a reconciliation of the final charterparty accounts and that the Defendant, in breach of the Charterparty, has failed to pay such sums.

The Defendant’s counterclaims

  1. The Defendant contends that the Master did not comply with instructions to proceed at eco-speed and his failure to do so amounts to (a) “a default of Master, officer or crew” entitling the Defendant to put the Vessel off-hire for time lost under clause 15; or (b) a breach of the clause 8 obligation to prosecute voyage with utmost despatch or
    (c) a breach of the obligation under clause 1 to provide a Vessel that was “tight, staunch, strong and in every way fitted for service” and maintain her as such (d) a breach of the performance warranty at the time of delivery entitling the Defendant to recover damages for resulting losses or deduct the same amount.

Evidence

  1. Both parties relied on expert evidence, and a large amount of documentary evidence was considered.
  2. Notably, the vessel was relatively new (2019) when entering the charter party. She stayed at Paradip for an extended period and an underwater cleaning was performed later. It was disputed whether her hull was satisfactorily cleaned at Trincomalee in Sri Lank before she entered into the charter party.
  3. Following completion of discharge at New Orleans, a surveyor from Fernandez Maritime Consultants LLC (“FMC”) attended on board on 1 November 2019 to inspect the Vessel on behalf of the Defendant. Their report states that “the vessel had considerable marine growth (barnacles) on her visible hull area….”

The Charter party terms

  1. The relevant terms considered under the amended NYPE 1946: lines 21-22, clause 1(maintenance), clause 8 (outmost despatch), clause 15 ( off-hire), Clause 74 ( weather routing clause), the vessel’s description in the recap, clause 92 (dispute resolution clause) and clause 102 (Performance Claims Clause- time bar issue)

The counterclaim for underperformance

  1. There were two distinct aspects of the Defendant’s counterclaim relating to underperformance, namely slow steaming and hull fouling.
  2. Here the main issues were:

a) Is the claim time-barred?

b) is there a sufficient sample of good weather on the laden voyage over which to assess the Vessel’s performance?

c) if so, whether the Defendant can show underperformance, including whether allowance should be made for positive currents?

d) if there is no good weather period for assessing performance, can the Defendant still establish a claim for underperformance, including whether breach of clause 8 and/or clause 15 (and consequential damages) can be established by reference to the Vessel’s engine speed as operated on the laden voyage?

e) the existence, extent and effect of any hull fouling on the Vessel’s delivery under the Charterparty, including whether any claim for time lost arising out of hull fouling was already covered by the claim for time lost in respect of slow steaming?

The decision

15. The judge answered these questions as follows:

a) The Defendant’s case was preferred and its counterclaim is not time-barred( [60]-[62]).

b) The 32 hour period on 23/24 October 2019 was a representative period of good weather within the Charterparty parameters, and appropriate for assessing the Vessel’s performance against the agreed warranty. Owners’ expert also agreed that this period of time would be sufficient ([103]). The 24 hour period between noon on 22 and 23 October 2019 was also a representative period of good weather since .. the record of adverse currents in the deck log were unreliable ([105]).

c) There was a failure to proceed with utmost despatch since it established an unjustified underperformance by reference to the Vessel’s speed during the good weather period. This can be extrapolated against the entire laden voyage since if she underperformed in good weather she will do so in bad weather too (The Didymi)([109]). Positive currents were to be disregarded absent clear wording, which reduced the time loss. As stated “in the absence of wording excluding the benefit of positive currents (or weather that is better than “good weather”) such benefit is not to be deducted in measuring the Vessel’s speed for the purpose of the performance warranty.([100])

d) The judge considered the law in applying the performance warranty ([90]-[94]) and adopted the traditional approach which is the good weather method. However, the judge accepted that this is not the only available methodology for making a claim for underperformance, and it does not bar compensation being claimed on alternative methods([91]). However, any alternative method must be established as reliable and consistent with the express performance warranty, especially in circumstances where the conventional method has been adopted for many years in an area of significant expertise, resources and innovation([94]). Further, the judge concluded that “Even if it had been open to the Defendant to ignore the performance warranty and seek damages on an alternative basis, the RPM method was not a reliable method to identify loss of time([113]).

e) The researchers suggest that that there is no established formula for the practical measurement of the impact of fouling on speed. The judge said that “given that I have rejected the claim based on the RPM method, it was not necessary to decide whether allowing recovery under the RPM method and also the lost time calculated ..for hull fouling would have allowed double recovery for the same underperformance (what counsel described as double dipping). In circumstances where the Claimant had established a loss from the slow steaming under the good weather method, there would be double recovery if .. calculation was added since the good weather method covers underperformance by reason of hull fouling (and any other matter affecting performance) ([120]-[123]).

Comment

The decision highlights that tribunals and courts will not easily depart from the traditional way of establishing breach and loss (The Didymi); whether one seeks to establish a claim/ counterclaim under clauses 1, 8 or 15, the obligation must be construed in light of the parties’ express agreement as to warranted performance during good weather. The issue of whether the positive currents apply or not in the performance assessment is now judicially settled. This is also in line with the bulk of published arbitration awards after 2012 (London Arbitration 21/18, 6/19, 26/19, 27/19) and commentaries from LMAA arbitrators (See, for example, B. Williamson’s articles).On the issue of positive currents, the author is also aware of three unpublished awards that adopt the same reasoning as in London Arbitration 15/07. Lastly, as the judge stated, “The charter provisions are to be applied (whether by the parties themselves, arbitrators or the court) in light of the fact that the parties, when contracting at least, will generally have expected to achieve certainty and commercially pragmatic solutions”.

The decision also highlights the Owners’ obligation to maintain their vessel’s hull in a proper state and to perform the voyage with the utmost despatch, whereas ‘bad weather’ will be determined in the light of the facts before providing a potential defence to the Owners for slow steaming. Again, the decision is balanced for both parties and offers guidance on the grounds that Owners or Charterers could support or defend such claims that raise issues of law, fact and practice. For example, the logs were found unreliable on the adverse currents; what if ECDIS printouts were provided in evidence? Or if Owners give valid reasons to justify any slow steaming? There are some points that Owners left unanswered.

Another issue (not considered here but arises in practice) would be how any loss is quantified for events happening during the voyage and trigger clauses 1/8/15 (net loss), and not as happened here at the commencement of the voyage. This sometimes leads to inflated claims depending on the applied methodology and can be quickly challenged.

Are now conflicting first instance decisions on the sample of good weather required to establish a claim?

Notably, the case went directly to court, and the judge relied on expert evidence. It is noteworthy that the Ocean Virgo was concerned with an appeal from an experienced arbitrator (Captain Paines) that he made a finding of fact on the sample period (5.5% was not enough to establish a claim). The court would not ordinarily disturb findings of fact from experienced arbitrators. This is an important distinction to be made. Therefore, this matter requires further consideration.

In a published article, C. Barcley (LMAA arbitrator and marine engineer) discussed the RPM method in 1974. Also, there was a published London arbitration award in 1980 that considered the RPM method. However, after the Didymi, it seems that no published awards considered the RPM method, and the reasons can be discerned from this new decision. However, in practice, the RPM method (based on 15% slip and not 5%, which is very optimistic) was used along with another proposed method to establish breach and loss, causing extensive debate between the parties.

Lastly, it remains unsettled how a reliable performance assessment will be established without good weather. There is still no proper guidance on the point. In a previous London Arbitration award, the tribunal awarded damages when the ship was performing at a slow speed due to technical issues, and bad weather prevailed.

The judgement can be found here: https://www.bailii.org/

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