Monday, July 15, 2024

Whether Owners entitled to disobey charterers’ employment orders

The Vessel was chartered on an amended BHPTime form. Various disputes arose under the charter and came before two LMAA Arbitrators for determination on documents only. Lawyers represented the parties. Owners’ claims succeeded in full, and Charterers’ counterclaims were dismissed.

The disputes referred to arbitration concerned Owners’ claim for a balance of unpaid hire of $306,234.80, liability for which the charterers denied, and the charterers’ counterclaim for a balance allegedly due to them of $729,819.55, liability for which the owners denied.

The ship was delivered to Charterers on 28 March 2007; the latest date for redelivery by them to head owners was 27 May 2008. In January 2008, Charterers sub-chartered the vessel on back-to-back terms, providing that the ship was to be redelivered “minimum 14 April 2008 to maximum 27 May 2008”. The major dispute between the parties arose because Charterers (and the head owners) assumed that a voyage that sub-charterers wished to perform could not be completed before 27 May 2008. They also assumed that the cargo Sub-charterers wished to load was not permitted under the charter. In due course, the parties agreed to extend the charter duration at an increased hire rate.

One of the issues was whether Charterers’ message to the master to load a cargo of coal, asking for some information, amounted to voyage instructions with which the master failed to comply. The tribunal did not find this convincing, as no specific form was required for voyage instructions or orders. The tribunal turned to consider the nature of the cargo in the context of the agreed terms in the charter party that provided “the ship would not be required to carry bituminous coal” and having regard to expert evidence. Charterers said that during the negotiations for this fixture, oral representations were made by Owners’ brokers to the effect that steam/bituminous coal was a permissible cargo. The tribunal found this unacceptable without any particulars regarding who was alleged to have made such representations, nor when, where or how.

Charterers purported to rely on a promissory estoppel or an estoppel by representation. They relied on a statement contained in a questionnaire to the effect that the ship had previously loaded 5 cargoes of coal in bulk. The tribunal thus considered the questionnaire and held that Charterers could not show that this was a representation upon which they were intended to rely, given that the parties had only just expressly agreed that bituminous coal was not to be permitted. It followed that Charterers’ reliance on the questionnaire was wholly misplaced. Charterers’ case on estoppel by representation or promissory estoppel failed. Equally, the tribunal rejected Charterers’ case on estoppel by convention. Charterers’ argument was an assumption as to future conduct rather than an assumption of present fact or law, as was required for estoppel by convention. For this reason alone, the point had no merit.

The tribunal was satisfied that the orders to perform that voyage were unlawful as bituminous coal was and remained an excluded cargo, and because they were satisfied that, in any event, the voyage could not have been performed by the latest date for re-delivery, there was no breach by Owners in refusing to perform it, and consequently, no counterclaim arising from Owners’ refusal that could succeed.

Charterers brought several counterclaims on different grounds. Charterers raised an underperformance claim relying upon a performance report issued by a major weather routing company.  The description of the ship’s performance was given “all details about and without guarantee”. The Tribunal dismissed this claim.

Two of the  issues (and for this summary) related to Vessel being off-hire due to alleged delays:

1.Delays in discharging wet cargo.

Charterers contended that there were delays in discharging because the cargo was excessively wet. Owners pointed out that certain periods during this off-hire period had nothing to do with the problem relied upon by Charterers. Also, the ship was not responsible, and there was no question of off-hire. The cargo was wet because it was loaded during rain, a fact for which Charterers were responsible; there was no failure on the part of the ship to discharge any excess water which accumulated in the holds, and in any event, Charterers could not bring themselves within the off-hire clause because they could not show that the full working of the ship was prevented: rather it was the working of shore equipment that was hindered.

Held, there was simply no evidence supporting Charterers’ case, and they could not get within the off-hire clause. At a late stage, in their closing submissions, Charterers sought to argue that Owners were bailees of the cargo, and it was therefore necessary for them to show why the alleged difficulties arose. However, there was no situation of bailment here; Charterers had no right to the cargo, and In any event, the concept of bailment could not affect the burden of proving an off-hire cause, which remained with Charterers.

2. Off-hire to lift bunkers.

To reach Wilhelmshaven, the ship had to pass through a sulphur oxide emission control area, where burning high sulphur fuel oils was prohibited under MARPOL. Owners said that Charterers failed to provide suitable oil, rather insisting that the ship proceed through the area whilst burning high sulphur fuel oil. That the ship refused to do, and she called at Flushing to take on some low sulphur fuel oil. Thus, Charterers contended that she was off-hire during that call.

Held, in their earlier submissions in arbitration, Charterers had argued that there was a breach of an implied term of the charter by Owners in failing to request bunkers in a timely manner and that no low sulphur oil was available for timely delivery. They did not, no doubt advisedly, pursue those arguments in their closing submissions, but they did persist in saying that the ship should have proceeded through the relevant zone in any event because they had offered an indemnity. However, as Owners argued, any such indemnity would have been void for illegality, and in any event, a ship cannot be required to ignore environmental regulations. As Owners’ expert said, no reasonably prudent owner would countenance a deliberate breach of MARPOL. Accordingly, Charterers’ claim to put the ship off-hire failed, along with all their other contentions in this arbitration.

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