NEW ISSUES AND RECENT CASES IN CHARTERING

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NEW ISSUES AND RECENT CASES IN CHARTERING

• TokyoMay 12, 2009
• William J. Honan
• Holland Knight LLP

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Clause 5, Part II, ASBATANKVOY

• 5. LAYDAYS. Laytime shall not commence before
  the date stipulated in Part I, except with
  Charterer's sanction . . .

3
Clause 6, Part II, ASBATANKVOY

• 6. NOTICE OF READINESS. Upon arrival at
  customary anchorage at each port of loading or
  discharge, the Master or his agent shall give the
  Charterer or his agent notice by letter,
  telegraph, wireless or telephone that the vessel
  is ready to load or discharge cargo, berth or no
  berth, and laytime, as hereinafter provided,
  shall commence upon the expiration of six (6)
  hours after receipt of such notice, or upon the
  vessel's arrival in berth . . . whichever first
  occurs. However, irrespective of whether the
  berth is reachable on arrival or not where delay
  is caused to Vessel getting into berth after
  giving notice of readiness for any reason over
  which Charterer has no control, such a delay
  shall not count as used laytime or demurrage. In
  any event, Charterer shall be entitled to six
  hours notice of readiness at loading and
  discharging ports, even if the vessel is on
  demurrage.

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Issue No. 1

• 1. If a vessel arrives prior to commencement of
  the laydays and is ready to load, is the vessel
  under an obligation to give its notice of
  readiness?

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Issue No. 2

• 2. If the vessel gives its notice of readiness
  prior to the commencement of laydays, does the
  six hour free period begin running upon the
  giving of the notice of readiness or at midnight
  of the first layday?

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Issue No. 3

• 3. Does the giving of an early notice of
  readiness require the charterer to commence
  loading immediately (or at least 6 hours
  afterwards)?

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Issue No. 4

• 4. If the charterer upon receipt of the early
  notice of readiness, orders the vessel to a
  berth, can the vessel refuse?

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Issue No. 5

• 5. If the charterer orders the vessel to its
  berth upon receipt of the early notice of
  readiness and begins loading the vessel, all
  before the commencement of the laydays, does the
  time used prior to the first layday count as
  laytime?

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Mr. Justice Langleys Holding

• 1. "Laytime never started at all, with the
  consequence not only that the owners have earned
  no demurrage, but also that they are obliged to
  pay the charterers despatch money for the whole
  of the laytime."
• 2. Charterers awareness that discharge had
  commenced without protesting or reserving its
  rights was not itself a sufficient happening to
  cause laytime start.

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Northgate Clause 6

• Vessel is to give its NOR upon arrival at the
  inner anchorage at Sepetiba but may give its NOR
  at the outer anchorage if space is unavailable in
  the inner anchorage.

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Judge Siberry said

• . . . , I consider that is a matter of
  commercial practicality, such an intended
  recipient of the NOR must have implied authority
  to waive a condition as to the commencement of
  laytime.

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He continued

• . . . if Charterer did not communicate the
  Northgate charter terms to the Terminal/MBR
  and/or give specific instructions that NOR was
  not to be accepted from the other anchorage
  unless the vessel was compelled to wait there
  because the inner anchorage was congested, it
  seems to me that they i.e., the Charterer took
  the risk that the Terminal/MBR would accept a NOR
  that could have been rejected under the Northgate
  Charter and thereby waive Charterers' right to
  invoke the invalidity of that NOR.

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Clause 6, Part II, ASATANKBOY

• Upon arrival at customary anchorage at each port
  of . . . discharge, the Master shall give the
  Charterer . . . notice . . . that the Vessel is
  ready to discharge . . . .

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The arbitrators said

• In the tribunal's view "anchorage" in clause 6
  could not be read too literally. The situation
  in the waters off Lagos was notorious . . . . To
  deprive an owner of the right to give a valid
  notice of readiness under the Asbatankvoy form of
  charter in such circumstances seemed to the
  tribunal wholly unreasonable and not what the
  parties could have intended.

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Agios Dimitrios Clauses 23(b) and 25

• Clause 23(b)
• At loading port(s) when tendering notice of
  readiness, Vessel's cargo holds and hatch covers
  shall be clean, dry of loose rust and otherwise
  ready and suitable to receive the intended cargo.
• Clause 25
• Crew and mechanical failure time lost at
  loading and/discharging port(s) which can be
  reasonably attributed to crew and/or ship's
  mechanical failure, shall not be counted as
  laytime or time on demurrage.

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Nikmary Facts Summary

• The vessel arrived at the port of Sikka to load a
  cargo of gasoil on December 2 and proceeded
  immediately to its berth.
• The vessel's tanks were inspected on December 3rd
  by an independent surveyor appointed by the
  charterer and were rejected.
• The supplier, Reliance Petroleum Limited, was
  prepared to supply the cargo on December 3rd.
• The vessel's crew cleaned the holds and, on
  December 5, the two surveyors, one appointed by
  the owner and the other appointed by the
  charterer passed the holds and the vessel gave
  its valid NOR to the receiver.
• No cargo was forthcoming and, on December 9,
  Reliance notified the charterer that due to its
  other commitments, the Nikmary would not be
  loaded until the end of the month.
• Loading in fact did not commence until January 3.

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Nikmary Clause 30(c)(v)

• Owner shall indemnify Charter for all direct
  and/or indirect costs and consequences as a
  result of the Vessel not being clean to the
  satisfaction of jointly appointed inspector and .
  . . all time until connection of hoses, after the
  Vessel has been passed as clean to the
  satisfaction of jointly appointed inspector shall
  not count as laytime or, if on demurrage, as time
  on demurrage.

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Charterers Duty to Provide Cargo

• A voyage charterer owes an absolute and
  non-delegable duty to provide cargo for loading
  and
• Charter exceptions will normally be read as
  protecting a charterer only in respect of its
  duty to load, and not as covering its duty to
  provide a cargo.

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Clause 23

• 23. Charterers shall be discharged and
  released from all liability in respect of any
  claim for demurrage which Owners may have under
  this Charter unless a claim in writing has been
  presented to Charterers together with supporting
  documentation substantiating each and every
  constituent part of the claim within 90 days of
  the completion of discharge of the cargo carried
  hereunder.

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Owner argued

• 1. the absence of the vessel officer's
  signature was of no relevance indeed, it was
  prepared to sign the pumping logs anytime.
• 2. the Charterer was shown to have received
  pumping logs signed by its own representative
  within the 90 day period.
• 3. even if the discharge port demurrage was
  time barred, due to the absence of a signed
  pumping log, the Owner should be able to recover
  the demurrage that it incurred at the load port.

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Mrs. Justice Gloster held

• 1. There as a significant commercial purpose in
  requiring a signature of a vessel's officer for
  someone should be identified that is willing to
  confirm its accuracy.
• 2. The Charterer should have the documents in
  one package and should not have to review its own
  files or make its own investigation.
• 3. Clause 23 refers to a single claim and there
  is no suggestion that part of a claim would be
  permitted if the Owner's submission was defective.

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Mr. Justice Steel ruled

• . . . I am not persuaded that . . . the failure
  to provide all "supporting documentation" . . .
  for one constituent part of the claim discharged
  liability for the entire demurrage claim.

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Time Bar General Principles

• 1. Contractual time bars are enforced.
• 2. Arbitrators require strict compliance to
  satisfy contractual time bars. Substantial
  compliance probably is insufficient.
• 3. Contractual time bars are enforced even if
  there is no dispute concerning the claim in
  question.
• 4. Contractual time bars are construed strictly
  against the drafter.

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Time Bar Practice Tips

• 1. If the Owner
• a) seek to eliminate altogether
• b) make the clauses mutually applicable
• c) provide as long a period as possible
• d) provide training to the persons handling
  claims
• 2. If the Charterer
• a) include all claims not just demurrage and
  detention
• b) draft the clause so as to avoid obvious
  loopholes

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Eland S.M.A. 4027 (March 4, 2009)

• The term "WVNS," coupled with a description of
  the cargo segregation system, exists primarily to
  protect owners . . . from being compelled to load
  different cargoes in such manner as to result in
  potential cargo claims. It is not a descriptive
  phrase that charterers . . . can waive in order
  to maximize the amount of cargo intake.
• . . . Since the Owner did not have to follow the
  improper voyage orders, it could impose, within
  reason, any conditions it felt necessary to
  protect its contractual rights.

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Elinda S.M.A. 4006 (May 30, 2008)

• Should the vessel be off-hire for more than
  fifteen (15) days, charterer shall have the
  option to cancel the charter party provided there
  is no cargo onboard.

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Clause 23

• Charterer to give 30 days notice with 10 days
  notice laycan speed and Owners to nominate the
  vessel latest 10 days prior first day with
  complete itinerary of he vessel . . . .

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Charterer instructed

• "Baltimore/Constanza shipment 5 under the
  subject COA 5/14 Oct.
• then
• ". . . would like to move the laycan for
  shipment 5 to 21/30 Oct.

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Charterer replied

• Actually the stem 5/14 has moved to 22/30 by the
  shippers because of cargo availability in this
  port. Therefore requesting owners for this
  amendment .

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Mr. Justice Steel held

• ... , in my judgment, as soon as the notice is
  given the owners can rely on it. The idea that
  over the period of 20 days before the nomination
  of the vessel has to be made the charterers can
  change the lays on dates as frequently and as
  substantially as they see fit, or even thereafter
  up to the stage that an estoppel be clearly
  established, is commercially unreal and uncertain.

31
Redelivery Clause

• . . . charterers are to give Owners not less
  than 30 days followed by 20/5/10/7 days notice of
  approximate redelivery date and intended port
  thereafter 5/3/2/1 days definite notice of
  redelivery date and port.

32
Charterer stated

• approximate notice of redelivery for the MV
  Zenovia at DLOSP 1 sp China on about 04 Nov 2007
  basis agw, wp, wog, uce

33
Charterer revised instruction

• Pls note that we hereby revise the date of
  redelivery to owners to about Nov. 20th within
  the range of redelivery.

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Panel held

• 1) the Owner had relied on Charterer's
  statement in refixing its vessel on the
  assumption that it would have the vessel back on
  about Nov. 4 (promissory estoppel).
• 2) there was implied a term that, when an
  approximate date is given by the Charterer, the
  Charterer was obliged "not to do anything
  deliberately which prevents that approximate date
  being met."

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Mr. Justice Tomlinson

• 1) If the arbitrators believed the acronym "WP"
  stood for "without prejudice" those words should
  have put the Owner on notice that Charterer could
  change the approximate redelivery date.
• 2) To imply a term in a negotiated contract,
  the term must be so obvious that the parties
  must have intended it for a part of the contract.
  Pointing to the notice periods (30/20/10/7
  approx 5/3/2/1 definite), the Court stated that
  "in my judgment the very structure of that
  regime militates against any argument that the
  parties must be bound to have agreed that the
  giving of the first notice constrained

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For Promissory Estoppel

• (i) a clear and equivocal representation by the
  charterers that they were giving up their rights
  (that is, giving up their right to retain the
  vessel until November 22) and
• (ii) owner acted in reliance on that
  representation in a way that would make it
  inequitable to permit charterer to change its
  position.

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NEW ISSUES AND RECENT CASES IN CHARTERING

• TokyoMay 12, 2009
• William J. Honan
• Holland Knight LLP