In the case of Cosco Bulk Carrier Co Limited v Team-Up Owning Co Limited (the 'Saldanha') [2010] EWHC 1340, Mr Justice Gross in the English High Court recently determined that piracy did not interrupt the hire period in a charter party on the New York Produce Exchange (NYPE) form.
Background
On 25 June 2008, Cosco Bulk Carrier Co Limited (Charterers) chartered the vessel Saldanha (the vessel) a Panamax size bulk carrier, from Team-Up Owning Co Limited (Owners) for a period of 47 to 50 months on the same terms as an earlier charter, which was on NYPE form with additional clauses.
On 22 February 2009, the vessel was seized by Somali pirates in the Gulf of Aden and remained in the control of the pirates until 25 April 2009. The vessel did not again reach the location at which she was first seized until 2 May 2009.
The Charterers refused to pay hire between 22 February and 2 May 2009.
The relevant charter party provision
Clause 15 of the Charter Party provided:
The issues
An arbitral tribunal found that clause 15 did not entitle the Charterers to treat the vessel as off hire in the piracy situation.
Loss of time by piracy was not disputed. It was also accepted that the 'full working' of the vessel was prevented by the piracy. The question on appeal was whether Charterers could successfully maintain that any of the following had prevented the full working of the vessel:
- 'detention by average accidents to ship or cargo';
- 'default and/or deficiency of men'; or
- 'any other cause'.
Detention by average accidents to ship or cargo
Mr Justice Gross agreed with the tribunal that an 'average accident' necessarily required an accident which caused damage, as noted by Justice Kerr in The 'Mareva A.S.' (1977) 1 Lloyds Rep 368 at 381.
He also did not consider that the incident was an 'accident', as the piracy was a deliberate and violent attack, and an 'accident' required lack of intent by all involved. He agreed with the tribunal that an 'average accident' to ship or cargo was an accident which caused damage to the ship or cargo but not its total loss. He was also not persuaded that the overlap between the words 'average accident' and the words 'damages to hull, machinery or equipment' led to a different conclusion.
Default and/or deficiency of men Mr Justice Gross agreed with the tribunal that the words 'default of men' involved a refusal by officers or crew to perform all or part of their duties as owed to the ship owner and not the negligent or inadvertent performance of those duties.
Any other cause
It was noted that the wording referred to 'any other cause' rather than the wording 'any other cause whatsoever'. Mr Justice Gross considered the difference in wording was significant as if the words were 'any other cause', then it was necessary to construe the words in a more limited way. Mr Justice Gross considered that seizure by pirates was an example of a totally extraneous cause whereas the other causes referred to in the clause were all related to the physical condition or efficiency of the vessel including its crew. Accordingly, he took the view that piracy did not fall within the scope of the 'sweep up wording'.
Conclusions
The Charterers failed in their attempt to avoid payment of hire during the period of piracy.
However, Mr Justice Gross signalled that clearer wording could be used to deal with the situation so that seizure or detention by pirates could be treated as an off hire event. In particular the use of the word 'whatsoever' after 'any other cause' might assist, although Mr Justice Gross was careful to avoid expressing a concluded view on this point. Clearer wording that specifically referred to detention as a result of piracy would be advisable if this is what Charterers wished to achieve.
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