UK: The London Commercial Court Rules that Vessel Chartered on NYPE Terms Remains on Hire Whilst Detained by Pirates

Last Updated: 5 July 2010
Article by Nick Shepherd

COSCO Bulk Carrier Co., Ltd v Team-Up Owning Co. Ltd [2010] EWHC 1340 (Comm) (The Saldanha)

In an important ruling for the maritime industry, Mr Justice Gross of the London Commercial Court has upheld the unanimous decision of an eminent arbitration tribunal that a vessel chartered on the NYPE 46 form which was seized by pirates remained on hire whilst under the control of the pirates.

In an Award on Preliminary Issues dated 8 September 2009, the tribunal had held unanimously that the vessel remained on hire during the period of detention and until it reached an equidistant position with the location at which it was seized. The arbitrators considered inter alia the extent and scope of the off-hire clause in the charter party and concluded that seizure of the vessel by pirates was not a peril covered by the wording of that particular clause.

The charterers appealed this part of the tribunal's decision. Mr Justice Gross has now upheld the arbitrators' position and dismissed the appeal. The successful owners were represented by Ince & Co. The charterers have been refused leave to appeal to the Court of Appeal.

Factual and contractual background

The m/v Saldanha was seized by Somali pirates on 22 February 2009 whilst sailing in a laden condition through the International Recommended Transit Corridor in the Gulf of Aden. The vessel was taken by the pirates to Eyl where it was detained by the pirates until 25 April. The vessel reached an equidistant position with the location at which it was seized on 2 May.

The charter was on the NYPE form and included the familiar off-hire Clause 15 in the following terms :

"That in the event of the loss of time from default and/or deficiency of men including strike of Officers and/or crew or deficiency of stores, fire, breakdown or damages to hull, machinery or equipment, grounding, detention by average accidents to ship or cargo, dry-docking for the purpose of examination or painting bottom, or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost..." (underlining added to identify the words relied on by the charterers)

The words "default and/or" and "including strike of Officers and/or crew or deficiency of" were amendments to the standard wording.

The Charterparty terms also included a "bespoke" clause 40 dealing with seizure, arrest, requisition and detention of the vessel, as well as a put-back clause and the CONWARTIME 2004 clause.

The Issues

It was common ground that the charterers were required to pay hire for the use of the ship unless they could bring themselves within the ambit of the off-hire exceptions. If unable to do so, the risk of delay was to be borne by the charterers. The charterers sought to argue that the vessel was off-hire on several grounds. These are dealt with individually below.

Average Accident

The charterers argued that detention by pirates amounts to "detention by average accidents to ship or cargo". They submitted that the capture of the vessel, albeit planned in advance and a deliberate act on the part of the pirates, was a fortuity so far as the crew and the vessel were concerned. Mr Justice Gross disagreed and endorsed the tribunal's findings, namely that heavily armed pirates attacking and seizing a vessel was not an accident, let alone an 'average accident' to the ship; and that an 'average accident' to ship necessarily means an accident that causes damage to the ship, as stated by Kerr J (as he then was) in The Mareva A.S. [1977] 1 Lloyd's Rep 368. As the tribunal had put it,

"Accident requires lack of intent by all protagonists. An obviously deliberate and violent attack is not described as an accident, no matter how unexpected it may have been to the victim."

Furthermore, whilst the wording 'average accident' points towards an insurance context, the judge stated it does not follow that 'average' in this context is simply to be equated with a peril ordinarily covered by marine insurance, such as the risk of piracy.

Default and or Deficiency of Men

The charterers argued that the phrase "default and/or deficiency of men" encompasses errors, alternatively negligent errors, by the master and crew. They sought to argue that the ship's officers and crew had failed to take adequate anti-piracy precautions before and during the attack, that those alleged failures were a significant cause of the vessel being seized, and that such alleged failures fell within the scope of the 'default of men' exception.

The owners vehemently dispute that there were any such failings as alleged and should it prove necessary in due course, the tribunal will be asked to consider the facts and circumstances of the seizure and make a finding in this regard. Nonetheless, solely to allow for the determination of the preliminary issues, the tribunal proceeded on the assumption that the alleged failure on the part of the officers and crew was a significant cause of the vessel's seizure and detention.

Both the arbitration tribunal and the judge rejected the charterers' argument that 'default of men' in clause 15 includes any failure by the Master and crew to perform their duties or any breach by them of their duties. Whilst it was accepted that the natural meaning of 'default of men' was capable of including a negligent or inadvertent performance of duties by the Master or crew, both the arbitrators and the judge decided that a narrower construction should be applied to the wording. In particular, the words "default and/or" and "including strike of Officers and/or crew or deficiency of" were added to the standard wording of the off-hire clause to meet a particular mischief, namely the refusal of officers and crew to perform duties, whether or not amounting to a full-scale strike.

Mr Justice Gross also observed that accepting the charterers' construction would result in a startling alteration to the bargain typically struck in time charterparties as to the risk of delay because it would follow that on almost every occasion when the Master or crew negligently or inadvertently failed to perform their duties causing a loss of time, a vessel would be off-hire under the 'default of men' wording. It was noted that such an argument had never been advanced in any previous cases.

Any Other Cause

The charterers argued that seizure by pirates falls within the sweep-up provision "any other cause". The charterers based this argument on several alternatives, all of which were rejected by the judge. Inter alia, the judge labelled as "unreal" the charterers' submissions that the crew's failure to carry out their duties under duress of pirates was equivalent to a refusal to perform those duties. With regard to average accident, he dismissed the contention that a fortuitous occurrence normally covered by marine insurance which happens not to have caused damage would fall within "the spirit" of clause 15 and be caught by the catch-all wording. In addition, the judge dismissed the suggestion that there was only a "fine distinction" between the narrower and wider constructions of 'default of men', still less a distinction that would bring the charterers within the sweep-up wording.

Finally, the judge observed that it was telling that bespoke clause 40 dealing with the risk of seizure, arrest, requisition and detention did not extend to cover seizure by pirates.

Comment

Mr Justice Gross confirmed that, in his view, seizure by pirates is a "classic example" of a totally extraneous cause that falls outside of the scope of the standard NYPE off-hire clause. However, had the wording of clause 15 been qualified with the addition of "whatsoever" after the words "any other cause", it is conceivable that the decision might have gone the other way. Parties contracting on the basis of NYPE time charter wordings should therefore consider closely the wording of their off-hire clause to achieve the desired allocation of risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.