UK: Hold Cleaning Under Time Charters - Recent London Arbitration Award

Last Updated: 10 August 2010
Article by Antonis Lagadianos and Evangelos Catsambas

When a time-chartered vessel's holds fail their inspection at an intended loadport and need further cleaning, a question arises as to who is liable for the shore cleaning time and costs – owners or charterers? The answer will depend on the applicable charterparty terms. This issue was recently considered in London Arbitration 7/10, where the arbitrators held that the owners had complied with their hold cleaning obligations under the charterparty in question.

Background facts

The vessel was chartered on the NYPE form for 110/170 days. She was delivered to the charterers DLOSP (dropping last outward sea pilot) at Haldia, India – just after discharging her last (coal) cargo under her previous charter. She then sailed in ballast to Bangshapan, Thailand to load her first cargo (steel) under the charter. Her holds were cleaned by the crew during the ballast voyage. The cleaning included scraping and sweeping. On arrival at the loadport, the on-hire surveyor found the holds to be in a sound condition, but noted dark staining on the bulkheads and sides. The staining was from the pre-charter coal cargo.

The vessel then sailed to discharge in the U.S. (Long Beach, California and Kalama, Washington). During the voyage, she was fixed to load grain at Vancouver, Washington after Kalama. At Kalama, the NCB (National Cargo Bureau) surveyor inspected the holds and required the removal of the staining. The charterers expressed their concern that, in view of this, the holds would fail their Vancouver inspection. The Master advised that the holds were being cleaned further with chemicals to remove the staining, and that they would be clean and ready for loading as soon as discharge was completed (which, in the event, happened two days later).

The vessel arrived at Vancouver seven hours after completion of discharge at Kalama. The USDA (U.S. Department of Agriculture) and NCB inspectors rejected her holds – apparently due to the staining. This led to five days of further cleaning by the crew and a shore team before the holds were passed at a re-inspection.

The charterers claimed for the delay, the bunkers consumed during it and the shore team expense.

The relevant charterparty clauses were (among others):

  • Lines 21-22. "Vessel to be at the disposal of the Charterers on dropping last outward sea pilot Haldia ... Vessel on her delivery to be ready to receive cargo with clean-swept holds...".
  • Clause 54. "Vessel's holds condition on arrival at first loading port to be fresh water washed down, clean dry, free from loose rust flakes/scales and residues of previous cargo and in every way ready and suitable to load Charterers' intended cargo to the satisfaction of the independent surveyor. If vessel is rejected by the independent surveyor at load port, vessel to be off-hire until ready to pass inspection...".
  • Clause 124. "All intermediate hold cleaning to be in Charterers' time, risk and expense, and vessel to remain always on hire, however crew to perform such cleaning with the same care as if they were acting on behalf of the Owners...".

The problem had arisen because the vessel had to load grain at the second loadport, and the standard of cleanliness for that was higher than the standard for loading steel at the first loadport (which the vessel had satisfied).

Tribunal's decision

The tribunal rejected the charterers' claim. It held that:

  1. True, on delivery the vessel's holds were not "ready to receive cargo with clean-swept holds" as required by lines 21-22. The vessel was delivered DLOSP Haldia, just after discharging the previous charter's coal cargo. It was impossible for the crew to clean the holds adequately between completion of discharge of the coal and delivery under the charterparty.
  2. The charterparty catered for this situation in clause 54. Clause 54 prevailed over lines 21-22. It was specific about how clean the holds had to be, and when: on arrival at the first loadport, the holds had to be sufficiently clean to load the intended cargo (steel). The crew were therefore given the chance to clean the holds properly; not before delivery, but during the ballast voyage to the first loadport – after delivery.
  3. Clause 124 reinforced that. It was clear about what owners' obligations were at the second and subsequent loadports. As long as the crew cleaned the holds properly ("with the same care as if they were acting on behalf of the Owners") during the ballast voyages to those loadports, owners were not liable if the holds were rejected. This was consistent with the decision in The Bunga Saga Lima [2005] 2 Lloyd's Rep. 1, which had concerned a charterparty hold cleaning clause which was materially similar to Clause 124.
  4. Therefore, the owners had complied with their charterparty obligations. They were not liable for the vessel's arrival at the second loadport in a non-grain clean condition.

Analysis

The decision shows a continuing commercial approach by London arbitration tribunals.

It seems the result might have been different if (1) lines 21-22 had required the holds to be 'grain clean' on delivery (i.e. more clean on delivery than at the first loadport); and (2) there had been enough time for the crew to make the holds grain clean before delivery. In such a case, charterers might have had stronger grounds for saying that the rejection at the second loadport was caused by the vessel's uncleanliness on delivery, and that Clause 124 was irrelevant in such circumstances.

Clearly, owners cannot ignore the hold cleanliness requirements on delivery, assuming that a clause such as Clause 54 will allow them to rectify the situation before arrival at the first loadport. This was an exceptional case, where the cleanliness requirement on delivery had been impossible to meet.

If the crew are expected to, and can, clean the holds as required before delivery, they must do so. Owners will be in breach if they do not. If the crew have not cleaned the holds as required on delivery, but the holds are nevertheless passed at the first loadport because the intended cargo requires a lower degree of cleanliness than on delivery, there is no issue – charterers have suffered no loss. If the holds fail their survey at the second or a subsequent loadport, where a higher degree of cleanliness is required, and charterers can show that this was the result of the uncleanliness on delivery, there is a potential issue. Clause 124 may be insufficient to protect owners in such circumstances.

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.

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