UK: Commercial Court Construes One Trip Time Charter

Last Updated: 12 April 2011
Article by Jamila Khan and Catherine Earnshaw

Ispat Industries Ltd v Western Bulk Pte. Ltd (Sabrina 1) [2010] EWHC 93 (Comm)

Ince & Co represented the successful Owners in this dispute arising under a one time charter trip. The majority of the LMAA Tribunal and subsequently the Commercial Court upheld the Owners' claim for repudiatory breach of the charter and awarded them damages in the amount of hire which would have been earned on the estimated duration of the charterparty.

Background Facts

Owners chartered the Sabrina 1 to Charterers under an NYPE charter for one time charter trip containing the usual Clause 16 exceptions ("the act of ...enemies always mutually excepted"). The charter provided among other things that "the vessel shall be employed for one time charter trip from Vizag to Mumbai lawfully trading between safe port(s), safe berth(s) and safe anchorages ..."

On 24 December 2007, Charterers sent voyage instructions to the Master detailing the load port as Vizag. On 26 December 2007, after subjects were lifted but prior to the laycan, Charterers informed Owners that they would have to cancel the fixture due to civil unrest and insurgency preventing the cargo arriving at the loadport. Owners accepted Charterers' repudiatory breach of the fixture and stated that they were looking for alternative employment for the vessel.

The vessel was not refixed until 15 January 2008. Owners commenced arbitration to claim damages in the sum of the hire which would have been earned on the 12 day time charter trip.

Prior to the commencement of arbitration proceedings, Owners obtained two Rule B attachments in New York to secure their claim. Both attachments were subsequently vacated and Charterers counterclaimed in the arbitration a sum in excess of US$1m equivalent to the attached sums.

The Tribunal's decision

A majority of the arbitrators held that Owners' claim succeeded and dismissed Charterers' counterclaim.

The Tribunal found primarily as follows:

  1. under a time charter, although the intended cargo was not available at Vizag because of "enemy activity" within clause 16 of the NYPE form, the Charterers were nonetheless obliged to find an alternative lawful cargo. The Charterers had made no attempt to do so and had simply cancelled the charter.
  2. there had been no failure to mitigate on the part of Owners.
  3. the Charterers' counterclaim would be dismissed on the grounds that neither the first nor second attachment proceedings in New York were a breach of the arbitration clause in the charterparty.

The Charterers appealed to the Commercial Court challenging the arbitration award on various grounds, including for serious irregularity under section 68 of the Arbitration Act 1996 and on questions of law under section 69 of the Act 1996. Mr Justice Teare dismissed the Charterers' challenges in full and found that, on the facts of the case, there had been neither serious irregularity nor error of law by the Tribunal.

The Commercial Court decision

The Judge held in essence as follows:

The Charterers had challenged the Tribunal's decision that the fixture was a time charter, arguing that having regard to the background matrix, the charterparty was in fact "a voyage charter or at least a charter limited to a very specific trip only". The Judge disagreed and held that although the fixture note referred to the "intended voyage" and to the "cargo intention" of iron ore, those references were to the voyage and cargo intended by Charterers. They were not apt to define the time charter trip as being only a voyage from Vizag to Mumbai carrying iron ore, but merely identified the Charterers' intention at the date of the fixture recap.

He also dismissed Charterers' argument, relying on The Kallang No 2 [2009] 1 Lloyd's Rep 124, that Owners had obtained security unreasonably in the form of the two Rule B attachments, in breach of the arbitration clause. The arbitrators' finding was confirmed by Mr Justice Teare, who held that ancillary applications for security were not a breach of an arbitration clause so long as there was no attempt to have the merits of the dispute determined other than in the agreed arbitration (The Rena K [1978] 1 Lloyd's Reports 545).

Finally, in relation to remoteness of damage, the Judge dismissed Charterers' assertion that there had been an alleged failure by the Tribunal to apply the "assumption of responsibility" test set out by the House of Lords in The Achilleas [2008] 2 Lloyd's Rep 275. He held that there had been no error of law by the Tribunal on this question. Owners had claimed damages measured by the hire that would have been paid for the expected minimum duration of the time charter trip, namely, 12 days and accordingly, there was no basis upon which it could be said that such measure of damages was contrary to market understanding or expectations.

Comment

The decision in this case confirms that while a charter for a time charter trip might in some ways be a "hybrid" charter, its nature is essentially that of a time charter on a time charter form and not a voyage charter.

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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