Pan Ocean Co Ltd v Daelim Corporation [2023] EWHC 391 (Comm)

It is common in time charters for a Vessel's cargo holds to be required to satisfy an inspection by a surveyor prior to loading.

In this case, the cargo holds were required by Clause 69 to pass an inspection of an "independent" surveyor. If the surveyor rejected the holds as unsuitable, then "...the vessel to be placed off-hire until the vessel passes the same inspection and any expense/time incurred thereby for Owners' account". The question which arose in the case was: what obligation do the parties have to arrange the second inspection?

The vessel charterers brought an appeal against the decision of an LMAA tribunal on this point, arguing that the tribunal had implied a strict, unilateral obligation on the charterers to have the cargo holds reinspected "without delay". They submitted that the implied term which was necessary in such circumstances was to impose an obligation on both parties to take reasonable steps to organise a reinspection.

Sir Ross Cranston (sitting as a High Court Judge), held at [48] that it was right that the implied term in this case had to oblige both parties to take reasonable steps to cooperate to organise a reinspection without undue delay. Since the inspector was to be independent, the vessel owners would have had to agree the surveyor so as to make it a joint appointment (in line with the understanding of an "independent" surveyor in The Protank Orinoco [1997] 2 Lloyd's Rep 42).

On the facts of the case, the tribunal had fallen into error when applying this implied term because it had held that the charterers were in breach of the term as from the moment that the Master notified them that the cargo holds had been cleaned and that the vessel was ready for a reinspection. The tribunal was required to assess how long it would have taken for the parties to organise and complete such a reinspection with reasonable steps. The charterers would only be in breach beyond that point.

Arbitration Act 1996: s70(2)

Another short point arising on this appeal was whether the respondent to an appeal under s69 of the Arbitration Act 1996 was permitted to rely on arguments under s70(2) at both the permission to appeal stage and the hearing of the appeal. The vessel owners had sought to argue at the permission stage that the appeal was prohibited under s70(2) because the charterers had not sought to apply to the tribunal under s57 for the correction of a mistake or the explanation of part of the award.

The charterers relied on CVLC Three Carrier Corp v Arab Maritime Petroleum Transport Co [2022] 1 All ER (Comm) 839 at [34] in which Cockerill J held that "the permission stage is intended to be a qualifying hurdle which is not revisited". However, the Judge found that this case was limited to addressing the requirements of s69(3) and did not address s69(2) which makes appeals subject to the restrictions of s70(2).

Michael Davey KC and Robert Ward acted for the claimants instructed by Ian Short and Keeley Edmondson of Campbell Johnston Clark.

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