The KRITI AKTI updated (period of Shelltime 3 charterparty)


Published: 3 March 2004

Review of the Court of Appeal judgment of The KRITI AKTI [2004] EWCA CIV 116, [2004] All ER (D) 340 (Feb)

Reference is made to our Legal News article of 20 August 2003, where the Commercial Court judgment (first instance) was reviewed and where we commented that leave to appeal had been granted to the owners. On 20 February 2004 the Court of Appeal dismissed the appeal and upheld the decision of the Commercial Court in favour of the time charterers.

The full facts of the matter and the relevant clauses were outlined in our web article of 20 August 2003. To summarise, the eleven months period provided by clause 3 expired on 24 April 2001. On 13 March 2001, the charterers told the owners that they were exercising their option to extend the final date of the charter to 14 June. That was on the basis that they were entitled to add to the eleven months period, the further 15 days provided for in clause 3 and the off-hire period.

From previous judgments it is established law that it is legitimate for a time charterer to give directions for the vessel's use on a voyage as long as the voyage can reasonably be expected to be completed by the final date of termination. In this connection the Court of Appeal in The Kriti Akti stated that the date of termination should be defined by taking into account any implied or express margin to which the time charterer was entitled (in this case 15 days). Therefore, the 15 day margin has a value for the time charterer when, and not merely after, giving directions for the use of the vessel.

As regards the date of termination of the basic charter period, the Court of Appeal added that there was no basis for implying into the charter some restriction on the date when final voyage directions could be given or a final voyage could commence. Taking clause 18 of Shelltime 3 into consideration, owners would thereby be exposed to a final round voyage of no fixed length which might clearly from the outset extend considerably beyond the final date of termination. However, this was not a problem derived from including any margin period of "15 days more in charterer's option". This problem was directly derived from clause 18 of Shelltime 3 and not from the margin period.

As a cautious comment the Court of Appeal did add however that a last voyage of extreme length would be precluded. (This aspect of the judgment might create some uncertainty which may have to be considered further in connection with future judgments).

In The KRITI AKTI, the position was that the words of clause 3 were on their face clear: the time charterer had the vessel for all practical purposes for any period they wished between 11 months plus or minus 15 days. A voyage within clause 18 might validly be commenced at any time during that period up to its final date of termination being 11 months plus 15 days (or as was the position in The KRITI AKTI 11 months plus off-hire plus 15 days).

By way of a final comment it should be added that clause 18 as it appeared in Shelltime 3 was amended in Shelltime 4 (clause 19) to the extent that the words "notwithstanding the provisions of clause 3 hereof" have been deleted.

Consequently, the judgment in The KRITI AKTI might have been different if the C/P involved had been a Shelltime 4 C/P (also compare The AMBOR (2000) LMLN 5499). However, the Court of Appeal's judgment in The KRITI AKTI does provide certainty as to the meaning and effect of a form of wording which is used in all kinds of time C/Ps to define the charter period.