The “PACIFIC VOYAGER” - English High Court decision on the nature of the shipowner’s obligation to get the vessel to the loadport
CSSA Chartering and Shipping Services S.A. v Mitsui O.S.K. Lines Ltd.
The English High Court handed down judgment last week on a novel issue regarding the obligation on the owner under a voyage charter to proceed to the loadport by a certain time.
During an intermediate voyage - i.e. after the charter had been fixed but before the beginning of the charter service - the vessel contacted with a submerged object in the Suez Canal. She had to be drydocked for repairs which would take months to complete, and the owners informed the charterers that the laycan would not be met. The charterers cancelled the fixture.
It was common ground that the charterers were within their rights to cancel the charter party under the cancelling clause (clause 11 of Shellvoy 5). The dispute was whether there was a separate breach of charter which would entitle the charterers to claim damages flowing from that breach. This aspect was crucial as the charterers' losses resulting from fixing a substitute vessel were substantial.
The English courts have previously said that where the charter contains (i) a term obliging the owner to proceed to the loadport with all convenient speed and (ii) an ETA at the loadport or a "readiness to load" date, then there is an "absolute" obligation to start the approach voyage by a date when it is reasonably sure that the vessel will arrive on time. The obligation is "absolute" in the sense that it is no defence for the owners to say that they took all reasonable steps to comply with it but could not do so. In this case there was no suggestion that the incident in the Suez Canal was due to any fault of the owners.
This charter contained the obligation on the owners to proceed to the loadport with all convenient speed (clause 3 of Shellvoy – point (i) above). However, there was no ETA at the loadport nor expected "readiness to load" date (point (ii) above). The only arguably relevant dates in the recap were the laycan window and a list of ETAs at interim ports on the previous voyage including for the vessel's final discharge before she would sail to the loadport.
Until now there was no English court decision dealing specifically with this scenario.
The Court decided that there was still an absolute obligation on the owners to start the approach voyage by a "reasonable" time, which had to be determined by the other terms of the charter. They dismissed the owners' argument that this obligation was reduced to one of "due diligence".
As there was no loadport ETA or "readiness to load" date, the Court said that the "reasonable" time by which the approach voyage to the loadport had to be commenced was derived by reference to the ETA set out in this charter for the final discharge port in the previous voyage (sailed under a prior fixture). As the owners did not comply with the obligation to commence the approach voyage by this time, they were in breach of contract and the charterers were entitled to damages.
Interestingly, the Court went on to say that if there had been no such ETA in the charter for the previous voyage, the obligation would have been to commence the approach voyage by a date when it was reasonably certain that the vessel would arrive at the loading port by the cancelling date (the end of the laycan window). The laycan would normally reflect when the parties expected the vessel to arrive at the loadport, and in that sense was similar to a loadport ETA.
The decision was ultimately about the allocation of risk for delays which happen before the charter service has started – i.e. before the approach voyage to the loadport has begun. On the basis of the terms of the charter in question, the Court found that this risk fell on the owners.
Permission to appeal has been granted.