The High Court recently held1 that, in relation to an owners’ performance warranty for speed and consumption in good weather, the favourable weather conditions need not have lasted for a minimum of 24 hours from noon to noon, at any one time, to be admissible. It also confirmed that, should a period, or periods, of “good weather” be found admissible, then a breach established during those periods should be applied to the whole of the charter period, but excluding any periods of slow steaming ordered by the charterers.
The proceedings were a Section 692 appeal from an arbitration award. They concerned a speed and consumption claim by the appellant Charterers, Polaris, arising out a of a time charterparty agreed with the respondent Owners, Sinoriches, on the NYPE form. Polaris took delivery of the “OCEAN VIRGO” on 14 December 2013, and performed a ballast voyage from China to Canada, and a laden voyage in the opposite direction. The ballast voyage was split into two legs, the Master being directed to steam at a different speed on each. The vessel was redelivered on 22 February 2014.
Owners had given various speed and consumption warranties on the basis of “good weather/smooth sea, up to a max BF SC 4/Douglas sea state 3, no adverse currents, no negative influence of swell.” Charterers alleged that the vessel had not met the speed and consumption warranties in good weather, as defined, and claimed US$263,832 in damages. The matter was referred to arbitration.
The Arbitration Award
The arbitrator’s position was that for a period to be considered “good weather”, it must constitute a period of 24 consecutive hours, running from noon to noon. The charterers’ weather analysts had set out the periods which they considered constituted “good weather”.
The arbitrator decided that none of them constituted an admissible “good weather” period. He held the first and third periods of the ballast voyage (at 14 and 8 hours respectively) too short to be admissible, whereas the second and fourth periods did not qualify as they unfolded during bad weather. Regarding the laden voyage, he found that there was no “good weather” on one of the relevant periods, and that the other was again too short to be admissible.
In addition, the arbitrator noted that any speed and consumption analysis was a sampling exercise and that the “sample size must be sufficiently large as to be representative of the voyage in its entirety.” With this in mind, he found that the potential “good weather” periods during the second leg of the ballast voyage constituted only 5.51% of the journey, which could not be taken as representative of the journey in its entirety. Therefore, there was, in the arbitrator’s opinion, no satisfactory “good weather” analysis for that second leg. A similar finding could be inferred in relation to the laden voyage in its entirety, the “good weather” periods amounting to just 5.336% of the total voyage.
Mr Justice Teare noted that the traditional manner in which a charterer seeks to establish a breach of a speed and performance warranty is to assess the vessel’s performance in “good weather”, excluding any period for slow steaming at the request of the charterer. If analysis of the vessel’s performance in “good weather” establishes a breach, then the extent of the shortfall in performance should be applied to the entire charterparty, whatever the weather conditions, excluding any slow steaming requested by the charterer.
The Court found that the arbitrator had erred in law by excluding periods of “good weather” that lasted for under 24 hours. There was nothing in the charterparty which could justify such an interpretation of the warranties.
However, the Court also held that the arbitrator had been entitled to exclude the periods of “good weather” relied upon in the second leg of the ballast voyage and in the laden voyage because they were too small a sample (5.51% of the second leg and 5.336% of the laden voyage). This only left the two periods of time of the first leg of the ballast voyage (excluded by the arbitrator) as potentially admissible. In the Court’s judgment, these two periods constituted admissible “good weather” periods and were amenable to analysis to determine any breach of the warranties.
The Court allowed the appeal, and remitted the case to the arbitrator for him to determine whether the relevant periods were, on their own or cumulatively, a sufficient sample representative of the voyage in its entirety. If they were, the arbitrator would have to determine whether the vessel’s performance during those periods constituted a breach of the warranties. Should a breach be established, then any consequential damages claim was to be assessed in relation to the whole of the charter period, whatever the weather. On this last point, the Court found that the arbitrator had made a further error in law when he had found that the warranties “are inapplicable in conditions that fall, for any reason, outwith the good Weather criteria”. Once a breach is established, the damages claim is assessed by having regard to the whole of the charter period whatever the weather.
The judgment helpfully establishes that, unless otherwise stated, a period of “good weather” under a speed and consumption warranty does not have to last for 24 hours, from noon to noon, to be admissible. The Court’s confirmation that a breach of performance over a sufficiently large sample of “good weather” should be considered as a breach for the duration of the entire voyage, excluding time for slow steaming requested by the Charterers, also brings welcome clarity to this issue.