The Court of Appeal has considered whether, in the context of a common off-hire clause in an NYPE time charter, sub-sub-charterers and/or receivers are considered “agents” for the purposes of a common exception to off-hire.
This was a case involving an amended NYPE form of time charterparty, the terms of which placed the vessel off-hire for any arrest or other lawful detention of the vessel, subject to certain exceptions, as follows: “Should the vessel be captured or seizure [sic] or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents…” [Emphasis added]. The case focused on the meaning of the last underlined phrase in the clause.
The facts of the case are, briefly, as follows. NYK were the Claimant Owners. They had chartered the “GLOBAL SANTOSH” to Cargill as charterers, who in turn sub-voyage- chartered the vessel. The vessel was carrying a cargo of cement sold by Transclear SA (Sellers) to IBG Investment Ltd (Buyers). Ultimately, Sellers were also sub-charterers in the voyage charter chain. The contract between Sellers and Buyers were on C&FFO terms which, inter alia, provided that demurrage would be payable to the Sellers by the Buyers for any delays experienced at the discharge port.
The vessel arrived at the discharge port, Port Harcourt, but was delayed for some two months in getting onto berth due to congestion in the port arising in part from the breakdown of the Buyers’ discharging equipment. By the time the vessel was permitted onto the berth, further delay arose as the result of a local court order for arrest of the cargo, obtained by the Sellers against the Buyers, to secure their sizeable demurrage claim. The order for arrest mistakenly also named the vessel by reason of which further delay was experienced. Cargill sought to place the vessel off- hire by reason of the off-hire clause referred to above. NYK argued that the proviso to the off-hire clause was activated because the delay had been occasioned by act and/or omission and/or default of Cargill’s agents. An arbitral Tribunal ruled in favour of Cargill and dismissed NYK’s claims.
On appeal to the Commercial Court, Field J allowed NYK’s appeal and held that parties such as sub-charterers, sub-sub-charterers or receivers to whom Cargill, by subletting the vessel, had delegated or sub-delegated the performance of its responsibilities under the charterparty could be Cargill’s agents for the purposes of the proviso to the off-hire clause, irrespective of the precise contractual relationship with the delegated party. However, that would only be the case where the act or omission or default referred to in the proviso to the off- hire clause occurred in the course of the performance by the delegate of a delegated task. On the facts, the Court at first instance held that while the Sellers were not agents within the meaning of the clause, Buyers were. Accordingly, NYK were within the proviso to the clause so long as Buyers’ actions had “occasioned” the arrest. That was a question of causation which was remitted to the Tribunal. Both parties appealed. The Court of Appeal held as follows:
- The proviso in the off-hire clause was wider than the trial judge had held – it was not limited solely to acts, omissions or defaults carried out by Cargill or their agents in the performance of a delegated task by a delegate. So long as a party was a delegate for the purposes of the proviso, then regardless of the legal nature of the act, omission or default, if the said act, omission, etc. occasioned the arrest of the vessel, then owners were within the meaning of the proviso. Not every act or omission of the delegate needed to be in the course of performance of a delegated task. Accordingly, both Sellers and Buyers were “agents” within the meaning of the proviso
- That was the interpretation that made the most sense looking at the language of the proviso, the charterparty as a whole and the commercial context. The classic division of risk under a time charterparty envisaged that the risk of delay would be for charterers to bear. The owners are responsible for the vessel and its crew; the charterers for the consequences of their liberty to trade the vessel. Pursuant to Cargill’s liberty to sublet the vessel under the terms of the NYPE form, consequences arising from its trading of the vessel were on its “side of the line”
- The question of causation was, as the trial judge held, to be remitted to the Tribunal
The widening of the highlighted proviso in the clause, by the Court of Appeal, places increased responsibility on time-charterers, even where they have little or no effective control over the actions of independent Sellers and Buyers.