London Arbitration 19/14

Two newbuildings were let by Owners to Charterers on an amended NYPE form for a period of about 35 months up to 37 months. Hire was to be paid semi-monthly in advance. Clause 55 of the charter allowed Owners to withdraw for non-payment of hire after the expiry of three clear days following service of an anti-technicality notice.

The first vessel was delivered on 22 February and the second on 19 April. By the beginning of February the following year, substantial hire payments were outstanding for both vessels. Anti-technicality notices were sent in respect of both vessels on 2 and 3 February respectively, requiring charterers to pay by 12:00 on 8 February. Payment was not received by that time, and on the same day Owners withdrew both vessels, with effect from 16:30. Owners presented Charterers with claims on both vessels for hire and damages for wrongful repudiation.

The Tribunal held that Owners had validly exercised their rights to withdraw. The notices given on 2 and 3 February complied with the requirement of “three clear days written notice” in clause 55.

The Tribunal also found Charterers in repudiatory breach of the charters. In evaluating the damages, the Tribunal referred to the “classic approach” of comparing the charter rate of hire with the market rate for a “matching fixture”. This was a fixture which covered the remaining period of the repudiated charter on substantially similar terms. It was a question of fact whether there was an “available market” for such a fixture, and if so, what the rate of hire would have been.

Having identified an available market and a rate of hire, the Tribunal made various deductions:

  1. a deduction of 1.5% to cater for contingencies that might affect the vessel’s earning capacity between the date of the award and the respective earliest dates of redelivery, including the possibility of the vessels dry-docking as permitted by the charter terms; and
  2. a discount rate applied to the period between the date of the award and the charter termination dates, to recognise that those were losses that Owners had not yet sustained (following Zodiac Maritime Agencies Ltd v Fortescue Metals Group Ltd [2011] 2 Lloyd’s Rep 360).

Owners were also partially successful in claims for stevedore damage. One claim was upheld, as it was fully supported with a notice of damage and relevant invoices. The second claim related to damage to hull paint coating and comprised estimated repair costs only, with no details given. Some of the damages were to be regarded as “fair wear and tear”, whilst for the others Owners were likely to have used the crew to repaint the areas worst affected and to have left the other damages to be re-painted at the next dry-docking, at no extra cost to Owners. For this item of claim, Owners were awarded a sum in respect of crew overtime and materials only.

Comment

This case reinforces Owners’ right to withdraw for non-payment of hire under the NYPE charter, where the anti-technicality provisions are complied with. It also provides some insight into the factors which will be taken into account when calculating the quantum of damages for repudiatory breach.