Revisiting the ‘net loss of time’ Clause 15 of NYPE 48*

In January 2010, after discharge of the cargo on board the MV "ATHENA" was refused by the local authorities in Tartous, Syria, the charterers instructed the master to sail to Benghazi, Libya. However, the master, in accordance with the shipowners’ instructions, stopped in international waters outside Libya. Despite charterers’ protest and instructions to the contrary, the vessel continued to drift in international waters for 10.9 days until the voyage to Benghazi was resumed. The charterers sought to deduct this period of time from the hire pursuant to an amended clause 15 in a NYPE 48 time charterparty which read:

‘That in the event of the loss of time from… default of master …or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost... and the cost of any extra fuel consumed in consequence thereof, and all extra expenses shall be deducted from hire’ [words bolded were typed additions to the printed form].

The matter went before an LMAA tribunal, which held that, had the vessel proceeded directly to Benghazi, it would not have berthed any earlier than it did. Nevertheless, the tribunal went on to hold that there had been an immediate loss of time by default of the master within clause 15, so that the vessel was off-hire for the 10.9 day period.

The shipowners appealed and the court, at first instance, allowed the appeal. The court found that, under the off-hire clause, the charterers had to show that there was a ‘net loss of time to the chartered service’ - that is, to the entirety of the service to be performed under the charter. On the tribunal’s findings, there had been no net loss of time in that sense.

The Court of Appeal overturned the lower court’s decision, holding that the construction which shipowners had argued for was:

(i) inconsistent with the conventional approach of clause 15;

(ii) inconsistent with the authorities; and

(iii) impractical in the sense that it could lead to a court having to undertake ‘the most intricate and speculative enquiries’ as to the course which events would have taken if full working of the vessel had not been prevented.

As the Court of Appeal noted, the relevant section of the Time Charters 6th Edition, to which the judge referred in the first instance decision, may have been a source of the misunderstanding, as it does indeed refer to the loss of time as the ‘time by which the progress of charter service has been delayed’. The Court of Appeal considered that what the authors must have meant by ‘charter service’ was the service immediately required of the vessel.

The Court of Appeal indeed held that the ‘full working of the vessel’ in clause 15 refers to her ability to do that which she is immediately required to do. ‘Immediately’ means what it says: the clause concentrates on the period during which full working of the vessel is prevented. Whether the same time would have been lost for other reasons at another stage of the chartered service - in this case the delay in berthing at Benghazi - is irrelevant to a claim under this clause.

The ‘time thereby lost’ thus means the time lost during the period of inefficiency by reason of the vessel’s inability to perform the service immediately required of her, and it is impermissible to have regard to events occurring after the end of the off-hire event.

This decision represents a welcome clarification of the proper understanding of a net loss of time clause as opposed to a period off-hire clause. It also brings certainty in that, from a commercial perspective, the calculation of the time lost can be made as it arises and be deducted from the next payment of hire, and, from a legal perspective, in that this decision follows the established line of authority of, notably, the "BERGE SUND" and the "PYTHIA".