CSSA Chartering and Shipping Services SA v Mitsui O.S.K Lines Ltd - "PACIFIC VOYAGER"

In a welcome decision [1] for charterers, the Commercial Court has clarified an as-yet unresolved point of law concerning the parameters of a shipowner's obligation to proceed to the loadport with utmost despatch. Clyde & Co represented the successful claimant charterers in this landmark result.

The case of Monroe Brothers Limited v Ryan (1935) 2 KB 28 established that where a voyage charterparty contains an obligation on an owner to proceed with all convenient speed to the loading port, and gives a date when the vessel is expected to load, there is an absolute obligation on the owner to commence the approach voyage by a date when it is reasonably certain that the vessel will arrive at the loading port, on or around the expected readiness to load date (ERTL). The usual charterparty exceptions, thus, only apply once the approach voyage is commenced, and cannot avail an owner prior to this point. Later authorities make clear that the same obligation arises with regard to an ETA in the charter.

Extending existing principles – the Commercial Court proceedings

Since the Monroe Brothers Limited v Ryan decision, it has, however, been unclear whether a similar obligation arises where there is no provision as to ERTL or ETA, but merely a cancelling date. On 18 October 2017, Popplewell J, in the Commercial Court, answered this question: the duty does still apply, by reference to the cancelling date, and indeed more widely.

Owners sought to argue that the absolute obligation recognised in Monroe only arose where there was a combination of an ETA/ERTL date with an obligation to proceed with all convenient speed/utmost despatch. In the event that there was no loadport ETA/ERTL, it was submitted that the obligation to proceed was merely one of due diligence.

The charterparty clause in question provided that "... the vessel shall perform her service with utmost despatch and shall proceed to [Rotterdam or STS off Rotterdam] ... and there ... load a full cargo". Popplewell J found this clause to impose an absolute obligation, which did not provide for any consideration of due diligence.

Significantly, Popplewell J found that a due diligence obligation in these circumstances would give rise to unacceptable commercial uncertainty. For example, if a vessel were delayed owing to suspected deficient maintenance, it would be undesirable for charterers' right to have the vessel proceed to loadport, be dependent upon an investigation into the cause of any delay.

In reaching his decision, Popplewell J drew heavily on the authority of Devlin J in The North Anglia [1956] 2 Lloyd's Rep 367. Here, Devlin J held that the obligation to proceed to the loading port must arise at a particular identifiable time. Where there is no express term as to the date by which the approach voyage must commence, the process must start immediately or, at least, within a reasonable period from the date of the charter. The question of what is "a reasonable period of time" depends on the expectations of the parties as to when loading will commence. This is how Devlin J reached the conclusion that the obligation to proceed arises at a time when it is reasonably certain that the vessel will arrive at the loading port on or around the expected readiness to load or arrival date. Popplewell J incrementally extended the logic of this reasoning, so as to find that the duty to proceed arises at a reasonable period of time, determined as a matter of construction of the charterparty terms.

Popplewell J was also influenced by policy considerations, and recognised the need to determine the correct allocation of risk between charterers and owners. In particular, it was noted that, if an owner enters into a charterparty but decides to embark on intermediate voyages before commencement of the chartered service, the risk of any delay ought to fall on the owner's shoulders. This is particularly so when one considers that owners earn freight for intermediate voyages, combined with the fact that charterers will have little control or insight into the terms of the intermediate charterparty (for example, how risky the intermediate voyage is, the likely weather conditions, etc.).

The decision: an overview

It was held that, where there is a clause requiring a vessel to proceed with all convenience/utmost despatch, this gives rise to an absolute duty on owners to commence the approach voyage. This duty attaches at a particular point of time, which is within a reasonable period of time, to be determined in light of the other charterparty terms (in the absence of an ETA/ERTL).

Taking this as the starting point, Popplewell J found that on the particular wording of this charter, the cancelling date was not the term which best informed the question of what a reasonable time is, at which the duty to proceed attaches. This was because the charterparty in question also contained ETAs in relation to the intermediate ports for the cargo operations on the previous voyage, including her ETA for final discharge at Antifer, France. It was found that this ETA could be used to derive the time at which the vessel could be expected to commence her approach voyage (namely, following anticipated discharge at Antifer).

However, significantly, Popplewell J recorded his view of what the position would be in the event that no ETAs had been given for the intermediate voyage. In those circumstances, he found that the laycan would still respond to the question when the reasonable time was, so there would still be an absolute obligation 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 decision is clearly correct as an obligation to proceed with despatch, by necessity, requires a start time to set off. By reinforcing the Devlin J guidance on reasonable time, Popplewell J has, in effect, left open laycans, itineraries, and/or intermediate ETAs, or indeed any relevant term speaking to what was anticipated by the parties, as pointers to framing the date on which the absolute obligation attaches. It is of course also possible that points of fact might become relevant to the question of what a reasonable period is.

What the decision does not decide, as it was not necessary, is whether the absolute obligation is a condition or an innominate term.

Practical Point for Charterers

Whilst the judgment gave a clear indication that a cancelling date is sufficient to attach to the obligation to proceed with utmost despatch, charterers should still take care to ensure that ETAs or ERTL dates are provided in all charterparties, as this decision is likely to be subject to appeal.