NYK Bulkship (Atlantic) NV -v- Cargill International SA [2014]

The Court of Appeal dismissed an appeal against the Commercial Court’s interpretation of a ‘Capture, Seizure, Arrest’ clause in a time charter. The case provides a useful illustration of the contractual allocation of risks and responsibilities between the parties to a time charter, particularly in respect of delay to a vessel.

By a time charter on an amended NYPE form, the “GLOBAL SANTOSH” was chartered out by the disponent owners, NYK Bulkship (Atlantic) N.V. to charterers, Cargill International SA, for a one time charter trip from Sweden to West Africa. Through a chain of voyage charters, the vessel was sub-chartered to Transclear SA, who employed the vessel to carry a cargo of cement sold to IBG Investments Ltd pursuant to a sale contract on C&FFO terms. Under the terms of the sale contract, IBG were responsible for unloading the cargo and liable to pay Transclear demurrage if that unloading was delayed.

Berthing was delayed due to congestion at the discharge port. Transclear obtained an arrest order against the cargo, and (by error) against the vessel, to secure its claim for demurrage against IBG.

During the period of the arrest, charterers withheld the payment of hire to the disponent owners under the time charter by relying on clause 49 which stated:

‘Should the vessel be captured or seizure 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 …’

Disponent owners commenced arbitration against the charterers for the unpaid hire. The claim was dismissed on the grounds that there was no evidence that Transclear was performing charterers’ obligation to load or discharge, and that, even if it was, Transclear did not arrest the vessel as charterers’ agent. On appeal at first instance, the Commercial Court remitted the claim back to the tribunal to consider whether IBG’s failures had, for the purposes of clause 49, occasioned the mistaken arrest of the vessel.

The Court of Appeal held that the plain wording of clause 49 meant that if the vessel was arrested or detained she was prima facie off-hire. The prima facie conclusion could only be displaced if the disponent owners could show that the arrest or detention came within the carve-out of the clause, i.e. that it was ‘… occasioned by any personal act omission or default of the charterers or their agents’.

Applying the guidance on contract construction to be found in the judgment of Lord Clarke in Rainy Sky SA -v- Kookmin Bank [2011], the Court of Appeal held that, the word ‘agents’ could be construed to include delegates of charterers and was capable of extending to sub-charterers, sub-sub-charterers and receivers. Contrary to charterers’ case here, neither clause 49 nor the charterparty as a whole required the acts or omissions of the delegate to be in the course of performance of the delegated task and there was no reason to read in such a requirement.

From the perspective of contractual allocation of risk under the charterparty, there could be no doubt that the acts, omissions or defaults that culminated in the detention or arrest of the vessel had involved charterers’ delegates and therefore fell on charterers’ side of the line.  Disponent owners had not been involved in any sense with the unloading of the vessel. While charterers were under no obligation to discharge the vessel in any given time, the dispute in question arose out of its trading arrangements concerning the vessel.

The Court of Appeal concluded that the language of clause 49, the charterparty as a whole and the commercial context all pointed to the ‘agents’ carve-out in clause 49 being of sufficient width that it prevented charterers from arguing that the vessel was off-hire. This outcome gave effect to the ‘… familiar division between owners’ and charterers’ spheres of responsibility’.