London Arbitration 5/15 illustrates the risks a charterer can face when fixing a vessel on a time-charter, and sub-letting it on a voyage charter.
The vessel was chartered on a NYPE form and then sub-chartered on a Gencon form, for a voyage from Argentina to Kenya.
During the time-charter but prior to the voyage charter, the vessel sustained hull damage as a result of contact with a berth in Uruguay. The tribunal found that the damage was not the fault of the vessel.
The vessel arrived at Necochea on 24 June and tendered notice of readiness (NOR) 1 at 06:00.
At the time of arrival the intended loading berth was unoccupied but due to bad weather and strikes the vessel was prevented from berthing until 4 July. Allegedly there was also no cargo available.
The vessel was instructed to berth on 3 July, however, she was incapable of loading until repairs were carried out. As a result the terminal refused to allow the vessel to berth. The repairs were completed on 10 July at a lay-by berth. At this point the Master tendered NOR 2.
Three issues arose for determination by the tribunal:
- Whether the vessel was off-hire from her arrival at Necochea on 24 June, until the completion of repairs on 10 July.
- When laytime began to count.
- Whether charterers were entitled to claim damages from owners due to the hull damage.
Issue 1: Off-hire
Clause 15 of the NYPE form provided that payment of hire shall cease for time “thereby lost” if damage to hull occurred and the “full working of the vessel” was also prevented. Accordingly the vessel would not go off-hire unless it was incapable of performing the service required of it by charterers.
Hence the tribunal found that the vessel remained on hire whilst waiting at anchorage, despite the hull damage. She eventually went off-hire on 4 July, when the port re-opened and she was instructed to berth, but berthing was refused by the terminal.
Issue 2: Commencement of laytime
Charterers were liable to pay hire until 4 July and could not look to sub-charterers for demurrage accruing during that period because both NORs were found to be invalid:
- NOR 1: the vessel was not physically ready to load due to the hull damage.
- NOR 2: being a “berth charter” the vessel needed to be at the loading berth when tendering NOR, which she was not.
The default position therefore applied that laytime ran only from the commencement of loading
Issue 3: Charterers’ claim for damages
Charterers sought damages from owners on the grounds that the hull damage prevented them from any of the following:
- Claiming demurrage from their sub-charterers.
- Claiming damages for detention from sub-charterers when cargo was unavailable.
- A claim for “consequential loss of time” because of the delays.
Charterers argued the hull damage constituted a breach of clause 7, on the grounds that the whole reach of the vessel was not available to them, and clause 8, for failing to prosecute the voyage with utmost despatch. However, the tribunal considered there could be no breach of clause 7 when the unavailability of the vessel was due to owners doing what was required, i.e. repairs.
As for clause 8, it was held that charterers had to show fault on the part of vessel resulting in a failure to proceed with utmost despatch, which was not possible.
The tribunal also found that there was no consequential loss attributable to any breach of charter or fault of owners. The delays after the completion of repairs were due to another vessel occupying the berth.
Owners and charterers need to consider carefully during negotiations the provisions of the charterparty. In particular, a charterer in the middle of a contractual chain is less likely to be the party bearing the loss of delays if contracting on back-to-back terms.