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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Minerva Navigation Inc v Oceana Shipping AG  EWCA Civ 1273 (23 October 2013)
Cite as:  2 Lloyd's Rep 673,  1 All ER (Comm) 552,  EWCA Civ 1273,  2 CLC 614
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, Commercial Court
Mr Justice Walker
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LEWISON
LORD JUSTICE UNDERHILL
| Minerva Navigation Inc
||Claimants / Respondents
|- and -
|Oceana Shipping AG
|Oceana Shipping AG
|- and -
|Transatlantica Commodities SA
||Defendants / Appellants
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Richard Lord QC (instructed by Holman Fenwick Willan LLP) for the Respondents
Michael Nolan (instructed by W Legal Limited) for the Appellants
Crown Copyright ©
Lord Justice Tomlinson :
"If authority is required for that proposition, we would refer to The Berge Sund  2 Lloyd's Rep 453."
The Berge Sund is a decision of this court.
"That in the event of the loss of time from deficiency sickness, strike or default of master, officers or crew or deficiency of
of men orstores, fire, breakdown or damages to hull, machinery or equipment, grounding, detention by average accidents to ship or cargo, dry docking for the purpose of examination or painting bottom, or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost; unless caused by the Charterers or Charterers agents or Charterers servants and all extra expenses directly incurred including bunkers consumed during period of suspended hire shall be for Owners' account and if upon the voyage the speed be reduced by defect in or breakdown of any part of her hull, machinery or equipment, the time so lost, and the cost of any extra fuel consumed in consequence thereof, and all extra expenses shall be deducted from the hire."
I have italicised the typed words which have been added to the printed form.
"On 28 December 2009 [Oceana] emailed [the charterers]:
"Following to apply for discharge in Yemen or Libya:
New hire USD 17,500/pdpr to start on sailing from Tartous until redelivery."
[The charterers] paid hire at this rate from 16 January 2010. This email which has been referred to as an addendum to the sub-charter was clearly intended to remove the obligation in the original ttc [trip time charter] for redelivery on sailing from a Syrian port to permit the vessel to discharge the cargo loaded at Novorossysk in either Yemen or Libya, following its rejection in Syria, as well as increasing the rate of hire payable under the sub-charter."
I would also add, although it is unnecessary to the analysis, that it seems to have been assumed that this "addendum" provided also for redelivery in either Yemen or Libya.
"Please note that we forbid berthing/discharging and releasing the cargo to receivers until our next written instructions. Hereby we confirm that receivers has (sic) right to take samples only. Upon arrival please anchor at road port Benghazi and waiting our further instructions."
The Decision of the Arbitrators
"78. As is made clear at paragraph 25.2 of Time Charters, the ship must render the service immediately required of her, in which event hire is payable continuously, but if she cannot or does not, hire is not payable for the time so lost. As is also made clear in that paragraph, the off-hire clause operates entirely independently of any breach of contract by the owners, and a claim under the off-hire clause may lead to a different answer than would ensue in the case of a claim for damages for breach of contract.
79. The Tribunal are satisfied that all [the charterers] need do in respect of their claim under the off-hire clause is demonstrate that there was a default on the part of the Master (which we have already accepted there was) and that in consequence, there was an immediate loss of time. On this last, we are satisfied that the consequence of the Master's failure to proceed directly to Benghazi, was a loss of time by her delayed arrival at that port. Whether the same time would have been lost for other reasons had she proceeded directly to Benghazi, is irrelevant to a claim under the off-hire clause. The time was lost in relation to the service immediately required of her and that is sufficient. If authority is required for that proposition, we would refer to the Berge Sund  2 Lloyd's Rep 453."
"In the event of loss of time from deficiency of men or stores, break-down of machinery, want of repairs, or damage, whereby the working of the vessel is stopped for more than 48 consecutive working hours, payment of hire shall cease until she be again in an efficient state to resume her service."
On 30 September 1887 in the course of a voyage from a West African port to Harburg on the Elbe, now part of the port of Hamburg, the vessel's high-pressure engine broke down at a point not far off Las Palmas. The Master put back to Las Palmas – her low-pressure engine working part of the way. As repairs could not be effected at Las Palmas the vessel had to be towed from that port to Harburg. She then discharged normally, over the course of ten days. Coincidentally, the repair to her high-pressure engine occupied the same period of time. The charterers contended that the vessel was off-hire both during the tow from Las Palmas to Harburg and during discharge, because the expression "efficient to resume her service" must be taken to mean total and absolute efficiency. The House of Lords held by a majority of four to one that the vessel was off-hire during the voyage from Las Palmas to Harburg. But by a different majority of four to one they also held that hire was payable in respect of the period spent discharging, the vessel being in an efficient state for the employment then required of her.
"I should read the contract as meaning this, which I think one of the noble and learned Lords suggested in the course of the argument, that she should be efficient to do what she was required to do when she was called upon to do it; and accordingly, at each period, if what was required of her was to lie at anchor, if it was to lie alongside the wharf, upon each of those occasions, if she was efficient to do it at that time she would then become, in the language of the contract, to my mind "efficient," reading with it the other words, "for the working of the vessel." How does a vessel work when she is lying alongside a wharf to discharge her cargo? She has machinery there for the purpose. It is not only that she has the goods in the hold, but she has machinery there for the purpose of discharging the cargo. It is not denied that during the period that she was lying at Harburg there was that machinery at work enabling the hirer to do quickly all that this particular portion of her employment required to be done. It appears to me, therefore, that at that period there was a right in the shipowner to demand payment of the hire, because at that time his vessel was efficiently working; the working of the vessel was proceeding as efficiently as it could with reference to the particular employment demanded of her at the time."
"Now, the contract is for the hire of a ship, and each of the parties must be taken to know what are, in the ordinary course, the duties to be performed by a ship, and it must be taken that each party is contemplating the possibility of the benefit which he is contracting to obtain being interrupted by various causes. That clause of the contract which has to be interpreted is in these terms, and each part of it, I should say, ought to be looked at with care and with reference to the words which are found associated with it in the particular instrument which we have to construe. It is, "That in the event of loss of time." That is the leading and guiding principle by which we are to ascertain what it is with reference to which the succeeding words are used. What the hirer of the ship is guarding against by this contract with the owner of the ship is, that he is not to pay during such period of time as he shall lose (that is, lose time) in the use of the ship by reason of any of the contingencies which this particular clause contemplates. "That in the event of loss of time from deficiency of men or stores, breakdown of machinery, want of repairs or damage, whereby the working of the vessel is stopped for more than forty-eight consecutive working hours." The language is consonant with what I have indicated to be the general intention of the parties in entering into this part of the contract. In the first place, it is "in the event of loss of time," and then the parties proceed to shew that that contingency which is to give rise to the actual operation of the clause is, that the working powers of the vessel are interfered with, and "the working of the vessel is stopped for more than forty-eight consecutive working hours," and upon that there is to be a cessor. What the parties to this contract contemplated was this: The hirer of the vessel wants to use the vessel for the purpose of his adventure, and he is contemplating the possibility that by some of the causes indicated in the clause itself, namely, "the deficiency of men or stores, breakdown of machinery, want of repairs or damage," the efficient working of the vessel may be stopped, and so loss of time may be incurred; and he protects himself by saying that during such period as the working of the vessel is stopped for more than forty-eight consecutive hours, payment shall cease; and now come the words upon which such reliance is placed: "until she be again in an efficient state to resume her service." If the contention which as been put forward at your Lordships' Bar were well founded one might have expected that the parties in contemplating what upon that view was said to be the intention of the parties if they had intended that the test should be the efficient state of the vessel as it originally was might very readily have used the words, "until such time as the deficiency of men or stores has been removed, or the breakdown of the machinery has been set to rights, or the want of repairs has been supplied or the damage has been remedied," and so forth; or the terms might have been inserted that the resumption of the payment shall be dependent upon the vessel being restored to full efficiency in all respects, as to seaworthiness and otherwise, as she was at the time when she was originally handed over. But the parties have not used such language. On the contrary, the test by which the payment for the hire is to be resumed is the efficient state of the vessel to resume her service; so that each of those words, as it appears to me, has relation to that which both of the parties must be taken to have well understood, namely, the purpose for which the vessel was hired, the nature of the service to be performed by the vessel, and the efficiency of the vessel to perform such service as should be required of her in the course of the voyage."
"The charterparty seems to me to be fairly clear. The object of the clause in question is to provide for a possible loss of time; and the question is how much time was provided for. In my opinion only such time was provided for as might elapse until the vessel was once more in full working order. When the accident ceased to prevent the full working of the vessel, the hire became again payable. This is the natural construction of the clause, and any other construction would involve intricate calculations as to the time which had been lost."
Stirling LJ, at page 257 said this:-
"In order to prevent the hire running there must be an accident preventing the full working of the vessel; therefore when she had been repaired, and was once more in full working order, she was no longer "detained" within the meaning of the clause in question."
"8(a) In the event that a loss of time, not caused by Charterer's fault, shall continue, (i) due to repairs, breakdown, accident or damage to the vessel, collision, stranding, fire, interference by authorities or any other cause preventing the efficient working of the vessel, for more than twenty-four (24) consecutive hours . . . then hire shall cease for all time so lost until the vessel is again in an efficient state to resume her service and has regained a point of progress equivalent to that when hire ceased hereunder."
The vessel was delayed in starting to load because of the need to carry out tank cleaning made necessary in consequence of the charterers' choice as to the sequence of cargoes to be carried. The question arose whether the vessel was during this period off-hire. This court held that it was not. After citing Lord Halsbury's remarks in Hogarth v Miller Staughton LJ said this, at page 459:-
"The reasoning in that decision seems to me equally applicable in the present case, whether one is considering "loss of time" or "preventing the efficient working of the vessel", or "again in an efficient state". In each case one has to decide whether Berge Sund while at Ras Tanura, was in the words of Lord Halsbury "efficient to do what she was required to do" by the charterers. Unfortunately that is by no means the end of the problem, but only the beginning of it."
At page 460 Staughton LJ continued:-
"In the ordinary way a charterer will wish a vessel to be profitably employed continuously throughout the charter period in loading, the carrying voyage, discharging, and if necessary a ballast voyage. Any time spent on other activities brings no immediate return to the charterer. Yet it is manifest that some other activities must take place in the charterer's time. When a ship has used up the fuel in her bunkers, she must pause to take more on board, and for that purpose perhaps call at a port where she would not otherwise have called. Time may be spent taking on ballast, either for a ballast voyage or to reduce the vessel's air draft so that she can go under a bridge. Lightening may be necessary, to enable her to go through a canal, as in Actis and Co Ltd v Sanko Steamship Co Ltd (The Aquacharm)  1 Lloyd's Rep 7;  WLR 119. Or time may need to be spent cleaning the vessel's holds or tanks. If the charterer orders the vessel to load coal on one voyage and sugar in bulk on the next, he can hardly expect the necessary cleaning to be done in the owner's time.
Time spent on those activities is, in the ordinary way, to be paid for in hire. The charterer has acquired the services of the vessel, and has the right to determine what cargoes she shall carry on what voyages. If, as a result of his orders, any of those measures become necessary, hire must be paid for the time so spent. Incidentally, there may be other expense for the charterer to bear. Almost invariably the charterer pays for fuel; the cost of lightening, ballast and cleaning may be a matter of negotiation.
One can justify that result in more than one way. It can be said that there is no "loss of time" when the vessel is carrying out those activities, or that the "efficient working of the vessel" is not prevented, or that she is still able to perform (and is performing) the service required by the charterer. By whichever route one goes, the result is that the vessel is not off hire.
Those, as I have said, are the consequences which flow in the ordinary way. But what if there are unusual or extraordinary circumstances? The arbitrators reached this conclusion, in para 59:
"Charterers justifiably declined to load the vessel after the coolant failed the test. This was an unexpected event since both owners and Charterers hoped to load the vessel immediately on presentation at Ras Tanura and the vessel was, thus, not in an efficient state to provide the service next expected of her, viz. to begin loading."
The arbitrators' test was thus one of hope or expectation. But even if that was to be an objective test, I cannot believe that it was right. It is, as Aristotle said, probable that many improbable things will happen. The question is not what the charterers hoped or expected their orders would be, but what service they actually required."
Finally, at page 461, Staughton LJ said this:-
"In my opinion the critical question is, what was the service required of the vessel on Dec 20 1982? What were the charterers' orders? They were not to load cargo; as I have said, that was the very last thing that the charterers would have ordered, since the copper strip test had been failed. The orders were, in part, expressly and at all relevant times by implication, to carry out further cleaning. That was the service required, and the vessel was fully fit to carry it out.
But then it may be asked whether the same reasoning would apply if, for example, a ship suffered an engine breakdown, and the charterer ordered her to carry out repairs. Would that be performing the service required? And would it make any difference, if instead the charterer merely said that the ship was off hire, and that what the owner did about it was up to him? In either of those cases the ship would clearly not be performing the service required, and would be off hire.
In my judgment the distinction lies in the fact that cleaning is in the ordinary way an activity required by a time charterer. It is his choice what cargoes are loaded, and consequently when and what clearing is required. If in a particular case the charterer declines to load until there has been further or extraordinary cleaning, the service required is that cleaning. Of course there may be cases where the need for such extra cleaning results from a breach of contract on the part of the owner or even from "neglect of duty on the part of the master, officers and crew". In that event the charterer has a remedy. But here the arbitrators rejected the charters' case that there had been negligence or want of due diligence in cleaning on the ballast voyage. Once they had reached that conclusion, the argument that the vessel was off hire or that the charterers could recover the hire paid was in my opinion doomed to failure.
I appreciate that in reaching this conclusion I may be differing from what Mr Justice Donaldson at least implied in the Bela Krajina case. But I can see no ground for distinguishing between ordinary cleaning and extraordinary or unusual cleaning. If either is required by the charterer, it is the service which for the time being the vessel must be efficient to perform, and time spent on it is not time lost.
It follows that in my judgment the vessel was not off hire, and the charterers' claim fails."
"25.53 It is usually the case that a ship is off-hire only if there has been a "loss of time". That expression, however, can be used in two different senses.
(1) On the one hand, the phrase "loss of time" is used to refer to the period of time during which the ship is prevented from working; so, in other words, "loss of time" means 'loss of a period of service'.
(2) On the other hand, "loss of time" or "time lost" is also used to refer to the period of time by which the progress of the charter service has been delayed; when used in this sense, "loss of time" or "time lost" means 'delay to the progress of the adventure'.
'Net loss of time' clauses
25.54 In order to claim off-hire under Clause 15 of the New York Produce form, the charterers have to show that there has concurrently been a loss of time in both of the senses identified above. Clauses of this kind are called 'net loss of time' clauses. The Baltime form contains a net of loss of time clause. So, too, does the Shelltime 4 form."
"Now it is customary to draw a distinction between what have been called "period" off-hire clauses and "net loss of time" off-hire clauses. Historically some time charters have contained period clauses under which in certain specified circumstances the ship goes off-hire for a certain period. The difficulty with such clauses has however been that the ship might be put off-hire during a period when by reason of a specified event her performance was impaired despite the fact that during such period she was partially capable of performing and did so perform the services required of her. See, for example, Hogarth v Miller Brothers & Co  AC 48 and Tynedale Steamship Co v Anglo-Soviet Shipping Co (1936) 54 Ll L Rep 341; (1936) 41 Com Cas 206. However there are also perhaps because of possible injustices of this kind, net loss of time clauses, under which the ship is only put off-hire for the "time lost thereby", so that the time charterers cannot escape all liability for hire in respect of time for which they have at least some use of the vessel for the services immediately required of her. Even in the case of such clauses, however, it has not followed that a precise comparison will be made between the period which would have been occupied in performing the relevant service had the off-hire event not occurred and the period in fact occupied in performing that service. No doubt the making of such a comparison, with the consequence that the difference between the two periods constitutes the period of off-hire, would lead to a logical result; but it could also lead to the most intricate and speculative enquiries as to the course which events would have taken if the vessel had not gone off-hire, and perhaps for that reason we find that, in for example the Baltime charter, although no hire is to be paid in respect of "any time lost thereby", nevertheless on the form of words so used no deduction of hire is made in respect of any period after the ship is once again able to perform the service immediately required of her. That clause is therefore a net loss of time clause, but only in respect of time lost during a particular period.
Into which category does cl.15 of the New York Produce Exchange form fall? In my judgment, both as a matter of construction of the clause and as a matter of authority, it falls into the same category as the off-hire clause in a Baltime charter. The clause contemplates the happening of a certain event which has the effect of preventing the full working of the vessel in the performance of the service immediately required of her. If such an event occurs, "the payment of hire shall cease for the time thereby lost". The clause therefore contemplates a cesser of the payment of hire during the period when "the payment of hire shall cease for the time thereby lost". The clause therefore contemplates a cesser of the payment of hire during the period when "the full working of the vessel" is so prevented but only to the extent that time is thereby lost.
This was the conclusion of the Court of Appeal in Vogemann v Zanzibar Steamship Co Ltd (1902) 7 Com Cas 254, on a clause which I find to be indistinguishable in any material respect from cl.15 of the charter now before me. Collins, MR, said (at p.257):-"
And then Robert Goff J set out the passage which I have cited at paragraph 25 above and continued:-
"That case was recently applied by Mr Justice Parker in The Marika M,  2 Lloyd's Rep 622. It is binding upon me, and I respectfully agree with it. Of course, Vogemann v Zanzibar was only concerned with the question of the period during which the vessel might be put off-hire. It was not concerned with the question how time lost during that period was to be computed. But since the clause only provides for hire to cease for "time thereby lost" it must follow that, only in so far as time is in fact lost during that period by reason of the relevant event, will the vessel be put off hire."
"It seems to me that the question of whether the vessel was operating on the orders of owners or charterers is not to the point in calculating what time was actually lost to the charterers as a result of the off-hire event. Obviously during the time that the vessel is under directions to go to the port where it is to be dry docked and during the dry docking itself, an off-hire event has taken place."
With great respect to Tuckey J I disagree. The off-hire event was dry docking. The full working of the vessel was not prevented whilst the vessel proceeded from Ravenna to Piraeus, because that was the service immediately required of her by the charterers, in agreement with the owners. The judge went on to hold that the tribunal must "count the time and count the duration of the off-hire event" but that it must also then "go on to see what causative effect that has had upon the charterers in the particular circumstances of the case". The judge went on to conclude that the charterers had not lost the time that it had taken for the vessel to sail from Ravenna to Piraeus, apart from a small amount of time involved in the deviation into that port for the purpose of dry docking. The vessel was not therefore off-hire whilst proceeding from Ravenna to Piraeus. The ultimate conclusion of the judge that the vessel was not during the voyage off-hire is I think right for the reason that the full working of the vessel was not prevented whilst she proceeded from Ravenna to Piraeus, that being the service immediately required of her. The decision is not however justified by the fortuity of the orders which the charterers gave for the employment which was to be undertaken once the vessel had completed drydocking, orders which were given some thirteen days after, on Tuckey J's approach, the vessel had already been affected by the relevant off-hire event. With respect, Tuckey J's reasoning, like that of the judge in the present case, failed to focus on the service immediately required of the vessel during the voyage from Ravenna to Piraeus. Walker J thought that the answer to the question "what service was immediately required by charterers of Ira when she left Ravenna?" might well be "none". But that is, with respect, untenable. Owners and charterers were agreed as to the required service, which was to proceed from Ravenna to Piraeus. I agree with Tuckey J that in certain circumstances it is not possible to determine what loss of time has occurred until the end of the off-hire event. The corollary is however that since the clause is concerned with the service immediately required of the vessel, it must be possible at the conclusion of the off-hire event to determine what net time has been lost in consequence of the event. It is thus impermissible to have regard to events occurring after the end of the off-hire event. If it were permissible, one would be faced with the question for how long after the end of the off-hire event could such events be relevant to the computation of loss of time consequent upon the off-hire event. As I have already pointed out, the judge's various formulations do not provide a principled answer to this question.
Lord Justice Lewison :
Lord Justice Underhill :