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Case Update: Smart Gain Shipping Co. Ltd. v Langlois Enterprises Ltd (The 'Globe Danae') [2023] EWHC 1683

Key Points

The High Court has upheld a decision of an LMAA Tribunal requiring charterers to pay shipowners on-hire costs of underwater cleaning even after the charterparty has expired.

Background Facts

Smart Gain Shipping Co Ltd (“Charterers”) chartered the MV Globe Danae (the “Vessel”) from Langlois Enterprises Ltd (“Owners”) on an amended NYPE form dated 9 June 2021 (the “Charterparty”).

Pursuant to the Charterparty, the Vessel was fixed on a time charter trip for the carriage of metallurgical coke in bulk from India to Brazil.

Upon arrival at the Brazilian discharge port, the receivers under the bills of lading rejected the cargo.

Consequently, the laden Vessel remained idle in Brazil (tropical waters) for 42 days until the cargo was eventually discharged. The Vessel was redelivered to Owners at Acu, Brazil, on 4 September 2021.

After her redelivery, the Vessel sailed to Tubarao, Brazil on 9 September where underwater cleaning took place. The Vessel was then delivered to her next employment on 16 September.

Owners subsequently claimed against Charterers for loss of time at the charterparty rate and costs incurred as a result of the underwater cleaning at Tubarao.

The Hull Fouling Clause

Clause 86 provided:

"Hull Fouling
Owners not to be responsible for any decrease in speed/increase in consumption of the Vessel whether permanent or temporary cause [sic] by Charterers staying in ports exceeding 25 days' trading in tropical and 30 days if in non-tropical waters. In such a case, underwater cleaning of hull including propeller etc. to be done at first workable opportunity and always at Charterers' time and expense. After hull cleaning vessel's performance warranties to be reinstated."

The LMAA Hearing

Charterers argued that in circumstances where the Vessel had been redelivered to Owners when underwater cleaning took place, Clause 86 did not apply. Charterers contested that the phrase ‘Charterers’ time’ meant that Owners’ could only claim the on-hire rate for the time spent hull cleaning when the Vessel was still on charter. If Charterers were to succeed on this argument, Owners would only be able to recover damages for losses incurred after the charter period where loss of time could be proved. In this case, Owners had not lost time because the Vessel had not yet commenced her next employment.

The Tribunal found in favour of Owners, noting that the purpose of Clause 86 was to make Charterers’ responsible for hull fouling which occurred as a result of prolonged port stays pursuant to Charterers’ orders. Whether Owners actually suffered loss of time and whether underwater cleaning was scheduled during or after the expiry of the charter period was irrelevant, Clause 86 required Charterers to arrange underwater cleaning at their time and expense at the charterparty rate.

Appeal

Charterers appealed to the High Court under section 69 of the Arbitration Act 1996 on the following point of law:

"If a clause in a time charterparty provides for underwater cleaning will be done at the charterers' time, does that provision give rise to a claim in debt (so that if the owners undertake cleaning after redelivery, they can claim for the cleaning time even if they have not suffered a loss of time)?"

In short, the High Court’s answer to the question above was yes and Charterers’ appeal was dismissed.

In carefully considering the wording of Clause 86, the High Court held that Charterers were obligated to compensate Owners for time spent underwater cleaning at the rate of hire irrespective of whether this took place during the charter period and whether Owners subsequently suffered a loss of time; the obligation was "always at Charterers' time" (our emphasis).

The High Court noted that this finding supported the commercial purpose of Clause 86, which was that Charterers should compensate Owners for hull fouling which occurs as a result of Charterers’ orders. It was noted that it would not be commercially sensible to provide Charterers with an incentive to redeliver the Vessel fouled so as to avoid paying hire for time spent cleaning. Whilst Clause 86 required hull cleaning to be done at the ‘first workable opportunity’, this is not always possible within the charter period, and in such circumstances, Charterers should still be liable for the time spent cleaning.

Comment

In upholding the Tribunal’s decision in this case, the High Court has set a precedent that where a hull fouling clause expressly states that time spent cleaning shall ‘always’ be at Charterers’ expense, Owners are not required to demonstrate an actual loss of time and Charterers shall be liable for the costs of the same irrespective of when the underwater cleaning took place, so long as Charterers are responsible for the fouling.

Whilst this is a welcome decision for shipowners, the entitlement to recover damages for time spent underwater cleaning at the charterparty rate will ultimately boil down to the construction and interpretation of the charterparty terms.


Article prepared by:

Profile image of Tessa Carr

Tessa Carr

Associate

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