The Approach Voyage - The Pacific Voyager

January 2018

PDF Version

06PacificVoyager

CSSA Chartering and Shipping Services S.A. and Mitsui O.S.K Lines Ltd – Pacific Voyager [2017] EWHC 2579

What are shipowners’ obligations when commencing the approach voyage to the load port?

In Monroe Brothers Limited v Ryan [1935] 2 KB 28 the Court of Appeal held that where a voyage charterparty contains an obligation on an owner to proceed with all convenient speed to a 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 (the “Monroe obligation”). An absolute obligation would mean that owners have no defence if the vessel does not reach the load port in time, even if they had exercised due diligence, i.e. even if they had made all reasonable efforts to reach the port in time. It was held in later cases that the Monroe obligation also applied to an estimated time of arrival (“ETA”), as well as an expected readiness to load date.

Facts

Mitsui O.S.K Lines were the Defendants and disponent owners (“Owners”) of the “Pacific Voyager”, (the “Vessel”), who fixed the vessel in a voyage charter dated 5 January 2015 to the Claimants, CSSA Chartering and Shipping Services S.A. (the “Charterers”) on the Shellvoy 5 form for a voyage from Rotterdam to the Far East (the “Charterparty”). The Charterparty provided a cancellation date of 4 February 2015 and also contained a clause which stated that the Vessel “shall perform her service with utmost despatch”.

When this fixture was agreed, the Vessel was laden with cargo under a previous charter and was due to call at various ports before heading to Rotterdam to load. In addition to the cancellation date, the Charterparty also advised of the ETAs for the various ports under this previous charter, at clause 1(B) of the Shellvoy 5 form, but did not provide an ETA for load port in Rotterdam.

While the Vessel was in transit through the Suez Canal on the previous voyage, on 12 January, she struck an underwater obstruction, and suffered damage, requiring drydocking for repairs. There was no suggestion that Owners were at fault for this accident. Whilst Charterers were kept informed of the incident and future prospects of performance, by the cancelling date of 4 February 2015, the Vessel was due to drydock and Owners advised that the repairs would take months. Charterers terminated the Charterparty on 6 February 2015 and presented a claim to Owners for damages.

The Parties’ Submissions - Absolute Obligation v Due Diligence 

Charterers submitted that the cancellation date was equivalent to an ETA and therefore the Monroe obligation applied in this case. This meant that Owners had an absolute obligation to commence the approach voyage to the load port at a time when it would be reasonably certain that the Vessel would arrive before, or at the very latest, on the cancellation date.

Owners submitted that the cancellation date was not an estimate given by Owners as to when the Vessel would arrive at the load port. Owners argued that the cancellation date only provides an option to cancel the Charterparty, but does not give rise to a claim in damages if the Vessel does not arrive at the port by that date. Therefore, the obligation for Owners to get the Vessel to the load port by the cancellation date, was one of due diligence only.

The Decision

The Court preferred Charterers’ arguments. The decision focused on the need for certainty in commercial contracts and the importance of ensuring that the Court gave effect to what had been agreed between the parties. The Court considered the current position in respect of a cancellation date, which is that it allows a charterer to bring the contract to an end if the vessel does not arrive by that date – that is the only remedy to charterers which it offers, it does not give rise to a right to claim damages. This limits the provision of any certainty regarding when arrangements can be made by charterers for the cargo to be loaded. In addition, it is not certain whether charterers would have any insight into a previous voyage, and they would be unaware of the terms of the previous fixture. This allocation of risk between an owner and charterer is dealt with by way of the Monroe obligation with owners giving an ETA or an expected readiness to load date. This then provides a charterer with some comfort that a claim for damages can be made if the vessel does not arrive in time. The Court therefore decided that if they were to agree with Owners’ submission - that the obligation to proceed with utmost despatch was one of due diligence only - this would not provide any commercial certainty for Charterers.

Owners’ obligations under a charter (for example, the duty to provide a seaworthy vessel and to proceed with utmost despatch) attach when the duty to proceed to the load port arises, i.e. when the approach voyage commences. This duty to proceed arises at a particular point in time, which the Court decided was to be a reasonable time. As there was no ETA provided, the Court looked to the other terms of the Charterparty to consider when this reasonable time arose. In this instance, the Court was able to look to the ETAs given for the previous voyages. The ETA given for arrival at the Vessel’s last discharge port under the previous charter also carried with it an estimate that the Vessel would take a reasonable period of time to complete her discharge. It was decided that after this reasonable discharge period the Vessel would be bound to commence the approach voyage.

The Court then went one step further to say that even without these ETAs there would still be an absolute obligation on the Owners to set sail at a reasonable time for it to be certain the Vessel would arrive by the cancellation date. The cancellation date represents an expectation of the parties as to when the Vessel will arrive at the load port – and therefore would provide the same function as an ETA when considering the Monroe obligation.
The allocation of risk in this matter consequently fell on Owners and Charterers were awarded damages.

Comment

This decision extends the scope of the Monroe obligation to a situation where the giving of an ETA relating to discharge ports under a previous charter can provide the reference point by when the vessel should commence the approach voyage, and when the owners’ obligations attach. The decision also suggests that a cancellation date on its own could potentially provide this reference point.

Shipowners should be aware that if they enter into a voyage charter when the vessel in question is still performing her previous service there is a risk that if the vessel does not arrive at the load port by the cancellation date (or ETA if one has been given) that the charterer could succeed in making a claim for damages.

During fixture negotiations, Charterers may prefer to push for an ETA to be provided in any new charters. This is because permission to appeal this case has been granted, and the Court of Appeal might give further guidance on this point when the appeal is heard.

 

Article by Joanna Bailey
Syndicate Executive
Americas Syndicate