Acts of Delegates & Off-Hire

August 2014

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Global Santosh - Arrest - Off-Hire Event? The Appeal

The Commercial Court decision in NYK Bulkship (Atlantic) NV v Cargill International SA (the “Global Santosh”) was discussed in issue 21 of Sea Venture. 

The case concerned the construction of a familiar additional off-hire clause providing for hire to be suspended for any period during which the vessel is arrested or detained; “unless such… arrest is occasioned by any personal act or omission or default of the Charterers or their agents..”. 

Mr Justice Field held that the reference to “agents” in the off-hire clause was not limited to those parties who had been directly instructed by the charterers (in this case Cargill), but extended to sub-charterers, sub-sub charterers or receivers to whom the charterers, by sub-letting the vessel had delegated or sub-delegated the performance of their obligations under the charter.  However, that the act, omission or default had to occur in the performance of the delegated task.

Field J went on to find that IBG, the buyers of the cargo, were Cargill’s delegate in respect of the obligation to unload cargo under clause 8 of the NYPE charter and that the failure to unload within the lay days specified in the sale contract was an omission or default that occurred in the course of performing the obligation to discharge as delegated.  As such, the vessel remained on-hire.

Field J’s judgment attracted market comment for its finding that failure to unload the cargo within the laydays specified in a sale contract was a relevant delegated act under clause 8 of the timecharter.  That decision has now been reviewed by the Court of Appeal. 

The Court of Appeal has confirmed that the term “agents” as used within the off-hire clause was not to be limited to agents strictly so-called and that delegates of the charterers could be agents for the purposes of the proviso.  However, in a departure from the Commercial Court’s reasoning, it held that where a party was a delegate of the charterer flowing from the sub-letting of the vessel, then they remain a delegate for the purposes of the proviso regardless of the legal nature of the act or omission.  Not every act or omission of the delegate will, or need be, in the course of performance of the delegated task.

In this case, the Court recognised that Cargill was under no obligation to discharge the vessel in any given time, however held that the dispute in question arose out of its trading arrangements concerning the vessel and fell on the charterers’ "side of the line". This, the Court considered, ‘gives effect to the familiar division between owners’ and charterers’ spheres of responsibility’.

The decision not only widens the scope of the proviso to this frequently met off-hire clause but may also have implications for other common charterparty clauses which include references to the parties or their agents.  The Court of Appeal decision was appealed to the Supreme Court in December 2015

 

Article by Stuart James.