Voyage Charter - Notice Of Readiness And Laytime Exceptions

June 2003

(Sea Venture Volume 21)

A number of decisions concerning the application of laytime exceptions contained in voyage charters have been discussed in previous issues of Sea Venture. Most recently, the Commercial Court decision in the "Solon" was considered in Sea Venture Vol.19.

In January 2003, in the case of the "Nikmary"¹ , the English Commercial Court was asked to consider whether delays experienced in reaching a berth after the Vessel had tendered a Notice of Readiness should fall for the owners' or charterers' account.

The "Nikmary" was chartered on the Asbatankvoy form, heavily amended to incorporate a large number of the charterers' own standard terms. On 2 December 2000 the vessel arrived at the nominated port of Sikka in India to load a cargo of gasoil. Notice of Readiness was tendered on the same day. Between 2 and 5 December the vessel's tanks were inspected on three occasions before finally being passed for loading, at which time the Master tendered a further Notice of Readiness.

The first inspection was carried out by the charterers' surveyor on his own. When the charterer's surveyor carried out the second inspection, he was accompanied by a surveyor appointed on behalf of the owners. At the time the vessel was finally passed, a third surveyor, this time appointed on behalf of the owners' P&I Club, was also present.

Between 5 December 2000 and 2 January 2001 the vessel was not able to berth due to priority being given to other vessels which had arrived after the "Nikmary" and within their nominated loading periods. The Court was asked to determine whether the period of delay fell for the owners' or charterers' account.

The charterers relied largely on their own standard chartering terms to exclude liability to pay demurrage to the owners. Amongst these terms was a clause providing for what was to happen in the event of the Vessel's tanks being failed upon inspection. The relevant extracts read: -

30. Operations Clause - Amended

…

c) Inspection/Cleaning - Amended

i) …The Owner shall clean the tanks, pipes and pumps of the Vessel to the satisfaction of the Charterer's Inspector who shall inspect the Vessel as per local and/or Charterer's requirements prevailing at the time.

ii) Notwithstanding whether or not the Vessel arrived and tendered NOR within laydays and notwithstanding any previous decision not to cancel the Charter, should, after inspection, the Vessel not be clean to the satisfaction of jointly appointed Inspector, the Charterer shall have the option of cancelling this Charter by giving Owner notice of such cancellation within 24 hours after rejection of the Vessel by the jointly appointed Inspector.

iii) Alternatively, should the Charterer still decide not to cancel this Charter, despite the Vessel not being clean to the satisfaction of the jointly appointed Inspector, the Vessel will be required, at Owner's risk, time and expense, to carry out further cleaning, per (i) above, and represent for further inspection by jointly appointed Inspector.

iv) Should, after further inspection, the Vessel still not be clean to the satisfaction of jointly appointed Inspector, the Charterer shall have the option to either cancel the Charter, as per (ii) above, or to request further cleaning, as per (iii) above.

v) Owner shall indemnify Charterers for all direct and/or indirect costs and consequences as a result of the Vessel not being clean to the satisfaction of jointly appointed Inspector and should the Charter not be cancelled, all time until connection of hoses, after the Vessel has been passed as clean to the satisfaction of jointly appointed Inspector, shall not count as laytime, or if on demurrage, as time on demurrage."

Based on the above clause, drafted as it was so heavily in their favour, the charterers' primary case was that responsibility for the lost time was effectively placed on the owners. The charterers may have felt that little else was required to reject the owners' claim: The charterers had exercised their option not to cancel the contract following the failed inspections and had required the owners to clean and then re-clean until the tanks were passed. Once passed, time until connection of hoses should then have been for the owners' account in accordance with clause 30 (c)(v). On the question of satisfying the requirement for a joint inspection to be carried out, the charterers submitted that whilst, technically, the inspection was carried out by three inspectors, and not one jointly appointed inspector, the requirement of the provision was satisfied in spirit, if not in form.

The charterers also placed reliance on clause 6 of the contract, which read: -

6. NOTICE OF READINESS. Upon arrival at customary anchorage at each port of loading or discharge the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the vessel is ready to load or discharge cargo, berth or no berth, and laytime, as hereinafter provided, shall commence upon the expiration of six (6) hours after receipt of such notice….. However, where delay is caused to the vessel getting in to berth after giving notice of readiness for any reason over which Charterers have no control, such delay shall not count as used laytime or demurrage."

The charterers submitted that the delay in procuring a berth for the Vessel was due to a reason beyond their control (delay having been caused by rejection of the vessel's tanks between 2 and 5 December 2000) and therefore, none of the lost time should count against laytime or demurrage.

Finally, the charterers also argued that the owners were in breach of charter in presenting a vessel at Sikka with unclean tanks. This, they argued, was the underlying cause of the delay.

Against this background the owners nevertheless considered they were entitled to claim demurrage. On the face of it, their claim had problems. After all, they had indeed presented a vessel with unclean tanks, it had taken two subsequent inspections for the tanks to be passed and by virtue of clause 30, they had, or so it seemed, agreed to be responsible for the loss of time consequent to the tanks being failed and then passed.

Despite the hurdles, the owners' claim for demurrage succeeded. On the construction of clauses 6 and 30, the owners argued that they were not in breach of charter. There was no express provision requiring the tanks to be clean on delivery and indeed, clause 30 expressly contemplated delivery with unclean tanks. It was argued that had the parties wished to include a provision requiring the owners to tender the vessel with clean tanks by a certain date, failing which they would face a claim in damages, they would have done so. Instead, they had merely agreed that charterers would have an option to cancel, or to require further cleaning until the tanks were passed.

On the inspection issue, the owners submitted that the charterers had not invoked clause 30 by asking the owners to agree to the appointment of a joint inspector. The Court held that the procedure agreed by the parties had not been followed and, therefore, the charterers would not be able to rely on clause 30 to prevent the running of laytime.

Having done what was required in terms of cleaning the tanks to the satisfaction of the charterers' inspector, the owners argued that the charterers had to comply with their own obligations, one of which was to provide a cargo for loading. In allowing the charter to remain alive by exercising their option to require the owners to clean until the Vessel was passed, the charterers remained under an obligation to make a cargo available in time to enable the vessel to load the cargo within the allowable laytime. As it happens, at the time that the "Nikmary" was waiting at anchorage, the charterers did not have a cargo available for loading. In the weeks preceding the "Nikmary"'s arrival, the charterers had experienced a problem with their shippers and this had resulted in them not being in a position to have a cargo available for the "Nikmary". Priority in respect of cargo was given to other vessels which were taken in to load ahead of the "Nikmary" because the shippers were committed to load those cargoes in the month of December. Unfortunately for the charterers, there was no comparable commitment to load the "Nikmary".

The Court held that the exception in clause 6 would not operate because cargo supply was something that fell within the charterers' sphere of control. The clause was not intended to excuse the charterers for their failure to fulfil their absolute obligation to provide cargo for the vessel.

In short, the proximate cause of the delay was held to be the charterers' failure to have a cargo available, rather than the vessel's condition on delivery. Neither clause 6 nor clause 30 assisted the charterers, so they were held liable to pay demurrage to the owners for the period between the tender of notice of readiness on 5 December 2000 and connecting hoses on 2 January 2001, after taking into account available laytime.

Where charterparty clauses are designed to address particular circumstances a party seeking to rely on them will not be allowed to do so unless those particular circumstances arise. Careful consideration of the facts of this case showed that the events which occurred were not a precise reflection of the circumstances which the clauses in question were designed to address.

1.Triton Navigation Ltd v Vitol SA (The Nikmary) [2003] 1 Lloyd's Rep. 151