Time Charter - Shelltime 4 - Last Voyage Instructions

January 2001

The English High Court recently considered* whether clause 19 of the Shelltime 4 form of time charter permitted charterers to give instructions for what would otherwise have been an illegitimate last voyage.

The relevant clauses for consideration were clause 4:

"Owners agree to let and charterers agree to hire the vessel for a period of 12 months (+/- 20 days charterers option) with additional option of 6 months to be declared at least 45 days prior to end of the first period, commencing from the date and time of delivery of the vessel."

And clause 19:

"If at the time this charter would otherwise terminate in accordance with clause 4 the vessel is on a ballast voyage to a port of redelivery or is upon a laden voyage, charterers shall continue to have the use of the vessel at the same rate and conditions as stand herein for as long as necessary to complete such ballast voyage, or to complete such laden voyage and return to a port of redelivery as provided by this charter, as the case may be."

The vessel was delivered under the charterparty on 28^th July 1987. Accordingly, the redelivery window was 8^th January – 17^th February 1989.

On 16^th December 1988 charterers purported to give voyage orders for the vessel which contemplated redelivery on or about 7^th March 1989 – well outside the redelivery window. After some debate about the validity of these orders, the owners refused to accept them and instructed the master not to comply with them. In response, the charterers redelivered the vessel on 14^th January 1989.

The charterers argued that their orders were for a legitimate last voyage by virtue of clause 19 and accordingly, that the owners were in repudiatory breach of the charterparty when they instructed the master not to comply with these orders. The owners argued that the orders were for an illegitimate last voyage and that they were under no obligation to comply.

In support of their position, the charterers argued that clause 19 absolves charterers from liability for late redelivery on conclusion of a legitimate last voyage and also permits the giving of orders for what would otherwise be an illegitimate last voyage. Owners agreed with the first proposition only.

Peter Gross QC (sitting as deputy high court judge) defined an illegitimate last voyage as:

"… a voyage which cannot reasonably be expected to result in redelivery before the terminal date. ..."

He added:

"…An owner is not obliged to obey an order to perform an illegitimate last voyage. …"

Charterers had sought to rely on the Court of Appeal decision in The World Symphony** in which the charterers were held entitled to give orders for what would have been an illegitimate last voyage but for a specific provision of the charterparty. The charterparty in that case had been Shelltime 3 form in which clauses 3 and 18 were similar to clauses 4 and 19 of Shelltime 4. However, Peter Gross QC distinguished the current case on the basis that the wording of clause 19 of Shelltime 4 and clause 18 of Shelltime 3 differed in one fundamental way: The "crucial words" in clause 18 of the earlier form, which stated that it would apply "notwithstanding" the provisions of clause 3 as to redelivery, were not replicated in form or substance in clause 19 of Shelltime 4.

In reaching his decision in favour of the owners Peter Gross QC held that there is no inconsistency between clauses 4 and 19, clause 19 does no more than qualify or mitigate clause 4. It does not override it.

Therefore, the charterers’ orders constituted orders for an illegitimate last voyage.

*Marimpex Mineraloel -Handelsgesellschaft MBH &Co KB and ors v Compagnie de Gestion et D’Exploitation Ltd [2000] All ER (D) 1523

**[1992] 2 Lloyd’s Rep 115