Are shipowners responsible for incomplete voyages?

Court of Appeal confirms owners’ liability for missed charter.

We reported previously on the decision of the Commercial Court in the case of CSSA v Mitsui OSK Lines (the “Pacific Voyager”) in which shipowners were held responsible for the vessel’s inability to perform a voyage, even though they were in no way at fault. That decision has now been confirmed by the Court of Appeal.

The vessel was chartered for a voyage from Rotterdam to the Far East. At the time of the fixture she was performing a previous charter which required her to discharge part of her cargo in Egypt, reload a further part cargo, and then go to France for final discharge. The intention was that she would then proceed to Rotterdam to load the contract cargo. The charter did not state any ETA at Rotterdam but the cancelling date was 4 February. On 12 January (a week after the charter was concluded) the vessel suffered damage in the Suez Canal and was obliged to discharge her cargo and go to drydock for repairs. There was no suggestion that the vessel or her owners were at fault or could reasonably have prevented the incident. By 4 February the vessel had not yet entered drydock and the owners estimated that repairs would take some months. The charterers terminated the charterparty and claimed damages in excess of US$1 million.

The charterers relied on previous case law establishing that where a charterparty contains an obligation to proceed with all convenient speed to the loading port and also specifies an ETA at the loading port, the shipowner has an absolute obligation to ensure that the vessel commences the approach voyage to the loading port in time to arrive on or around the expected date.

The owners argued that as the charter in this case did not specify an ETA they were only obliged to exercise due diligence to get the vessel to the loading port in time. The Commercial Court judge rejected this argument. Although the charter did not give an ETA for arrival at Rotterdam it did give ETAs at the intermediate ports where the vessel was due to load and discharge under the previous charter, and this had the same effect. On this basis, the owners had to take the risk of delays and were liable for the charterers’ losses.

The Court of Appeal agreed with the judge on this point. The owners’ argument did not give sufficient weight to the obligation of “utmost despatch” and the obvious purpose of specifying the itinerary under the previous charter was so that the charterers would know roughly when the vessel would be available to load their cargo. The obligation of utmost despatch therefore applied as from the date when the vessel was expected to leave the last French discharge port. The court declined to make any ruling on the charterers’ alternative argument that even if the itinerary had not been specified the same result could be achieved by reference to the cancelling date. This was a hypothetical question which did not arise on the facts of this case.