November 6, 2018

The Obligation to Proceed with Utmost Despatch - Shoring up early principles

CSSA Chartering and Shipping Services SA v Mitsui O.S.K Lines Ltd - "PACIFIC VOYAGER"

For some time the question of whether the Monroe v Ryan [1935] 2 KB 28 authorities apply when there is neither a loadport Expected Ready to Load Date ("ERTL"), nor Estimated Time of Arrival date ("ETA"), has been open. The question of course touches upon the allocation of risk before a vessel enters into its chartered service, particularly where Owners have agreed to take on, or are already engaged in, a preceding fixture.

The Court of Appeal has affirmed that the duty arises even without the ETRL/ETA, and the Parties should look to the full terms of the Charter to determine what the reasonable expectations for the time of commencing the approach voyage is. Here, that involved considering the itinerary stated, assessing a reasonable time for discharge at the discharge port of the preceding voyage and thereby finding the date when "reasonably" the Owner should commence the approach voyage.

Background

The "PACIFIC VOYAGER" was chartered for a voyage from Rotterdam, or ship to ship transfers off Rotterdam, to the Far East. At the time of the fixture, the vessel was carrying cargo under a previous charter. On her way to discharge this cargo, she hit a submerged object in the Suez Canal and suffered rapid water ingress into a ballast tank. There was no suggestion that the vessel or the Owner was in any way at fault or could have avoided this incident.

The vessel required significant repairs, which Owners anticipated would take in the order of "months". Charterers terminated the Charterparty and claimed damages accordingly. The issue in the proceedings was whether, in these circumstances, the Owners' failure to commence the approach voyage by a specific date was a breach of the Charterparty.

The Charterparty in question provided that "…the vessel shall perform her service with utmost despatch and shall proceed to [loadport]…and there…load a full cargo".

It is established law that, where a voyage charterparty contains this type of provision (occasionally framed in terms of proceeding 'with all convenient speed'), 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 ETRL or the ETA. The usual charterparty exceptions thus only apply once the approach voyage is commenced and cannot avail an Owner prior to this point.

The fundamental principles underlying this body of case law originated with the case of Monroe Brothers Limited v Ryan [1935] 2 KB 28 and these have been consistently upheld and elaborated upon ever since.

However, until now, it has been unclear as to whether a similar obligation arises where there is no provision as to ETRL or ETA at the loading port. The question raised in the "PACIFIC VOYAGER"' case is whether, in the absence of an ETA or ETRL at the loading port, the obligation to proceed could attach by reference to either (i) an itinerary contained in the charterparty which provided an ETA at the last discharge port under the previous charter; or (ii) the cancelling date.

First instance decision: duty held to arise within a reasonable period of time

At first instance in the High Court, Popplewell J found that the duty to proceed to loadport arises at a particular point of time, which is within a reasonable period of time, to be determined as a matter of construction of the charterparty terms. Taking this as a starting point, Popplewell J found that on the particular wording of the charter, the ETA which provided for the vessel's final discharge at Antifer under the previous charter could be used to derive the time at which the vessel could be expected to commence her approach voyage (namely, following anticipated discharge at Antifer). As Owners did not commence the voyage on or around that date, they were in breach and the Charterers were entitled to damages accordingly.

Popplewell J noted, obiter, that if there had been no ETA for the previous port, Owners would have been obliged to commence the approach voyage by a date when it was reasonably certain that the vessel would arrive at the loading port by the cancelling date.

Court of Appeal decision: no magic in ETRLs

In challenging the first instance decision, Owners alleged that the obligation to proceed only attached when the vessel departed from her last discharging port under her previous charter. As the vessel never departed from the last discharging port, the obligation did not arise.

Owners sought to distinguish the previous authorities as being decisions which turned upon each charterparty's own wording. In the charterparty in question, Owners maintained that there were three key differences to the previous authorities: (i) there was no ETA or ETRL, but instead the relevant Part 1(B) of Shellvoy 5 stated an itinerary in respect of the prior fixture, (ii) the ETA which related to the discharge at Antifer under the previous charter was expressly qualified by the wording "bss iagw/wp", and (iii) the obligation of utmost despatch was expressly made '"subject to the terms of this charter".

The Court of Appeal unanimously upheld Popplewell J's decision at first instance.

Longmore LJ acknowledged that every charterparty must be construed on its own terms, but noted that the shipping world required authoritative guidance in the interests of business certainty. As such, the general principles of policy which underpin the previous decisions (such as Monroe vs Ryan) should be regarded as "helpful guides" against which the contractual terms ought to be construed.

It was noted that the obligation of utmost despatch was an important one and was intended to give comfort to charterers. Such an obligation would be meaningless if some time for sailing was not put in. This meant that the vessel must either proceed "forthwith" at the date of the charter or "within a reasonable time". In this instance, the inclusion of the itinerary in the form of ETAs from the previous charter meant that "forthwith" could not have been meant. Instead, one had to look at the terms of the charterparty to ascertain what a reasonable time would be. Whilst in some charters this could be ascertained by reference to the ETRL, Longmore LJ held that "there is no particular magic in the concept of a date of expected readiness to load" and that this was simply a guide to working out what a reasonable time would be. In this case, the itinerary was the best guide.  

In other words, the general principle remains the same, irrespective of whether the charterparty contains an ETRL, ETA or other provision: the duty arises either 'forthwith' or within a "reasonable period" of the date of the charter. If a charter contains an ETA/ETRL for the loadport, then a 'reasonable period' will be the date the vessel must leave to allow her to arrive at the loading port on or around the ETRL or ETA. If a charter contains an ETA for the previous discharge port or an itinerary for the previous charter (as was the case for the "PACIFIC VOYAGER"), the reasonable time would be such time as it is reasonable to suppose the vessel would leave for the loadport once a reasonable time for discharging had elapsed at the previous port.

Longmore LJ echoed the observations of Devlin J in the North Anglia [1956] 2 Lloyd's Rep 449 in holding that Owners would have had to have used very clear words if they had sought to make the beginning of the chartered service contingent on the conclusion of the previous voyage.

In finally disposing of Owners' case, Longmore LJ noted that the rubric "bss iagw/wp" merely served to underscore what was already implicit in the estimates given in the itinerary, namely that they were estimates given honestly and on reasonable grounds.  Similarly, Owners could derive no assistance from the words "subject to the provisions of this charter", as these words did not add anything of significance to the normal rules of construction. In any event, it had been accepted by Owners that the exceptions could not apply to events which occurred before the chartered service, particularly in this instance where the vessel was performing obligations under a previous charter which Charterers had no control over.

In contrast to Popplewell J's decision,  Longmore LJ shied away from expressly stating that the cancelling date in this charter could also have sufficed for the purposes of ascertaining the moment the obligation attaches. He noted that if, for any reason, it were impermissible to rely on the itinerary for the previous charter, he would have difficulty in saying that the cancellation date would do instead. In order to decide this point, it would be necessary for the Court to know why it was that the itinerary could not be relied on and, if it were because there was no ETA Rotterdam, that might apply equally to any argument about the cancelling date. If there were no itinerary, however, the position might be different.

In so saying, it is likely that the Lord Justice had in mind the Owners' qualification argument; namely, if it were found that the qualification to the ETAs ('iagw/wp') meant that there was no effective ETA in Rotterdam, then that reasoning might apply equally to any other means of defining  the relevant date. Were there no qualified itinerary, that problem might not arise and the laycan may still constitute good evidence.

Guidance for Charterers

It should be noted that Owners have expressly reserved their rights to appeal the decision to the Supreme Court. If they do so, and permission were granted, it appears likely that they will seek to overturn the Monroe v Ryan doctrine in its entirety.

In light of this, combined with Longmore LJ's reluctance to confirm that the cancelling date would suffice for the purposes of calculating the date upon which the duty attaches, Charterers should continue to ensure that ETAs or ETRL dates are provided in all charterparties as best practice.