Supreme Court

NYK Bulkship (Atlantic) NV v Cargill International SA

[2016] UKSC 20; [2016] WLR (D) 255

2015 Dec 1; 2016 May 11
Lord Neuberger of Abbotsbury PSC, Lord Mance , Lord Clarke of Stone-cum-Ebony , Lord Sumption , Lord Toulson JJSC

Shipping — Charterparty — Time charter — Construction — Off-hire provision — Charterparty allowing sub-charters but charterers remaining ultimately liable for unloading of vessel at port of discharge — Charterparty stipulating that vessel off-hire if arrested save where arrest occasioned by act, omission or default of charterer or “agent” of charterer — Vessel arrested outside port of discharge as result of dispute between parties to sub-charter — Start of unloading delayed until dispute resolved — Shipowner claiming vessel not off-hire during period of delay as sub-charter parties deemed to be charterers’ agents — Whether sub-charter parties acting as charterers’ agents only during actual performance of discharging — Whether acts of sub-charter parties leading to arrest outside scope of agency — Whether charterers able to rely on off-hire provision

Ships’ names — Global Santosh

Facts

A bulk carrier was time chartered on an amended Asbatime form on terms that, by clause 8, the charterers were to perform all cargo handling, and, by additional clause 49, that the vessel would be off-hire during any period of detention or arrest by any authority or legal process, subject to the proviso that it would not be off-hire if the detention or arrest were “occasioned by any personal act or omission or default of the charterers or their agents.” As expressly permitted to do, the charterers sub-chartered the vessel to sub-charterers by way of a voyage charter for the carriage of a cargo of cement sold by a sub-sub-charterer under a sale contract on C & FFO terms under which the buyer undertook to unload the cargo and to pay demurrage to the sub-sub-charterers for any delay in that unloading. Upon arrival at the discharge port, the vessel was held at anchor for over two months due to congestion, caused in part by the breakdown of the buyer’s offloader, and a dispute arose between the sub-sub-charterer and buyer as to whether demurrage was payable. The former obtained an arrest order on the cargo to secure its demurrage claim, with the order mistakenly also naming the vessel as the object of the arrest, causing further delay until that claim had been settled and the order lifted. The charterers paid hire to the shipowner for the period of delay due to congestion but, in reliance on clause 49, withheld it for the period during which the vessel was under arrest. The shipowner averred that the proviso to that clause applied, and the matter was referred to arbitration. The majority of the arbitral tribunal held that the arrest had not been caused by any act or omission of the charterers themselves, that the sub-sub-charterer had been acting on its own behalf and not as agent, and so the proviso to clause 49 did not apply. It did not consider whether the buyer had been the charterers’ agent. On the shipowner’s appeal under section 69 of the Arbitration Act 1996, the judge agreed that the sub-sub-charterer had not been an agent but held that the buyer, as the party to whom the unloading had been delegated, had been an agent and remitted to the tribunal the question whether its failure to unload within the laydays specified in the sale contract had “occasioned” the arrest. On appeal by the charterers and cross-appeal by the owners, the Court of Appeal, upholding the decision to remit, held that the charterers were responsible for, and so had delegated, everything which arose out of their trading arrangements concerning the vessel and that their decision to sub-charter the vessel had in turn provided the occasion for the dispute between the sub-sub-charterer and the buyer, who were accordingly both agents within the meaning of the proviso.

On the charterers’ appeal—

Held

Held, appeal allowed (Lord Clarke of Stone-cum-Ebony JSC dissenting). Where a ship was sub-let under a marine charterparty, with a chain of contracts comprising one or more sub-time charters or voyage charters and/or a bill of lading, the charter operated as a contract under which the rights of the time charter at the head of the chain were made available to, and the obligations of the time charterer vicariously performed by, the parties down the chain. Although each party in the chain, though not strictly speaking the agent of the party above him, would be referred to as such, it did not follow that everything done by that so-called agent was to be attributed to the time charterer, but only such functions as served to discharge the time charterer’s obligations under the charterparty. It was therefore necessary in each case to determine the scope of the agency by asking to what acts or omissions it extended. In circumstances where the charterparty imposed on charterers a requirement to perform whatever cargo handling occurred, but not any obligation as to the timing of such handling, any acts or omissions in the actual discharge of the cargo by a party acting under a sub-charter or contract thereunder would be a vicarious exercise of the charterer’s obligation under the charterparty within the scope of the agency, whereas any acts or omissions relating to a failure to unload the cargo at or within a particular time would not. Since the charterers were only liable under the proviso to clause 49 for any acts or omissions of other parties in the actual performance of cargo handling operations, whereas the acts of the sub-sub-charterer and buyer in the course of their dispute which occasioned the arrest of the vessel had not been carried out in vicarious performance of any obligation of the charterers and so were outside the ambit of the proviso, the award of the majority of the arbitral tribunal would be restored (post, paras 14, 19, 22, 26–28, 30).

Cases Considered

Hyundai Merchant Marine Co Ltd v Furnace Withy (Australia) Pty (The Doric Pride) [2006] 2 All ER (Comm) 188, CA distinguished.

Appellate History

Decision of the Court of Appeal [2014] EWCA Civ 403; [2014] 2 Lloyd’s Rep 103 reversed.

Appearances

Simon Rainey QC and Daniel Bovensiepen (instructed by Holman Fenwick Willan LLP) for the charterers.

Timothy Young QC and Belinda McRae (instructed by Skinitis Maritime Law Firm) for the shipowner.

Reported by: Colin Beresford Barrister

© 2016. The Incorporated Council of Law Reporting for England and Wales.