Premature delivery

Premature delivery
Chia May Navigation Corp v Seatrek Ltd

THIS arbitration was started by Chia May Navigation Corp, as owner of the Chia May, to recover from the charterer damages arising out of the premature redelivery of the vessel.

Under a NYPE charter dated July 14, 1998, the owner chartered the Chia May to Seatrek for a period of "...minimum three months, maximum five months time charter..." The vessel was delivered on July 23, 1998, and began a voyage from Australia to Iceland under a subcharter.

Clause 4 provided for a charter hire rate of $6,750 per day, and for the vessel to be redelivered within an agreed range of ports. The earliest permissible redelivery date under the charter would have been October 23, three months after delivery. But, in a fax to the owner on September 9, the charterer advised that its planned employment after the Iceland voyage had failed and that it intended to redeliver the vessel on dropping the sea pilot outbound at Straumsvik, Iceland, which was outside the redelivery range.

The charter acknowledged that this premature redelivery was not permitted by the charter terms, and offered to compensate the owner at $1,000 per day up until October 23. Alternatively, it invited the owner to mitigate its damages based on the minimum period of three months and to submit its claim. The owner rejected the monetary offer. At 1300hrs on September 23, the charterer redelivered the vessel off Straumsvik, and did not dispute that the owner was entitled to damages.

To mitigate its damages, the owner fixed the vessel to Chilsan Merchant Marine Co Ltd for a time-chartered trip to the Far East with redelivery passing Skaw, which was within the charter party redelivery range, at a rate of $5,575 per day. The Chilsan delivery took place on September 27. Because the Seatrek charter included the option of redelivery passing Skaw, the owner maintained that the damage calculation was straightforward, amounting to full hire until 0001hrs on September 27, plus the difference between the two hire rates for the period between delivery under the Chilsan charter and 0200hrs on October 23.

The charterer argued that the correct measure of damages should take into consideration the total net hire earned under the Seatrek, Chilsan and post-Chilsan charters over the five months that Seatrek could have controlled the vessel. But the arbitration panel found this argument seriously flawed, because "calculations of this nature generally consider only the minimum charter period and, moreover, in this case, the charterer had specifically acknowledged the owner's entitlement to damages only up to the minimum three-month period of the charter.

The charterer submitted historical evidence to support its argument that the short-term market for similar vessels with delivery in Europe ranged between $6,250 and $7,650 per day. But the panel noted that the fixtures reported at these rates were for periods of between three and six months, or for prompt vessels at other delivery points.

Both parties acknowledged that the principle governing damages in cases of wrongful delivery was based on "...difference between the original charter rate and the prevailing market rate for equivalent business at the time of the breach..."

Contrary to the point advanced by the charter, the panel found that the term "equivalent business" did not mean that the owner had to commit its vessel for a three-to-five-month period, but only for its remaining minimum period. Accordingly, it was found that the owner's approach to damages was correct.

In addition, the panel found no reason to criticise the owner's actions following the breach, or its fixture to Chilsan. It was noted, "An owner always strives to make the best of existing market conditions and, provided it acts reasonably, is not required in circumstances such as these to put the best interests of the breaching party above its own. Moreover, the charterer knowingly committed the breach that gave rise to this dispute, and apparently chose not to pursue other short-term business for the same rate considerations that it now criticises the owner."

Lashing and securing
Hapag Lloyd AG v Coveline Inc

THIS arbitration arose out of a voyage undertaken by the Panamanian-flag Caribbean Sun under a New York Produce Exchange form of time charter. The charter called for one voyage from Kingston, Jamaica to west coast South America ports via Cristobal, Panama.

The charterer's cargo consisted of seventy empty containers, 34 of which were stowed on deck. One of the charter party clauses specifically permitted the charterer to engage the master and crew to lash/unlash and secure/unsecure the containers only as charterer's servants and at charterer's risk.

Thirty-four empty containers were loaded on deck by the charterer's Jamaican stevedore and were lashed/secured partly by the Jamaican stevedore and partly by the ship's crew, supervised by the chief mate, pursuant to the charterer's right to use the ship's personnel as its servants for those services. When loading was completed, the chief mate issued a "satisfactory stowage" certificate, whereupon the vessel sailed from Kingston.

About six hours after leaving port, the vessel reportedly took a substantial roll to starboard. Lashings gave way, with the loss overboard of nine containers and their gear, and damage to three other containers. All the affected containers were stowed on deck forward.

The ship's log and master's note of protest described the then-weather as Beaufort force 4/5, with the vessel rolling twenty to forty degrees to port and to starboard in ten-to-fifteen-foot-high heavy easterly swells.

The charterer claimed for depreciated value of the containers lost overboard, and repairs to the three damaged containers, maintaining - among other things - that the chain lashing gear was corroded and wasted, and that the classification records showed the vessel to have been poorly maintained.

The arbitration panel concluded that there was insufficient proof that the chains and other securing devices were defective, adding that "the presence of corrosion on chains does not make them unseaworthy per se."

The panel noted that both the Jamaican stevedore and the ship's crew had participated in the lashing/securing, but that it was unclear which part each played in securing the containers. It was pointed out that if, as was certainly possible, the containers were improperly lashed and/or secured for the stowage plan being used, this would be the responsibility of the charterer by virtue of the acts of its agents/servants.

The panel did not accept that there was any chain failure as a result of rusting, wasting or corrosion, although it was not an impossibility. But in any event the securing personnel, whoever they may have been, had the opportunity and duty to use reasonable care in the selection and use of gear for the lashing work. Failure to do so would be chargeable to the charterer. If, however, any gear was defective but not reasonably discoverable by the personnel using it, it would follow that the vessel would not be unseaworthy for also failing to have discovered such defects.

The question of how to evaluate the significance of the chief mate's satisfactory stowage certificate, said the panel, was "something of a puzzle", by virtue of his acting for the charterer in some activities and for the vessel in others. If the vessel had sustained - and the owner had claimed for - damages arising from faulty lashing/securing, the chief mate's certificate might have precluded an owner recovery. In any event, no such claim was made.

The panel found that the mate's signing of a one-sentence stowage certificate was not a warranty by the vessel owner of safe cargo stowage to the charterer, who remained responsible for cargo stowage. The safe stowage certificate did not, and could not, shift this responsibility to either the owner or the vessel, especially in the face of several charter party clauses stating the opposite.

The panel held that the doctrine of res ipsa loquitur did not apply for a variety of reasons, but particularly since the charterer, as well as the owner, had offered several logical explanations for the occurrence, some of which indicated possible charterer responsibility through acts and/or failure to act by those who performed the stowage on behalf of the charterer.

While the vessel's classification record revealed a somewhat spotty maintenance history, the panel found that none of the comments related to lashing gear or equipment . The panel concluded that the casualty was caused by improper and inadequate lashing/securing of the containers on the forward bays by the charterer's Jamaican stevedore and/or the ship's crew acting as the charterer's servants, and was therefore chargeable to the charterer. The charterer's claim was therefore denied.