Informative Memo-Marine
On May 7, 2023, the High Court of Justice of England (hereinafter “High Court”) issued a judgment on Case No. CL-2022-000595, between Langlois Ltd. (hereinafter “Langlois”) and Smart Gain Shipping Co. Ltd. (hereinafter “Smart Gain”).
In summary, the central discussion of the present case revolves around whether under Clause 86 of the Charterparty Agreement (Charterparty), Langlois (owner) are entitled to claim the hire rate and related expenses for the time used for cleaning the vessel after redelivery by Smart Gain (charterers), or whether they only entitled to claim damages for breach of the Charterparty.
I. Background
On June 9, 2021, Langlois and Smart Gain entered on the Charterparty for the time charter trip from India to Brazil, for carry up harmless metallurgical coke in bulk, expected to last approximately 40 to 50 days.
According to the provisions of Clause 86 of the Charterparty, it stated the following:
“Clause 86 Hull Fouling
Owners not to be responsible for any decrease in speed/increase in consumption of the Vessel whether permanent or temporary cause [sic] by Charterers staying in ports exceeding 25 days trading in tropical and 30 days if in non-tropical waters. In such a case, underwater cleaning of hull including propeller etc. to be done at first workable opportunity and always at Charterers’ time and expense. After hull cleaning vessel’s performance warranties to be reinstated.”
On June 10, 2021, the vessel was delivered to Smart Gain; however, the cargo was rejected, resulting in the vessel remaining inactive for 42 days. After completing the discharge in Brazil on September 4, 2021, the vessel was redelivered to Langlois without Smart Gain undertaking cleaning of the hull. Subsequently, on September 9, the vessel arrived in Tubarao, where Langlois undertook underwater cleaning of the vessel’s hull and propeller, which took 30 hours between September 9 and 11.
As a result, Langlois claimed an amount of US$ 74,506.70, which led to the initiation of an arbitration process before the London Court of International Arbitration. In the Final Partial Award of October 2022, the Arbitral Tribunal ruled in favor of Langlois, a decision that was appealed by Smart Gain before the High Court.
II. Judicial Process
The High Court held that the Arbitral Tribunal referred to the case of The Nick R [1984] 2 Lloyds LR 186 to conclude that the owners were not required to demonstrate loss of time regardless of whether the cleaning was performed before or after redelivery. In this regard, the Tribunal considered that Clause 86 created a debt claim in relation to the time element, as it imposed on the charterers the obligation to arrange for underwater cleaning at the first workable opportunity, at their own time and expense, even after the final discharge.
On the other hand, the Tribunal referred to London Arbitration 1/19, LMLN, January 17, 2019, in which it was determined that the charterers had the option to redelivery the vessel without cleaning the holds by paying a lump sum and providing for intermediate hold cleaning at the charterers’ time and expense.
Contrarily, in London Arbitration 29/22, LMLN, September 2022, it was ruled that if the charterers were unable to arrange underwater cleaning on completion of the final discharge they had to
arrange it at the nearest convenient port at their time, expense, and risk. Consequently, the owners were entitled to claim damages and not hire fees for the reasonable time taken to inspect and clean the vessel.
In this regard, the High Court held that Clause 86 place an obligation on Smart Gain to pay compensation at the rate of hire for the underwater cleaning of the hull. Thus, if the vessel is returned uncleaned, the cleaning will be at the charterers’ expense, and the owners should clean it before its new employment or postpone a new charter until the vessel is clean to avoid breaching the warranty.
Therefore, the High Court determines that Clause 86 concluded that the cleaning be at the Smart Gain’s time an expense. Therefore, while the vessel can be redelivered unclean, Smart Gain must compensate Langlois at the hire rate for the time when cleaning is undertaken.
Finally, the High Court concludes that there is no reason not to apply the case of The Nick R, which is binding, and for the reasons indicated above, the High Court dismissed Smart Gain’s appeal.
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