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Withdrawal – interpretation of off-hire clause – payment suspended during off-hire period and therefore owners not entitled to withdraw

The facts

The vessel was let on the NYPE form for 36/40 months at the charterers’ option.

Clause 15 read as follows:

“15. That in the event of loss of time from deficiency of men or stores, fire, breakdown or damages to hull, machinery or equipment….. the payment of hire shall cease for the time thereby lost…..”

The charter provided for an escalation in hire on the annual anniversary of the contract at which time the vessel was off-hire due to drydocking in Palermo.

In spite of their view that hire was not payable, the charterers instructed monthly payment to the owners’ Swiss bank account making a deduction for the off-hire period on the owners’ best estimate of the off-hire period.

The charterers neglected to calculate the hire due on the new rate applicable.

By an administrative error, payment was made one day late.

The charter contained an anti-technicality clause requiring three days’ notice to purge any default. On the due date, being a Friday, the owners gave notice in terms of the anti-technicality clause after banking hours at approximately 8pm.

On the Monday, the charterers noticed that they had not taken account of the escalation in hire and gave immediate instructions for payment of the balance.

On the same day, the owners instructed their bank to return both payments without giving reasons. They viewed the deduction for time (four days) while the vessel remained in dry docks as impermissible. After the expiry of the three day notice period, the owners withdrew their vessel.

The owners offered to allow the vessel to remain in the charterers’ service on an increase of hire to the then current market rate which was substantially higher than the charter rate. Over the period of the charter this amounted to $2.1000 000.00.

The charterers obtained an ex parte injunction restraining the owners from withdrawing the vessel pending arbitration and the vessel thereafter remained in the service of the charterers until the completion of the charter.

The parties agreed to refer the matter directly to the Commercial Court.


The determinative issue was that of the interpretation of clause 15. Bingham J held that the clause meant that the charterers were not obliged to make payment while the vessel was off-hire.

In case he was wrong, he decided other points the most significant of which were:

1. Charterers were not entitled to rely on their payment being in good faith if it was short.

2. On the authority of the Afovos, that the charterers had until midnight on the due date to pay.

3. That it was unconscionable for the owners to deliberately withhold their view that underpayment had taken place without communicating this to the charterers.

4. That forfeiture on equitable principles did not apply.


Expert evidence was allowed on the trade practice in making a deduction for anticipated off-hire. Reference was made to the 1977  Tropwood case where evidence was accepted that miscellaneous expenses such as insurance premiums were topped up in arrears.

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Charter Party Casebook