128. Western Bulk Carriers K/S v Li Hai Maritime Inc (The “Li Hai”) [2005] 2 Lloyd’s Rep 389

Withdrawal – garbled notice of withdrawal ineffective – owners liable for damages

The facts

The vessel was let on the NYPE form.

The charter had been renewed by the parties for four consecutive years.

During the course of the charter, numerous disputes arose regarding deductions made by the charterers, with frequent threats of withdrawal.

On the forty fifth payment of hire, the charterers made two deductions:

1. for a cancellation fee incurred by them in respect of an order for bunkers;
2. 7 days’ off hire in anticipation of dry-docking.

The charterers included an advance payment for victualling and cables in the sum remitted.

The owners disputed the validity of the deductions and after an exchange of correspondence, provided the following notice, purportedly in terms of the anti-technicality clause:

“Please be advised that the charterers in breach of clause 5 of the charter-party dated 27 September 2002. Owners hereby give seventy two hours notice that owners will withdraw the vessel from the service of the charterers without prejudice to any claims that owners may otherwise have upon the charterers.”

As clause 5 referred to payments of hire, the charterers presumed that the owners notice was directed at the deduction for off-hire which the charterers thereupon remitted.

At the expiry of the seventy two hours provided for in the notice, the owners withdrew the vessel.

Findings

Hirst QC, Deputy Judge in the Commercial Court held that to be effective, a notice of withdrawal is required to be clear and unequivocal in its terms, which this notice was not. The owners’ withdrawal was therefore unlawful.

In addition, he held that the terms of the notice misled the charterers to believe that the only deduction on which they were being challenged was the deduction for off-hire and the owners were therefore estopped from relying on the failure to make good the cancellation fee incorrectly deducted by the charterers.

In the course of his judgement, Hirst QC found in favour of the owners on the following points:

1. because the charterers were responsible for taking on sub-specification bunkers, they were not entitled to a cancellation fee which was caused by the owners requirement of tank cleaning;

2. distinguishing the Lutetian which contained a special clause suspending payment while the vessel was off-hire, he found that the full months’ hire was due and payable by the charterers. It did not avail the charterers that when the vessel was withdrawn it had in fact been off-hire for some time which meant that the charterers were, in effect, in advance with their payments of hire.

3. Despite the sum for victuals and cabling having been paid in advance, the charterers were not entitled to rely on this payment to compensate for the unjustified deduction for the cancellation fee.

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