149. Marbienes Compania Naviera S.A. v Ferrostaal A.G. (The “Democritos”) [1975] 1 Lloyd’s Rep 386; [1976] 2 Lloyd’s Rep 149

Redelivery – contention that the contract was a voyage charter despite being on an NYPE form, rejected

The facts

The vessel was let on the NYPE form for “an about trip via port or ports via the Pacific, duration about 4 to 6 months”.

The vessel was delivered late and in a damaged state. The charterers took delivery of the vessel, relying on an undertaking from the master regarding the minimum loading capacity of the vessel.

The vessel sailed from Durban to Portland without being able to load the promised minimum cargo of steel.

The vessel was required to stop en route at Cape Town for engine repairs.

After discharge at Portland, the vessel sailed to Seattle where it was dry docked for extensive repairs.

Upon completion of the repairs, a cargo was loaded in Seattle and dispatched to Acajutla.

About five months into the charter, the charterers entered into a voyage sub-charter which was reasonably expected to be completed about one month late based on the premise that the term of the charter was six months.

The owners protested and the parties entered into a without prejudice agreement pursuant to which the voyage was completed and was in fact redelivered about one month late.

In the interim the market had risen and the owners claimed damages for the overrun calculated at the market rate.

The charterers attempted to escape liability for the overrun contending that the contract was, in effect, a voyage charter with no fixed term. In consequence they were liable for hire at the charter rate for the period of the overrun.

The owners appointed Cedric Barclay and the charterers appointed Ralph E Kingsley as arbitrators. The arbitrators appointed John P Powell as umpire. The award was stated in the form of a special case.

Findings

The tribunal found that the owners were entitled to damages at the difference between the market rate and the charter rate for the period of the overrun.

Five days were added to accommodate the “about” qualification of the period of the charter. Three days’ hire was deducted for slow steaming from Durban to Portland.

In the Commercial Court, Kerr J rejected the charterers’ contention that this was a voyage charter and upheld the arbitrators’ award on this aspect.

It was accepted by Kerr J that the charterers would be entitled to damages over and above being absolved from the liability to pay hire during the period of off-hire but he found that none had been proved by the charterers.

Kerr J ordered a remittal of the case to the arbitrators to hear further evidence on the point whether the charterers had waived their right to damages for the delivery of the vessel in a damaged condition. Charterers appealed.

In the Court of Appeal (Lord Denning MR, Lawton and Bridge LJJ) the finding on redelivery was confirmed.

The Court of Appeal held that no damages were claimable arising from defective delivery.

Commentary

The findings of Kerr J in regard to the owners’ obligation to deliver the vessel are ambivalent. On the one hand he found that there was no absolute obligation on the owners to deliver the vessel in the condition agreed upon within the laycan period and that the only remedy which the charterers had for the failure in this regard is to cancel. Yet he went on to hold that damages were claimable despite acceptance of the vessel by the charterers in its damaged state but that such claim may have been waived.

Kerr J pointed out that there was no obligation on the owners to extend the period of the charter by the period that the vessel was off-hire in the absence of an express or implied term to this effect in the contract.

Lord Denning MR’s obiter dictum that a charterer cannot be liable for late redelivery on condition that the final voyage orders are legitimate was rejected in the later cases.

Damages are claimable for an overrun even where the final voyage orders are legitimate. The significance of the legitimacy of the final voyage orders is that the owners can refuse to carry out the voyage if it is illegitimate.

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