157. Torvald Klaveness A/S v Arni Maritime Corporation (The “Gregos”) [1992] 2 Lloyd’s Rep 40; [1993] 2 Lloyd’s Rep 335; [1995] 1 Lloyd’s Rep 1

Redelivery – time for determining legitimacy of orders for final voyage

The facts

The vessel was instructed to load a cargo of iron ore for delivery at Fos in Italy at a time when it could reasonably be expected that the cargo would be discharged at Fos and redelivered off Gibraltar before the expiry of the charter.

After the instruction had been given a vessel grounded in the Orinoco obstructing the passage of the vessel in question and making the time table unworkable. The owners were unwilling to proceed with the final voyage but did so under protest, the parties having entered into a without prejudice agreement.

The vessel was delivered eight days late for which the owners claimed damages.

Two questions arose for decision before the arbitrator:

a. the timing of the assessment of legitimacy of the final voyage; and

b. whether the instruction to carry out an illegitimate voyage was tantamount to repudiation entitling the owners to cancel.

Findings

Evans J in the Commercial Court found that the time for deciding whether the owner is bound to perform the order or not is when the time for performance arrives. He qualified this finding by stating that where an advance order was given by the charterers, the owners might accept in circumstances in which it would not be possible for them later to withdraw.

He rejected the charterers’ contention that where the overrun is expected to be commercially insignificant, the instruction for the final voyage cannot be equated with repudiatory breach.

In the Court of Appeal (Russell, Hirst and Simon Brown LJJ – main judgement given by Hirst LJ) the charterers’ contentions found favour and their appeal was upheld on both points. The reasoning of the Court of Appeal was that commercial certainty dictated that the time at which the order for the last voyage was given should be determinative. Secondly, the Court of Appeal held that the order for an illegitimate last voyage was not repudiatory because the owners could simply refuse to carry out the voyage.

The House of Lords (Lords Templeman, Ackner, Mustill, Slynn of Hadley and Woolf – main speech given by Lord Mustill) restored the finding of the Commercial Court.

Commentary

Lord Mustill found that the Democritos was not authority for the result in this case. The attractive and simple reasoning which he employed was that an advance order by the charterers is always provisional in that the primary obligation of the owners is to make the vessel available for only a finite period.

Regarding the second question of repudiatory breach, it must be remembered that the NYPE form contains a provision that the master is obliged to employ the vessel under the directions of the charterers. As such, an order for an illegitimate voyage is always a serious breach. The very terms of the contract do not allow the owners to simply ignore the charterers’ orders.

Lord Mustill distinguished between the giving of an illegitimate order and the insistence upon such order in the face of an objection from the owners. He held that it was the latter aspect which constituted repudiatory breach. The owners are not entitled to snatch at an opportunity to cancel given by an ill advised order.

The facts of this case provide a good illustration of the problems of presentiation. An ongoing relationship extending over a significant period of time is governed by a set of rules drawn up at the inception of the period. By the very nature of the process, there is a tension between what is anticipated when the contract is signed and the adventitious events which occur as the relationship develops.

Lord Mustill’s approach is consistent with that of Saville J in the Peonia: arguments of commercial convenience must always yield to the wording of the contract itself.

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