Whistler International Ltd v Kawasaki Kisen Kaisha Ltd (The Hill Harmony) (Kawasaki Kisen Kaisha Ltd v Tokai Shipping Co Ltd of Tokyo)

Under a time charter, an obligation to prosecute voyages with the utmost despatch ordinarily requires the master to take the shortest and quickest route. A usual alternative route, or a satisfactory navigational or maritime reason, may justify another course.

The charterer controls the vessel’s commercial employment and may, subject to the charter and overriding safety considerations, direct the ocean route. Navigation concerns seamanship and the safe operation of the vessel. An exception for navigational error does not protect an owner who simply fails to perform the obligation of despatch or to obey a lawful employment order.

The charterers hired the bulk carrier Hill Harmony under a time charter. On two voyages from Vancouver to Japan, the master rejected instructions to follow the shorter great-circle route and instead took a longer southerly route. The resulting delay and additional fuel consumption caused a loss of about US$89,800.

A majority of the arbitrators found that the owners had breached their obligations to prosecute the voyages with the utmost despatch and to follow employment orders. Clarke J reversed their award in the Commercial Court, [1999] QB 72. The Court of Appeal dismissed the charterers’ appeal, [2000] QB 241.

The central issues were whether choice of an ocean route concerned the vessel’s commercial employment or its navigation, and whether the exception for navigational error protected the owners.

1. The appeal was allowed unanimously and the majority award restored. Lord Hobhouse of Woodborough delivered the principal speech. Lord Bingham of Cornhill gave concurring reasons. Lord Nicholls of Birkenhead, Lord Hoffmann and Lord Hope of Craighead agreed with both speeches.

2. Per Lord Bingham and Lord Hobhouse, the obligation to prosecute a voyage with the utmost despatch ordinarily requires use of the shortest and quickest route. That obligation may accommodate a different usual route or a satisfactory navigational or maritime reason. The arbitrators were entitled to find that neither existed. The master’s preference for calmer waters, based on an earlier experience of heavy weather, did not justify the substantial delay.

3. Per Lord Bingham and Lord Hobhouse, the terms “employment” and “navigation” must be understood in their contractual context. Employment concerns the economic use and exploitation of the vessel’s earning capacity. Navigation concerns seamanship, including technical decisions about handling, course-setting, speed and the safe operation of the ship. Subject to the charter and overriding safety considerations, the charterer may direct not only that the ship proceed from one port to another but also which ocean route it should follow.

   The master retains responsibility for making good the selected route, navigating safely and responding to maritime hazards. He may refuse an order which exposes the vessel to a risk that the owner did not agree to bear. In an extreme case, he may be obliged to refuse it. No such risk was established on the arbitrators’ findings.

4. Per Lord Hobhouse, the exception in Article IV rule 2(a) of the amended Hague Rules did not protect the owners. The relevant breach was the failure to perform both aspects of clause 8: utmost despatch and compliance with employment orders. An exception for navigational or managerial error does not excuse a deliberate failure to perform those obligations based on an erroneous view of the contract. Nor did the master’s decision involve seamanship. In addition, the owners failed to prove facts bringing the decision within the exception.

   The orders of Clarke J and the Court of Appeal were displaced. The arbitral award was upheld, and the owners were ordered to pay the charterers’ costs in the House of Lords and the courts below.

1. House of Lords: The charterers’ appeal was allowed unanimously. The orders below were set aside and the arbitral award was upheld: [2000] UKHL 62; [2001] 1 AC 638.
2. Court of Appeal: The charterers’ appeal was dismissed. The court held that selection of the ocean route was a navigational decision for the master: [2000] QB 241.
3. Commercial Court: Clarke J reversed the majority award, holding that the route decision concerned navigation rather than employment: [1999] QB 72.
4. Arbitration: A majority of the arbitrators substantially upheld the charterers’ claims for breach of the utmost-despatch obligation and failure to obey employment orders.