Action Navigation Inc v Bottiglieri Navigation Spa

An implied indemnity in a time charterparty protects owners against loss caused by compliance with charterers’ lawful employment orders only to the extent that the loss falls within the risks the parties allocated to the charterers. The question is determined by construing the charterparty against its commercial and factual background when made. Foreseeability is not conclusive, but a risk foreseen and foreseeable by both parties may be treated as one accepted by the owners. Ordinary expenses and risks of trading are generally outside the indemnity. Separately, where an award is reasonably understood as applying an owners’ matters or deviation provision, an appeal limited to construction of the off-hire clause cannot succeed.

The owners appealed under the Arbitration Act 1996 from three related arbitration awards arising out of successive time charterparties. The vessel had been ordered to Visakhapatnam, where it remained for about 22 days and suffered marine fouling. The arbitrators rejected the owners’ claims for the cost of cleaning the hull and for hire during the cleaning period.

The appeal concerned whether the cleaning costs fell within an implied indemnity arising from the charterers’ lawful employment order, and whether the vessel was off-hire under clause 15 of the charterparty while cleaning was carried out at Portland.

1. Appeal dismissed. The owners were not entitled to recover the cost of de-fouling under the implied indemnity, and the challenge concerning clause 15 failed.
2. The parties agreed that the charterparty contained an implied indemnity against the consequences of complying with lawful employment orders. Its scope was a matter of construction, assessed at the date of contracting and against the charterparty’s factual and commercial background. There also had to be a direct causal link between the order and the loss or expense.
3. Following the approach in The “Island Archon” [1994] 2 Lloyd’s Rep 227, the relevant question was whether the owners had agreed to bear the particular risk. Foreseeability was not conclusive, but the arbitrators were entitled to treat hull fouling caused by ordinary inactivity at a warm-water port, and the resulting cleaning expense, as a foreseeable and foreseen risk accepted by the owners. The expense was an ordinary expense of trading and fell outside the indemnity.
4. The arbitrators’ reasons were properly read as deciding that the vessel was off-hire under clause 54, concerning deviation or owners’ matters, rather than clause 15. The reference to the call at Portland being for the owners’ purposes, and the absence of any finding of loss of time in the clause 15 sense, supported that construction.
5. If the arbitrators had intended to decide the issue under clause 15, their conclusion would have conflicted with The “Rijn” [1981] 2 Lloyd’s Rep 267, which treated non-fortuitous marine growth as outside the relevant wording of clause 15. The appeal was limited to clause 15 and therefore could not succeed.

• High Court (Commercial Court): Appeal from arbitration awards dismissed. Permission to appeal had been granted by Langley J.