Borgship Tankers Inc. v Product Transport Corporation Ltd.

A clause in the Shelltime 4 form making cargo claims subject to the Hague-Visby Rules applies to claims sufficiently connected with cargo and measured by reference to the cargo. It covers the type of claim normally brought by cargo interests, including certain financial losses. It does not generally apply to a charterer’s claim for loss of use of the vessel, where the loss is measured by lost employment or freight under a sub-charter rather than by reference to the cargo itself. The clause must be construed in the context of the charter-party as a whole. Commercial certainty also supports following an established Commercial Court construction of a standard-form charter-party.

The claimant charterers brought arbitration claims arising from the cancellation of a sub-charter after the vessel was allegedly unsuitable to load gasoline. The principal claim was for lost net freight, with an additional claim for wasted bunkers. The respondent owners contended that those claims were subject to the one-year time bar in Article III rule 6 of the Hague-Visby Rules, as incorporated through clause 27(c)(ii) of the Shelltime 4 charter-party.

The preliminary issue was whether the claims were cargo claims within clause 27(c)(ii) and were therefore time-barred. A contingent application under section 12 of the Arbitration Act 1996 would arise only if the claims were time-barred.

1. The claims were not time-barred. The claimant’s pleaded case was taken at face value for the preliminary issue. Its principal loss was loss of use of the vessel and lost employment under the sub-charter, not loss of, damage to, or financial loss measured by reference to the cargo.
2. Clause 27(c)(ii) had to be construed by applying modern principles of commercial construction and considering the charter-party as a whole. The clause was not an incorporation by general words of the Hague-Visby Rules, as in The Marinor [1996] 1 Lloyd’s Rep 301. It used specific wording directed to cargo claims in the marine-market sense.
3. The court followed and applied the construction adopted by Evans J in The Stena Pacifica [1990] 2 Lloyd’s Rep 234. Clause 27(c)(ii) covers claims of the kind normally brought by cargo interests, including appropriate claims for financial loss connected with the goods. It may also apply where the alleged breach corresponds with, or is co-extensive with, an obligation under the Rules. It does not apply to an independent charter-party obligation merely because the loss has some connection with a particular intended cargo.
4. The court accepted that the clause did not apply to claims for loss of use of the vessel. The fact that the vessel was intended to carry an identified cargo did not convert the claim for lost freight into a cargo claim.
5. There was a strong reason for commercial certainty. Even if the court had reached a different construction, it would have been doubtful whether it should depart from the established construction of a standard-form charter-party in The Stena Pacifica, which had stood for 15 years. The principle stated in Dunlop and Sons v Balfour W. Williamson [1892] 1 QB 507 supported that approach.
6. The contingent section 12 issue did not arise. The court observed, without deciding the point, that a later appellate change to the established construction of a standard-form clause might support an argument under section 12(3)(a) of the Arbitration Act 1996.