Hyundai Merchant Marine Co. Ltd. v Furness Withy (Australia) Pty

For the purposes of an off-hire clause, a vessel may be detained where a physical or geographical constraint prevents her performing the service required by the charter. It is immaterial that she could leave or proceed elsewhere. Once detention begins under a clause suspending hire until release, the court need not calculate the net delay by asking what progress would otherwise have been made.

Where the charter-party expressly allocates the risk of detention to owners, an implied indemnity arising from charterers’ employment orders cannot reverse that allocation. In a single-trip time charter, general risks associated with an agreed range of ports are ordinarily risks accepted by owners. A proviso concerning a nominated port applies only where the detention is shown to result from the nomination of that particular port.

The charterers hired the vessel under a single-trip time charter for a voyage from the US Gulf to South Korea. New Orleans was nominated as the loading port. Before entering the Mississippi, the United States Coast Guard designated the vessel a High Interest Vessel and ordered her to await a security inspection. She remained at designated waiting locations until inspection was completed.

The charterers claimed that hire was suspended under clause 85, which applied where the vessel was captured, seized, detained or arrested. The owners argued that the vessel was free to leave, that the river closure caused any effective delay, and that the clause’s proviso or an implied indemnity made the charterers liable. The issues were whether there was detention, whether the proviso applied, and whether the owners could recover the hire by indemnity.

1. Detention. The vessel was detained within clause 85. A vessel is detained where a physical or geographical constraint prevents her proceeding with the service required under the charter-party. Freedom to turn back or sail elsewhere does not prevent detention. The US Coast Guard order kept the vessel from proceeding to New Orleans, directed her to specified waiting locations and kept her waiting for inspection. The reasoning in The Mareva A/S [1977] 1 Lloyd’s Rep. 368 and The Jalagouri [1999] 1 Lloyd’s Rep. 903; [2000] 1 Lloyd’s Rep. 515 applied.
2. Duration. Clause 85 was a period off-hire clause, not a net-loss-of-time clause. Once detention commenced, hire was suspended until release. The possible effect of the Mississippi closure on the vessel’s hypothetical progress was therefore irrelevant.
3. Proviso and burden. The charterers had to show circumstances falling within the off-hire exception. The owners then bore the burden of proving that a proviso applied. The rule that hire remains payable unless charterers clearly establish an exception was recognised in Royal Greek Government v Minister of Transport [1948/9] Lloyd’s Rep. 196. The court treated contra proferentem as a last-resort default rule and construed the clause without relying on it.
4. Causation. The risk of Coast Guard inspection was general to US Gulf ports and was not shown to result from the nomination of New Orleans rather than another Gulf port. The proviso therefore did not apply. The reasoning in The Berge Sund [1993] 2 Lloyd’s Rep. 453 was followed as to the approach to the proviso.
5. Implied indemnity. Although an indemnity will ordinarily be implied in a typical time charter for losses caused by complying with charterers’ orders, it does not cover risks which owners agreed to run and cannot contradict an express allocation of risk. The principle confirmed in The Island Archon [1994] 2 Lloyd’s Rep. 227 did not assist the owners.

The charterers were entitled to a declaration that the vessel was off-hire from 09.20 on 20 February 2004 until 12.45 on 26 February 2004, and to payment from the escrow account of US$257,732.77 plus accrued interest.