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

A special off-hire clause in a time charter must be construed by identifying the contractual allocation of responsibility between owners and charterers. The causation inquiry is directed to why the authority detained the vessel, rather than merely to the fact that the detention occurred at, or in connection with, a trading port.

Where detention resulted from the vessel’s status as a first-time caller to the United States, that status was a matter for owners. It was not detention by reason of a port of trading within the proviso to clause 85. The vessel was therefore off-hire.

The disponent owners appealed from a Commercial Court decision that their vessel was off-hire while detained before entering New Orleans. The charterers had ordered the vessel to load there under a single trip time charter.

United States Coastguard authorities had classified the vessel as a High Interest Vessel because it was making its first call at a United States port. It was held at anchorage pending a security inspection. The issue was whether clause 85 made the resulting detention off-hire, or whether its proviso retained hire because the detention was by reason of a port of trading under the charter.

1. The appeal was dismissed unanimously. The vessel was off-hire under the primary part of clause 85. The detention was not within the proviso for detention occasioned by the charterers’ act, cargo, or a calling port of trading.

2. The court accepted that the judge had erred in describing the trip time charter as essentially a voyage charter transaction. A trip time charter remains a time charter. Delay is ordinarily the charterers’ risk unless the plain language of an off-hire clause transfers it. That error did not affect the correct result on clause 85.

3. Clause 85 drew the familiar contractual line between matters concerning the vessel and crew, for which owners were responsible, and matters concerning the charterers’ trading employment of the vessel. Its proviso required a causative connection with the charterers’ side of that line. The question was why the Coastguard exercised its power in this case, not simply whether the governing security regime concerned a port of call.

4. The vessel’s first-time-caller status was a matter of vessel status which owners knew, or were required to know, and for which charterers were not obliged to inquire. It was analogous to the vessel’s need to have appropriate canal documentation. The detention accordingly fell on owners’ side of the contractual allocation, despite its occurrence while the vessel was approaching New Orleans.

5. The court upheld the judge’s conclusion by a different analysis. Hire of US$257,732.77 was not payable for the detention period.

Rix LJ added, obiter, that back-to-back charter provisions would usually be expected to operate consistently, but may allocate a particular risk differently when their contractual contexts differ.

• Court of Appeal (Civil Division): In [2006] EWCA Civ 599, dismissed the owners’ appeal and upheld the conclusion that the vessel was off-hire, although by different reasoning.

• Commercial Court: Mr Michael Crane QC, sitting as a deputy High Court judge, held that the vessel was off-hire under clause 85. No citation for that decision is stated in the judgment.