Pentonville Shipping Ltd. v Transfield Shipping Inc (MV Johnny K)

Where a charterer has duties to provide and load a full cargo, liability for deadfreight or related loss depends on causation and contractual attribution. A failure to load at the required rate does not necessarily cause the shortfall if an independent order prevents completion of loading. The court must determine whether that order is, as between the contracting parties, attributable to the charterer or for which the charterer is responsible. An order issued by a port authority is not automatically outside the charterer’s responsibility. If the charterer’s conduct or an associated shipper prevents the owner from making the vessel available to receive the cargo, the charterer cannot rely on that prevention to defeat the claim.

The owners appealed under section 69 of the Arbitration Act 1996 against an award rejecting their claim for deadfreight and damages. The vessel had been nominated to load 172,700 tonnes of iron ore at Port Hedland, but sailed with 156,855 tonnes after an instruction to vacate the berth or sail. The arbitrators found that a full cargo was available and could have been loaded, but concluded that the loss was caused by an order of the terminal or port authorities and was not attributable to the charterers.

The central issues were whether the principles in Aktieselskabet Reidar v Arcos Ltd required the claim to succeed, and whether the arbitrators had correctly determined whether the order to sail was attributable to the charterers.

The appeal was allowed to the extent that the relevant part of the award was remitted to the arbitrators for reconsideration under section 69(7)(c) of the Arbitration Act 1996. The arbitrators were permitted to reach the same ultimate conclusion after reconsideration.

1. Causation and Reidar v Arcos. The decision in Aktieselskabet Reidar v Arcos Ltd was not determinative. That case concerned circumstances in which the vessel could not lawfully carry the full cargo later in the season and waiting would have frustrated the charterparty. Here, the vessel could have loaded the nominated cargo by remaining at the berth for about three weeks, and there was no finding that doing so would frustrate the charterparty. The charterers’ failure to load at the required rate therefore had not been found to cause the relevant loss.
2. Contractual prevention. The charterers had duties both to provide and load the nominated cargo. Those duties were complemented by the owners’ duty to make the vessel available to receive it. If the order to leave was attributable to the charterers, they had prevented performance of the owners’ obligation and could not rely on that prevention to defeat a claim for deadfreight or damages.
3. Attribution of the order. The critical question was whether the order to sail was one for which the charterers were responsible as between the parties. The arbitrators’ references to the terminal, port authorities and the shippers were unclear and did not establish who gave the order or why. The fact that a port authority issued an order was not conclusive. The order might have been inspired by the shippers, and an order from the terminal operated by the shippers would be attributable to the charterers.
4. The arbitrators may not have addressed the attribution question, or may not have applied the correct considerations identified in Cosmar Compania Naviera S.A. v Total Transport Corp., Mediolanum Shipping Co. v Japan Lines Ltd and Newa Line v Erechthion Shipping Co. S.A.

• High Court (Commercial Court): The owners appealed under section 69 of the Arbitration Act 1996. The relevant part of the arbitrators’ award was remitted for reconsideration.