Ts Lines Ltd. v Delphis NV

Under an off-hire clause, a vessel is efficient only if it is able to perform the service required by the charterers at the relevant time. Travelling in the general direction of the required destination is insufficient where the vessel is operating under instructions to proceed elsewhere and cannot perform the contracted cargo operation. The court should examine the vessel’s actual instructions and the commercial purpose of the charterparty, rather than rely on a purely geographical concept such as a common route. A vessel which was diverted to a repair yard from the beginning of the relevant voyage therefore remained off-hire throughout, even while its route temporarily coincided with the route to the intended port.

The claimant appealed under section 69 of the Arbitration Act 1996 against a consolidated declaratory award concerning two identical NYPE 93 time charters. The vessel suffered substantial damage after anchoring near Yokohama and was directed by Class to proceed to Hong Kong to discharge its cargo before going to a repair yard. The arbitrators held that the vessel was temporarily on-hire while travelling along a route which coincided with the route to Shanghai, the next intended cargo port.

The issue was whether that period interrupted the 20-day consecutive off-hire period required for cancellation under clause 81, having regard to the construction of clause 57.

1. The appeal was allowed. The arbitrators had erred in law in treating the vessel as efficient, and therefore on-hire, during the period when it travelled from Yokohama towards Hong Kong along a route which coincided with the route to Shanghai.

2. The governing question under clause 57 was whether the vessel was in an efficient state to perform the service required by the charterers. The authorities, including Hogarth v Miller [1891] AC 48, established that efficiency was assessed by reference to the particular employment and service required at the relevant time.

3. The vessel was not performing that service. From the beginning of the voyage it was proceeding under Class’s instructions to Hong Kong and the repair yard, rather than to Shanghai to discharge and load cargo in accordance with the charterers’ orders. Its temporary geographical coincidence with the Shanghai route did not make it efficient for the charterers’ purposes.

4. The commercial purpose of the charterparty was better served by examining the vessel’s instructions and intended service than by asking whether it was travelling on a common route. A common-route test would not necessarily produce certainty and could make a vessel on-hire for an inconsequential distance despite its known inability to perform the charterers’ instructions.

5. The charterers bore the burden of bringing themselves within the beneficial off-hire provision, and the court remained slow to interfere with experienced arbitrators. Those principles did not justify upholding an error of law.

6. The court observed that the result might have differed if the vessel had begun the voyage in compliance with the charterers’ instructions and its destination had been changed only later. Here, however, the non-compliant route was intended from the outset.

7. The vessel remained off-hire throughout the relevant period. The appeal was accordingly allowed.

• High Court (Commercial Court): appeal under section 69 of the Arbitration Act 1996 allowed against the consolidated arbitration award.
• Arbitration: the arbitrators held that the vessel was on-hire during the period when its route coincided with the route to Shanghai.