Cosco Bulk Carrier Co Ltd & Anor v M/V "Saldanha" C/P dated 25/06/08

Under a time charterparty, hire remains payable unless charterers clearly bring the loss of time within an off-hire exception. Ambiguity is resolved in favour of owners and the contractual allocation of delay risk is decisive.

In the standard wording considered, “average accident” required an accident causing damage to the ship or cargo. Seizure by pirates was neither an accident nor an average accident. “Default of men” concerned refusal by officers or crew to perform duties, not negligent or inadvertent performance. The words “any other cause”, without “whatsoever”, were limited by the general context of the clause and did not cover piracy as a wholly extraneous cause.

Charterers appealed from a unanimous arbitral award on preliminary issues concerning hire under a time charterparty. Somali pirates seized the vessel, causing loss of time and preventing its full working. Charterers withheld hire and relied on three off-hire causes in clause 15: detention by average accidents to ship or cargo, default and/or deficiency of men, and any other cause.

The tribunal rejected each contention. The central issue was whether seizure by pirates, or its effects on the vessel and crew, fell within any of those expressions.

1. General approach. Hire under a time charterparty is payable continuously unless charterers clearly establish an applicable exception. Doubt in the meaning of an exception is resolved in favour of owners. The contractual allocation of delay risk, rather than general fairness, governs.
2. Average accident. The expression “average accident” required an accident causing damage to the ship or cargo. The seizure was a deliberate attack and could not naturally be described as an accident. “Average” in this context referred to damage short of total loss, or at least to an accident causing damage associated with a marine peril. The presumption against surplusage did not justify a different construction.
3. Default of men. Although “default” could naturally include negligent performance, the clause’s history and wording, including the reference to strikes, supported a narrower meaning. It covered refusal by officers or crew to perform duties, distinct from an individual transient act of negligence. The assumed failure to take anti-piracy precautions therefore did not qualify.
4. Any other cause. The absence of “whatsoever” was significant. The words were limited by the general context of the clause and related to the physical condition or efficiency of the vessel, crew or cargo. Piracy was a classic wholly extraneous cause and remained outside the provision, whether the focus was piracy itself or its effects.
5. Clause 40, dealing expressly with seizure, did not cover seizure by pirates. That omission could not justify distorting clause 15. Parties wishing to cover piracy could do so expressly, or potentially use “any other cause whatsoever”, though the latter observation depended on persuasive obiter dicta. The appeal from the tribunal’s award was dismissed. Costs were left for further consideration.

• Arbitration tribunal: By a unanimous award on preliminary issues dated 8 September 2009, the tribunal held that the vessel was not off-hire under clause 15, clause 39, or the war risk and insurance provisions. Only the clause 15 determination was appealed.
• High Court (Commercial Court): The appeal was dismissed. The tribunal’s reasoning on clause 15 was upheld.