Hyundai Merchant Marine Co Ltd v Daelim Corporation

Where a charterparty warrants consumption as “about” a stated figure, the warranted performance is a range. Underperformance is assessed against the upper limit, while overperformance requires consumption below the lower limit. The parties may therefore use different figures for those purposes.

A contractual credit for overperformance must be construed in the context of the clause providing for the relevant calculation. Where that clause refers back to annual calculations under the charterparty’s performance provision, an overperformance in one annual period cannot be carried forward to offset underperformance in a later period.

The claimant charterers sought declarations concerning the construction of clause 24 of the Shelltime 3 form, as amended, and additional clause 42. The charterparty warranted maximum fuel-oil consumption of “about 40 mt” per day and provided that overperformance would be credited against underperformance.

The first question was whether overperformance was measured against 42 mt, the upper limit of the agreed range, or 38 mt, the lower limit. The second question was whether any unused credit from the first year could be carried forward against underperformance in the second year. The proceedings followed an earlier preliminary ruling by Flaux J on a separate speed and consumption issue in [2011] EWHC 3108 (Comm).

1. Construction of “overperformance”. The court held that “about 40 mt” meant an agreed range of 38–42 mt per day. Performance below 38 mt was better than warranted and constituted overperformance. Consumption between 38 and 42 mt constituted performance in accordance with the warranty, not overperformance.
2. Clause 42 overrode the provisions in clause 24 imposing increased hire for overperformance, but preserved a credit for overperformance against underperformance. That credit had to be measured by reference to the warranted range. It was therefore coherent to assess underperformance against 42 mt and overperformance against 38 mt.
3. The authorities relied on by the owners, the Larissa [1983] 2 Lloyd’s Rep. 325 and the Evanthia [1985] 2 Lloyd’s Rep. 154, concerned different issues and provided no significant assistance.
4. Annual calculation. Although the second issue did not strictly arise, the court held that clause 42’s reference to “calculation” referred to the annual calculation contemplated by clause 24. An overperformance in one year could not be carried forward to offset underperformance in a later year.
5. The answer to the first issue was 38 mt. The answer to the second issue was no.

The judgment followed an earlier Commercial Court judgment by Flaux J on a separate preliminary issue in the same proceedings, reported at [2011] EWHC 3108 (Comm). No appeal was determined in this judgment.