NYK Bulkship (Atlantic) N.V. v Cargill International S.A.

Under a time charterparty, hire continues unless the charterer brings the case within the plain words of an off-hire provision. A vessel detained or arrested is prima facie off-hire where the charterparty so provides, but an agreed carve-out may keep hire running where the event was occasioned by the personal act, omission or default of the charterers or their delegates. “Agents” may include sub-charterers, sub-sub-charterers and receivers. The carve-out is not confined to acts performed in carrying out the delegated task, nor does it require correspondence between obligations under different contracts. Where causation has not been decided by the arbitrators, that issue should be remitted to them.

NYK, as owners, chartered the vessel Global Santosh to Cargill under a time charterparty. The vessel was detained following an arrest order obtained in a dispute between parties in the sub-charter and sale-contract chain concerning cargo demurrage. Cargill withheld hire under clause 49.

A majority of the arbitrators held that the vessel was detained and arrested, but that the clause 49 proviso did not apply. On an appeal under the Arbitration Act 1996, Field J held that delegates could be agents for the proviso and that IBG’s defaults occurred in the course of its delegated task, but remitted causation to the arbitrators. Cargill appealed and NYK cross-appealed. The central issues were the scope of the proviso and whether causation should be remitted.

The Court of Appeal dismissed Cargill’s appeal and NYK’s cross-appeal. It upheld Field J’s conclusion that the clause 49 proviso was applicable, although for different reasons, and upheld the remission of causation to the arbitrators.

1. Under a time charterparty, hire continues unless the charterer establishes that the case falls within the plain words of an off-hire clause. Clause 49 made detention or arrest prima facie an off-hire event. The proviso operated as a carve-out, and NYK bore the burden of showing that the event was occasioned by the personal act, omission or default of Cargill or its agents. This approach was consistent with The Doric Pride [2006] EWCA Civ 599.
2. The word “agents” was capable of including delegates. Sub-charterers, sub-sub-charterers and receivers could fall within the proviso, irrespective of the precise contractual relationship in the chain above them. The court declined to read in a requirement that the relevant act or omission occur in the course of performance of the delegated task.
3. Once a party was a delegate for the purposes of the proviso, an act or omission did not need to correspond precisely with an obligation owed by Cargill under the charterparty. The language, structure and commercial context supported a broad allocation of responsibility. The dispute between Transclear and IBG arose on Cargill’s side of the line, whereas matters attributable to the owners or unrelated third parties would remain within the general off-hire scheme. The question whether an entirely extraneous act might fall outside the proviso was left open.
4. The court would not decide whether Transclear’s or IBG’s acts or omissions occasioned the detention or mistaken arrest. The parties were entitled to a decision from the arbitrators on causation, including any alleged break in the causal chain. Field J had been entitled to remit that question under section 69(7)(c) of the Arbitration Act 1996. The arbitrators’ unanimous conclusion that clause 15 did not apply was accepted.

• Court of Appeal (Civil Division): Cargill’s appeal and NYK’s cross-appeal were dismissed. Field J’s decision on construction and remission was upheld, although the construction reasoning differed.
• Queen’s Bench Division, Commercial Court: Field J held that delegates could be agents for clause 49, found that IBG’s failures occurred in the course of its delegated task, and remitted causation to the arbitrators.
• Arbitration: The majority held that the vessel was detained and arrested but that the proviso did not apply. The arbitrators unanimously held that clause 15 did not apply.