Fasterfreight Pte Ltd v Bulk Trident Shipping Ltd

A charterparty provision stating that no deductions from hire may be made without the owner’s express written agreement can prevent a charterer from withholding an instalment of hire because the vessel is allegedly or actually off hire at the payment date. The provision must be construed in the context of the charterparty as a whole. Where it expressly refers to the off-hire clause and to alleged off-hire, it may qualify the charterer’s otherwise arising right to cease payment. The charterer must pay the disputed hire provisionally, while retaining any contractual right to recover overpaid hire. The owner’s consent is not an unfettered discretion: it must be withheld only for a genuine dispute and rationally.

The charterers appealed under section 69 of the Arbitration Act 1996 from a partial final award requiring payment of unpaid hire under a trip time charter. The charterparty required hire to be paid every five days in advance and stated that no deductions, including for actual or alleged off-hire, could be made without the owners’ express written agreement.

The charterers contended that non-payment was not a deduction where the vessel was off hire and that the off-hire clause suspended the obligation to pay. The owners argued that the amended payment clause required payment first, leaving any recovery claim to be determined later. The central issue was whether the prohibition on deductions applied to withholding an instalment of hire when off-hire was alleged at the due date.

1. Appeal dismissed. The arbitrators had correctly awarded the owners the unpaid hire, subject to the charterers’ right to pursue any subsequent counterclaim for overpaid hire.
2. The payment clause had to be construed as a whole. The words prohibiting deductions were embedded in the hire-payment clause, began with an overriding expression, expressly referred to the off-hire clause, covered actual and alleged off-hire, and extended to any other cause. In context, they applied to any exercise of rights under the off-hire clause which would reduce or prevent payment of a hire instalment.
3. The clause therefore required the charterers to pay hire even if it might later be established that the vessel was off hire at the relevant date. It operated as an interim allocation of cash-flow risk, without removing the charterers’ ultimate right to recover hire which was not earned. The lien and repayment provisions reinforced that construction.
4. The owners’ written agreement was subject to a contractual discretion. It had to be exercised for a proper purpose, requiring a genuine dispute, and rationally. On the facts found by the arbitrators, there was a genuine and reasonable dispute about whether the vessel was off hire.
5. The court did not decide whether the construction adopted in Tradax Export v Dorada Compania Naviera (The “Lutetian”) governed an unamended charterparty where the vessel was off hire at the payment date. That decision was not dispositive because the charterparty in the present case contained the additional payment restriction.

High Court (Commercial Court): Permission to appeal on a question of law was granted by Andrew Baker J. Henshaw J dismissed the section 69 appeal and upheld the arbitrators’ partial final award.