A time charter chain in a rising market

Q: What if the grounds stated in the anti-technicality notice are wrong – does this invalidate the anti-technicality notice? The tribunal held that owners’ and Members’ statement that sub charterers were only entitled to deduct hire from the last hire payment (singular) was wrong as this contradicted the charter party which expressly provided that, on redelivery, charterers (in each case) had the right to deduct the value of redelivery bunkers “from the last sufficient hire payments” (in the plural) and that this incorrect statement created a “genuine ambiguity” for sub charterers. The tribunal held that owners’ and Members’ anti-technicality notices were therefore invalid.

Q: After serving an anti-technicality notice, how quickly do owners then need to withdraw the vessel before they are deemed to have waived their right to withdraw? The tribunal referred to The Laconia [1977] where it was held that, where owners withdraw the vessel from charter, they must do so within “a reasonable time” and that “What is a reasonable time – essentially a matter for arbitrators to find – depends on the circumstances. In some, and indeed many cases, it will be a short time – vis. the shortest time reasonably necessary to enable the shipowner to hear of a default and issue instructions”. Further, the tribunal held that, in order to determine whether owners have waived the right to withdraw the vessel, the tribunal looks at whether or not owners have delayed in withdrawing the vessel, not at whether or not charterers have relied on the length of time taken before owners withdraw the vessel. In this case, owners and Members each served their anti-technicality notice on 16 March and the 3 clear banking days under the anti-technicality notices expired on 21 March. Members withdrew the vessel on 27 March. The tribunal commented that for Members to wait until 27 March to withdraw the vessel was, in their opinion, “far longer than “reasonably necessary” in the circumstances of the case”. Owners, on the other hand, purported to withdraw the vessel 2 days earlier than Members, namely on Sunday 25 March. The tribunal commented: “This does of course make [owners’] position somewhat stronger than that of [Members]”, although also noting that owners’ “continued performance of the Charterparty for in excess of a further 2 days (both of which were working days) after the assumed right to withdraw arose could be taken as evidencing their election not to withdraw the Vessel from the Head Charter”. Whilst the tribunal did not need to come to a conclusion one way or the other on this point, it can be seen from this that owners should exercise their right of withdrawal very promptly – probably within a maximum of 3 days in most cases – or owners will run the risk of being held to have waived their right of withdrawal.

Q: For what period can charterers claim these market loss damages for? The tribunal held that the period over which damages should be payable was from 25 March (Members’ purported withdrawal of the vessel from charter) not up to 20 April or any of the likely actual redelivery dates (for either the Egyptian or PG voyages) but to 18 May, namely the maximum charter party period permitted to sub charterers, including added offhire periods. This, the tribunal found, was the correct period because this was the (maximum) charter period which sub charterers had lost by reason of the wrongful withdrawal from charter. Of course, if sub charterers had given an estimated redelivery date of 18 May, additional hire would have been due.

In this case, therefore, sub charterers were held to be entitled to have their cake and eat it: they were entitled to pay hire less estimated bunkers only up to their 20 April estimated redelivery date and yet were awarded damages up to the 18 May maximum charter party period (albeit “only” at the charter versus market rate).