Charterparty - War risks - Claimant company chartering vessel from defendant owner
Pacific Basin IHX Ltd v Bulkhandling Handymax AS: QBD (Comm) (Mr Justice Teare): 25 January 2012
The claimant company chartered a vessel from the defendant company, which was the owner of the vessel, instructing it to carry a cargo to China via, inter alia, the Gulf of Aden. The defendant refused to proceed via, inter alia, the Gulf of Aden on account of a risk from pirates. It proceeded instead, at extra cost, via the Cape of Good Hope. In the arbitration that followed, the defendant claimed for unpaid hire and the claimant counterclaimed for the additional expenses incurred by reason of the vessel having proceeded via the Cape of Good Hope.
The arbitrators concluded that the defendant was entitled to refuse to obey the order to proceed via the Gulf of Aden pursuant to Conwartime 1993 and the defendant was accordingly awarded $462,221.40. The claimant appealed against the award pursuant to section 69 of the Arbitration Act 1996, on the basis that the arbitrators had erred in law in their construction of subclause 2 of Conwartime 1993. It was held, inter alia, that the arbitrators had erred in law and that no order would be made for a remission until after the parties had studied the terms of the judgment (see All ER (D) 154 (Nov)).
The principal issue that fell to be determined was clarification of the meaning of the phrase ‘exposed to acts of piracy’ in the context of subclauses 2 and 3 of Conwartime 1993. In his earlier judgment, the judge held that ‘exposure to acts of piracy means that the vessel is subject to the risk of piracy or is laid open to the danger of piracy’. The claimant submitted, inter alia, that being ‘exposed to acts of piracy’ meant being exposed to the peril or danger of piracy, by which was meant ‘being in contact with pirates’ or ‘being exposed to acts of piracy having an actual effect on the vessel’. The defendant contended, inter alia, that being ‘exposed to piracy’ simply meant being exposed to the risk of piracy.
The court ruled: The question to be addressed by an owner or master, when ordered to go to a place, was whether there was a real likelihood that the vessel would be exposed to acts of piracy in the sense that the place would be dangerous on account of acts of piracy. What was dangerous would depend upon the facts of the particular case. It would depend upon both the degree of likelihood that a particular peril might occur, and the gravity or otherwise of the consequences of the vessel, cargo and crew should that peril occur (see ,  of the judgment).
The dispute could and ought to be resolved by reference to the terms of subclause 2 itself. The meaning of the phrase ‘exposed to war risks’ in subclause 2 ought properly to be construed as referring to a situation which was ‘dangerous’. That was consistent with the Oxford English Dictionary definition, but, more importantly, flowed naturally from the wording of the clause read as a whole and thereby gave effect to the intentions of the parties (see ,  of the judgment).
In the instant case, whether or not the Gulf of Aden was dangerous to the vessel on account of acts of piracy would depend upon the degree of likelihood that they would occur and the gravity of the consequences to the vessel, cargo and crew if they did occur. That was a matter for the arbitrators to assess on the evidence before them (see  of the judgment).
The award would be remitted to the arbitrators to reconsider, in the light of the judgment and having regard to the evidence adduced by the parties, whether, in the reasonable judgment of the defendant, there had been a real likelihood that the Gulf of Arden would, on account of acts of piracy, be dangerous to the vessel (see  of the judgment).
Michael Nolan (instructed by Swinnerton Moore) for the claimant; Julian Kenny (instructed by Ince & Co) for the defendant.