Stig Gregersen, Vice President, Syndicate 1, Copenhagen, reports on the Bunga Saga Lima case – [2005] EWHC 244 QBD (Com Ct) – 4 February 2005

The BUNGA SAGA LIMA was time chartered pursuant to a NYPE C/P as amended stipulating inter alia as follows:

Line 21:
“Vessel on her delivery to be ready to receive cargo with clean swept holds and tight, staunch and in every way fitted for the cargo as per clause 29 …”

Clause 46 – Cleaning clause:
“On arrival at the first load port Vessel’s holds to be clean and suitable to load Charterers’ intended cargo to Shipper’s surveyor’s satisfaction.”

Amendment 5: Clause 46:
“Cleaning clause, add at end: It is understood that on delivery or upon arrival 1st loading port vessel to be clean per grain standard up to independent surveyor’s satisfaction.”

Clause 13 – Fixture Note:
“Owners warrant that vessel’s holds on delivery or arrival first load port to be cleaned, swept washed down with freshwater, dried up free from rust leaks, scale, free from salt and free from residue of previous cargo and in every respects ready to load up to the satisfaction of the local surveyor. Should vessel fail to pass hold inspection Owners to arrange cleaning at their time and expense and the vessel to be off-hire from the time of failure until survey passed in all holds and any extra or directly related expenses incurred to be for Owners account.”

When the vessel was delivered, the holds were dirty with coal residues which would have precluded grain from being loaded.

However, the time charterers’ first cargo to be loaded was iron ore, but the coal residues had to be removed before the vessel could load her second cargo, rapeseed in bulk, in consequence of which the vessel was delayed in the second loading and costs were incurred to have the holds cleaned.

Various disputes arose between the owners and the time charterers including inter alia that the time charterers alleged that they could place the vessel off hire while the vessel was cleaned for the second loading and further that they could deduct the cleaning expenses from the hire.

The arbitrators found that at the time of delivery both the time charterers and the owners knew that the holds were dirty and did not comply with the “grain clean” requirement.

The charterers’ claims were rejected by the arbitrators who in effect did decide that when the charterers had not insisted on cleaning being performed at the first load port (even though iron ore could be loaded without any cleaning), the time charterers had lost the right to claim for the loss of time and expense at the second load port.

The charterers sought leave to appeal and it was held by the court that the charterers’ submission that the arbitrators’ conclusion on the construction of the C/P was “obviously wrong” would be rejected. Actually, the court confirmed that the arbitrators were correct in their conclusion. The only entitlement to place the vessel off-hire provided by the Fixture Note, clause 13, was to do so in the event that the holds were not clean upon delivery or arrival at the first load port. No other right was provided to the charterers to place the vessel off-hire at a subsequent load port, and even if the vessel’s holds were not clean upon arrival at the second load port (as in the present matter) there was no default on the part of the owners, like neither of the other off-hire clauses of the C/P were applicable. The allocation of responsibility for presenting the vessel with clean holds was fairly and squarely addressed by the Fixture Note, clause 13, as was the entitlement to place the vessel off-hire.

It is thus recommended that when a vessel is time chartered pursuant to terms similar to the Fixture Note, clause 13, in the BANGA SAGA LIMA, the time charterers should always require the vessel to be “grain clean” upon arrival/delivery at the first load port even if the actual cargo to be loaded at the first load port should not require such cleaning; alternatively the time charterers should expressly reserve their rights to the owners and most importantly obtain the owners’ agreement hereto.

Stig Gregersen