Time Charters. Suspension of hire and suspension of service

… I have not been persuaded that a charterer who has agreed to pay a month’s hire in advance is absolved from making the payment if, although the owners have not sought to repudiate the contract, the ship is not in fact at the disposal of the charterer for some days immediately before and after the first day of the month of hire.
Per Lord du Parcq in Tankexpress v Compagnie Financière Belge des Pétroles (The Petrofina)(1948) 82 Ll.L.Rep. 43, at p. 60

Clause 15 of NYPE 46 form "the payment of hire shall cease"

Timely, punctual and continuous payment of hire in advance is a primary obligation of the charterer and also an absolute one which, as Lord Wright said in The Petrofina [1948] 2 All ER 939 at p.946, is not excused by accident or inadvertence. The only exception from this rule is deemed to be found in the wording cl 15 of NYPE 46 form providing as follows:

NYPE 1946 (lines 97-101)

15. That in the event of loss of time from deficiency of men or stores, fire, breakdown or damages to hull, machinery or equipment, grounding, detention by average accidents to ship or cargo, drydocking for the purpose of examination or painting bottom, or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost; and if upon the voyage the speed be reduced by defect in or break-down of any part of her hull, machinery or equipment, the time so lost, and the cost of any extra fuel consumed in consequence thereof, and extra expenses shall be deducted from the hire.

In Tradax Export SA v Dorada Compania Naviera SA of Panama (The Lutetian) [1982] 2 Lloyd’s Rep. 140, Bingham, J. held that the language of cl 15 of NYPE 46 form, which said that when time was lost from the listed causes "the payment of hire shall cease", accords with the Charterers’ construction that the parties intended the owners to be secured by payment in advance in respect of hire which he would or might earn but not in respect of hire which he could never earn. Accordingly, no hire was payable on the due date if the ship was off-hire at that time.

Authors of Time Charters, 6th Edition, 2008 suggest that where the owners are wrongfully withholding the services of the ship, and the charter is on the New York Produce form, such act would fall under the "or any other cause" wording of off-hire clause and may trigger suspension of payment of hire on the principles stated in The Petrofina [1948] 2 All ER 939. In other instances when off-hire provisions are not wide enough and the owners have not sought to repudiate the contract, but the ship is not in fact at the disposal of the charterer for some days immediately before and after the first day of the month of hire, the charterer would not be absolved from making the payment.

Express agreement on temporary suspension of ship’s service

Contrary to the rule that withdrawal is irrevocable and operates only in way of cancellation of charterparty, the parties can expressly agree on temporary suspension of ship’s service for non-payment of hire. Such provision contains, for example, in cl.10(e) of Supplytime 89 form:

Supplytime89, cl.10(e)

In Greatship (India) Ltd v Oceanografia SA de CV [2012] EWHC 3468 (Comm) Mrs Justice Gloster considered argument of commerciality advanced by the charterers and its effect on otherwise unambiguous language of the clause. She approached the issue form comparison point of view between permanent withdrawal and temporary suspension and said at paras 35-36:

35. … there is a fundamental difference between permanent withdrawal of a vessel, and temporary suspension of service, during the period of which the vessel remains on hire. The right to suspend performance is a "lesser" or "intermediate" right. It is wholly unsurprising that the manner in which such rights are to be exercised are different. I see no reason why it should be regarded as uncommercial to give the owner the right to suspend performance immediately when the charterer fails to pay, on the due date, hire, bunkers or other obligations, in clear breach of the charterparty. It is for the charterer to ensure that the owners receive payment by the due date. I see no commercial reason why owners should be potentially obliged to provide the services of the vessel without payment for a period of seven to eight days (i.e. because of intervening weekends) before any notice of suspension became effective for the purpose of Part [4], in circumstances where the Charterers have failed to honour their payment obligations. On the Arbitrators’ approach, if payment is not made, Owners would be powerless to prevent the loading of cargo during the five day notice period and then be effectively unable to withdraw the vessel because of the presence of cargo.

36. There is every commercial reason for a difference between the triggers permitting the exercise of the right to withdraw, and the exercise of the right to suspend services. Since permanent withdrawal cannot be contractually remedied by charterers after the vessel has been withdrawn, there is every commercial justification for the requirement that owners must give five banking days notice before their right to withdraw can be exercised. By contrast, the suspension of performance is temporary, can easily be remedied by the payment of hire (which charterers are bound to pay) and, therefore, there is no need to give five banking days notice prior to suspension. The consequences of the exercise of the respective rights are, therefore, of a different order and this is reflected by the different pre-conditions for the exercise of owners’ respective rights.

It was held that applying principles of construction stated in Rainy Sky SA v Kookmin Bank [2011] UKSC 50 that, if the contract has used clear and unambiguous language, the court must apply it, however surprising or unreasonable the result might appear to be, "it was not permissible in effect to re-write the Charterparty on so-called grounds of commerciality".

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