London Arbitration 5/26

NYPE – TIME CHARTER – SPEED AND CONSUMPTION – NOON REPORTS – ABOUT – NO EXTRAPOLATIONS

This dispute arose under a trip time charter on an amended NYPE 1946 form between claimant owners and respondent charterers. The owners claimed US$160,407.16 allegedly due under their final hire statement, while the charterers denied liability and asserted a right of set-off based on alleged underperformance of the vessel.

The recap incorporated key performance warranties. The vessel was described as capable of:

“ABT 14.00 KNOTS (L) ON ABT 35.00 MT IFO/DAY + ABT 0.10 MT MDO/DAY”

This performance was expressly qualified by defined environmental conditions:

“ABOVE SPEED AND CONSUMPTION ARE GIVEN IN CONTINUE 24 HOURS GOOD WEATHER / SMOOTH SEAS AND UNDERSTOOD TO MEAN ALL WEATHER CONDITIONS NOT EXCEEDING BEAUFORT SCALE FORCE 4 (MAX 16 KNOTS), AND TOTAL COMBINED (SEA AND SWELL) SIGNIFICANT WAVE HEIGHT CONFINED TO LIMITS OF DOUGLAS SEA STATE 3 (0.5M – 1.25M) WITH NO ADVERSE CURRENTS AND NO NEGATIVE INFLUENCE OF SWELLS. NO EXTRAPOLATIONS TO BE MADE FOR WEATHER CONDITIONS OTHER THAN THOSE DESCRIBED ABOVE.”

The hire provision stated:

“HIRE USD 38000 PDPR INCLOT.”

Clause 79 (Weather Routing) stated:

“Vessel’s speed and consumption warranted under this charter party are under continue good weather conditions not exceeding BEAUFORT SCALE FORCE 4 (MAX 16 KNTS), AND TOTAL COMBINED (SEA AND SWELL) SIGNIFICANT WAVE HEIGHT CONFINED TO LIMITS OF DOUGLAS SEA STATE 3 (0.5-1.25 M) WITH NO ADVERSE CURRENTS AND NO NEGATIVE INFLUENCE OF SWELLS. OWNERS TO HAVE BENIFIT OF POSITIVE CURRENTS;

AWT/TNM ALWAYS EXCLUDED

The charterers may supply an independent weather bureas [sic] advice to master during voyages specified by the charterers. However, master remains to have the choice of route. The master shall comply with the reporting procedure of the routing service selected by the charterers. Evidence of weather conditions shall be taken from the vessel’s deck logs and independent weather bureau reports.

In the event of consistent discrepancy between the deck logs and the independent weather bureau reports, the a [sic] third mutually agreed independent weather routing company to be appointed, whose report to be taken as final and binding. Cost to be split equally between charterers and owners.”

The vessel was on hire from 29 September to 20 November at US$38,000 per day, with VLSFO priced at US$570 per metric ton. The charterers contended that the owners warranted a speed of about 14 knots and consumption of about 35 mt of IFO per day. By reason of the word “about,” they argued that the minimum acceptable performance was 13.5 knots and 33.25 mt per day.

It was common ground that “good weather” required a continuous period of at least 24 hours, wind not exceeding Beaufort Force 4, sea state not exceeding 1.25 meters, and the absence of adverse currents.

The charterers alleged that the vessel failed to meet the performance warranty. They relied on a report prepared by a weather routing company, which concluded that 88.26 hours were lost and that the vessel overconsumed 27.83 mt of IFO and 0.21 mt of MDO. During a period identified as good weather between 8 and 10 October, the vessel achieved a speed of only 12.26 knots while consuming 33.93 mt of IFO per day. On this basis, the charterers claimed losses of US$155,744.60, consisting of US$139,745.00 for lost time and US$15,999.60 for excess fuel consumption. They asserted an equitable set-off and maintained that no hire was due.

The owners denied that the vessel underperformed and challenged the weather routing report. They argued that the report relied improperly on noon reports, which were merely snapshots and did not establish continuous good weather over a 24-hour period. They further contended that the report failed to take into account the absence of negative swell, the effect of positive currents, and the full requirements of the charterparty. The owners also maintained that the charterers had not requested the vessel’s deck logbooks, which would have provided more reliable evidence.

The tribunal observed that the charterparty did not expressly state whether deck logs or weather bureau reports should prevail in case of disagreement, although clause 79 required the appointment of a third independent bureau in the event of discrepancy. No such appointment was made, which the tribunal regarded as surprising given the mandatory language of the clause. The tribunal noted that adherence to this mechanism might have avoided the dispute.

The absence of deck logbooks was considered significant. The tribunal found it curious that the charterers did not request them and that the owners did not disclose them voluntarily. Even if the owners were disponent owners, they would ordinarily be able to obtain such documents. The tribunal held that the logbooks were clearly relevant and should have been disclosed as part of the assessment process.

Despite these concerns, the tribunal accepted the weather routing report. It found that the report was based on appropriate data and methodology, that it properly applied the charterparty’s definition of good weather, and that it took into account currents and swell. The tribunal accepted that the period from 8 to 10 October constituted a qualifying period of continuous good weather. It also found that the vessel’s slip factor of approximately 25 percent during that period indicated clear underperformance. The tribunal further observed that if positive currents had been fully taken into account, the vessel’s performance would have appeared even worse.

On this basis, the tribunal held that the charterers had established a prima facie case that the vessel failed to meet the performance warranty.

A central issue concerned the meaning of the extrapolation clause:

“NO EXTRAPOLATIONS TO BE MADE FOR WEATHER CONDITIONS OTHER THAN THOSE DESCRIBED ABOVE.”

The charterers argued that this clause did not prohibit extrapolation altogether but only precluded extrapolation based on non-qualifying weather conditions. They contended that extrapolation from performance observed in good weather was permissible. The owners, by contrast, argued that the clause constituted an absolute prohibition on extrapolation.

The tribunal adopted a plain and commercially sensible interpretation. Referring to the ordinary meaning of “extrapolate,” it held that the clause permitted extrapolation from data obtained in qualifying good weather but prohibited reliance on data from weather conditions outside the defined parameters. The tribunal rejected the owners’ interpretation on the basis that it would undermine the performance warranty entirely and that there were no sufficiently clear words to exclude extrapolation altogether.

The tribunal followed established authorities and concluded that it was permissible to extrapolate from good weather performance to assess overall voyage performance. It therefore held that the weather routing company was correct to extrapolate from the identified good weather period and to conclude that the vessel underperformed and overconsumed. The findings of 88.26 hours of lost time and 27.83 mt of excess fuel consumption were accepted as reasonable.

In conclusion, the tribunal dismissed the owners’ claim for US$160,407.16. It held that the charterers were entitled to set off their losses. The owners were ordered to bear their own costs and to pay the charterers’ recoverable legal costs, to be assessed if not agreed. Interest was awarded at 5.5 percent per annum, compounded quarterly from the date of payment to reimbursement. The owners were also ordered to pay the costs of the award in the sum of £10,500, with provision for reimbursement and interest if the charterers had already paid any portion.