Smart Gain Shipping Co Ltd v. Langlois Enterprises Ltd (The “Globe Danae”) – KBD (Comm Ct) , 5 July 2023

Langlois (Owners) chartered the vessel, MV Globe Danae, to Smart Gain (Charterers) for a trip from India to Brazil carrying metallurgical coke. The dispute arose from clause (86) in the charterparty regarding hull fouling.  Langlois claimed compensation for time spent on cleaning, based on clause 86, while Smart Gain argued cleaning obligations ceased upon redelivery. 

This was an appeal of a partial arbitration award from October 2022.  The charterparty, dated 9 June 2021, utilized an amended NYPE form and had an estimated duration of 40 to 50 days.

Relevant charterparty clauses included:  Clause 4 which stipulated that hire would continue until the vessel’s redelivery in good condition, except for fair wear and tear. Clause 8 obligated the captain to expedite the voyage under Smart Gain’s orders. Clause 70 required disputes to be resolved through arbitration according to the London Maritime Arbitrators Association’s terms.

The Arbitration

The focus of the arbitration revolved around the potential for hull fouling while inactive in warm waters and the speed and fuel efficiency issues that could result from this growth. Clause 86 in the charterparty read: 

“Hull Fouling

Owners not to be responsible for any decrease in speed/increase in consumption of the Vessel whether permanent or temporary cause [sic] by Charterers staying in ports exceeding 25 days’ trading in tropical and 30 days if in non-tropical waters. In such a case, underwater cleaning of hull including propeller etc. to be done at first workable opportunity and always at Charterers’ time and expense. After hull cleaning vessel’s performance warranties to be reinstated.”

Other sections of the charterparty also mentioned “charterers’ time,” relating to issues such as delays due to smuggling, bans between China and Taiwan, and stevedore damage affecting seaworthiness, among others. The term “loss of time” appeared in various contexts, encompassing scenarios such as hire cessation, boycotts, blockades, accidents, groundings, and loss of hire from ship-to-ship operations.

The vessel was delivered to Smart Gain on 10 June 2021 and loaded with cargo in India before heading to Brazil. Although the discharge port was “any Brazilian port” as per the bill of lading, the intended receivers rejected the cargo. The loaded vessel remained idle in tropical water ports for approximately 42 days. After eventual cargo discharge, the vessel was returned to Langlois on 4 September 2021 in Açu, Brazil.

Subsequently, the vessel sailed to Tubarão, Brazil, arriving on 9 September 2021. Langlois then conducted underwater cleaning of the hull and propeller, requiring around 30 hours. The vessel was subsequently deployed for its next task on 16 September 2021.

Langlois sought compensation from Smart Gain amounting to US$74,506.70, representing loss of time for the 2.29 days spent on cleaning. The claim was based on clause 86, asserting that the cost of cleaning should be borne by Smart Gain. Smart Gain argued that its obligation to clean ended upon vessel redelivery and that Langlois could only seek damages, requiring proof of loss, to be made whole. 

The tribunal ruled in favor of Langlois summarizing its conclusion as follows:

The tribunal summarized its conclusion in the following way:

“Clause 86 imposed an obligation on [Smart Gain] to arrange underwater cleaning at the first workable opportunity at their time and expense at the charterparty hire rate, regardless of when the vessel was redelivered, and that this obligation gives rise to a claim in debt.”

The Appeal

The charterers appealed under section 69 of the Arbitration Act of 1996 citing that:

“If a clause in a time charterparty provides for underwater cleaning will be done at the charterers’ time, does that provision give rise to a claim in debt (so that if the owners undertake cleaning after redelivery, they can claim for the cleaning time even if they have not suffered a loss of time)?”

Smart Gain contended they were only liable for the cleaning while the vessel was on hire.  Once the charterparty came to an end, only damages could be claimed, and only if a loss from the damages could be proved.

The court upheld the tribunal’s decision and dismissed the appeal. 

The charterparty, the court reasoned, needed to be viewed as a whole. Referring to a similar case, Damon Compania Naviera v E A L Europe Africka Line GmbH (The Nicki R) [1984] 2 Lloyd’s Rep 186, involving charterparty repairs, the court established that damages for time spent on repairs were due at the hire rate if they affected seaworthiness, regardless of charterparty status. Applying this precedent to clause 86, it was acknowledged that the provision’s language wasn’t straightforward. However, the tribunal’s conclusion was upheld: charterers were obligated to pay compensation at the hire rate, “always at Charterers’ time,” with the phrase “at the first workable opportunity” applicable before and after the charterparty. The court further clarified that the work could be done by the owners at charterers’ time and expense, thus preventing double hire issues.