Cancellation and delay

Ermionis Shipping Co SA v Flota Mercante Grancolombian SA.

This dispute arose under a time charterparty dated September 18,1978, between A. Catsogeorgis and Th. Efstathiou as managers for Ermionis Shipping Co S A, owners of the Apostolos K, and Flota Mercante Grancolombian SA (FMG) as charterers.

The vessel was fixed for a trip time charter from New York/Philadelphia range to Colombia, with lay/can of September 18/20, 1978. She arrived at the New York pilot station on September 17 at 1930 hrs and docked the following day at 0830 hrs at Pier 3, Brooklyn. The Certificate of Delivery and On Hire September 18 showed a delivery date of the vessel on that day at 0001 hrs at “Pilot Station New York”. It also showed the on-hire time as September 19 at 1230 hrs, the master signing the document “Due Charterarty Owner’s Approval”.

On September 19, during the period from 0800 - 1230 hrs, the stevedores seemingly refused to board the vessel because of the “unsuitability of gangway”. At 1230 hrs the crew completed shifting the starboard gangway to the portside in replacement of the defective gangway. Loading of general cargo began in 1300 hrs with four gangs and continued until 1700 hrs, certain stoppages occurring during the loading operation which were attributed to “no power” and “defective winches”. Ermionis retained shore labour to overhaul the vessel’s winches, but in FMG’s opinion a considerable amount of man hours was lost because of the deficiency of the vessel’s gear, which led them to cancel the contract and discharge the previously loaded cargo. The unloading started on September 20 at 0800 hrs with ship’s gear except at No. 2 hatch.

Notice of cancellation was given at 1900 hrs on September 19 and the vessel was idle from September 21 through September 29. On September 27, when the winch testing was to take place, FMG arrested the vessel. At 0800 hrs on September 30 FMG resumed the discharge of the cargo which was completed by 1110 hrs. The vessel remained under arrest until October 5 when the security was posted and a release order was signed and by which time FMG had also provided counter-security for Ermionis’ claims. Ermionis refixed the vessel on October 6 for a time charter trip with October 10-16 lay/can and delivery “on arrival pilot station Pascagoula, Mississippi.”

The basic issue at arbitration was whether or not FMG had been entitled to cancel the charter when they did. Pointing out that FMG had apparently fixed the vessel to fill a temporary requirement, the Panel said that the combination of the short time employment, together with the type of business contemplated, required a different standard than that applied in such cases as the Pacsun (SMA Award 746) and Hong Kong Fir (Lloyd’s Law Reports -1961 -159, and 1961 -2-478). On the other hand, added the Panel, the actions taken by FMG were drastic. Whereas the condition of the vessel might have been such that FMG could have placed the vessel of Thire, forcing Ermionis to take corrective action, the Panel felt that FMG had over-reacted by terminating the contract.

The Panel referred to the decision in the case of the Eastern Street (SMA 1352, 1979) (which supported the cancellation of a time charter) and said that the facts in the present case did not permit them to draw the same conclusion. In the Eastern Street, the classification society lifted the cargo gear certificate which made it “impossible for any cargo loading to be effected with ship’s gear, an essential operation inasmuch as the heavy lift capability of the vessel was specifically bargained for.”

The Panel said there was no question in the present case that the No 2 winches of the Apostolos К were not working but the other winches were in working condition and Ermionis had offered to hire a shore crane to deal with this deficiency.

It was the Panel’s decision that the cancellation by FMG was anticipatory and wrongful and that the delay encountered at the loading port was not of such severity that it would have jeopardised or frustrated the venture for which the vessel was contracted. “Charterers were also aware,” said the Panel, “that at the time of the fixture the vessel was seventeen years old. Although this in itself is not an excuse for the winch breakdowns or for a performance below the warranted standards, it nevertheless can be taken as an indicator that the vessel is no longer in a prime condition and more prone to potential breakdowns resulting in delays/offhire periods.”

“The fact that pursuant to Clause 4 the charterers had to give a 15-day notice of redelivery, indicates to the Panel that, the duration of this voyage was clearly anticipated to be in excess of 15 days. The Panel... calculates the duration of the intended voyage to be 20 days, for which owners would have earned hire (net of commission) in the amount of $51,502. In their claim, however, owners overlook the fact that in order to achieve this revenue, the vessel would have to operate for 20 days which, using owners’ running expenses of $2,200 per day, would have caused expenses of $44,000 for a net earning of $7,502.”

Noting that Ermionis had claimed $11,000 for running expenses and $8,900 for bunkers for the voyage from New Orleans to New York, the Panel said that if FMG had not cancelled the contract, the expenses of $ 19,900 would have been incurred by Ermionis in any event as a ballast leg to perform this particular time charter trip. The Panel saw no justification for granting the claim and awarded Ermionis the net hire as if the contract had been performed.

“Likewise”, said the Panel, “since owners are being awarded the net earning of the cancelled voyage, it is appropriate to assume the theoretical redelivery of the vessel pursuant to the contract, e. at one safe port “Atlantic Colombia”. Hence owners would have incurred certain expenses to tender the vessel under the substitute voyage at “on arrival pilot station Pascagoula for which they were not entitled to claim under the contract.” The Panel therefore denied the claim of Ermionis for $8,360 representing the IFO and diesel oil consumed for the voyage from New York to Pascagoula.

Having decided that FMG had wrongfully cancelled the charter, the Panel held that they could not recover costs for stevedoring services. On the other hand, said the Panel, certain delays were caused through deficiencies of the vessel for which FMG were entitled to an award for damages suffered.

FMG argued that all hire must cease where there is a breakdown of machinery, but the Panel did not accept this. It was held that FMG’s reliance on Clause 15 was misplaced as it spoke of the “full working of the vessel” and there was no evidence that the breakdown of the No 2 winches rendered the vessel totally inoperative. The Panel could not accept either the argument that a breakdown during the day prevented the full working of the vessel for the entire day. It was held that, based on Clause 15 and the provision of “any stevedoring and/or labour charges for breakdown of vessel’s equipment... to be for owners’ account”, FMG were entitled to be reimbursed for the labour stand-by charges.

Whilst reaching a conclusion which would entitle FMG to an award, the Panel nevertheless was unable to make such a decision in FMG’s favour for lack of conclusive proof. It was held that, “The discrepancies between owners’ and charterers’ evidence on the offhire periods/labour stand-by, as well as the invoices submitted, do not permit us to reconcile this claim sufficiently to reach an award on this issue...”

Case № 3