Illegitimate last voyage

New York arbitration concerned disputes which arose during the performance of a NYPE form of time charter between Koch Carbon Inc, as owner, and Normarine Ltd, as charterer. The vessel which was the subject of the charter was the 68,337 dwt, 1987-built, Bahamas-flag bulk carrier Glorious Rena. The term of the charter was for a minimum of five months up to "about" seven months, with the word "about" defined as meaning fifteen days more or less.

The vessel was employed in the charterers service from January 2, 2000, until being redelivered to the owner on September 1, 2000 in Dalien, China. For the voyage leading up to redelivery, the charterers had sublet the vessel to Wilmar Trading of Singapore for a trip time charter via the US Gulf to China with a bulk soyabean cargo.

It was agreed that Wilmar would take delivery of the vessel upon sailing from El Ferrol on June 26, 2000. Thereafter, the vessel tendered notice of readiness at New Orleans on July 10, and on the following day moved to anchorage, where its holds were rejected by the NBC and the USDA. After cleaning, the holds were passed on July 13, when the vessel moved to Reserve to load the soyabean cargo. That completed, it sailed for the Panama Canal on July 15, arriving there on July 2, and leaving Balboa for China on July 23. The vessel arrived at Dalien on August 22, began discharge on August 24, and was redelivered to the charterers on September 21.

The core issue in the dispute was whether the last voyage was legitimate. Koch's charter agreement with the head owner required redelivery to take place "on or about" July 31, 2000, and - unlike its agreement with Normarine - did not define the word "about" or otherwise fix the flexibility margin for the charter period.

Normarine originally calculated the final voyage to be completed by August 17, on the basis of which Koch had agreed to pay the head owner $12,000 per day, a differential of $4,550 per day above the Koch/head owner rate, and $3,050 more than Koch was receiving from Normarine. At arbitration, Koch sought to recover that amount, plus hold cleaning and other final hire port disbursements, from Normarine, amounting to $94, 021.

Koch argued that Normarine's calculation of the time required to complete the last voyage was patently unreasonable, and that the voyage itself was therefore illegitimate. Normarine, meanwhile, maintained that the final voyage was reasonably calculated to be completed by August 17, within its interpretation of the charterparty term of seven months plus fifteen days. It also argued that it was insulated from having to pay any rate differential for the overlap period by reason of Clause 67 of the charter, which provided, "Should the vessel be ordered on a voyage by which the charter period may be exceeded, the charterers are to have the use of the vessel to enable them to complete the voyage, provided it could be reasonably calculated that the voyage would allow redelivery about the time fixed for the termination of this charterparty."

The panel found partly in favour of Koch, and partly in favour of Normarine. They unanimously concluded that Normarine's calculation of the last voyage was unreasonable, and the voyage illegitimate. It was found that the calculation was seriously at odds with accepted practice, and made no provision for what might be regarded as customary allowances. Having found that the last voyage estimate was not reasonably calculated, the panel concluded that the charterer had failed to bring itself within the protection of Clause 67.

The panel found that Koch was entitled to rely on Normarine's representations regarding redelivery, and was not estopped from pursuing its claims for overlap. But the arbitrators did not accept Koch's position that the fifteen days agreed meaning for the word "about" only applied to unforeseen circumstances beyond the control of the charterer which delayed redelivery.

The panel found the Koch/Normarine charter language to be straightforward and unambiguous, entitling the charterer to sue the vessel for a maximum of seven months and fifteen days, but no further. "Koch's charter with the head owner did not include a definition of the word 'about' ", said the arbitrators, "and is therefore materially different from the Normarine charterparty on this crucial issue. This alone is sufficient to defeat Koch's demand that Normarine be treated as its indemnitor.

"In our view, the position adopted by Koch restricting application of the fifteen days to unforeseen delay is better applied in circumstances where the charterer's implied reasonable margin of flexibility, or the word "about", is not well-defined…

"The Glorious Rena charterparty … leaves no doubt as to the meaning of 'about', nor is there any language which qualifies the charterer's unfettered privilege to add that period to the original seven months … The vessel should have been redelivered by 0400hrs on August 17. As redelivery did not take place until 0210hrs on September 1, and no offhire periods occurred which extended the illegitimate last voyage, we find charterers are responsible for an overlap of fourteen days, 22 hours and ten minutes, payable at the market or charterparty rate, whichever is higher."

Koch argued that the prevailing market was in excess of the $12,000 rate it paid to the head owner. Normarine maintained that the prevailing market did not exceed $10,500. The panel disagreed with both, and instead found that the proper rate to be applied to the overlap period was the $11,400 which Wilmar paid to Normarine for that same period, less commissions.

Finally, the panel denied a claim lodged by Koch for hold washing, pointing out that it was illogical to have washed the holds between ore to coal and coal to coal cargoes.

Case № 17