The Charterers claimed the Vessel underperformed and withheld US$ 95,294.66 from hire based on an analysis and calculations performed by [x] WRC. The dispute was referred to arbitration under the LMAA Terms 2012. A sole arbitrator awarded and directed the charterers to pay the full amount together with interest and costs of this first final Award.
Clause 78- Weather routing clause.
“…..IN CASE OF CALCULATED UNDERPERFORMANCE OF THE VESSEL AND OWNERS CONTEST SUCH CALCULATIONS, OWNERS ARE TO PROVIDE THEIR REASONS FOR NOT ACCEPTING WRC REPORTAND COPIES OF LOG BOOKS AS EVIDENCE FOR A REVISED PERFORMANCE ANALYSIS BY AN INDEPENDENT WRC which is mutually agreed and cost to be shared 50/50. SUCH REVISED VOYAGE ANALYSIS BY THE INDEPENDANT WRC TO BE FINAL AND BINDING FOR BOTH PARTIES..”
Clause 97- Vessel’s description
“Speed/cons: abt 14 knots ballast /abt 13.5 knots laden on 36mt IFO (380 cst) at sea for main engineand auxiliaries. No MDO at sea
..Above speed/consumption basis no swell and no adverse current and good weather which is only up to Beaufort scale 4…”
The issues
In this reference the central issues to be considered were:
(i) the meaning and effect of the performance warranty and whether or not the Charterers applied the warranty as it was intended, and
(ii) whether the Vessel in fact underperformed or was the performance of the Vessel affected by the weather and sea conditions encountered during each of the voyages.
The Owners case
The owners disputed the charterers’ calculations and deductions from hire and proposed an independent WRC based on clause 78. Then, the parties could not agree upon an independent WRC, and the owners submitted that since this dispute resolution procedure failed, the matter was to be determined by the arbitration agreement.
Owners defended the claim on these grounds: charterers have failed to bring themselves within clause 15 and establish loss due to a defect or breakdown; thus, the claim fails at the outset. Even if charterers bring themselves within clause 15, they cannot show loss of time or bunkers overconsumed when the voyage data are analysed as per the English law principles.
Regarding the performance methodology, owners asserted that a day with an adverse current could not qualify as a good weather day to assess the vessel’s performance. Likewise, swell data were missing from the report as compared to the forecasts and any day during which there is swell also cannot qualify as a good weather day. Further, the WRC has not considered the “about” when calculating MDO consumption, and “about” means 5% per London Arbitration 1/07.
Therefore, the charterers’ deduction was unlawful.
The Charterers case
Ballast voyage
On 123 hours of good weather, the WRC calculated an average good weather speed of 12.60 knots under a favourable current of 0.20 knots. Thus, the good weather speed was only 12.40 knots. As a result, the vessel lost 64.50 hours and consumed an extra 54.62 mt IFO but saved 3.53 MDO.
Laden Voyage
The WRC relied on 371.50 hours of good weather and calculated the vessel’s average good weather speed was 12.30 knots, while a favourable current of 0.20 knots assisted her. Thus, the good weather speed was only 12.10 knots. As a result, the vessel lost 64.50 hours and consumed extra 47.92 mt IFO but saved 5.752 MDO.
In their submissions, charterers argued that the X report is binding upon all parties. They disputed the owners’ understanding of the off-hire clause 15 and submitted that they were deprived of the full use of the vessel and were entitled to put her off–hire. Alternatively, they were entitled to set off against hire a claim for damages due to owners’ breach of the charter party and relied on The Nanfri [1978] 2 Lloyd’s Rep 132; The Chrysovalandou Dyo [1981] 1 Lloyd’s Rep 159 and to The Kostas Melas [1981] 1 Lloyd’s Rep 18.
The charterers submitted that the WRC applied a compliant methodology with the charter party terms and English law. The WRC’s method was to assess good weather on a six-hourly analysis, and a “day” is the period between consecutive daily noon positions. Subject to the direction and number of time zones through which a vessel passes, the weather and seas are assessed every six hours and categorised as either “Good” or “Bad” and, if more than half of the day is classified as “Good”, the whole day is considered to be a fair-weather day. The charterers further submitted that the Masters’ noon report did not reflect the weather for the entire day with the same accuracy and detail as the WRC did.
Owners’ reply
The owners asserted that the charterers’ reliance on the Nanfri was misplaced. The proper way was to read the authorities in conjunction with the test applied in the Kostas Melas, which requires that the right of set-off be measured against the test of good faith. The charterers could only make such deductions in good faith and the reasonable belief that there had been a breach of the Charterparty on the part of the Owners. However, the charterers failed to make any positive case to bring themselves within the off-hire clause 15 or prove an independent breach and were not entitled to claim set-off.
Another issue concerned the charterers’ denial of any discrepancies between the weather data in the vessel’s logs and the data calculated by the WRC in their voyage audit reports.
The discussion
The owners are familiar with the vessel’s performance when giving the warranty and act in good faith. It should be viewed with skepticism if a third-party attempts to reinterpret such a warranty. However, equally, a vessel’s failure to perform should be examined and determined if such failure results from:
(i) misrepresentation on the part of the Owners; and/or
(ii) a defect in or breakdown of any part of her hull, machinery or equipment as is contemplated by clause 15 of the Charterparty in this reference, and/or
(iii) an intentional slowing of the main engine, for whatever reason, and/or
(iv) the effect of wind and/or currents and/or waves and/or swell.
Off hire
Held, that it is well known that if a charterer wishes to make deductions from hire on the basis of the off-hire clause, he must show that the loss of time was a consequence of a defect or breakdown.Charterers did not identify any breakdown or defect which caused any evidenced loss of time or consumption of extra fuel and failed to substantiate an entitlement to claim set-off pursuant to clause 15.
Reduce speed – passing strait
The owners referred to the remarks included in the Log Abstracts and in the master’s reports to WRC concerning speed reductions and changes in her course to alleviate the effects of heavy weather. The WRC made no allowance in their analysis on the ballast voyage but excluded 6th September from their laden voyage assessment since the master reported he had reduced speed due to poor visibility and heavy coastal vessel traffic. There were times when the Vessel’s speed was intentionally reduced for heavy weather and whilst in congested waters.
The performance warranty
The performance warranty is clear in its wording and meaning. The Owners intended that the performance warranty be applied, providing the Vessel encountered no swell, no adverse current, and good weather, which is only up to Beaufort Scale 4. The Charterers did not dispute it. Applying these criteria, the owners submitted that the vessel saved time and bunkers.
No adverse currents
The owners submitted that when the charter party states “no adverse currents”, the charterers could not claim a benefit for favourable currents (London Arbitration 15/07).
Held, that as the warranty excludes adverse currents and makes no mention of favourable currents, no account can be taken of favourable currents. As for the “about” allowance, the purpose of the about is to protect the owners if the fuel consumption is slightly above that expected and not penalise the charterers if the Vessel consumes less than expected.
No swell
Owners highlighted that the WRC has not taken into account the qualifying criterion of “no swell” and referred to the website of the WRC that mentioned “…for days to be selected as “good weather days”, they must meet all parameters defined in the charter party …..”
The WRC has applied Significant Wave Height as “the de-factor standard” of the profession and includes swell.
Held, that the WRC took no account of the good weather criterion of clause 97 in respect of swell. By their own admission, the Significant Wave Height multiplies the Average Wave Height by a factor of 1.6 and is equivalent to Douglas Sea Scale 3, which includes a Swell Code. Thus, the charterers have not substantiated their claim that the Vessel did not comply with performance warranty during the ballast voyage. Moreover, the Log Abstracts evidence that the Vessel could perform at “about 14 knots” in ballast condition as recorded between 9th and 12th July, and at other times during the voyage.
Logs or weather reports
The owners submitted that the conditions reported contemporaneously by the Master were, by and large, in accordance with the WRC’ forecast that the Vessel would encounter. The charterers asserted that even if the master’s reports were by and large in accordance with the WRC forecasts it did not mean that the Master had accurately reported the weather encountered. Weather forecasting continues to improve with technology and is more often accurate than it is inaccurate. By and large, modern weather forecasting assisted by the latest technology is reliable across the large and predictable expanses of the world’s oceans.
Held, that as the master’s reports are, by and large, in accordance with the forecasts, it is not reasonable to simply dismiss the master’s reports as inaccurate or false. In addition, there is no presumption in the charterparty in favour of the weather data produced by WRC over the evidence of the Master as is contained in his reports and in the Log Abstracts. Significantly, the forecasts predicted the swell would be encountered and WRC took no account of it in the performance assessment.
Accordingly, charterers’ claim failed.
Comment
For the readers’ reference, this award was issued in 2013. Notably, this is another published award that the tribunal departed from London Arbitration 4/12 and followed the London arbitration 15/07, which was heavily argued that applied the correct approach on the issue of positive currents for many years. Now, the Divinegate judicially settles this issue (https://www.charterpartydisputes.com/the-divinegate-2022-performance-claims).
However, there are still different views on the meaning and application of the words “no swell” in the performance warranty. Based on more recent published awards (and one unpublished), the trend is to avoid a restrictive application in exchange for interpreting this wording with business efficacy in mind. Therefore, London tribunals will likely take a pragmatic view and consider these words to mean “no adverse swell” to make the contract work. In practice, weather routing companies and experts (technical offices) adopt different methodologies, sometimes incorporating a significant wave height of 1.25 meters or 2.0 meters when the charter states, “no adverse swell”; again, this method is not entirely free of criticism since the report’s methodology did not separate wind and sea waves, thus providing a confusing representation of the sea state in the reports (See also London Arbitration 23/21 & 29/22).
Further, the parties also attempt to distinguish “no adverse swell” from “no negative influence of swell” or treat these words as a surplusage or give a different meaning, saying the words are ambiguous, i.e., it is susceptible to more than one meaning and reasonably intelligent persons would differ as to which meaning is the proper one. Therefore, the words “no swell” do not offer a complete defense to the owners (as felt when drafting the clause). Based on experience, charterers have points to argue in order to settle.
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