Underperformance: Owners Still Liable Where Fouling Caused Following Charterers’ Orders

The following article  has been amended to provide clarification in respect of Clause 29(b) of the relevant charterparties. 

Imperator I Maritime Company v Bunge SA [2016] EWHC 1506 (Comm).  – Clarification

The English High Court has held that an owner is still liable for a vessel’s underperformance, even where that underperformance has been caused by fouling as a result of following charterers’ orders.

The case involved a vessel which had a prolonged stay in tropical waters which resulted in fouling of the vessel’s hull and propeller by marine growth. The fouling meant that the vessel underperformed as it could not maintain the warranted speed.

The relevant head and sub-charterparties contained the following clause:

“Clause 29…

(b) Speed Clause

Throughout the currency of this Charter, Owners warrant that the vessel shall be capable of maintaining and shall maintain on all sea passages, from sea buoy to sea buoy, an average speed and consumption as stipulated in Clause 29(a) above, under fair weather condition not exceeding Beaufort force four and Douglas sea state three and not against adverse current…”

The Court held that the speed warranty in Clause 29(b) was expressed in wide and unqualified terms.  The warranty was that the vessel “shall be capable of maintaining and shall maintain on all sea passages” the specified performance and, as such, the warranty related to the vessel’s actual continuing performance.  Whilst the parties had included an express restriction on the extent of the performance warranty, limiting it to passages under fair weather conditions, they had not excluded the performance warranty in respect of voyages after the vessel had been waiting in warm water ports.

Owners sought to argue that the continuing performance warranty did not apply where the vessel’s performance fell-off because of bottom fouling in the course of contractual trading. This argument was rejected. In his judgment, Mr Justice Phillips concluded that the proposition stated in paragraph 3.75 of Time Charters (the go-to text book for time charter disputes) is too widely stated. He held that where there has been underperformance, it is not a defence (on a continuing performance warranty) for owners to prove that the underperformance was caused by following charterers’ orders UNLESS the underperformance resulted from a risk that owners had not legally assumed responsibility for under the charterparty.

In light of this decision, Owners should be careful to limit the application of speed and performance warranties – for example, by limiting such warranties to passages under fair weather conditions and excluding a performance warranty in respect of voyages taken after a vessel has been waiting in warm water ports. The BIMCO Hull Fouling Clause for Time Charter Parties was produced to try and address issues of hull fouling following a prolonged stay in port (either within or outside a tropical zone).

The BIMCO clause provides that any warranties concerning speed and consumption shall be suspended pending inspection of the vessel’s underwater parts following a stay in port exceeding 15 days (or such other period as the parties may agree). Should Members require further assistance, then please do not hesitate to contact your usual FD&D claims handler.