Speed and consumption disputes under English law
The purpose of this brief article is to examine the general position regarding speed and performance disputes under English law and in particular with reference to the speed and performance warranty contained within the New York Produce Exchange time form, l993. The general words used in this type of charter are:-
"speed about...knots, fully laden, in good weather conditions up to and including maximum force...on the Beaufort winscale, on a consumption of about...long/metric tonnes of...".
It is this form of wording which appears more often than not in claims that come before the Club. It may be worth mentioning that this particular warranty wording will differ in alternative forms of charterparty. For example: The "Baltime 1939" charter clause 12 refers to the ..."speed capability in knots (about) on a consumption in tonnes (about).
In most cases when the ship has failed to perform in terms of speed and/or consumption it is usual for the charterer to bring the claim in the form of a claim for damages for breach of this particular warranty. It may be worth mentioning briefly other relevant clauses that may give the claimant alternative grounds on which to claim.
The alternative charterparty provisions which may be considered to be relevant are:-
Line 5 - "with hull, machinery and equipment in a thoroughly efficient state"
Lines 21/22 - "vessel on her delivery to be tight, staunch, strong and in every way fitted for the service"
Clause 1 - "that the owners shall keep the vessel in a thoroughly efficient state in hull, machinery and equipment for and during the service"
Clause 8 - "the Captain shall prosecute his voyages with the utmost dispatch".
Clause 15 - "if upon the voyage the speed be reduced by defect in or breakdown of any part of her hull, machinery or equipment, the time so lost and the cost of any extra fuel consumed in consequence thereof, and all extra expenses shall be deducted from hire."
When it is not possible to establish a claim for breach of the speed warranty it is, however, sometimes possible to argue in the alternative either that the loss of speed was caused by a defect existing at the time of delivery and/or that the defect arose after delivery and the owners failed to take reasonable steps to repair it and are accordingly in breach of their obligation to maintain the vessel in a thoroughly efficient state during service. Turning to clause 8 there is the possibility to argue that owners are at fault for failing to proceed with dispatch. This would probably be much more difficult to establish since the master has navigational control of his vessel, the master cannot be blamed if he selects a route to avoid expected bad weather, or if he slows down because of fog or if he heaves to avoid slamming by the waves in heavy seas. Errors of navigation are mutually accepted under clause 16 of the charter, although this has been held not to excuse negligent errors of navigation. The sort of occasion when a claim under clause (8) is perhaps conceivable is where the master wrongfully delays obeying a legitimate order of charterers to enter a port or to load a cargo.
One might also consider breach of the maintenance obligation in clause 1 of the charter. This is a continuing warranty and does not apply only on delivery. It is however not an absolute warranty and if the engine breaks down and needs a new camshaft for example the owners cannot be expected to fix the engine immediately. The owners are only obliged to act reasonably. The usual route for a speed and consumption claim is under the warranty contained in lines 9 and 10.
WORDING OF SPEED AND CONSUMPTION WARRANTY
*Words used to describe ship's capability
*Words used to describe ship's capability
Care needs to be taken when considering whether a ship has breached it's performance warranty. The warranty only applies when the ship is fully laden. Proof from owners that the ship was able to achieve 15 knots on the ballast voyage to the delivery port is not proof that the warranty was met, the vessel must be able to make 15 knots or about 15 knots when laden.
The warranty refers to the ship's "capability". It is arguable that if technical evidence is produced to show that the ship is capable of achieving the speeds warranted even if those speeds were not actually met then the performance warranty has been adhered to. In practice the arbitrators will require and examine evidence of actual performance.
We are chiefly concerned with the NYPE charter form and more specifically the 93 version. This charter leaves a space blank for parties to stipulate what they regard as good weather. As most people have had experience of speed and performance questions the usual figure inserted is force four on the Beaufort scale. Accordingly winds of force four and winds below force four are considered as good weather. The owner would contend since the warranty only relates to how the ship should perform in good weather, any data which indicates weather was bad should be discarded. The Courts in response to this have said that of course it is necessary to find good weather days and establish whether the ship has under performed during those days, if the ship did under perform on the good weather days then it is logical to assume that she also under performed in bad weather.
*Interpretation of word "about"
In recent years there appears to have been a general acceptance that the word "about" incorporated in a speed and performance clause gives a margin of 0.5 of a knot either side. It is probably, not correct to talk about margins in percentage terms. Some American arbitrators do apply margins in percentage terms. The general assumption that "about" is reflected by 0.5 should not be taken as an absolute. The l987 Court of Appeal case of the AL BIDA, where the Court agreed with the arbitrator's arguments said that the latitude as to speed must depend on the ship's configuration, size, draft and trim. Technically therefore if the ship's configuration is a particularly unusual or strange one it is possible that the margin could be extended or restricted. It could be argued that the large oil tanker might need a smaller tolerance than say a fully laden container vessel. However as a general rule of thumb London arbitrators do tend to say that for vessels up to 15 knots you should probably allow half a knot for the word "about". There are instances where arbitrators have allowed margins larger than 0.5 if the ship is warranted to steam at more than 15 knots.
So far we have only applied the word 'about' to the warranted speed. There are, however, arbitration decisions that have applied the 'margin' to the consumption element of the warranty. In one London arbitration ruling, the arbitrator held that the word 'about' allowed 0.5 knot margin to the speed and a 4% margin to consumption.
*CONSIDERATION FOR OWNERS IN DEFENDING PERFORMANCE CLAIMS
There are numerous reasons why a vessel can under perform without owners being in breach of charter and without an event occurring within the off hire clause. Briefly some Defences that the owners may legitimately consider are as follows:-
i) Charterers supplied bad fuel. Such allegations raise difficult problems of proof. Normally the bunker supplier will have a sample, allegedly taken from the supply barge, which will show the fuel specification. It is very difficult for owners to overcome such evidence unless they have taken a manifold drip sample at the time of receipt of the bunkers.
ii) There was bad weather on the voyage. Very often charterers argue for under performance on the basis of a voyage plan prepared by a routing company which only gives details of anticipated weather. Clearly that is not good enough since the actual weather on the voyage may well have been different from what was anticipated. Nor as Reliance on post voyage analysis does not guarantee success. For one thing the routing organisation may do their time loss calculation in an unapproved manner. For another thing the routing organisation may get weather reports from vessels in the vicinity rather than from the actual vessel itself. London arbitrators and the Courts will appreciate that weather conditions can vary over a short distance. The best evidence of the conditions experienced by the vessel should be the experience of the man on the spot and that should be recorded in the log books. However it may not be possible to rely on these obvious arguments if there is a clear clause in the charterparty providing that Ocean Routes data be used in the event of consistent discrepancies between owners and charterer's evidence.
iii) Allowance should be made for the word "about" both in respect of speed and in respect of fuel consumption.
iv) Savings in fuel may reduce the damages.
v) The master made a sensible navigation decision to avoid bad weather or to deviate to save life or property. Alternatively, if he made a navigational error, that is accepted under clause 16 and/or the Hague rules.
*CALCULATION OF SPEED AND CONSUMPTION CLAIM
We can identify two methods of calculation of which a numerical example will follow to illustrate.
*The first method of calculation is to take the vessel's average good weather performance and to apply that performance to the period under review.
*The alternative method of calculation is to take the vessel's overall performance during the period under review and then to apply allowances to take into account weather conditions. Please see appendix II.
First method of calculation - vessel's average good weather performance applied to period under review.
Description in charterparty "about 15 knots on 20 mt IFO in good weather conditions.
GOOD WEATHER BAD WEATHER TOTAL
Distance sailed 3,000.00 miles 1,500.00 miles 4500.00 miles
Time taken 215 hrs 145.33 hrs 360.33 hrs
Fuel consumed 195 mt 105 mt 300 mt
Vessel sailed good weather distance of 3,000 miles in 215 hours 13.95 knots
If vessel had maintained average good weather speed of 13.95 knots over total distance of 4,500 miles 322.58 hours, or 13.44 days
If vessel had maintained average good weather speed of 14.5 knots 310.34 hours, 12.93 days, to sail 4,500 miles
Charterers can therefore claim for 0.51 days 13.44 days less 12.93 days
Vessel consumed 195 mt in good weather conditions 215 hours, 8.958 days = 21.77 mt per day
If vessel had used average good weather consumption of 21.77 mt per day for time voyage would have taken 13.44 days she would have consumed 292.59mt
At the warranted consumption of 20 mt per day for time voyage should have taken 12.93 days she should have consumed 258.60mt
Charterers can therefore claim 33.99mt
Second method of calculation taking vessel's overall performance during period under review and applying allowances to take into account weather conditions.
Description in charterparty: "about 15 knots on 20 mt IFO in good weather conditions".
Total Distance 4,500 miles
Total time taken 360.33 hours
Total fuel consumed 300 mt IFO
Appropriate allowance for adverse wind and sea state 1.5 knots
Vessel should have maintained warranted speed of 15 knots less 0.5 knots for "about" less 1.5 knots for wind and sea state plus 0.5 knot for current 13.5 knots
At 13.5 knots, vessel should have sailed 4,500 miles in 333.33 hours
As vessel actually took 360.33 hours, charterers can claim for 27 hours lost time
Vessel should have taken 333.33 (13.88 days), consuming 20 mt per day
Vessel should have consumed 277.60 mt IFO
Vessel actually consumed 300.00 mt IFO, charterers can claim the cost of 22.40 mt IFO
(Had the vessel consumed less than 277.60 mt, owners would be entitled to credit for the bunkers saved unless the speed claim is for off-hire instead of damages).
List of useful cases
*The EVDOXIA (1980) 2 Lloyd's Rep. 107
Ocean Routes' evidence was accepted in a London Arbitration in preference to the log entries, as the log did not record an appropriate reduction in RPM in alleged heavy weather conditions and as, according to the logs, soundings were taken when the alleged conditions would not have permitted such operations.
*The RIJN (1981) 2 Lloyd's Rep. 267
As the accumulation of hull growth during an abnormally long stay in tropical waters (3 months at Lorneco Marques) resulted from charterers' own instructions, they could not claim damages for the vessel's reduced speed.
*London Arbitration (1983) LMLN 98
Log evidence as to weather was accepted in preference to Ocean Routes' evidence.
A 1 knot allowance was given for bad weather up to force 5/6.
"good weather and smooth water" in the Baltime Form was treated the same as "good weather conditions" in the NYPE Form.
restricted visibility did not prevent the weather being "good" as speed was not reduced in accordance with regulations.
*The IOANNA (1985) 2 Lloyd's Rep. 164
Fouling which existed when the vessel was delivered constituted a "defect in the hull" enabling charterers to put the vessel off hire.
Owners were not entitled to credit for bunkers saved as the speed claim was brought as an off hire claim.
*London Arbitration 12/1985 LMLN 158
Owners were allowed double benefit where the word "about" qualified the speed and the consumption description.
0.5 knot was allowed for "about" in relation to speed.
4% was allowed for "about" in relation to consumption.
"good weather and smooth water" was treated as being up to and including Beaufort Force 4 conditions.
*London Arbitration 2/1978 LMLN 188
Where the description of the vessel's speed and consumption were preceded with "Description: all about", owners were allowed double benefit for "about".
5% was allowed for "about" in relation to consumption.
As the speed claim was brought for damages not for off hire, owners were entitled to credit for bunkers saved.
*The "AL BIDA" (1987) 1 Lloyd's Rep. 124 - (Court of Appeal)
Where the vessel under-performed on certain voyages and over-performed on other voyages, charterers were entitled to claim in respect of the periods of under-performance, without owners being given any credit for the periods of over-performance (although the description of the vessel was preceded by the words "capable of maintaining").
Owners were not entitled to credit for bunkers save where the "claim was brought as off hire claim".
No precise speed allowance can be fixed in law for the word "about" as a reasonable margin must be assessed taking into account factors such as the ship's configuration, size, draft and trim.
*The DIDYMI (1988) 1 Lloyd's Rep. 108 (Court of Appeal)
Where a charterparty was for a five year period and provided for a guaranteed average speed in good weather conditions, charterers' speed claim was calculated by applying an average good weather speed to the entire charterparty.
*London Arbitration Award (Unpublished)
Where a charterparty stated that the vessel could steam "fully laden, under good weather conditions about 12.5/13 knots...", the Arbitration Tribunal decided that the correct approach was to reduce the normal 0.5 knot allowance for "about" to 0.25 knots applied to the lower end of the range; consequently, the vessel was required to perform at 12.25 knots.
*The GAS ENTERPRISE (1993) 1 Lloyd's Rep. 352
Although the charterparty provided for the performance of the vessel to be assessed by reference to her average speed and bunker consumption during good weather conditions, the Court of Appeal held that, in order to calculate the performance claim, charterers were entitled to apply the vessel's good weather performance to the entire period under review since, if a vessel is under-performing in good weather, she is equally likely to be under-performing in bad weather.