Hill Harmony - Which way now?
Every mainstream time charter form will contain a term which places the Master under the orders of the charterers as to the employment of the ship. The Master must follow these orders within the bounds of safety of his ship, crew and cargo. In return, the owners generally receive an indemnity (express or implied) for the consequences of complying with these orders. This should be contrasted with the navigation of the ship. Risks of navigation will generally be owners' risks. For charterparties incorporating a Clause Paramount, owners will normally be exempted from the consequences of any errors of navigation.
The line drawn between employment and navigation is a fine one. Orders to send a ship to a particular port will be orders as to employment. Likewise, orders as to port rotation. But what about the route the ship takes? Is routing also a matter of employment or a matter of navigation ?
This issue has come under close scrutiny in the case of the HILL HARMONY.
The HILL HARMONY was time chartered down a chain of NYPE charters which contained the usual employment clauses but no special routing clauses. The time charterers, on the advice of Ocean Routes, ordered the ship to proceed from Vancouver to Japan by the northerly, great circle route. The Master had experienced heavy weather on a similar voyage some months before. He disregarded the charterers' orders and insisted on taking the longer, southerly rhumb line route. The charterers refused to pay for the extra time taken and the bunkers consumed. The disponent owners claimed these sums in London arbitration.
The dispute focused on the employment provisions of the charter. The charterers argued that the Master's decision was a breach of their orders as to the employment of the ship; or, alternatively, a breach of the obligation to proceed with utmost despatch. The tribunal agreed. The arbitrators held that the routing instructions were "employment" orders which the Master was bound to follow unless he could justify his refusal to do so. They further found that his refusal, based on his experience on the particular voyage some months before, was unjustified.
The owners appealed. Both the High Court and Court of Appeal found in the owners' favour. The High Court ruled that routing was a decision as to navigation. Once that was established, any route taken by the Master, whether justified or not, would suffice. The Court of Appeal largely agreed and held that, in absence of any special provisions, the Master could take any reasonable route.
The case was finally referred to the House of Lords. The highest English appeal court restored the decision of the arbitration tribunal and found in favour of the charterers.
The House of Lords ruled that an order as to routing is an employment order. Time charterers are therefore entitled to give routing orders to the Master which, unless they compromise the safety of the ship, must be followed. In addition, it was held that the Master must follow the shortest and quickest route unless there are navigational reasons for not doing so.
Navigation is still the Master's responsibility. He is at liberty to change course for safety reasons. He can refuse to enter a port he considers to be unsafe and can, similarly, leave port if it becomes unsafe. The HILL HARMONY decision does not alter these principles. Neither does it give the time charterers carte blanche to order the ship to take any route, however unsafe. The time charterers have the right to use the ship in a commercially advantageous way and can determine the route the ship takes, as a matter of employment. However they cannot place the ship, her cargo and crew in danger.
The circumstances in which a Master disagrees with the routing of an entire voyage will probably be rare. When a Master does disagree, he must have a sound reason linked to safety which justifies a different route. Owners who cannot justify their Master's decision will bear the risk of that decision. In the words of the leading judgements:
"The choice of ocean route was, in the absence of some overriding factor, a matter of the employment of the vessel, her scheduling, her trading, so as to exploit her earning capacity..." (Lord Hobhouse)
"So, in the absence of..'navigational or other reasons' for not taking the shortest and quickest route, the master was contractually obliged to take it..
.But, subject to safety considerations and the specific terms of the charter, charterers may not only order the vessel to sail from A to B, but may also direct the route to be followed between the two." (Lord Bingham)
A similar result was achieved by charterers in a New York arbitration referred to by the House of Lords (Reefer Express Lines Pty Ltd v Cool Carriers).
In that case, on facts less favourable to the charterers, the tribunal also held that the Master also could not take a longer voyage contrary to the charterers' orders
You may also be interested in:
The United Nations Commission on International Trade Law (UNCITRAL) approved on 30 June 2022 a draft convention (the Draft Convention) on the effect of judicial sales
The UK Club would like to draw Members' attention to the latest International Group circular from MARIN on the update on the roll risk estimator excel sheet.
Circular 07/22: Sanctions - The European Union’s 6th Sanctions Package - EU Regulation 833/2014– (the “Regulation”)
[AMENDED 22 JULY] On 21 July 2022 the European Union published a Maintenance and Alignment Package