“CV STEALTH” (No.2) – Cause of vessel’s detention

November 2017

Were Sub-Charterers' orders still an effective cause of the vessel's detention? Can a credit against damages be given before any saving has been made?

The case relates to the same charterparty and circumstances described in ST Shipping and Transport Pte Ltd v Space Shipping Ltd [2016] EWHC 880 (Comm) ("CV STEALTH"), namely the detention of the vessel in Puerto La Cruz, Venezuela, and relates to further claims in the arbitration as a result of the vessel's continued detention.

ST Shipping and Transport Pte Ltd v Space Shipping Ltd and Space Shipping Ltd v ST Shipping and Transport Pte Ltd [2017] EWHC 2808 (Comm)

Lax & Co LLP acted for the Respondent, Space Shipping Ltd (Disponent Owners) and Clyde & Co LLP acted for the Claimant, ST Shipping and Transport Pte Ltd (Sub-Charterers).

Disponent Owners made further claims in arbitration for trading losses between July 2015 and September 2015 and various expenses arising from the detention. The Tribunal published a second award which did not allow the trading losses claim but which set out at least USD800,000 of expenses which the arbitrator held were in principle recoverable. He declined to make a monetary award on the basis that Disponent Owners had provisionally made a saving estimated to be around USD1.4m for drydocking expenses which may have to be credited against sums payable by Sub-Charterers. At the time of the publication of the second award, there was an outstanding question as to whether or not the bareboat charter between Disponent Owners and Head Owners was frustrated and also whether the vessel was a CTL and should have been abandoned to underwriters.

It was subsequently determined in the head arbitration that the bareboat charter had not been frustrated. As a result, Disponent Owners sought a monetary award against Sub-Charterers for USD4.37m in respect of bareboat hire and USD3.5m for expenses incurred as a result of the detention between July 2015 and March 2017. Disponent Owners further sought the lifting of the drydocking credit. By his fourth award, the arbitrator held that the vessel was not a CTL, Sub-Charterers' orders remained the cause of Disponent Owners' loss to March 2017 and awarded the hire sought as well as expenses (subject to some adjustments), whilst the drydocking credit would remain in place.

In the High Court before Mr Justice Popplewell, Sub-Charterers appealed the arbitrator's finding as to causation. Disponent Owners appealed against the continued application of the drydocking credit.

Sub-Charterers' appeal

Sub-Charterers argued that the arbitrator had asked himself the wrong question when it came to causation – what he should have asked was whether Sub-Charterers' order continued to be an effective cause of the continued detention of the vessel.

The parties did not disagree on the test for causation itself – that the cause be an effective cause and that where an effective cause is operative, it will only be replaced by an intervening cause if that intervening cause "obliterates" the wrongdoing as per Borealis v Geogas Trading [2011] 1 Lloyds Rep 482 at [44].

Sub-Charterers argued that the sole effective cause of the detention had become the unreasonable refusal by the Venezuelan courts to release the vessel, when on any view there became no basis to continue to detain the ship.

Instead, the arbitrator had asked whether anything had changed since the original detention (he found that it had not) and in asking himself that question, had made an error of law. Sub-Charterers argued that it was necessary for the arbitrator to review all of the steps taken in the various Venezuelan proceedings (including steps taken by both Disponent Owners and Sub-Charterers in some of those proceedings), and review the various unreasonable decisions made in the Venezuelan court, the cumulative effect of which could break the chain of causation.

The Court rejected Sub-Charterers' appeal. It found that the arbitrator had made a finding of fact that Sub-Charterers' orders had caused the detention to July 2015 in his first award and had implicitly made the same finding in the second award to September 2015 in awarding Disponent Owners their expenses.

Disponent Owners' appeal

The arbitrator held that the drydocking credit of USD1.4m should remain in place on the basis that the vessel may never be redelivered to Head Owners and therefore Disponent Owners may never have to pay those costs which Disponent Owners otherwise would incur in accordance with their obligations under the bareboat charter.

Disponent Owners argued that the arbitrator should not have made such a deduction, which could only be made where Disponent Owners were found to have received a benefit which arose from their breach. Disponent Owners argued that a potential future saving could not be made against their entitlement to hire and expenses, where that future saving may never be made.

The Court did not accept Disponent Owners' argument and held that there could not be any criticism of the arbitrator's approach to wait and see what happened.

In relation to both appeals, the Court held that neither appeal fell within clause 41 of the charter which provided for appeals on a point of law to be made without permission of the Court. Permission in both appeals was required and was refused.

Issued by

Catriona Lewis

Associate

Lax & Co LLP

Dir: +44 (0) 20 7397 0542

catriona.lewis@laxlaw.co.uk

May 14th, 2018

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