The Grande Island – What, if anything, can deleted words mean in a standard form charterparty?

The English Court has dismissed an appeal brought under s.69 of the Arbitration Act 1996, holding that ‘reasonable preventive measures’ as defined in the BIMCO Piracy Clause for Time Charter Parties 2013 can include the vessel leaving an area exposed to the risk of piracy, even if the parties have deleted the provisions conferring the right to do so.

The facts

Pacific Basin Supramax Limited (“Owners”) entered into a time trip charterparty with Olam International Limited (“Charterers”) for The Grande Island (the “Vessel”) to carry a cargo of bulk wheat from Ghent to Nigeria (the “Charterparty”).

The Charterparty was based on the NYPE form and included the BIMCO Piracy Clause for Time Charter Parties 2013 (the “Piracy Clause”). Sub-clauses (a) and (b) of the Piracy Clause were deleted.

The Charterparty also contained a bespoke ‘Nigerian trading’ clause, which provided for armed naval guards, a citadel, and specific arrangements for the Vessel to wait at alternative locations in event of congestion at the ports of Lagos, Harcourt and Calabar. Critically, the port of Warri was not included in that list.

Further, the off-hire clause provided that hire was to be suspended for the period of any deviation, but the Piracy Clause provided that any action taken in accordance with that clause was not to be deemed a deviation.

The Vessel was due to discharge at Warri in the Gulf of Guinea but was unable to berth. Owners did not want to wait at the Warri anchorage due to the perceived risk of piracy. Owners therefore ordered the Vessel to return to Lagos.

Owners’ position was that the Vessel’s actions were permitted under the Piracy Clause, and that the Vessel had been on hire during the relevant period. Charterers argued that the deletion of sub-clauses (a) and (b) of the Piracy Clause deprived Owners of the liberty to divert the Vessel as they did, and that the Vessel had therefore been off-hire during the relevant period.

The Award

In arbitration, the Tribunal acknowledged that the parties had deleted sub-clauses (a) and (b) of the Piracy Clause, which meant that Owners were not entitled to refuse to call or remain at an area exposed to the risk of piracy as stated in those sub-clauses. However, sub-clause (c) entitled Owners to take “reasonable preventive measures” to protect the Vessel, crew and cargo if the Vessel passed through an area in which there was a risk of piracy. The Tribunal held that the relevant area was in fact exposed to a risk of piracy, and that Owners’ actions constituted a “reasonable preventative measure”. The Vessel therefore remained on hire.

The appeal

Charterers appealed to the English High Court on the question of whether sub-clause (c) of the Piracy Clause entitled Owners to refuse to remain in an area due to piracy risk while the Vessel remained on hire, given that: (i) the parties expressly excluded the provisions which would have given Owners that same entitlement (i.e. sub-clauses (a) and (b) of the Piracy Clause); and (ii) the parties expressly agreed in the Nigerian trading clause that the Vessel could withdraw to wait at areas alternative to Port Harcourt or Calabar, but had not agreed the same in relation to Warri.

Main arguments on appeal

On behalf of the appellant Charterers, it was argued that the only express right to leave an area that the Piracy Clause conferred was contained in sub-clause (a), which had been deleted by the parties with the objective intention of removing that right. It was further submitted that the absence of Warri from the list of ports in the Nigerian trading clause excluded any right to leave Warri. If, as the Charterers submitted, the Owners did not have the benefit of the Piracy Clause (or the war risks and liberty clauses in the Charterparty), the Vessel was off hire for the duration of its deviation to Lagos.

Owners accepted that the deletion of sub-clauses (a) and (b) was intended to remove the rights conferred by those sub-clauses, but argued that this had no impact on the construction of sub-clause (c). Sub-clauses (a) and (b) on the one hand, and sub-clause (c) on the other, conferred overlapping but independent rights, and had different triggers. There was no reason why leaving Warri and returning to Lagos could not be a ‘reasonable preventative measure’ permitted to Owners under sub-clause (c).

The High Court decision

HHJ Hodge KC (the “Judge”) dismissed the appeal, a decision arrived at by two alternative routes.

First, the deletion of sub-clauses (a) and (b) were not permissible aids to the interpretation of sub-clause (c). He referred to the leading authority of Mopani Copper Mines plc v Millenium Underwriting Limited [2008] EWHC 1331 (Comm), in which it was held that deleted words may only be referred to as an aid to construction if the remaining words are ambiguous on their own. The Judge held that there was no ambiguity in sub-clause (c), and therefore it was correct for him to construe sub-clause (c) without considering the potential impact of the parties having deleted sub-clauses (a) and (b).

In construing sub-clause (c), there was nothing to indicate that departure from the affected area could not constitute ‘reasonable preventative measures’. The express reference to ‘re-routeing within the Area’, which Charterers had argued excluded departure to Lagos, was qualified by the words ‘including but not limited to’ (emphasis added). It did not make commercial sense for the parties to agree that a deviation to avoid danger within an area at risk of piracy would leave the Vessel on-hire, but that she would go off-hire as soon as she transited out of that area as part of a ‘reasonable preventative measure’.

In addition, the Charterparty’s war risks clause expressly provided that the Vessel ‘shall not be obliged to proceed or required to continue to or through’ any area exposed to war risks, which included the risk of piracy. This provision reinforced the interpretation that Owners’ liberty to depart from an area exposed to piracy risks was contemplated within the Charterparty as a whole.

Second, the Judge agreed with Owners’ argument that the rights conferred on Owners in sub-clauses (a) and (b) were independent of, and additional to, those conferred in sub-clause (c). Therefore, even if he had held that the deleted sub-clauses (a) and (b) were permissible as an aid to the construction of (c), that did not mean that the range of ‘reasonable preventive measures’ was limited to measures taken within the area of risk.

Comment

This decision is an important reminder of the impact of deleting wording in a standard form charterparty, of which NYPE is a paradigm example, only to then find you want to invoke that wording in a later dispute over the meaning of some, usually related, wording that remains.

As long as the remaining wording is clear and unambiguous, the law will give effect to it. The Court made it clear in this case that the deleted words will effectively be treated as never having existed. After all, the parties intentionally turned their mind to removing those words so that they had no effect and did not form part of the parties’ bargain. Only if there is any ambiguity will the law allow deleted words to be examined as an aid to construction, and those cases are likely to be relatively rare.

View the annex to this article here.