Bottiglieri v. Cosco Qingdao

Home ] Up ]

Bottiglieri Di Navigazione Spa v. Cosco Qingdao Ocean Shipping Co
English Commercial Court: Gloster J.:
[2005] EWHC 244 (Comm): 4 February 2005
Edmund Broadbent, instructed by Swinnerton Moore, for the claimant charterers
Nevil Phillips, instructed by Birketts, for the respondent shipowners
The Court dismissed applications for leave to appeal under s.69 of the Arbitration Act 1996 and for remission to the tribunal on the grounds of serious irregularity under s.68 of the Act in a case where the tribunal had held that where a charterer had not insisted upon the holds of a vessel being cleaned to the charterparty standard upon delivery, notwithstanding that it was well aware that the holds were dirty, it had precluded itself from placing the vessel off-hire or claiming damages for breach of the obligation to clean the vessel, in respect of time lost and expense incurred in cleaning the holds at the load port for the second cargo carried.

DMC Category Rating: Confirmed

The charterers, Bottiglieri, applied for leave to appeal against an arbitrator's award made in favour of Cosco Qingdao ("Cosco"), as disponent owners of the vessel, the "Bunga Saga Lima". In November 2002, Cosco chartered the vessel, a 73,144 tonne deadweight bulk carrier, built in 1998, to Bottiglieri under a timecharterparty on an amended NYPE form. The period of the charter was short, to consist of two or three laden voyages.

In the arbitration, Cosco had claimed US$86,631 in respect of hire. Charterers’ defence to that claim related to the time lost and expenses incurred in connection with the cleaning of the holds at the second load port, Rostock, following the first voyage under the charter. It was common ground that when the vessel was delivered into charterers’ service at Sepetiba, Brazil on 8 December 2002, her holds were dirty with the residues of her previous cargo of coal. The residues did not, however, prevent Bottiglieri from loading its first cargo, iron ore to Poland [not in all holds], but the residues had to be removed before the second cargo, rapeseed in bulk from Rostock to Pakistan, could be loaded, delaying the vessel while her holds were cleaned to a suitable standard. In consequence, Bottiglieri claimed that it should be entitled to deduct a sum as off-hire plus expenses under the charterparty or clause 13 of the fixture note and, alternatively, it was entitled to recover the same amount as damages in respect of Cosco's breach of its delivery obligations under clause 13.

Clause 13 of the fixture note read;
"Owners warrant that vsl’s holds on delivery or arrival first load port to be cleaned, swept washed down with freshwater, dried up free from rust leaks, scale, free from salt and free from residue of previous cargo and in every respect ready to load up to the satisfaction of the local surveyor. Should vessel fail to pass hold inspection Owners to arrange cleaning at their time and expense and the vessel to be off-hire from the time of failure until survey passed in all holds and any extra or directly related expenses incurred to be for Owners acct."

Clause 15 of the charterparty read:
"that in the event of the loss of time from deficiency strikes and/or default of men or stores….machinery or equipment…or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost; …and the cost of any extra fuel consumed in consequence thereof, and all extra expenses shall be deducted from the hire."

Clause 46 of the charterparty read:
On arrival at the first load port vessel’s holds to be clean and suitable to load Charterers’ intended cargo to Shipper’s surveyor’s satisfaction.

Amendment 5: Clause 46 read:
"Cleaning clause: add at end: it is understood that on delivery or upon arrival at first loading port, vessel to be clean per grain standard up to independent surveyor’s satisfaction."

The arbitration tribunal held that as Bottiglieri had not insisted on the cleaning being done on delivery of the vessel, it had lost its right to claim for the loss of time and expense when the cleaning was done before the second cargo was loaded.

Bottliglieri sought leave to appeal under s.69 of the Arbitration Act 1996 on the questions whether:
a) on the true construction of the charterparty, the express provisions of cl.13 of the Fixture Note prevailed over cl.15 of the charter, so as to prevent Charterers putting the vessel off-hire at the second load port because of the dirtiness of the holds upon delivery/arrival at first load port, in circumstances where the Charterers had not earlier, at the first load port, exercised their right under cl.13 either to reject delivery of the vessel or to place her off-hire at the first load port until the holds were brought up to the correct grain standard;
b) by accepting delivery of the vessel without reservation, Charterers waived their right to grain clean holds upon arrival at the second load port (Rostock) and thereby lost their entitlement to place the vessel off-hire at Rostock.

The Charterers also sought an order under s.68 of the Act, remitting the award to the arbitrators for reconsideration on the basis that the Tribunal had been guilty of a serious irregularity, in that
a) the Tribunal concluded that cl.46, Amendment 5 of the charterparty had to be read together with cl.13 of the Fixture Note, with the result that a failure to exercise the right to insist upon cleaning to a grain standard at the first load port under cl. 13 prevented a subsequent complaint that the holds were not grain clean under cl.46, Amendment 5;
b) the Tribunal concluded that Charterers had waived the right to grain clean holds at the first load port and thereby any right to damages for any failure of the holds to be so clean, the basis for that conclusion being Charterers’ awareness of the actual condition of the holds at the first load port and their failure nevertheless to exercise their right to place the vessel off-hire under cl.13;
c) The tribunal’s conclusions in these respects were not founded upon any argument raised by Owners who, with regard to a), had not contended that cl.13 cut down any right to damages for a breach of cl.46 Amendment 5 and who, with regard to b) above, had alleged estoppel/waiver on the basis of representation, reliance and inequity, but not on the basis set out by the tribunal.

As regards the off-hire point, the judge held that the tribunal had been correct in reaching the decision that, unless the vessel was placed off-hire at the first load port under cl.13, Charterers could not rely on the absence of clean holds at the first load port subsequently to place the vessel off-hire. Even if, as here, the vessel’s holds were not clean upon arrival at the second load port, there was, the judge said, "no default on the part of the Owners nor any other off-hire trigger within the meaning of cl.15. The vessel was able to function; the allocation of responsibility for presenting with clean holds was fairly and squarely addressed by cl.13 as was the entitlement to place off-hire."

This finding also dealt with the second point on the off-hire claim. "If I am right," the judge said, "in my conclusion that, as a matter of construction… Charterers had no entitlement under cl.15 in the circumstances of this case, to place the vessel off-hire at the second load port by reason of the prior failure of Qwners to present the vessel with clean holds on delivery or at the first load port, no question of the loss of any such entitlement by waiver or otherwise can arise." On this point too, the tribunal’s conclusions were correct.

Further, the highest at which the Charterers’ could put their challenge was that the tribunal was "arguably wrong". This did not satisfy the requirements of ss.3(c)
of s.69, that the tribunal’s conclusions were "obviously wrong" or "open to serious doubt". There was thus no need for him to deal with the issue whether the questions raised were ones of "public importance" as required by ss.3(c)(ii). She did, however, express doubts in this regard, saying that there was "no evidence that the market required a resolution of the issues of construction which arose in the context of this particular charterparty."

Accordingly, the application to appeal on the off-hire claim was dismissed.

As regard the damages claim, the Charterers’ principal contention was that the Tribunal had decided against them on grounds not raised by either party and which they had been given no reasonable opportunity to answer – in particular, that the Charterers had waived the right to grain clean holds at the first load port and thereby any right to claim damages for the holds not being in that condition. In approaching this issue, the judge reminded herself that, "in interpreting the findings of a tribunal consisting of experienced commercial and professional men, as opposed to lawyers, one should look at the substance of such findings, rather than their form, and that one should approach a reading of the award in a fair, and not in an unduly literal, way. In other words, it is not necessary that an award should contain express findings of fact, provided that the necessary findings may be "spelled out". In her view, it was wrong to suggest that the arguments about waiver were not before the tribunal.

Having examined in detail the various submissions made to the tribunal and the wording of the award, the judge concluded that there was no basis for a challenge to the award on the asserted grounds of irregularity. "The arguments that the right to complain about the breach of cl.46 (Amendment 5)," she said, " and the right to claim damages as a result of such breach had indeed been waived by Charterers or in the circumstances they were estopped from doing so were matters which the Tribunal clearly considered. Further, in my reading of the award, there is no basis for saying that the tribunal decided the claim for damages against the Charterers on points not argued by owners or not in issue between them."

The judge also rejected the Charterers’ further application that they be allowed leave to appeal under s.69 of the Act against the tribunal’s findings on the waiver issue, on the grounds that the award was "obviously wrong" or "open to serious doubt in relation to a question of "general public importance". The judge stated that, in her view, the decision of the tribunal on these issues was not obviously wrong and even if she had come to that conclusion, she did not believe the questions involved to be ones of general public importance, given the relatively small amount of money involved and the fact that the outcome essentially depended on the circumstances of the particular case. "I have no doubt," she said, " that these experienced commercial arbitrators were rightly influenced by the practicalities of Charterers’ failure to insist that the holds were cleaned to the requisite standard at the first load port…where the cleaning would have been a much easier task to have accomplished than at Rostock".

The Charterers’ applications were dismissed accordingly.

Back to Top


These Case Notes have been prepared with care, but neither the Editor nor the International and other Contributors can guarantee that they are free from error, nor that they contain every pertinent point. Reliance should not therefore be placed upon them without independent verification. The Editor and the International and other Contributors disclaim all liability for any loss of whatsoever nature and howsoever arising as a result of others acting or refraining from acting in reliance on the contents of this website and the information to which it gives access. The Editor claims copyright in the content of the website.