S.A Marine Corp v. Canfornav

Home ] Up ]

SA Marine Corp. S.A v. Canfornav Limited
Society of Maritime Arbitrators of New York: Austin L. Dooley, Chairman, A.J.Siciliano and Michael A. van Gelder, arbitrators: 17 December 2003
Peter J. Gutowski, of Freehill Hogan and Mahar, for SA Marine Corp
Edward W. Keane, of Mahoney and Keane, for Canfornav

In this case, Owners were, by a majority decision of the arbitration panel, successful in recovering hire that Charterers had deducted in respect of a period of detention arising from a drug search at the port of loading and the time taken to repair a hole cut in the side of the vessel to give access to compartments in which illicit drugs were (mistakenly) thought to have been secreted. The majority held that the words "or restriction" added after the words "any other cause" in the standard off-hire clause of the New York Produce Exchange Form of charterparty were to be read "eiusdem generis" and did not therefore constitute a new and independent off-hire event.

DMC Category Rating: Confirmed

SA Marine Corp. as disponent owners, chartered the m/v Energy Ranger, a bulk carrier of 45,950 metric tonnes deadweight, to Canfornav to carry a full cargo of concentrates from Punta Patache in Chile to Montreal in Canada. The charterparty was on a New York Produce Exchange Form, the off-hire clause of which had been amended to read:

"That in the event of loss of time from deficiency and/or default of men including strike or stoppages by Master, Officers and crew or deficiency of stores, fire, breakdown or damages to hull, machinery or equipment, grounding detention by average accident to ship or cargo, drydocking for the purpose of examination or painting bottom, or by any other cause or restriction preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost; and 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 until the vessel has regained the same or equidistant position, and the cost of any extra fuel consumed in consequence thereof, and all extra expenses shall be deducted from the hire".

On 31 January 2002, whilst she was loading at Punta Patache in January 2002, the vessel was served with an order of detention signed by the Captain of the Port. The order, which had been issued at the urging of the United States Drug Enforcement Agency ("DEA"), alleged that illicit drugs, believed to be cocaine, were hidden aboard the "Energy Ranger". The authorities then conducted a rigorous search of the vessel, including the cutting of a hole in the ship’s side to give access to suspect ballast tanks. On February 6, the detention order was formally lifted, the search having revealed nothing untoward. The hole in the ship’s side was temporarily patched. The vessel completed loading and sailed for Montreal the following day.

She arrived Montreal on 26 February and completed discharge on 6 March. Repairs to the patched access hole delayed her departure from Montreal a further day. She was re-delivered to owners on 11 March, on exiting the St. Lawrence River.

Charterers deducted hire for the period of the detention at Punta Patache and for the time spent at Montreal in repairing the access hole, for a total of US$89,530.00, which Owners initiated arbitration proceedings to recover.

Owners contended that the words "or restriction" in the off-hire clause were to be read subject to the ‘eiusdem generis’ (of the same type) rule of construction. On this basis, the detention suffered in Chile was not akin to any of the other circumstances addressed in the off-hire clause and therefore the charterers were not entitled to put the ship off-hire for the time lost in consequence of it. Charterers, on the other hand, maintained that the detention at Punta Patache was a classic example of the type of "restriction" addressed by the words in the off-hire clause. The purpose of inserting this word was, according to the charterers, to create an entirely new off-hire event, distinctive from and unrelated to those found in the printed version of clause 15 (the off-hire clause) of the New York Produce Exchange form of charterparty. Thus, in the charterers’ view, the eiusdem generis rule of construction was inapplicable in this case.

The panel thought it important to note that neither Owners nor Charterers had had any part in the events which had brought about the detention of the vessel in Punta Patache. On the contrary, that responsibility, the panel said, "appears to rest entirely with the DEA….. Whatever reasons the DEA may have had for acting as it did, the subsequent exhaustive search of the vessel uncovered no evidence of [the smuggling of large quantities of illicit drugs]." In consequence, the panel was charged with the task of "deciding which innocent party, Owners or Charterers, is contractually required to bear the loss."

The panel noted that "off-hire clauses serve to allocate stated risks between contract partners and operate independently of fault." A majority of the panel, Messrs. Siciliano and Dooley, then held that the words "or restriction" did not operate as a new or independent off-hire event; rather they were an extension of the phrase "any other cause". In reaching this conclusion, the majority were influenced by the fact that the same words appeared in a rider clause to the charterparty, which allowed the charterers to put the ship off-hire for "….loss of time, delay or impossibility of or restriction on the full working of the ship, by reason of its registration, flag or the terms on which the crew have been engaged." They said that it was clear that the words "or restriction", as used in that clause, had no independent meaning from the named lost time events which preceded them.

The majority agreed with the "long line of New York arbitration and court decisions which hold that unless the word "whatsoever" or its equal appears after "any other cause", the eiusdem generis rule of contract interpretation applies to limit permitted off-hire events to those of the same character as those already identified (in the off-hire clause). Here the cause of the vessel’s detention was neither among nor akin to those off-hire events enumerated within clause 15 (the off-hire clause)."

As regards the time spent in Montreal in repairing the access hole, the panel were satisfied that the repairs were the unavoidable consequence of the drug search in Punta Patache. Accordingly, the majority held that the vessel was not off-hire during the repair period, on grounds similar to their conclusion in respect of the detention in Chile. The costs of the repair had already been borne by the Owners.

Owners were therefore awarded the US$89,530.00 they claimed, together with legal costs of US$26,500.00.

The third arbitrator, Mr. Van Gelder delivered a reasoned dissenting award on the off-hire issues.



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.