It is a well-recognised principle established in Monroe Brothers Limited v Ryan [1935] 2 KB 28 that an absolute obligation would be imposed on a ship owner to commence the voyage by a date when it is reasonably certain that the ship would arrive at the port of loading on or around the “expected readiness to load date” (“ERTL Date”) if the owner has a duty under a charterparty to proceed with all convenient speed to the loading port and the charterparty gives a date when the ship is expected to load (the “Monroe Obligation”).  The same would also apply to the situation where the charterparty provides an estimated time of arrival (“ETA”) at the load port.  Nevertheless, it had been unclear in law whether such a stringent duty would also exist even if there is no provision concerning an ERTL Date or an ETA. 

Background

In CSSA Chartering and Shipping Services S.A. v Mitsui O.S.K. Lines Ltd [2017] EWHC 2579 (Comm), the claimant is a charterer who entered into a charterparty with a ship owner to charter the vessel, “Pacific Voyager”, to perform laden voyages at various locations.  For reasons not being the fault of any parties, the ship had suffered unpreventable rapid water ingress in its tank and it hit a submerged object in Suez Canal.  As a result, the ship was required to be drydocked for repairs for a period of time before it could continue to perform any future charter voyage. 

The charterer terminated the charterparty on 6 February 2015 and commenced legal action against the ship owner for recovery of damages.  However, the charterparty did not provide an ERTL Date but only a common express power for the charterer to terminate the charterparty if the ship failed to arrive before the cancelling date, which was agreed as 4 February 2015.  As such, the major battle line of the parties before the Court was whether in the absence of an ERTL Date in the charterparty the Monroe Obligation would still be imposed on the ship owner.

Ship Owner’s Arguments

Before the Court, the ship owner accepted that it would have had a Monroe Obligation if the charterparty included an ERTL Date, but the ship owner argued that it should not have such an obligation if the charterparty only included a cancelling date.  It contended that estimation could not be made without an express ERTL Date for there to impose the ship owner a Monroe Obligation.  The ship owner accordingly took the stance that cancelling of the charterparty was merely a contractual option for the charterer to exercise if it thought fit but does not automatically impose a Monroe Obligation on the ship owner.  The ship owner further contended that the only obligation could have been implied on it would be the duty to exercise due diligence to manage the ship to arrive at the loading port on or before the cancelling date. 

Court’s Analysis

While the ship owner tried to shift as much obligation as it could, the Court rejected the contention that the Monroe’s Obligation would only arise if both an ERTL Date and all convenient speed/utmost despatch are present and the duty to proceed was merely a due diligence one in the absence of an express ERTL Date or an ETA. 

In this case, the charterparty in fact contained several estimated time of arrival for the completion of the previous charter, which could be seen as equivalent to an ETA at the loading port and thus could be taken into account to ascertain the expected time when the ship could be expected to begin the approach voyage.  The Court made it clear that that the voyage should have commenced immediately or at least within a reasonable time from the date of the charter even if in the absence of any express clause stipulating the time for the voyage to begin.  A reasonable period of time would be judged by referring to the expectations of the parties as to when loading would commence.

The Court also acknowledged the concern of risk allocation between the charterer and the ship owner and the conflicting interests thereof, because the latter would have to bear the risk of delay before commencing the service under the charterparty if it had another intermediate voyage, but plainly the charterer would like to know as accurately as possible the date on which the ship could arrive at the target loading port for the purpose of performing subsequent tasks.  Therefore, a so-called “due diligence obligation”, as advanced by the Counsel acting for the ship owner, would in fact provide an undesirable commercial uncertainty for the parties.  An obligation to proceed would certainly arise at the time when it was reasonably certain that the vessel will arrive at the loading port on or around the ERTL Date and the obligation would have arisen at a reasonable period of time by reference to the relevant charterparty terms.

Conclusion

This novel but remarkable decision clarifies the ship owners’ obligation to proceed with the voyage whether or not the ERTL Date or an ETA was stated in the charterparty.  As such, ship owners must bear in mind that the Monroe Obligation would exist even if without a provision concerning an ERTL Date or an ETA.

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.