London Arbitration 1/19 Hold Cleaning – Owners’ calculation of damages

Hold Cleaning – Owners’ calculation of damages

By Carlos Vazquez

In this recent London arbitration, the tribunal was asked to determine whether Owners’ assessment of damages following a breach by the time charterer for failure to redeliver the vessel with clean holds had proper legal basis.

The facts

The vessel was chartered on an amended NYPE 1946 form to perform “2-3 laden legs of minimum duration 40 days”.

Rider clause 29 contained a cargo exclusion clause stating: “…Charterers are allowed to load one dirty cargo out of sulphur, salt, petcoke and concentrates as per relevant protective clause and provided not the last cargo. Coal not to be allowed as last cargo.”[emphasis]

Additional clause 34 gave Charterers the option to redeliver the vessel with dirty holds as follows: ”Charterers shall have the option of redelivering the Vessel without cleaning of holds against paying the Owners a lump sum of USD 5,000, including removal of dunnage/bark/debris.” (the “ILOHC provision”).

The vessel was delivered on 12 December to perform a first voyage with a full cargo of coal. A second voyage was thereafter carried out, this time involving a cargo of anthracite (a type of coal). The vessel was then redelivered to Owners on 29 January with unclean holds. As a result Owners engaged the crew to wash the holds, not an easy task as coal stains remained and hand cleaning was required. Cleaning took place until 7 February and the vessel was fixed two days later under a separate employment.

Owners presented a claim for the period it took them to clean the holds after redelivery, namely, from 29 January to 7 February. They assessed their loss as the hire equivalent to those 9 days, a total of USD 100,533.44.

Charterers for their part, admitted that while they were in breach of charter for loading coal as a last cargo, Owners’ losses should be limited to any resultant extra cleaning. Charterers asserted that there was no legal basis to support Owners’ assessment of their damages as being effectively an extended period of hire. Charterers argued that Owners had failed to offer any evidence of any cleaning operations or extra costs. Charterers further pleaded that the only evidence submitted by Owners was that their vessel had been fixed on subjects on 7 February and that said subjects were lifted on 9 February. There was no proof according to Charterers that Owners may have been late in performing the follow-on fixture nor details available suggesting that for a full period of 9 days Owners’ crew was performing cleaning operations. Charterers accepted that USD 5,000 was due to Owners pursuant to the ILOHC provision in the charter but that there were not due any compensation beyond this figure.

The Arbitrators’ decision

The arbitrators held that Owners’ claim would be dismissed in its entirety.  The arbitrators agreed with Charterers in that Owners had failed to formulate, particularise or prove any additional costs and time thereby incurred, or any losses. The arbitrators observed that only one conclusion could be drawn from the total lack of evidence submitted by Owners and that is that no losses or extra costs had in fact been incurred.

Conclusion

The case raises several interesting observations, not least that a grasping Owner may get short shrift by advancing a claim in a manner that will allow him to recover losses that may not have actually been suffered. While perhaps the tribunal’s decision may be seen as harsh (if Owners truly sustained extra cleaning costs), their aspirations to recover a much higher compensation attracted little sympathy from the arbitrators particularly given their total failure to particularise any extra cleaning expenses.