The Laconia [1976] 1 Lloyd’s Rep. 395 (C.A.); [1977] 1 Lloyd’s Rep.

315 (H.L.).

A charter of the Laconia required the charterers to pay hire to owners’

dollar account with the First National City Bank’s branch in Moorgate,
London. The charterers’ bank in London, the Midland Bank, sent the
First National Moorgate a payment order issued under the (now
defunct) London Currency Settlement Scheme, a paper-based
system. This instructed the First National to make a payment to the
owners’ account and stated that the First National’s account with the
Midland had been credited with the necessary funds. Under the
scheme, the payment order was regarded as the equivalent of cash.

However, since the payment order had to be processed, the owners’

account was not credited until about 24 hours after the order had
been presented to their bank. In the Court of Appeal, [1976] 1 Lloyd’s
Rep. 395, at page 399, Lord Denning, M.R., said, “The paying bank is
the agent of its own customer to make the payment. The receiving
bank is the agent of its customer to receive it. The banks themselves
regard the ‘payment order’ as equivalent to cash … If the paying bank
had sent actual currency, the payment would be made when it was
handed over the counter to the receiving bank … So also with the
‘payment order”’.

The case went to the House of Lords, [1977] 1 Lloyd's Rep. 315 but
was decided on other grounds.

However, three members of the House expressed tentative opinions

on the point.

Two considered that payment was effective upon delivery of the

payment order to the owners’ bank.

Lord Salmon expressed the view, at page 327, that, “there is no real
difference between a payment in dollar bills and a payment by
payment orders which in the banking world are generally regarded
and accepted as cash”. Lord Salmon rejected the idea that because
time was necessary for processing the payment order, the payment
order did not give the owners immediate use of the funds. He pointed
out that even a cash deposit requires processing before a credit is
raised on a customer’s account: see page 326.

Lord Russell said, at page 333: “I would as at present advised incline

to the view that, a payment order being as between the banks the
equivalent of cash—meaning I take it irrevocable and ‘good’—it
should suffice for punctual payment that such cash equivalent be
tendered in due time to the nominated bank to be credited to the
named account: this was the method of payment laid down: you
cannot pay ‘into’ an account, whether you are tendering cash or its
equivalent.”

Lord Fraser expressed the contrary view, that payment should be

made in sufficient time to enable the owners’ account to be credited
by the due date.

The Right of Withdrawral

In appropriate circumstances a ship owner can withdraw a vessel from service and
escape the charter party if the hire is not paid on time by the charterer. This is an
important topic since it has wide ranging effects on the parties.
Exercise of the right to withdraw the vessel by the ship owner will depend normally
on economic issues. The shipping industry is a very volatile market and can go from
extremes of depression to high demand in a very short time. During a trade slump
when large numbers of vessels are tied up idle at the quays vessels can be hired at
very low rates since while a vessel is at sea the ship owner does not have to pay any
dock charges. If the demand for shipping rises the ship owner will use any excuse to
escape from a charter party that has been negotiated during the slump period. The
Laconia 22 is the leading case on this topic.

The Laconia.
12th April Sunday : The Hire was due for payment.
13th April Monday : The charterers paid the hire.
14th April The ship owner directed the bank to return the money and at 18:55 p.m.
The ship owner informed the charterers of withdrawal.

The court held that once a punctual payment of an instalment has not been made a
right of withdrawal accrued to the owners. The clause required ʹPayment of hire, in
advance, and failing punctual and regular payment the ship owner can withdraw.ʺ 
Wilberforce: The word advance is important, and thus it should have been paid by
Friday the 10th. The requirement of punctuality is strict.
Fraser: The ship owner cannot be deprived of the right of withdrawal by the tender of
an unpunctual payment. Once the charterer had failed to pay in advance nothing
could be done to remedy the breach : p320 ibid.

The Mihalios Xilas.26 Clause 39 regarding the payment of hire stated that each
monthʹs hire should be paid in advance except for the final monthʹs hire when items
of the owners liability could be deducted up to the expected redelivery time. On the
13th March the 9th monthʹs hire was due for payment within 7 working days, that is
to say the 21st March. The Charterers deducted $31,000, which represented an
underpayment, and on the 26th March the Ship owner withdrew the vessel.

The Mihalios Xilas [1979] 2 Lloyd’s Rep. 303 (H.L.).

The Mihalios Xilas was chartered on the Baltime form. Additional Clause 39 provided for the
payment of hire monthly and for “the last month’s hire to be estimated and paid in advance, less
bunker cost and Owners’ disbursements and other items of Owners’ liability up to such time as
vessel is expected to be re-delivered …”. Hire for the ninth month was due on 22 March. On 21
March the charterers paid considerably less than a full month’s hire and their agents explained to
the owners that the shortfall was because the charterers were deducting in respect of certain
advances and estimated bunkers and disbursements on redelivery, showing that they regarded this
hire payment as the last under the charter.

The owners, on the afternoon of 22 March, a Friday, asked the charterers for vouchers supporting
the deduction for advances and disputed the charterers’ estimate of the redelivery date and the
amount of the deduction for bunkers and disbursements on redelivery. They followed this with
another request on Monday, 25 March, but no further details were supplied and the owners
withdrew their ship shortly after noon on Tuesday, 26 March.
In arbitration the umpire found: (a) that the charterers’ estimate that the ship would be redelivered
at the end of the ninth month was not reasonable; (b) that the amount deducted was in any event
unreasonable and (c) that the owners’ decision to withdraw had been made within a reasonable
time.
The House of Lords held that the owners had made a valid withdrawal. They rejected an argument
that the owners had, by their delay, waived their right to withdraw. Lord Diplock said: “Waiver
requires knowledge and I agree with the umpire that the owners were entitled to a reasonable time
to make enquiries of the charterers and of the master of the vessel (as they did) with a view to
ascertaining whether [the charterers’ estimates were based on reasonable grounds] before electing
whether to withdraw or not. That being so, his finding that from Mar. 21 to noon on Mar. 26 was a
reasonable time to do so is one of fact which cannot be disturbed.”

it was conceded by counsel for the charterers that a timely but insufficient payment gave rise to the
right to withdraw.
The Mihalios Xilas was chartered on the Baltime form. Additional Clause 39 provided for the
payment of hire monthly and for “the last month’s hire to be estimated and paid in advance, less
bunker cost and Owners’ disbursements and other items of Owners’ liability up to such time as
vessel is expected to be re-delivered …”. Hire for the ninth month was due on 22 March. On 21
March the charterers paid considerably less than a full month’s hire and their agents explained to
the owners that the shortfall was because the charterers were deducting in respect of certain
advances and estimated bunkers and disbursements on redelivery, showing that they regarded this
hire payment as the last under the charter. In arbitration the umpire found that the charterers’
estimate that the ship would be redelivered at the end of the ninth month was not reasonable, also
that the amount deducted was in any event unreasonable and excessive.
It was accepted before Kerr, J., that in these circumstances the owners were entitled to withdraw.
The judge said: “In the result there was accordingly an underpayment by the charterers of the ninth
months’ hire, and it was not disputed that on the facts found this constituted a ‘default of payment’
for the purposes of the second paragraph of cl.containing the right to withdraw the vessel.”
(The question for decision by the courts, which eventually reached the House of Lords, was whether
the owners had subsequently waived their right to withdraw; as to which see paragraph 16.110.)

The Berge Sund 41 discusses an off hire clause in respect of

events ʹ.. preventing efficient working of vessel for more
than 24 consecutive hours ..ʹ The hold of the vessel had to
be cleaned. This took from 20 Dec to 9 Jan. The ship owner
claimed this was due to an order of the charterer to load a
particular cargo and by virtue of the Employment and
Indemnity Clause the charterer had to reimburse the ship
owner for all consequences of following chartererʹs orders
The court held that ten months of similar cargoes had not
caused a need to clean hull, so the cleaning was not a
consequence of carrying a particular cargo and not therefore
an order of the charterer. A vessel that cannot carry cargo
because hold needs cleaning is not in efficient state :
Therefore the vessel was off hire whilst being cleaned.

Withdrawal for Non-Payment of Hire - Time

June 1999
Charter
(Sea Venture Volume
18)

At common law, non-payment of hire by charterers will only entitle the

owners to treat the governing charterparty as being terminated for
repudiatory breach of contract if the charterers’ default evinces an
unequivocal intention not to perform their contractual obligations. For this
reason, it is fairly difficult to demonstrate that charterers are in repudiatory
breach. In order to avoid this trap, most time charters grant the owners an
express right of withdrawal for non-payment of hire. By way of illustration,
such a right is specifically granted by clause 5 of the New York Produce
Exchange 46 ("NYPE 46") and clause 6 of the Baltime charterparties in the
following terms:

"5. Payment of said hire to be made in New York in cash…semi-monthly in

advance .… failing the punctual and regular payment of the hire, or bank
guarantee, or on any breach of this charter party, the owners shall be at
liberty to withdraw the vessel from the service of the charterers .…"

and

"6. Payment of hire to be made in cash…without discount, every 30

days in advance. In default of payment the owners to have the right of
withdrawing the vessel from the service of the charterers, without
noting any protest and without interference by any court or any other
formality whatsoever .…"

The effect of withdrawing a vessel for non-payment of hire is that the

charterparty comes to an end, leaving the owners free to employ the vessel
elsewhere. The owners will be entitled to recover hire payable up to the date
of withdrawal but not any additional damages which they may suffer as a
consequence of the early termination of the charterparty. Indeed, the owners
will have to account to the charterers for a) any overpaid hire and b) the
value of the any bunkers remaining on board at the time of the withdrawal. It
can be seen, therefore, that the right of withdrawal is a means by which the
owners can get the vessel back from recalcitrant charterers, thereby limiting
their exposure to future losses.

However, withdrawal is often only a sensible option if the vessel is free of

cargo. This is because withdrawl of the vessel from the charterers’ service
does not bring the bill of lading contract to an end. Where the owners are the
carriers under the bill of lading contract (as is commonly the case), they will
remain under an obligation to deliver the cargo at the port(s) named in the
bills of lading despite the withdrawal of the vessel from the charterers’
service. In such circumstances, if the bills of lading in question are "freight
prepaid" bills of lading, the owners’ prospects of recovering any of the
expenses incurred in the carriage and delivery of the cargo to the port(s)
named in the bills of lading will be remote. Where the owners are not the
carriers under the bill of lading contract, their position will be somewhat
better albeit they will still owe a duty of care as bailees of the cargo to those
interested in it. It is clear therefore, that an owner should think carefully
before withdrawing a vessel which is laden with cargo because the charterers
have not paid hire on time.

Failure to pay hire by the due date

a) Payment in cash

Although it is now well established that payment in cash money is not

required as such, payment must be made in a manner which is exactly
equivalent to and as good as cash (the "Brimnes"¹). Where payment is made
by way of an inter-bank transfer, it must be on terms which provides that the
owners will have unconditional use of the money on or before the due date
for payment. Transfer on the due date but for value at a date thereafter is not
"payment in cash" and will amount to a late payment (the "Chikuma"²).

b) Part payment of the amount due

It is established that the owners’ right of withdrawal arises not only when a
full hire installment is not paid, but also when a timely payment has been
made for a sum which is less than the amount due and the outstanding
balance is not paid by the due date (the "Mihalios Xilas"³).

c) Tender of payment after the due date but before withdrawal

The House of Lords in the "Laconia"4 (overruling the Court of Appeal’s

decision in the same case and the "Georgios C"5) held that owners’ right of
withdrawal is not lost merely because the charterers tender the overdue hire
before the owners have given notice of withdrawal. If the charterers fail to
pay the hire in time they are in default and their tender of hire thereafter
cannot alter that position. Having said that, owners in such circumstances
would need to consider their position carefully bearing in mind the right to
withdraw is not automatically linked with a right to damages.

d) Withdrawal following a deduction made from a hire payment

The answer to the question of whether the owners can withdraw the vessel
from the charterers service because they have made a deduction from hire
depends on whether the charterers have a right to make the deduction,
whether under an express provision of the charterparty or under the doctrine
of equitable set-off.
This issue has not been considered by the House of Lords. However, the
Court of Appeal suggested in the "Nanfri"6 that charterers may not in beach
of their obligation to pay hire if the deduction is permitted by the
charterparty or by the doctrine of equitable set-off, is reasonable and is made
in good faith. The position is different where the charterers’ deduction, albeit
reasonable and made in good faith, is not permitted under either the express
terms of the charter party or the doctrine of equitable set-off. In the latter
case, the charterers will be in breach and the owners will be entitled to
withdraw the vessel (the "Lutetian"7).

e) Acceptance of late payment by owners

The facts of the the "Laconia"8 are as follows. The vessel was chartered on
the N.Y.P.E. form, hire being payable semi-monthly in advance to the
owners’ account with the London branch of the First National City Bank. A
payment fell due on a Sunday, but it was only at about 1500 hours on the
following Monday that the charterers’ bank delivered a "payment order" to
the owners’ bank for the appropriate amount. Shortly thereafter, the owners’
bank began processing this document (which is the equivalent of cash
betweeen banks but which does not produce a credit in the payee’s account
for about 24 hours). The owners’ bank telephoned the owners’ London
agents as per its standing instructions when the hire was received. The
owners’ bank was told to refuse the payment and return it, which it did by a
payment order following morning. Meantime, the owners gave the charterers
notice at 1855 hours on Monday evening that they were withdrawing the
vessel.The Court of Appeal held that the owners were not entitled to
withdraw the vessel and one of the grounds for this finding was that the
owners had waived their right of withdrawal since they were bound by their
bank’s acceptance of the payment order. The House of Lords overruled this
decision, holding that the owners were entitled to withdraw and had done so
effectively.

The position would have been different if the owners had been found to have
accepted the late payment and thus waived their right to withdraw. However,
the House of Lords found that it was not within the owners’ bank’s express
or implied authority to make commercial decisions on behalf of the owners
by accepting late payments of hire without instructions. Since the bank had
returned the payment the following day pursuant to the owners’ instructions,
the House of Lords held that this had taken place within a reasonable time
and so it could not be said that the owners had given the charterers any
grounds to suppose that the late payment had been accepted.

f) Acceptance of a timely but insufficient payment

The Mihalios Xilas was chartered on the Baltime form with hire to be paid
monthly in advance. The charterers mistakenly believed the ninth month to
be the last month under the charter party and so they remitted the the ninth
hire instalment less US$31,000.00. The owners queried the deduction and
then withdrew the vessel five days later without returning the part payment
of the advance hire.

The Court of Appeal held that the short payment was not a proper payment
and, in the circumstances, the owners could elect to either accept the short
payment and not withdraw the vessel or refuse it and withdraw the vessel.
The Court of Appeal held that the owners’ retention of the short payment,
coupled with their demand for further details about the deduction and the
fact that the owners took several days to decide to withdraw the vessel,
indicated that the owners had waived their right of withdrawal. This decision
was reversed by the House of Lords which held that the owners were entitled
to take a reasonable time to ascertain whether the amounts deducted from
the hire were reasonable before deciding whether to exercise the right of
withdrawal and the five days taken by the owners was reasonable in all the
circumstances. The House of Lords also found that the owners’ retention of
the part payment of advance hire, which the owners were only obliged to
refund following the exercise of their right to withdraw, did not amount to
an election to treat the charter as continuing and so did not operate as a
waiver of their right to withdraw the vessel.

g) Previous acceptance of late payments of hire

The fact that the charterers have made late payments of hire on previous
occasions which have been accepted by the owners may preclude the owners
from exercising their right to withdraw when faced with a further failure to
pay on time (the "Scaptrade"9). Where a course of dealing has been
established by the owners accepting late payment without protest, the
owners will not be able to withdraw the vessel if a subsequent hire
instalment is paid late pursuant to that course of dealing. In order to re-
establish their right to withdraw in such circumstances, the owners need to
give notice to the charterers that they require the charterers to adhere strictly
to the hire payment provisions in the charterparty. Only once the owners
have re-established that hire must be paid when it falls due will the owners
be in a position to exercise their right of withdrawal.

Exercise of the right to withdraw

The owners are allowed a reasonable time in which to ascertain the true
position. However, once they are aware of a non or insufficient payment,
they must act quickly or else the right to withdraw may be lost. That said,
the owners are allowed a reasonable time to seek legal advice once the
position is known. Whilst the owners are considering what to do, they
should avoid giving any indication whether by word or by conduct to the
charterers that the vessel continues to be on charter since this could result in
waiver of their right to withdraw.

a) Anti-technicality clauses

Once hire is overdue, the right of withdrawal comes into play subject to the
requirements of any anti-technicality provisions contained in the charter
party. Typically, the charter party will contain a clause which requires the
owners to send an anti-technicality notice to the charterers. Unless the
charterparty expressly provides to the contrary, it has been established that
in order to be effective an anti-technicality notice must inform the charterers
that a) the hire is due and has not been paid and b) the vessel will be
withdrawn unless the charterers remedy their default within the time
specified. In short, it should say, "You haven’t paid up when you should
have done: pay in [48] hours or lose the ship". This is how it was put in a
leading case on withdrawal (the "Afavos"10).

The importance of getting the form of the anti-technicality notice right is

emphasised by the findings of the High Court in the "Pamela"11 . In this case,
clause 7 of the charterparty gave the owners the right to withdraw the vessel
if hire was not paid on time, and referred to rider clause 27. Clause 27 was
the anti-technicality clause which provided:

"If hire is due and not received, the Owner, before exercising the
option of withdrawing the vessel, will give Charterers forty-eight (48)
hours notice… and will not withdraw the vessel if the hire is paid
within these 48 hours."
Hire was not received on the due date, and owners’ brokers accordingly sent
the following message to charterers,

"re PAMELA

Pls inform chrs they are in breach of contract due to non-receipt of

hire.
Also pls notify chrs of withdrawal of the vsl."

The Court held that this message, referring to non-payment of hire and
withdrawal of the vessel was not sufficient as an anti-technicality notice,
even if the charterers would have suspected, or presumed, that they could
have remedied the default by paying the outstanding hire within 48 hours.
The owners’ position would have been secure if they had unequivocally
notified the charterers that the vessel would be withdrawn unless charterers
remedied their default within the allowed time.

b) Notices of withdrawal

Unless there are express provisions to the contrary contained in the charter
party, the notice of withdrawal must be given to the charterers. The owners
are not bound to give prior notice of their intention to withdraw to the
charterers. All that is required is that the withdrawal notice is unequivocal:
i.e., it states clearly that the owner is treating the non payment of hire as
having terminated the charterparty and that the vessel is withdrawn.
Continuing to perform the bill of lading contract by carrying the cargo to
destination does not have the effect of reinstating the charter (the
"Tropwind" (No. 2)12).

c) Relief against forfeiture

The concept of "relief against forfeiture" is derived from English property

law. In a contract for the lease of property, the owner of the property is
usually given a right of forfeiture which is a right to re-possess the property
for non-payment of rent. In certain circumstances, relief against forfeiture
will be granted by the Courts in order to prevent the abuse of this right.

In the context of charterparty contracts, the owners’ exercise of their right to

withdraw the vessel from the charterers’ service can also result in great
hardship for the charterers. It has been argued that, by analogy with property
law, relief against withdrawal should be available in circumstances where
charterers may suffer heavy losses in consequence of an oversight or error in
the payment of hire. However, the House of Lords rejected this argument in
the "Scaptrade"13, ruling that the English Courts had no jurisdiction to grant
this type of relief in the context of withdrawal under a charterparty.

Payment of Hire and

Off-hire
Prof Martin Davies
International Seminar: Tanker
Chartering – A Legal Perspective
Intertanko
Houston, 29 March 2007
2

Payment of hire
• Charterers’ primary obligation
• Must be paid in full without
deduction
o Unless the charter permits

deduction
 o Or Charterers are entitled to
deduct by way of set-off
• Non- or under-payment permits
Owners to withdraw
o NYPE cl. 5: “…otherwise

failing the punctual and

regular payment of the hire…
or on any breach of this
Charter Party, the Owners
shall be at liberty to withdraw
the vessel from the service of
the Charterers”
o Disputed deductions

o Rising market

Deductions from hire

• Express provision in the charter
o E.g. Shelltime 4, cl 9(ii):

“Payment of hire shall be

made…less…(ii) any amounts
disbursed on Owners’ behalf,
 any advances and
commission thereon, and
charges which are for
Owners’ account pursuant to
any provision hereof”
o Ditto STB Form, cl 3(b)

• Equitable set-off
o Charterers are entitled to

make deductions for claims

relating to loss of time
o Only loss of time claims are

sufficiently closely related to

the obligation to pay hire
o U.S. law generally stricter

Deduction must be
reasonable
• Permitted deduction may be
made even though the amount
is still in dispute
 o No need to agree amount
with Owners
o No need to go to arbitration

first
• The Nanfri [1978] QB 927 at 975
per Lord Denning MR:
o “If the charterer quantifies his

loss by a reasonable
assessment made in good
faith, and deducts the sum
quantified, then he is not in
default. The shipowner
cannot withdraw his vessel
on account of non-payment
of hire nor hold him guilty at
that point of any breach of
contract.”
5

Reasonable deductions
• Shelltime 4, cl 9(iii)
 o “Payment of hire shall be
made…less…(iii) any
amounts due or reasonably
estimated to become due to
Charterers under Clause 3(ii)
[deficiencies on delivery] or
24 [speed and consumption]
hereof”
6

Equitable set-off
• The Nanfri: claims that “arise
out of the same transaction or
are closely connected with it”
• Deprivation of use of ship
o Breach of speed warranty

(The Chrysovalandou Dyo

[1981] 1 Lloyd’s Rep. 159)
o Not cargo damage claims:

The Nanfri
• If Charterers are not entitled to
deduct, Owners are entitled to
 summary judgment for hire (or
can withdraw): The Aditya
Vaibhav [1991] 1 Lloyd’s Rep.
573
o Bona fide belief not enough

Not for any other

reason
• Must pay last month’s
(or half-month’s) hire
in full even if it is
obvious that
redelivery will take
place before end of
month (or half-
month)
• Unless specifically
permitted by charter:
o E.g. NYPE, lines 58-60: “for
the last half month or part of
same the approximate
amount of hire…”
o Cf. Baltime: no such provision
8

Withdrawal for non-

payment of hire
• English law inflexible
o Owners can withdraw for any
late payment or under-
payment, however technical
 Charter back to Charterers

at increased market rate

o No equitable relief against
forfeiture: The Scaptrade
[1983] 2 Lloyd’s Rep. 253
  No matter what the
hardship to Charterers
9

“Anti-technicality”
clauses
• Designed to give
relief against
strictness of English
law
• In effect, notice of
withdrawal clauses
• Shelltime 4, cl 9(a)
o “In default of such proper and
timely payment,
(a) Owners shall notify
Charterers of such default and
Charterers shall within seven
 days of receipt of such notice
pay to Owners the amount due
including interest, failing which
Owners may withdraw the
vessel from the service of
Charterers…”
10

“Anti-technicality”
clauses
• Owners must give an
ultimatum: must
make it clear that
withdrawal will take
place if payment is
not made
• The Afovos [1983] 1
Lloyd’s Rep. 335
(HL)
o “Owners have instructed us
that in case we do not
receive the hire which is due
today, to give charterers
notice as per cl. 31…for
withdrawal of the vessel from
their service”
o Insufficient
11

More strictness re anti-

technicality
• The Pamela [1995] 2 Lloyd’s
Rep. 249
o Notice sent by telex late on

Friday night not effective

 until received on Monday
morning
o Too late for anti-technicality

clause
• The Western Triumph [2002] 2
Lloyd’s Rep. 1
o Owners gave notice of

withdrawal by e-mail before

hire became overdue
o E-mail not received until

after hire was overdue

o Arbitrators held notice invalid

because premature
o Immaterial that notice was

received after hire became

overdue
12

Waiver of the right to

withdraw
• Owners lose their right to
withdraw if they act in such a
 way as to communicate to
Charterers that the charter is to
continue
o E.g., acceptance of a late

payment
o Not enough for Owners’ bank

simply to receive payment

o Must retain it for long enough

to lead Charterers to believe

that it will not be returned:
The Laconia [1977] 1
Lloyd’s Rep. 315 (HL)
• Acceptance of timely but under-
paid hire does not amount to
waiver
o Owners entitled to a

reasonable time to calculate

correctness of deductions
before exercising right to
withdraw: The Mihalios Xilas
[1979] 2 Lloyd’s Rep. 303
(HL)
13
 Effect of withdrawal
• In English law, charter comes to
an end immediately upon
effective notice of withdrawal
• If in mid-voyage, Owner must
carry cargo to its destination
and deliver on terms of BLs if
they were signed by or on
behalf of Owners
o Cannot demand freight from

receivers if pre-paid to
Charterers: The Alev [1989] 1
Lloyd’s Rep. 138
(agreement to pay freight
(again) held invalid because
of economic duress)
• If BLs signed by or on behalf of
Charterers, Owners assume
Charterer’s obligations after
withdrawal:The Lakatoi Express
(1990) 20 NSWLR 57
• In U.S. law, withdrawal only
becomes effective at end of
voyage and discharge of cargo:
Diana v. Sub-freights of
Admiralty Flyer, 280 F.Supp. 607
(SDNY 1968)
14

Effect of withdrawal
• Owners entitled to payment
from Charterers on quantum
meruit basis for carrying cargo
after withdrawal?
o Scrutton says so

o Market rate, not contract

rate?
o Left unsettled in The

Tropwind (No. 2) [1981] 1

Lloyd’s Rep. 45 (CA)
• Presumably only arises if
Charterer insolvent, which
makes the question moot
 o If Charterer solvent, it may
choose to re-charter at new
market rate anyway
15

Off-hire clauses
• “Period” = on/off
• “Net loss of time” =
time lost
• Partial efficiency is
the key to the
difference
o Still off-hire under a period
clause
o Lost time only under a “net
loss of time” clause
16

Period clauses
 o E.g. Shelltime 3, cl. 21:
 “In the event of loss of

time (whether arising from

[various specified events]
or in any other manner)…
hire shall cease to be due
or payable from the
commencement of such
loss of time until she is
again ready and in an
efficient state to resume
her service from a position
not less favourable to
Charterers than that at
which such loss of time
commenced.”
o The Bridgestone Maru No. 3
[1985] 2 Lloyd’s Rep. 160
17

Net loss of time clauses

o E.g. Shelltime 4, cl. 21:
 “On each and every
occasion that there is loss
of time (whether by way
of interruption in the
vessel’s service or from
reduction in the vessel’s
performance)…the vessel
shall be off-hire from the
commencement of such
loss of time until she is
again ready and in an
efficient state to resume
her service from a position
not less favourable to
Charterers than that at
which such loss of time
commenced; provided,
however, that any service
given or distance made
good by the vessel whilst
off-hire shall be taken into
account in assessing the
 amount to be deducted
from hire.”
18

Time lost after full

efficiency restored
• No deduction under English law,
even under “net loss of time”
o The Marika M [1981] 2

Lloyd’s Rep. 622: vessel lost

berthing turn after
grounding; not off-hire while
waiting for berth once in full
working order
o NYPE, cl. 15: “the payment of

time shall cease for the time

thereby lost”
• Deduction would be permitted
under U.S. law
o All time lost as a result of

enumerated causes
o Not so for “period” clauses
 19

“…or any other cause”

• Eiusdem generis (of the same
kind) with listed causes
o Unless “whatsoever” is added

• Confined to causes related to

physical condition of ship or
crew
o Not off-hire during delays

from “extraneous” causes

o The Aquacharm [1982] 1

Lloyd’s Rep. 7 (not off-hire

during lightening to pass
through Panama Canal)
o The Manhattan Prince [1985]

1 Lloyd’s Rep. 140 (not off-

hire under Shelltime 3 during
boycott by ITF)
• Focus should be on effect –
preventing full working – not
cause
20
 Practice tips
• Read the clause
carefully before you
do anything,
whichever side you
are on
• Charterers - if in
doubt, pay in full
(especially in a rising
market)
• Owners - give clear
and unequivocal
notice of withdrawal
(especially if there is
an anti-technicality
clause)