The recent decision in Singapore Arbitration 2/26 addresses two issues of practical significance for New Zealand voyage charterers:
- Whether an owner’s statement that a vessel cannot meet an agreed laycan amounts to an anticipatory repudiatory breach entitling charterers to terminate before the cancelling date; and
- Whether the “Monroe Obligation” applies where a charterparty contains no express estimated time of arrival (ETA) or expected readiness to load date (ERTL).
On the first issue, the Tribunal found that statements indicating a vessel will be unable to arrive within the agreed laycan may amount to an anticipatory repudiatory breach, even before the cancelling date has passed.
On the second issue, the Tribunal confirmed that the Monroe Obligation may apply even where there is no express ETA or ERTL. The Monroe Obligation is an implied term requiring owners to commence the vessel’s approach voyage in sufficient time to enable the vessel to arrive at the loading port within the contractual laycan. The doctrine reflects the principle that owners who commit a vessel to an intermediate fixture do so at their own risk and remain responsible for ensuring that those commitments do not prevent performance of subsequent charterparty obligations. In those circumstances, the agreed laycan may itself provide the relevant benchmark for determining when the vessel’s approach voyage should commence.
The decision is also a timely reminder that delays arising under a preceding fixture generally remain the owner’s risk and do not excuse non-performance of a subsequent charterparty.
Background
The dispute arose under a voyage charterparty with an agreed laycan from 1 July to 10 July.
The vessel owners (Owners) initially sought an earlier laycan, which the charterers (Charterers) rejected. Owners subsequently proposed postponing the laycan to 20 July to 30 July because of the vessel’s obligations under a preceding fixture. Charterers rejected that proposal and reaffirmed that the original laycan remained contractually binding.
On 28 June, Owners informed Charterers that the vessel was unable to arrive within the laycan and requested either cancellation of the charterparty or an extension of the laycan. Charterers responded by offering a revised laycan of 7 August to 14 August. Owners rejected that proposal and reiterated on multiple occasions that they could not guarantee the vessel’s arrival within the contractual laycan.
On 2 July, before the cancelling date had passed, Charterers accepted what they considered to be an anticipatory repudiatory breach and terminated the charterparty. Owners argued that the termination was wrongful and that Charterers had themselves repudiated the contract.
The Issues Before the Tribunal
The Tribunal considered the following issues:
- Whether Owners’ communications amounted to an anticipatory repudiatory breach entitling Charterers to terminate before the cancelling date.
- Whether delays arising under a preceding fixture excused Owners’ inability to meet the agreed laycan.
- Whether Owners had breached the Monroe Obligation by failing to arrange the vessel’s schedule and route so that it could arrive within the contractual laycan.
The Tribunal’s Decision
What amounts to an anticipatory repudiatory breach?
The Tribunal reaffirmed the established principle that anticipatory repudiatory breach occurs where:
- the conduct of a party would lead a reasonable person to conclude that it no longer intends to be bound by the contract; or
- a party intends to perform the contract only in a manner substantially inconsistent with its contractual obligations.
Applying that test, the Tribunal found that the laycan was an essential and material term of the charterparty. The Owners’ statements that they could not guarantee the vessel’s arrival within the contractual laycan demonstrated an intention not to perform the charterparty in accordance with its agreed terms.
The Tribunal rejected the argument that Owners merely intended to perform late rather than not perform at all. An intention to perform outside the agreed laycan was still performance in a manner substantially inconsistent with the charterparty.
Accordingly, Charterers were entitled to terminate the charterparty on 2 July without waiting for the cancelling date to pass. Owners were liable in damages for the resulting breach.
Can an Owner rely on delays under a preceding fixture to excuse non-performance?
A central issue was whether delays arising under a preceding fixture excused Owners’ inability to meet the contractual laycan. The Tribunal held that they did not.
While Owners are free to employ their vessels as they see fit, the commercial consequences of those decisions remain their responsibility. If a preceding fixture delays the vessel and prevents compliance with a subsequent charterparty, that risk falls on Owners rather than subsequent Charterers.
In reaching its decision, the Tribunal relied upon the principles established in CSSA Chartering and Shipping Services SA v Mitsui OSK Lines Ltd (The Pacific Voyager) [2018] EWCA Civ 2413; [2019] 1 Lloyd’s Rep 370, Monroe Brothers Ltd v Ryan [1935] 51 Ll L Rep 179 and Louis Dreyfus v Lauro [1938] 60 Ll L Rep 94. Those authorities confirm that the risks associated with intermediate fixtures are assumed by Owners.
The Monroe Obligation
The Tribunal also considered the Monroe Obligation. The Monroe Obligation derives from Monroe Brothers Ltd v Ryan and has been reaffirmed in more recent authorities, including The Pacific Voyager.
The Monroe Obligation is an implied term requiring owners to commence the vessel’s approach voyage in sufficient time to enable arrival at the loading port within the laycan.
The Owners argued that the obligation only arises where:
- there is an obligation to proceed with all convenient speed or utmost despatch; and
- there is an express ETA or expected readiness to load date.
The Tribunal rejected that argument.
Relying on The Pacific Voyager, it held that where no ETA or expected readiness to load date has been provided, the agreed laycan may itself represent the parties’ expectations as to arrival and perform the same function for the purposes of the Monroe Obligation.
The Tribunal therefore found that Owners had breached the Monroe Obligation by failing to arrange the vessel’s schedule and route such that it could commence its approach voyage in sufficient time to arrive within the contractual laycan or by the contractual cancelling date.
Key Takeaways
1. Prior fixture delays remain the owner’s risk
The decision confirms that a vessel’s commitments under a preceding fixture do not excuse failure to meet a subsequent laycan. Owners remain responsible for arranging vessel employment in a manner consistent with future contractual obligations.
2. Charterers may terminate before the cancelling date
Charterers are not necessarily required to wait until the cancelling date has passed. Where owners make clear that they cannot perform the charterparty in accordance with its terms, charterers may be entitled to terminate.
3. Communications matter
Statements indicating that a vessel will be unable to meet the agreed laycan may themselves amount to evidence of anticipatory repudiatory breach. Parties should therefore exercise caution when discussing delays and proposed amendments to fixture dates.
4. The Monroe Obligation remains highly relevant
The absence of an express ETA or expected readiness to load date will not necessarily prevent the Monroe Obligation from arising. The agreed laycan may itself provide the benchmark against which compliance is assessed.
Because of New Zealand’s relative isolation, vessels may experience difficulty in meeting laycans for New Zealand ports when delays arise under preceding fixtures. This case highlights that a failure to commence an approach voyage to New Zealand to meet the contractual laycan can have significant consequences for owners.
If you have any questions about the recent decision in Singapore Arbitration 2/26, please get in touch with our Marine or Transport & Logistics Teams or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
