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by | May 30

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Application of the word ‘about’ – When does under-consumption start?

Application of the word ‘about’. Owners and Charterers of time chartered vessels where the vessel’s consumption is described to be “about” need to be aware of the recent High Court decision in The Gaz Energy No.2 (Hyundai Merchant Marine Co. Ltd. v Trafigura Beheer BV [2012] EWHC 1686 (Comm)). The High Court has now re-affirmed that when calculating the consumption to determine over consumption the upper limit of the “about” range is to be used. However, it clarified that for the purposes of set-off and under-consumption the vessel’s consumption should be calculated by reference to the lower limit of that range. The case establishes a legal precedent on a practical time charter issue that has been missing from the relevant case law and displaces the decision of London Arbitration 20/07 (where the mean figure was used).

On 21 June 2012, the High Court handed down its decision1 on a time charter performance case where the issue was whether, in circumstances where the vessel has performed within the consumption warranty of “about ‘X’ metric tons IFO”, i.e. a daily consumption of IFO between “X –5%” and “X +5%” metric tons (applying the 5% tolerance for the word “about”), the saving is to be calculated by reference to the lower figure of “X –5%” metric tons or the higher figure of “X +5%” metric tons.

Insofar as a claim by the Charterers for underperformance (i.e. over-consumption) is concerned, the issue has been well and long settled; the ruling of The Al Bida is to the effect that when the word “about” is incorporated the upper limit of the range is to be used for the calculation. For example, when the daily consumption is warranted to be “about 40 m.t.”, the figure of 42 m.t. will be used for calculating the over-consumption. This benefits the Owners as the calculation is on the basis of their minimum legal obligation, that is to say the method least onerous to Owners and the least beneficial to Charterers.

However, what is the position when there is underperformance in terms of speed but there is a contractual obligation to credit the Owners or set off any saving of bunkers under consumed? What is the figure the parties should use in their calculation in order to find out, in the first place, the allowed consumption and then determine whether there was any saving to be set off against any speed underperformance? Using, for instance, the previous example, should this figure be 42 (i.e. 40 +5%) or 38 (i.e. 40 –5%) metric tons? In The Gaz Energy No.2 the Disponent Owners argued that the proper figure should be 42 metric tons. This would apply the same test as for over-consumption as referred to above. The situation was made more complex due to the fact there was an arbitration decision where, in similar circumstances, the LMAA Tribunal (London Arbitration 20/07) had used the contractual consumption holding that the proper figure should be 40 metric tons…(Application of the word ‘about’)

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