The vessel was fixed on the NYPE 1946 form, with delivery at Montreal, and redelivery "upon dropping outbound pilot one safe port Cuba."

The printed charter form was amended to provide that the Charterer would not purchase the bunkers remaining on board at the time of delivery, but would pay a provisional sum in respect of anticipated consumption, with the exact quantities to be assessed by survey, and "any balance after final hire statement agreed to be paid or returned as the case may be."

An additional clause (33) required the Charterer to place the Owner in funds for 25 days’ hire plus the cost of estimated bunker consumption plus ballast bonus, in part prior to the vessel’s departure from Montreal, and the balance before its entry into the territorial waters of Cuba. The clause further provided that: "Any time lost due to delay of payment to be for Charterers’ account and vessel to remain on hire. Charterers understand that the vessel will not enter Cuban territorial waters until Owners have received the notice from Charterers’ bank [confirming the irrevocable transfer of funds] or the balance of funds in Owners’ account."

Although the first instalment had not been received, the Owner allowed the vessel to sail from Montreal. By the time the ship arrived off Cuba, the Charterer had still paid nothing; and, in the absence of the funds or the requisite bank notice, the Owner instructed the vessel to wait outside territorial waters north of Matanzas (i.e. more or less south of Key West).

After some days, the payment was received, and the vessel then proceeded to discharge at Cienfuegos and Santiago without further incident – until, immediately after completion at Santiago, the vessel was arrested by the Charterer as security for various claims against the Owner. In this, the Charterer relied on Clause 18 of the NYPE form: "… and the Charterers to have a lien on the Ship for all monies paid in advance and not earned."

In order to deal with this issue, it was necessary first to establish the state of the accounts as between the Owner and the Charterer at the moment of the arrest.

The first question concerned the interruption of the voyage pursuant to Clause 33. According to the Charterer, this provision was strictly unenforceable, being either contrary to the Hague Rules as incorporated into the charter party or else in contravention of the Hague Visby Rules as enacted in the Canadian Carriage of Goods by Water Act. The arbitrator found that the Canadian statute did not apply, because this expressly related only to bills of lading: as between the Owner and the Charterer, the terms of the bills of lading were irrelevant. As to the Hague Rules, which the Charterer had contended must take precedence over anything else in the charter party, there was no conflict: either the stoppage was part of the contractual voyage and therefore involved no deviation, or else it was a reasonable deviation in that it was expressly provided for.

The Charterer also argued that the Owner had acted unreasonably in stopping the vessel where it did: the Master should properly have proceeded to a point off Cienfuegos (the first discharge port) before he interrupted the voyage. This argument was also rejected. The Charterer had certainly been told that the Master intended to wait where he did, and did not protest. There had also been some confusion as to the Charterer’s true intentions; and, as noted by the Owner, the Charterer’s failure to pay the first instalment under Clause 33 fully entitled it to wait as far away as Montreal.

Accordingly, the Owner was entitled to stop the vessel as and where it did, and had acted reasonably in doing so. There was no interruption of hire.

The second question concerned a slow steaming claim. This was found to be without merit, partly because the vessel’s draft was greater than that to which the warranty related, and partly because it was based on an ambiguity caused by the lay-out of the relevant clause, a manifest clerical error which could properly be rectified by reference to the exchanges during negotiation.

The third question involved address commission on the ballast bonus. According to the charter party, an address commission was payable on the hire. The Charterer had made a similar deduction from the ballast bonus, to which the Owner had not objected. Subsequently, but still before the arrest, the Owner realised its mistake, and wrote: "The ballast bonus should not have been considered as a gross amount, however since it was Owners’ mistake, we will stand by it." The arbitrator found that the address commission had been incorrectly deducted, because the ballast bonus could not properly be construed as "hire", and that in the context in which it was made, the Owner’s admission did not constitute any surrender of its rights.

A fourth issue, small but significant, concerned the periodic payment due in respect of cables and representation. Although stated as payable simply "per month", it was clear from the conduct of the parties that both had understood this to mean "per month or pro rata"; but in the absence of any express exclusion, it must remain payable even during off-hire periods.

The fifth question concerned the payment for bunkers. The Charterer argued that the amount paid under Clause 33 for estimated consumption was not truly earned, but only a payment on account. The Owner’s reply was that the Charterer’s lien under Clause 18 could properly be exercised only following breach; and in this case it was clear that the obligation to settle the bunker account only arose after the final hire statement had been agreed, which could not occur prior to redelivery.

The Charterer’s argument failed. All else apart, if it were correct, this would mean that the Charterer could (at least in theory) exercise its lien on fourteen out of every fifteen days, the hire being payable semi-monthly in advance. The Charterer’s lien was not possessory; and if it had elected to bargain away its right under the printed form to redeliver within a port and thereby weakened its position as to the exercise of its lien after redelivery, that should not change its nature.

In light of these findings, the correct statement of accounts at the moment of the arrest showed a small balance in the Owner’s favour. The arrest was, therefore, improper. No argument having been presented to the contrary, the Charterer should reimburse the Owner for its reasonable legal costs in relation to the freeing of the ship.

Absent the Owner’s breach, the loss of time caused by the arrest fell to be considered under the off-hire clause. This being in the standard NYPE 1946 wording, the arrest did not fall within the enumerated events and was not caught by the words "or by any other cause preventing the full working of the vessel." Even if the word "whatsoever" had been added, the event causing the loss of time was the Charterer’s unjustified action, which must fall outside the scope of the clause. Accordingly, the vessel remained on-hire for the period of the arrest.

In order to obtain the vessel’s release, the Owner had entered into a so-called Escrow Agreement with the Charterer, whereby it agreed to make two payments, one directly to the Charterer and the other to an escrow agent. According to the Charterer, the direct payment was not properly a payment to account, but had been made unconditionally and without reserve, in full and final settlement of the speed and consumption dispute.

The wording of the Escrow Agreement had been negotiated at some length, with both sides taking legal advice. It contained no wording relating to final settlement of any part of the dispute, nor did it make any mention of release from further claims. On its true construction, the Escrow Agreement should be read in conjunction with the charter party, and the sum paid directly to the Charterer should be treated as a mere payment on account, to be included in the final adjustment of the hire account. This being so, it was not necessary to consider the Owner’s arguments concerning duress.

The arbitrator’s fee should be divided equally between the parties, and each should bear its own legal costs.