During the course of her trading, the Coral Seas waited for a berth at Guaiba Island (near Rio de Janiero) for twenty-eight days and completed loading four days later. It was evident on departure that the vessel’s performance has dropped. Consequently, it had to stop at Jakarta to take on emergency bunkers. An underwater inspection in Singapore found light fouling on the bottom and heavy fouling on the propeller. The propeller was cleaned and the vessel proceeded to complete her second laden leg.

The sub-charterers made deductions from hire as set-off damages for breach of the continuing speed warranty in the charterparty. The head charterers did the same against the owners. The owners claimed a balance of USD 280,720.69 on final hire accounts and the head charterers claimed a balance of USD 389,379.51 from the sub-charterers. The head charterers and sub-charterers each counterclaimed USD 32,825.56. All claims were heard before arbitrators in London as required by the charterparties. The arbitrators found in favour of the head charterers and sub-charterers.

The owners and the head charterers appealed (the arguments were presented by counsels for the owners and the sub-charterers, counsel for the head charterer was neutral) to the High Court with the following question:

Where under a time charter the owner warrants to the time charterer that the vessel shall maintain a particular level of performance throughout the charter period, and the time charterer alleges underperformance in breach of that warranty, is it a defence for the owner to prove that the underperformance resulted from compliance with the time charterer's orders?

As part of his arguments, counsel for the owners pointed to The Leonidas ([2000] EWHC 213 (Comm)) where the seemingly absolute speed warranty was subject to the incorporated Hague Rules. The counsel submitted that the charterparties in question also incorporate the Hague Rules and therefore in the overall construction of the scheme of the charterparties the speed warranty should not be read as absolute.

Held:

The speed warranty was understood to be wide and unqualified. Underperformance resulting from compliance with the charterer’s instruction was not a defence on which the owners could rely unless it was caused by a risk which was not assumed contractually by the owner and for which it would be entitled to receive indemnity from the charterer. The incorporation of the Hague Rules did not affect the judge’s analysis. The fact that the owners may have relied on an exception in the Hague Rules indicated to the judge that the speed warranty should not be interpreted restrictively.