![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
England and Wales High Court (Commercial Court) Decisions |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Golden Fleece Maritime Inc & Anor v ST Shipping & Transport Inc [2007] EWHC 1890 (Comm) (02 August 2007) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2007/1890.html Cite as: [2007] EWHC 1890 (Comm), [2008] 1 Lloyd's Rep 262, [2008] 1 All ER (Comm) 497, [2007] 2 CLC 648 |
[New search] [View without highlighting] [Printable RTF version] [Help]
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
(1) GOLDEN FLEECE MARITIME INC (2) PONTIAN SHIPPING SA |
Claimants |
|
- and - |
||
ST SHIPPING & TRANSPORT INC |
Defendant |
____________________
Mr Nicholas Hamblen QC and Dr Malcolm Jarvis (instructed by Clyde & Co LLP) for the Defendant
Hearing dates: 16-24 July 2007
____________________
Crown Copyright ©
Mr Justice Cooke :
Introduction
The Charter Parties
"1. At the date of delivery of the vessel under this charter
(a) ….
(b) she shall be in every way fit to carry crude petroleum and/or its products; crude and/or dirty petroleum products always within vessels natural segregation, excluding lubes/casingheads/cbfs
(c) she shall be tight, staunch, strong, in good order and condition, and in every way fit for the service, with her machinery, boilers, hull and other equipment (including but not limited to hull stress calculator and radar) in a good and efficient state …
…
(g) she shall have on board all certificates, documents and equipment required from time to time by any applicable law to enable her to perform the charter service without delay
(h) she shall comply with the description in Form B appended hereto, provided however that if there is any conflict between the provisions of Form B and any other provision, including this Clause 1, of this charter such other provision shall govern …
3. (i) Throughout the charter service Owners shall, whenever the passage of time, wear and tear or any event (whether or not coming within Clause 27 hereof) requires steps to be taken to maintain or restore the conditions stipulated in Clauses 1 and 2(a), exercise due diligence so to maintain and restore the vessel.
…
(iii) If the Owners are in breach of their obligations under Clause 3(i) Charterers may so notify Owners in writing: and if, after the expiry of 30 days following the receipt by Owners of any such notice, Owners have failed to demonstrate to Charterers' reasonable satisfaction the exercise of due diligence as required in Clause 3(i), the vessel shall be off-hire, and no further hire payments shall be due, until Owners have so demonstrated that they are exercising such due diligence.
4. Owners agree to let and Charterers agree to hire the vessel for a period of 6 months in Charterers option further 6 months +/- 15 days Charterers option applicable to final period. Option for the second period to be declared by the Charterers 45 days prior to expiry of previous charter period. commencing from the time and date of delivery of the vessel, for the purpose of carrying all lawful merchandise crude and/or dirty petroleum products including fuel oil, lswr, cbfs, condensate, etc, maximum three grades within vessels natural segregation. In case of heat cargoes vessel to maintain loaded temperature maximum 135 deg f max loading temp 165 deg f. (subject always to Clause 28) including in particular in any part of the world, as Charterers shall direct, subject to the limits of the current British Institute Warranties limits and any subsequent amendments thereof. Notwithstanding the foregoing, but subject to Clause 35.
….
39. Owners warrant they are member of ITOPF.
SPECIAL PROVISIONS:
1. LOA: 229.732 M
SLOPS: 3465 CBM
DOUBLE SIDE: YES
SBT: YES
…
4. TRADING: WORLDWIDE ALWAYS WITHIN BRITISH INSTITUTE WARRANTY LIMITS INCLUDING US…
…
52. ELIGIBILITY & COMPLIANCE
Owners warrant that the vessel is in all respects eligible under application conventions, laws and regulations for trading to and from the ports and places specified in Clause 4 of the Charter Party and that she shall have on board for inspection by the authorities all certificates, records, compliance letters and other documents required for such services, including, but not limited to, a U.S. Coast Guard Certificate of Financial Responsibility (Oil Pollution) and a certificate required by Article VII of International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended.
Owners further warrant that the vessel does, and will, fully comply with all applicable convention, laws, regulations and ordinances of any international, national, state or local government entity having jurisdiction including, but not limited to, the U.S. Port and Tanker Safety Act, as amended, the U.S. Federal Water Pollution Control Act, as amended, MARPOL 1973/1978 as amended and extended and SOLAS 1974/1978/1983 as amended and extended and OPA 1990.
In the interest of safety, the Owners will recommend that the Master observes the recommendations as to traffic separation which are issued from time to time by the International Maritime Organisation (IMO) or as promulgated by the state of the flag of the vessel or the state in which the effective management of the vessel is exercised.
Any delays, losses, expenses or damages arising as a result of failure to comply with this Clause shall be for the Owners' account and the Charterers shall not be liable for any delay caused by the vessel's failure to comply with the foregoing warranties.
…
FORM B
Shelltime 4 – Form B to be included in this Charter Party.
The Owner shall arrange to deliver the following documents twenty one (21)days prior to deliveryas soon as possible after fixtures concluded:
Form B (latest edition)
General Arrangement and Capacity Plans including Deadweight Scale."
"Profit share to be based on PLATTS average monthly rates for the following routes….
(a) 80,000 MTS NHC Rastan/Singapore 60% (PLATTS 80 AG/FE)
(b) 80,000 MTS NHC Singapore/Chiba 40% (PLATTS 80 Indo/Japan)."
The Regulations
"4.1 It has always been recognised that the best way of improving safety at sea is by developing international regulations that are followed by all shipping nations and from the mid-19th century onwards a number of such treaties were adopted. Several countries proposed that a permanent international body should be established to promote maritime safety more effectively, but it was not until the establishment of the United Nations itself that this was realised. In 1948 an international conference in Geneva adopted a convention formally establishing IMO (the original name was the Inter-Governmental Maritime Consultative Organization, or IMCO, but the name was changed in 1982 to IMO).
4.1.1 Under the auspices of IMO, the MARPOL Convention is the main international convention covering prevention of pollution of the marine environment by ships from operational or accidental causes. It is a combination of two treaties adopted in 1973 and 1978 respectively and updated by amendments through the years.
4.1.2 Until the 1970's, most oil tankers were constructed such that the cargo tanks were an integral part of the vessel's hull, and, furthermore, when the vessel was empty, water ballast was carried in the same tanks that were also used for oil cargoes. The result of such design was that there was a risk of pollution of the sea from "operational" reasons (water washing the tanks in between oil and ballast water carriage) and "accidental" reasons through rupturing of the vessel's hull from either a collision or grounding when the vessel was laden. Such vessels would have been regarded as "single-skinned" or "single-hulled".
4.1.3 To reduce these risks regulations were introduced to cover operational risks for existing tankers ("load on top" and "crude oil washing") and, more relevant to this dispute, new tanker design. Initially new tankers were required to have dedicated separate water ballast tanks (which were never used for oil carriage). The 1973 MARPOL Convention (Annex I) Regulation 13 required segregated ballast tanks on new tankers over 70,000 deadweight tonnes and the 1978 Convention extended this to new crude oil ships over 20,000 tonnes. Such tankers were referred to as SBT (Segregated Ballast Tanks) vessels. The dedicated ballast tanks were spread throughout the vessel to maintain trim/stability. Such designs greatly assisted the reduction of pollution from "operational" reasons but did not address the collision and grounding pollution risks.
4.1.4 A development in design followed and the "segregated ballast tanks" were placed along each side of the vessel such that the oil cargo was carried in tanks in the centre of the vessel and ballast was carried in tanks at the side of the vessel, so-called "wing tanks". Such vessels were described as "double-sided" vessels and the FRIXOS/ELLI are examples of such a design. In the 1980's Shell also built 5 ships of a similar design. This design meant that when the vessel was carrying an oil cargo the wing ballast tanks were empty and therefore in the event of a collision it was more likely that only the wing tanks would be holed and the centre tanks, containing the oil, would stay intact. Such a design was like having a double wall around the oil cargo. It was usual for these ships to have their class description as SBT/PL (Segregated Ballast Tanks-Protected Location).
4.1.5 Finally, the logical step was taken in tanker design in the late 1980's when vessels were built such that the oil cargo tanks did not form any part of the ship's hull and were completely protected from the sea on both sides and the bottom. Such vessels were referred to as "double-hulled" vessels and could withstand collision or grounding with a considerable reduction in the pollution risk. The amendments to 1973/1978 MARPOL Conventions introducing double hulls were contained in Regulation 13F – prevention of oil pollution in the event of collision or stranding. The amendments were adopted in March 1992 and entered into force in July 1993. Regulation 13F applied to new tankers – defined as delivered on or after 6 July 1996 – while existing tankers must comply with the requirements of 13F not later than 30 years after their date of delivery.
4.1.6 Of course it is well known in the Shipping Industry that, following the Exxon Valdez disaster in Alaska in 1989, the USA unilaterally sought to ban single hulled tankers. The Oil Pollution Act 1990 (OPA1990) addressed this by promoting the use of double hulled tankers in US waters although this legislation allowed for the phase out of single hull.
4.2 On 12 December 1999 the 37,238-dwt tanker "Erika" broke in two in heavy seas off the coast of Brittany, France, while carrying approximately 30,000 tonnes of heavy fuel oil. Although the crew were saved, some 14,000 tonnes of oil were spilled and more than 100 miles of Atlantic coastline were polluted. Following this accident there was strong feeling within the EU that such cargoes should only be carried in double-hulled ships even though such a policy would be stricter than MARPOL, which most EU countries were signatories to. After considerable industry/government discussion and lobbying the EU view prevailed. From 21 October 2003 there was an absolute bar on carriage of heavy grades of oil within EU ports or terminals on vessels that did not have a complete double hull as defined by MARPOL 73/78, Annex 1, Regulation 13F or 13G(1)(c) or 13H(1)(b) except for certain ice-Class strengthened vessels. This was pursuant to EU Regulation 417/2002 dated the 18 February 2002, amended by Regulation 1726/2003 dated 22 July 2003, which took effect on 21 October 2003 (see Appendix 7 to this report for full texts of Regulations and Journal).
4.3 Of course, concurrent with the EU actions, the IMO were working to unify the MARPOL regulations with the EU ones. Following the "Erika" disaster, proposals were submitted to the Marine Environment Protection Committee (MEPC) to accelerate the phase-out of single-hull tankers contained in the 1992 MARPOL amendments. The amendments to Regulation 13G in Annex 1 of MARPOL 73/78 were adopted by the MEPC's 46th session in April 2001. The "Prestige" tanker incident in November 2002 gave impetus for implementation of EU Regulations and further calls for changes to MARPOL 73/78. The MEPC, at its 49th session in July 2003, agreed to an extra session of the Committee, to be convened in December 2003, to consider the adoption of proposals for an accelerated phase-out scheme for single hull tankers, along with other measures including an extended application of the Condition Assessment Scheme (CAS) for tankers. The MEPC – 50th session: 1 and 4 December 2003 adopted Regulation 13(H) to enter into force on the 5 April 2005."
"(5) In the case of an oil tanker of 5,000 tons deadweight and above, carrying heavy grade oil as cargo fitted with only double bottoms or double-sides not used for the carriage of oil and extending to the entire cargo tank length or double hull spaces which are not used for the carriage of oil and extend to the entire cargo tank length, but does not fulfil conditions for being exempted from the provisions of paragraph (1)(b) of this regulation, the Administration may allow continued operation of such a ship beyond the date specified in paragraph (4) of this regulation, provided that:
(a) the ship was in service on 4 December 2003;
(b) the Administration is satisfied by verification of the official records that the ship complied with the conditions specified above;
(c) the conditions of the ship specified above remain unchanged; and
(d) such continued operation does not go beyond the date on which the ship reaches 25 years after the date of its delivery.
(6) (a) The Administration may allow continued operation of an oil tanker of 5,000 tons deadweight and above, carrying crude oil having a density at 15°C higher than 900 kg/m3 but lower than 945 kg/m3, beyond the date specified in paragraph (4)(a) of this regulation, if satisfactory results of the Condition Assessment Scheme referred to in Regulation 13G(6) warrant that, in the opinion of the Administration, the ship is fit to continue such operation, having regard to the size, age, operational area and structural conditions of the ship and provided that the operation shall not go beyond the date on which the ship reaches 25 years after the date of its delivery."
Construction of the charters
i) Both parties appreciated that fuel oil was one of the two main cargoes to be carried under the charter party. The charter provided for the carriage of crude oil and dirty petroleum products. The trading of fuel oil constituted over 80% of the trade in dirty petroleum products.
ii) Both parties knew that ST had no intention of seeking to trade the vessel to the USA because of the restrictions operating there and the lack of commercial opportunity in respect of single hulled vessels during the phase out period when their use was still permissible.
iii) Both the Owners and ST knew that, following the oil spill incidents, regulation (EC) No 1726/2003 dated 22 July 2003 had come into effect, accelerating the phasing out of single hull tankers and providing that they could not carry heavy grades of oil within EU waters after 21 October 2003.
iv) Both parties intended that the vessel be traded East of Suez.
v) The Arabian Gulf is the main lifting area for crude and fuel oil cargoes in the East of Suez market, as both parties were aware.
vi) Each knew that the ability to carry fuel oil was central to the vessel's ability to operate out of the Arabian Gulf, East of Suez on the core trade to the Far East.
vii) Each knew that the vessels were, by reason of their length, suitable for loading at Bandar Mahshahr. Only a small minority of Aframax tankers were capable of so doing and in consequence these vessels had a competitive advantage and would attract a premium for a voyage commencing there. Fuel oil was the prime cargo loaded at that port.
viii) The ability to carry fuel oil was therefore critical to their ability to operate in the premium fuel oil trade from Bandar Mahshahr.
ix) Both parties were aware that an inability to carry fuel oil would result in the loss of a significant proportion of available cargo possibilities, would restrict the vessels' trading opportunities and relegate the vessels to a position where they competed with the lower end of the tanker market.
x) Both parties knew that the IMO had adopted regulation 13H in December 2003, which was to come into force on 5 April 2005.
xi) Both parties knew that Regulation 13H prima facie had the effect of restricting the types of oil which single hull tankers such as Elli and Frixos could carry. They would not be able to carry the vast majority of commercially traded fuel oils without obtaining a dispensation from their flag state administration.
xii) Both parties regarded the two vessels as being "double-sided".
xiii) There was considerable uncertainty as to the way in which the new regulations would be interpreted but there was a common view, espoused by Captain Apostolou of the Owners and Mr Andersen and Captain Sawant of ST, that double-sided vessels would largely be unaffected by the Regulations and would obtain the necessary dispensation. Captain Apostolou was the head of the Fleet Operations Division, the Designated Person Ashore and Environmental Manager of the Owners, whose responsibilities involved ensuring that the vessels' statutory, survey and classification certificates were kept up to date. Mr Andersen was the head of Shipping at ST's office in London, having previously worked in Singapore. He had overall commercial responsibility for the chartering decisions made by ST. Captain Sawant was an operator with ST and was responsible for the day to day operations of a number of chartered vessels, including the Frixos.
xiv) There was a general view which, again, I find to have been shared by these three people, that the majority of states east of Suez would take a more relaxed approach to the new MARPOL Regulations as they had historically done in the past or would accept any dispensation granted by the Flag State Administration. Some, such as Saudi Arabia, were not party to MARPOL at all.
xv) The Profit Share Agreement was modelled on the Shell charters of these two vessels, which had preceded ST's charters.
xvi) Profit Share Agreements of this "closed book" variety, provide for a basic rate of hire which is below market rate and an additional profit sharing arrangement, where the Charterer hopes he can do better than the Platts rate.
The Language of the Charter Parties
Clause 3
Clause 52 and the description of the vessel as having "double sides"
Conclusion on Liability
The Alleged Implied Term
Damages
The Elli
"The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken".
i) Hire that ST would have earned under the Tianbao sub-charter from 1730 hrs on 30 August 2005 until re-delivery on 30 September 2006 - 395.64583 days x $28,275 = | $11,186,885.84 |
ii) Plus off hire bunker consumption between 30 August 2005 and 9 September 2005= | $22,803.88 |
Less hire payable by ST to the Owners from 1730 hrs on 30 August 2005 until re-delivery at 0900 hrs on 30 September 2006 - 395.64583 days x $17,775 = | $7,032,604.63 |
Less profit share payable to the Owners = | $3,206,313.75 |
Less actual earnings achieved from employment of the Elli until 0900 hrs on 30 September 2006 = | $489,463.40 |
Total lost profits = | $481,307.94 |
The Frixos
Conclusion