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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> AIC Ltd. v Marine Pilot Ltd.  EWHC 1182 (Comm) (17 May 2007)
Cite as:  EWHC 1182 (Comm),  2 Lloyd's Rep 101
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| AIC Limited
|- and -
|Marine Pilot Limited
Timothy Young Esq, QC (instructed by Eversheds) for the Defendant
Hearing dates: 19th January 2007
Crown Copyright ©
Mrs Justice Gloster, DBE:
Worldscale 200 minimum rate (flat) Amsterdam rate to apply. Overage at 50 percent.
Demurrage per day: United States $30,000 (thirty thousand) per day/pro rata.
Should the Charterer fail to supply a full cargo, the Vessel may, at the Master's discretion, and shall upon request of the Charterer, proceed on her voyage, provided that the tanks in which cargo is loaded are sufficiently filled to put her in seaworthy condition. In that event, however, deadfreight shall be paid at the rate specified in Part 1 hereof on the difference between the intake quantity and the quantity the Vessel would have carried if loaded to her minimum permission freeboard for the voyage.
9. SAFE BERTHING SHIFTING
The vessel shall load and discharge at any safe place or wharf, or alongside vessels or lighters reachable on her arrival, which shall be designated and procured by the Charterer, provided the Vessel can proceed thereto and lie at and depart therefrom always safely afloat, any lighterage being at the expense, risk and peril of the Charterer.
19. GENERAL EXCEPTIONS CLAUSE
The Vessel, her Master and Owner shall not unless otherwise in this Charter expressly provided, be responsible for any loss or damage or delay or failure in performing hereunder arising or resulting from: - any peril, danger of accident or the sea or other navigable waters; ..And neither the Vessel, nor Master or Owner, nor the Charterer, shall, unless otherwise in this Charter expressly provided, be responsible for any loss of [sic] damage or delay or failure in performing hereunder, arising or resulting from: - perils of the seas..."
2. 3 consecutive voyages following basis:
Minimum 90,000 metric tonnes always consistent with 45 feet fresh basis arrival Northwest Europe. No deadfreight to be for Charterer's account provided minimum quantity supplied. ½ grades with Vessel's natural segregation gasoil or unleaded mogas undarker 2.5 NPA
Load one safe port Ventspils. Discharge 1/2 safe ports United Kingdom Continent Bordeaux/Hamburg range.
2nd and 3rd voyages in direct continuation normal steaming plus 24 hours for cancelling (steaming basis Ventspils/Rotterdam or vice versa 3.5 days, additional 24 hours for cancelling to exclude delays due to bad weather force 6 and above, fog and narrow passage closure or restrictions beyond Owner's control).
3. Worldscale Hours Terms and Conditions shall apply to this Charter Party.
Laytime 84 SHINC
11. LIGHTERING CLAUSE
If Charterers request Vessel to load/discharge via lightering/ship-to-ship transfer (weather permitting and always subject to Master's approval which [is] not unreasonably to be withheld) at anchor of any load/discharge port.
Charterers will provide at their cost and expenses all suitable fenders, hoses and any other equipment to safely perform the load/discharge operation.
All time commencing from Vessel's arrival at the lighterage ship-to-ship location until Vessel's break free, shall run continuously weather permitting or not, without interruption and shall count as full laytime used or demurrage if vessel already on demurrage ."
"since all concerned were aware that it would not be possible for the Vessel at that particular time to load this quantity, this was a gesture without legal significance."
It was not clear from the Award whether the NOR was served before or after the Charterer's tender.
The Tribunal's conclusions
"6. In addition to the disagreement relating to the freight rate for voyages 1-5 and 6-8, a dispute arose on voyage 6 as a result of a claim by Owners for what was described as "deadfreight". On the sixth voyage, the Vessel had lifted a cargo of only 67,058mt diesel as opposed to the contractual minimum quantity of 90,000mt. As a result of what were said to be altogether exceptional conditions as Ventspils the available water in the dredged channel was reduced to the extent that, when asked for him advice as to the quantity of cargo which the Vessel could load on the available draft, the Master informed the Charterer that she would be able to load no more than 67,000mt. The vessel was duly instructed to load up to the maximum permissible sailing draft and the owners subsequently claimed damages representing the freight which they had been unable to earn on the difference between the quantity of the cargo actually loaded and the minimum contractual quantity.
7. We note here for the purposes of determining the issues of principle arising out of the Owner's deadfreight claim that it was agreed that we had to assume that, as a matter of fact, the Vessel could not have safely proceeded to Ventspils, load the minimum contractual cargo of 90,000mt and departed safely with that cargo on the sixth voyage. Similarly, we were invited to assume that it would have been possible for a ship-to-ship transfer ('STS') in deep water to have taken place at or off Ventspils in a location which would not have involved the subsequent use of the dredged channel with the draft limitation.
25. We have referred to the importance assumed at the hearing by the arguments relating to possible STS transfer of the balance of the minimum contractual cargo. Indeed, for our part, by the conclusion of the hearing we were satisfied that the possibility of an STS transfer represented an insuperable obstacle so far as the Charterer's attempt to avoid liability for the deadfreight claim was concerned.
26. In a nutshell, we could see no answer to the submission made on behalf of the Owners that there was no obstacle to the Charterers completing loading by STS in accordance with Clause 11 of their own Terms. All that was required to initiate the STS procedure was a 'request' although it was true that an STS transfer could only take place weather permitting and always subject to the Master's approval (which was not to be unreasonably withheld). Thus, as it was put by Counsel for the Owners
'there was no legal obstacle to their loading a full contract quantity and thus no legal answer to their deadfreight liability.'
27. The only answer offered on behalf of the Charterers to this argument was that although there was a contractual entitlement to call for an STS transfer, there could be no obligation on them to do so. They accepted that, at the time, the Owners had referred to the possibility of the Charterers contemplating 'filling up' the vessel in another port. The Owners had confirmed that if this was in the Charterers' mind, they were willing to assist. However, the Charterers emphasised that non one at the time had even suggested an STS transfer.
28. Given that we had to assume for the purpose of this application that it would have been practicable for the vessel to have 'topped off' on the sixth voyage with an STS transfer, we accepted as correct the submission made on behalf of the Owners that whilst this was indeed no more than an option (so that the Charterers were not obliged to exercise it) if they failed to do so they could not escape liability for any freight lost by the Owners as a result. We were bound to conclude that it was an available means of performing the Charterers' obligations under the charter to load the minimum contractual quantity and that the Charterers could not therefore rely on their own deliberate decision not to exercise this option in order to avoid liability for a prima facie breach.
29. It is implicit from the comments made above that we rejected the Charterers' argument that they had not failed to supply or furnish the minimum contractual cargo. Their argument that they could rely upon the fact that the Master had only called for 67,000mt of cargo was not one that impressed us. It was clear so far as we were concerned that when the Master tendered Notice of Readiness stating that he expected to load a cargo of 'approximately 67,000mt', he was doing no more than providing a technically informed statement from the Vessel of the maximum quantity of cargo which her staff felt could [be] lifted in the prevailing physical circumstances known to all. On no sensible legal or commercial view could the Master's NOR be taken to have varied the term of the charterparty or to have given rise to an estoppel in the Charterers' favour.
30. Although the Charterers formally 'tendered' for loading a quantity of 93,410.495mt, since all concerned were aware that it would not be possible for the vessel at that particular time to load this quantity, that was a gesture without legal significance. As Counsel for the Owners argued, in this context the Charterers' obligation to 'tender' or 'furnish' required them to have the cargo alongside the vessel for loading. Since that would have meant that she would not have been able to proceed out of the port for an indefinite period following completion of loading, the fact that the quantity of cargo 'tendered' was available in the port was not, in our view, relevant to the question of whether the Charterers had complied with their obligation with regard to the minimum cargo size.
32. It was not realistic in our view to argue (as the Charterers sought to do) that this was not a case involving a breach of the obligation to furnish a cargo of minimum size but a case where a ship had deliberately failed to call for the full amount of cargo because her staff were aware that she would be unable to load it. In answer to the arguments put forward on behalf of the Charterers as to the contractual allocation of risk as it appeared from a true construction of the contract, Counsel for the Owners submitted that what the parties had essentially agreed was that Charterers could load whatever quantity they required but that they would pay freight on a minimum cargo size of 90,000mt. We agreed. On the evidence it struck us that what had happened here was that when confronted with this unfortunate situation the Charterers had decided that of the available options open to them (one of which would have been to have awaited the dredging of the channel which was referred to in the contemporaneous documents as a matter of urgency) they had decided that the least unattractive option was to have the vessel sail away with less than the minimum contractual quantity.
33. On a true construction of the provisions of the contract we were therefore satisfied that there was no answer to the Owners' deadfreight claim and that it was unnecessary (as Counsel suggested on their behalf at the hearing) for us to get into the realm of possible unsafety. However, out of deference to the care with which the arguments on this point were presented at the hearing and because Counsel for the Owners submitted that this case reinforced the correct conclusion on the construction of the contract, we shall refer briefly to these arguments."
"40. As to the Charterers' argument that a draft limitation restricting cargo quantity could not, on the authorities, constitute 'unsafety', we agreed with the Owners that whilst in the present case there was no question of unsafety in the ordinary usage of that word, there is authority for the view that a port can be unsafe because of a need for lightering to get into or out of it. The same principles apply to questions of unsafety involved in leaving ports as entering them.
41. As to the supposed objection in principle to any unsafe port or berth argument in this case based on the fact that there was no evidence of unsafety at the date of the charterparty, our view was that if, as a matter of fact, there is a propensity for sudden silting to occur in the dredged channel at Ventspils, that could form the basis of an unsafe port or berth case. Had it been necessary for us to decide this point, on the very limited evidence before us, we could not have concluded that the silting up of the channel constituted an abnormal occurrence, such that the unsafety was not something for which the Charterers might be liable.
42. Had we been required to do so, we therefore would have been inclined to conclude that the Owners' case based on the breach of an alleged safe port/berth warranty, could not be dismissed as a matter of principle but if pursued, would have to be considered on its merits."
i) whether the Charterer had failed to supply the minimum quantity of cargo; this in turn required the determination of two sub-issues, namely:
a) whether, by formally tendering for 93,410.495mt, the Charterer could nonetheless be said to have failed to supply or furnish cargo because that tender was "without legal significance" in the circumstances where all parties know that because of the draft restriction the Master could only load 67,000mt and/or because, in order to comply with its obligation to furnish, the Charterer had physically to bring the cargo alongside the Vessel for loading; and
b) whether, even if such a formal tender would have prima facie satisfied the Charterer's obligation to furnish, the existence of the option to load the balance of the cargo by STS transfer and, on the assumed facts, the availability of that option meant that the Charterer could not escape any liability for its failure to load the contractual minimum cargo if it failed to exercise the STS transfer option;
ii) whether the wording in the Charterparty, referring to the sole loadport as "1 safe port Ventspils", constituted a warranty by the Charterer of the safety of the port, as opposed to an agreement by both parties that the port was safe; and
iii) whether features of a loadport which might mean that a vessel "could not proceed to, load the contractual cargo at and depart from the port" by reason of a draft restriction could as a matter of law render the port prospectively unsafe.
Issue i)(a): Had the Charterer "fail[ed] to supply a full cargo", notwithstanding its "formal" tender of 93,410.495mt?
i) that the Charterer had no desire nor intention to load that full cargo since it would delay the Vessel in her voyage and accordingly "they did not actually try or ask to pump more than 67,058mt on board;"
ii) that there was no inhibition against the Vessel receiving a full 90,000mt of cargo; the inhibition was in her departing in the channel on her chartered voyage with that full cargo on board; the Charterers adopted the least unattractive option of having the Vessel sail away with less than the minimum cargo;
iii) the obligation to supply cargo under Clause 3 of the Asbatankvoy form means "pump to the Vessel" since freight is calculated under Clause 2 of the form by "an intake quantity" and Clause 10 says that "The cargo shall be pumped into the Vessel at the expense, risk and peril of the Charterer";
iv) there was no finding of a refusal on the part of the Master/Owner to load the cargo, nor was the Tribunal even asked to assume a refusal; (the Owner accepted that if there had been a wrongful refusal on its part, the Charterer would not have been obliged to load by STS);
v) that, in order for there to have been a tender of legal significance, the Charterer would have to have been prevented from pumping the cargo into the Vessel, either physically or by the Owner evincing "an improper intention to refuse to accept it";
vi) all that happened in the present case was that,
"because of the draft in the channel, the Master gave a technically informed statement that the Vessel could not sail along that channel with more than about 67,000mt on board and the Charterer decided to load only that quantity.";
see paragraph 15 of Mr. Young's submissions;
vii) consequently, submitted Mr. Young,
"since everyone appreciated the reality of the situation, and since no more cargo was intended to be loaded than the 67,058mt actually loaded, the Charterer in truth requested the Vessel proceed with such cargo as they had loaded, or, alternatively, the Charterer supplied 67,058mt on board and no more and then (no more being supplied) the Master had the liberty to sail, which he did. In either event, clause 3 expressly stipulates that the Charterer.. w[as] to pay deadfreight".
Conclusion on Issue i)a)
"that it would not be possible for the Vessel at that particular time to load that quantity" (see paragraph 30 of the Award).
"had decided that of the available options open to them (one of which would have been to have awaited the dredging of the channel which was referred to in the contemporaneous documents as a matter of urgency) they had decided that the least unattractive option was to have the vessel sail away with less than the minimum contractual quantity".
Be that as it may, that commercial decision does not, in my view, undermine or detract from the fact that here there had been an actual tender of full performance by the Charterer. In those circumstances, I do not see how it could be said that there had been a "failure" on the part of the Charterer within the meaning of clause 3.
Issue i) (b) Whether, even if such a tender would have prima facie satisfied the Charterer's obligation to furnish, the existence of the option to load the balance of the cargo by STS transfer and, on the assumed facts, the availability of that option, meant that the Charterer could not escape any liability for its failure to load the contractual minimum cargo if it failed to exercise the STS transfer option?
"Given that we had to assume for the purpose of this application that it would have been practicable for the vessel to have 'topped off' on the sixth voyage with an STS transfer, we accepted as correct the submission made on behalf of the Owners that whilst this was indeed no more than an option (so that the Charterers were not obliged to exercise it) if they failed to do so they could not escape liability for any freight lost by the Owners as a result. We were bound to conclude that it was an available means of performing the Charterers' obligations under the charter to load the minimum contractual quantity and that the Charterers could not therefore rely on their own deliberate decision not to exercise this option in order to avoid liability for a prima facie breach."
"(iii) that the Owner is not entitled to claim deadfreight in respect of the difference between the minimum contractual quantity under the Charterparty and the addenda thereto and the quantity of cargo loaded on the sixth voyage."
Issue ii): whether the wording in the Charterparty referring to the sole loadport as "1 safe port Ventspils" constituted a warranty by the Charterer of the safety of the port, as opposed to an agreement by both parties that the port was safe?
i) There was no warranty of safety at Ventspils in this case, because Ventspils was a known port and the Owner took the risks of that port. In a case where the contract provides "1 safe port, Port X", the parties are in fact agreeing between themselves, but neither is warranting, that the port is safe, so that the owner's obligation to go there is definite. Thus the words "safe port Ventspils" are not apt to constitute a warranty by one party to the other that Ventspils is indeed safe.
ii) The primary purpose of a safe port warranty is to permit an owner to refuse to go to that port if he realises the unsafety; the secondary purpose is to give him the right to damages if he goes there without realising the unsafety and his ship is damaged. However, if the port is named, an owner cannot thereafter refuse to go there. He has agreed to it, and thus taken the risk; there is thus no room for a charterer's safe port warranty. In support of this submission Mr. Berry relied upon the dissenting judgment of Dixon CJ in Reardon Smith Line, Limited v Australian Wheat Board ("The Houston City")  2 Lloyds Rep 148 at 153, and in particular the following passage:
"When the charterer is prepared at the time of taking the charter to specify the place where the cargo will be available or the place at which he desired it delivered, the shipowner must take the responsibility of ascertaining whether he can safely berth his ship there or will take the risk of doing so. If he agrees upon the place, then, subject to excepted perils, his liability to have his ship there is definite. But where the charterer cannot specify the place of loading or discharge at the time of the charter, the shipowner must agree to submit his ship to the charterer's orders. The orders are normally given directly to the master. When the charter limits the choice of safe ports or safe berths, the purpose is to impose upon the charterer the necessity of doing in the interest of the ship what the shipowner would have done if the charterer had been prepared to nominate to him a port of loading or discharge at the time of proposing the charter, namely, avoiding an unsafe port. The fulfilment of the duty of naming the port of loading is inseparably connected with the fulfilment of the duty of providing the cargo. The charterer must provide the cargo at the named port and he must accordingly name a port where he can provide the cargo. If the safety of the port is in doubt, it seems better to suppose that the charterer must bear the responsibility of his choice, if it is a wrong one, and if the master is not prepared to take the extreme step of declining to lift the cargo because of the dubious security of the port. To place the master in the position of having to decide at his peril whether to take the risk of a doubtful port or berth as an alternative to refusing to come in and lift the cargo operates to the undue advantage of a charterer who in fact has named an unsafe port. For if the master of the ship decides not to frustrate the entire adventure but to take the risk, then on that construction of the clause the master would, by his decision, relieve the charterer of all responsibility; whereas, had the decision of the master been the contrary, the charterer would, because the port was unsafe in fact, be liable for all the damage flowing from failure to provide a cargo according to the conditions of the charter. The point may be stated concisely be saying that the charterer promises that he will provide a cargo and that it will be at a port which is safe or by saying that he promises that he will name a port which is safe."
The passage in that dissenting judgment was subsequently approved by the Privy Council in the same case at  AC 266 at 282 and also, prior to The Houston City reaching the Privy Council, by the English Court of Appeal in Compania Naviera Maropan S/A v Bowaters Lloyd Pulp and Paper Mills Limited  2 QB 68.
iii) Accordingly, Mr. Berry submitted, the present case was a case where the Charterer, with the agreement of the Owner, was prepared at the time of taking the charter to specify the place where the cargo was available to load, and therefore the obligation was on the Owner to satisfy itself as to the safety of the port or berth. In the words of Dixon CJ, "his liability to have his ship there is definite".
iv) Further, he submitted, it is clear that warranties of safety are primarily related to the time that the order is given to go to the port, and the effect of such a warranty is that the port is at that time prospectively safe; see Scrutton op. cit., Article 69, page 128. Such a warranty, submitted Mr. Berry, is inconsistent with, and cannot be aptly included in, a charterparty where a single port is named. In such circumstances, there is no room or need for any order to go to the port, and the obligation to go there is definite from the time of contracting.
v) Mr. Berry accepted that Dixon CJ's comments in relation to the present issue were obiter, since in The Houston City, the voyage charterparty contained the words "safe port", but did not name the port; the relevant term in that case was "one or two safe ports in Western Australia". However, Mr. Berry submitted that the fact that the charterparty in that case contained those words meant that the judge's obiter comments applied to a case where the words "safe port" appear;
vi) As further obiter support for his proposition, Mr. Berry sought to rely upon the following statement of Mustill J in Transoceanic Petroleum Carriers v Cook Industries Inc (The "Mary Lou")  2 Lloyds Rep 272 at 280:
"The charterers also drew attention to the specific reference to New Orleans as a permissible loading port. This does show, I agree, that the making of a passage up the Mississippi River was regarded as a possible element of the voyage. If the river had attributes which made it permanently unsafe, or if it was known to be unsafe at the time of the charter, then the naming of the port might have been enough to nullify the requirement, added to the printed form, that the loading port would be safe. But this was not the case, and it is entirely consistent with the wording of the clause to say that the owners agreed that the ship would visit the named ports if, but only if, they proved to be safe at the material time."
The relevant wording of the charter was "proceed to one or two safe berths one safe port US Gulf New Orleans/Ama/Reserve/Myrtle Grove/Destrehan counting as one port". He submitted that the acceptance of Mustill J that, if the Mississippi River had attributes which made it permanently unsafe, then the naming of New Orleans "might have been enough to nullify the requirement, added to the printed form, that the loading port would be safe" supported his argument.
vii) Mr. Berry also relied on two London arbitration decisions where he submitted that the point had been decided in charterer's favour on materially similar words: see (1986) 181 L.M.L.N. 18/86 (a time charter for trading at and between safe berths/ports, including a named port), and (1997) 463 L.M.L.N. 11/97 (a voyage charter to one named safe port). He prayed in aid the well-established principle that in commercial cases it is of the utmost importance that points such as these are settled one way and not subject to conflicting decisions.
viii) Finally, even without reference to authority, Mr. Berry submitted that the word "safe", taken by itself, is at best neutral as to whether either party or neither is warranting safety. In a case where the charterer has no right to choose the port as it has been contractually stipulated before the charter begins, it is the owner who has the greatest means of information as to the safety of the port, and the ability of the ship safely to go there, and accordingly there is no need to read the words as a charterer's warranty. In any event, the clause should be read contra preferentem the owner.
"On a true construction of the charterparty, the effect of naming Castellammare in the preamble was that the safe port warranty remained applicable to other ports to which the vessel might be ordered to by the charterers. By agreeing to the named port in the charterparty the owners took upon themselves any risks attaching to the port in respect of safety. When the port was put up by the charterers, the owners were in a position to check it out in respect of safety and/or other hazards either through publications such as the appropriate Pilot or through local correspondents. The effect of accepting the named port put the owners in the same position regarding that port, as in the case of a named port in a voyage charterparty. Therefore, the charterers gave no warranty regarding the safety of the port/silo berth at Castellammare."
The report of the case is extremely brief and it is not possible to discern what arguments were presented or whether there were any other provisions of the charter, or features of the factual matrix, that supported the conclusion reached.
"the naming of the port deprived the owners of the protection afforded by the prefix "one safe port". Those words were invariably inserted when a range of ports was involved, but they lost their purpose entirely in the case of a named port."
Again, the report of the case is extremely brief.
Issue iii): whether features of a loadport which might mean that a vessel "could not proceed to, load the contractual cargo at and depart from the port" by reason of a draft restriction render the port prospectively unsafe?
"we agreed with the Owners that whilst in the present case there was no question of unsafety in the ordinary usage of that word, there is authority for the view that a port can be unsafe because of a need for lightering to get into or out of it. "
" a port will not be safe unless in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship; " see Scrutton Article 69 page 130, and the authorities there cited.