Recent English case law Short summaries from decisions of the High Court, the Court of Appeal and the Supreme Court
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Last updated 29-Feb-2016

Gard Marine & Energy Ltd v China National Chartering Co Ltd (Rev 1) (Ocean Victory) [2015] EWCA Civ 16 (22 January 2015)
Shipping – Bareboat Charterparty – The demise charterers had insured the vessel for the respective rights and interests of themselves and the owners – Vessel attempted to leave port in adverse weather conditions – While leaving the port and the vessel was driven back onto the breakwater wall, and subsequently became a total loss – Insuring companies took an assignment of both the owners’ and the demise charterers’ rights in respect of the grounding and the total loss of the vessel – The Insurers claimed from Charterers damages arising out of the loss of the ship – Whether as a matter of law in the circumstances there had been a breach of the safe port warranty – Whether, on the true construction of the terms of the demise charterparty, the demise charterers, who had insured the vessel at their expense, had any liability to the owners in respect of insured losses, notwithstanding that such losses may have been caused by a breach of the safe port warranty.

On 24 October 2006 OCEAN VICTORY, a capesize bulkcarrier, part-laden with a cargo of iron ore, sought to leave the port of Kashima, Japan during a severe gale. Master hesitated to leave the port in such adverse weather conditions believing that it was safer to remain alongside, but on the advice of Charterers’ representative at the port, a local experienced mariner, finally agreed that the vessel should leave. The concern was that she was at risk of breaking her moorings even if supported by tugs. As she proceeded along the Kashima Fairway she was confronted by northerly or north-north-westerly winds of about Beaufort scale force 9 and by heavy seas generated both by the winds and by the dominant swell from the north-east. In prevailing conditions master had to put wheel hard a port and hard a starboard to keep vessel clear from unsafe depths and breakwater. Such wheel movement applied for prolonded time drastically reduced speed of the vessel. When north-west of the seaward end of the South Breakwater she eventually lost steerage and with her portside exposed to the gale she was set down onto the end of the breakwater. She was then driven southwards by the weather, went aground and was abandoned by her crew who were airlifted ashore. Notwithstanding the assistance of Nippon Salvage on LOF 2000 terms she broke apart and was declared total loss on 27 December 2006.

The owners submitted that the port was prospectively unsafe for OCEAN GLORY, because there was a risk that vessels moored in port might be advised to leave port on account of long waves and yet there was no system in the port to ensure either that vessels left in good time and in conditions which did not pose a threat to safe navigation or that vessels did not attempt to depart in conditions which did pose a threat.

The charterers contended that unsafety of a port cannot not be judged by the fact that its systems fail to guard against every possible hazard, but whether or not it provided reasonable safety while taking reasonable precautions. They also argued that "in the light of the fact that no vessel had ever been trapped by a combination of wind and swell at the RMQ and adverse conditions in the channel (whether on 24 October 2006 or before) it is difficult to see upon what basis the port is to be criticised for not having put in place a system to address such a (non) risk." Alternatively the charterers put forward an argument that the cause of the casualty was the master’s misunderstanding that the vessel had been ordered to leave the port and/or his negligent navigation when leaving.

The judge did not accept charterers’ argument based on the concept of "reasonable safety" and pointed out that it would introduce an unwelcome and inappropriate measure of uncertainty in the meaning of the safe port warranty if safety were to be understood as "reasonable safety" rather than safety. He also held that: "A port is not saved from being unsafe where, although the vessel will be exposed to a danger which cannot be avoided by good navigation and seamanship, the port has taken precautions designed to protect vessels against that danger but which in fact do not protect the vessel from that danger. If, despite the taking of such precautions, the vessel remains exposed to a danger which cannot be avoided by good navigation and seamanship then the port is unsafe.
… The unsafety of the port lay in the absence of a system for ensuring that such advice was given only when it was safe to leave port."

12. Insurance and Repairs

(a) During the Charter period the Vessel shall be kept insured by the Charterers at their expense against marine, war and Protection and Indemnity risks in such form as the Owners shall in writing approve, which approval shall not be unreasonably withheld. Such marine war and P. and I. insurances shall be arranged by the Charterers to protect the interests of both the Owners ands the Charterers and mortgagees (if any), and the Charterers shall be at liberty to protect under such insurances the interests of any managers they may appoint. All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear.
If the Charterers fail to arrange and keep any of the insurances provided for under the provisions of sub-clause (a) above in the manner described therein, the Owners shall notify the Charterers whereupon the Charterers shall rectify the position within seven running days, failing which Owners shall have the right to withdraw the Vessel from the service of the Charterers without prejudice to any claim the Owners may otherwise have against the Charterers.
The Charterers shall, subject to the approval of the Owners and the Underwriters, effect all insured repairs and shall undertake settlement of all costs in connection with such repairs as well as insured charges, expenses and liability (reimbursement to be secured by the Charterers from the Underwriters) to the extent of coverage under the insurance herein provided for.
The Charterers also to remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurance and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances. All time used for repairs under the provisions of sub-clause (a) of this Clause and for repairs of latent defects according to Clause 2 above including any deviation shall count as time on hire and shall form part of the Charter period.
(b) If the conditions of the above insurances permit additional insurance to be placed by the parties, such cover shall be limited to the amount for each party set out in Box 28 and Box 29, respectively. The Owners or the Charterers as the case may be shall immediately furnish the other party with particulars of any additional insurance effected, including copies of any cover notes or policies and the written consent of the insurers of any such required insurance in any case where the consent of such insurers is necessary.
(c) Should the Vessel become an actual, constructive, compromised or agreed total loss under the insurances required under sub-clause (a) of Clause 12, all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the Owners and the Charterers according to their respective interests. The Charterers undertake to notify the Owners and the Mortgagee, if any, of any occurrences in consequence of which the Vessel is likely to become a Total Loss as defined in this clause.
(d) If the Vessel becomes an actual, constructive, compromised or agreed total loss under the insurances arranged by the Charterers in accordance with sub-clause (a) of this Clause, this Charter shall terminate as of the date of such loss.
(e) The Owners shall upon the request of the Charterers, promptly execute such documents as may be required to enable the Charterers to abandon the Vessel to insurers and claim constructive total loss.
(f) For the purpose of insurance coverage against marine and war risks under the provisions of sub-clause (a) of this Clause, the value of the vessel is the sum indicated in Box 27.
The Court of Appeal disagreed with decision of Teare J. Longmore LJ delivering the only reasoned judgment agreed with the Charterers that the casualty could rightly be described not merely as "remarkable" but also as unprecedented. His Lordship pointed out that conclusion of the judge led to surprising result that a modern port, with a first-class safety record and with a large volume of ships and major industrial entities using it, was unsafe in 2006 and had been unsafe for 40 years previously, notwithstanding that there had been no previous casualty of a similar nature. It was further underlined that on the judge’s conclusion, the port remains unsafe to date, since the changes to port procedures made since the casualty would not have prevented it had they been in place in 2006.

Main cricitcism of the judge’s approach was to his treatment of the issue of abnormal occurrence. Supported by words of Lord Roskill on the nature of charterers’ promise to nominate safe port and of the "abnormal occurrence" exception, in his speech The Evia (No. 2) [1983] 1 AC 736 at 757, Longmore LJ said:
A charterer does not assume responsibility for unexpected and abnormal events which occur suddenly and which create conditions of unsafety after he has given the order to proceed to the relevant port. These are the responsibility of the ship’s hull insurers (if owners have insured) or of owners themselves. Moreover the concept of "safety" is necessarily not an absolute one. As the Court of Appeal said in The Saga Cob [1979] 1 Lloyd’s Rep. 548 at 551, column 2, in the context of political risk:- "In the latter case [the safe port warranty] one is considering whether the port should be regarded as unsafe by owners, charterers, or masters of vessels. It is accepted that this does not mean that it is unsafe, unless shown to be absolutely safe. It will not in circumstances such as the present be regarded as unsafe unless the "political" risk is sufficient for a reasonable shipowner or master to decline to send or sail his vessel there."
In view of their Lordships the judge was wrong in his analysis of issue whether the simultaneous coincidence of the two critical features, i.e. severe swell from long waves and gale force winds in the Kashima Fairway, was an abnormal occurrence or a normal characteristic of the port of Kashima? Or put even more simply, was it an abnormal occurrence or a normal characteristic of the port that a vessel might be in danger at her berth at the Raw Materials Quay but unable at the same time safely to leave because of navigation dangers in the Kashima Fairway arising from the combination of long waves and gale force northerly winds which, in fact, occurred.

Longmore LJ stated that the judge wrongly limited his analysis by addressing separately the respective constituent elements of the combination 1) swell from long waves and 2) gale force winds, which applied together made it dangerous for a vessel either to remain alongside or impossible to navigation of the Fairway. While in the judge decision each component, viewed on its own, neither could be said to be rare and both were attributes or characteristics of the port, what mattered was not the nature of the individual component dangers but the nature of the event (i.e. the critical combination) which gave rise to the vessel effectively being trapped in port.

It was held that:
59. [O]ne has to look at the reality of the particular situation in the context of all the evidence, to ascertain whether the particular event was sufficiently likely to occur to have become an attribute of the port, otherwise the consequences of a mere foreseeability test lead to wholly unreal and impractical results. That point may be illustrated by examples given by charterers in their written argument: does the mere fact that it is "foreseeable" from the location of San Francisco that earthquakes may occur in its vicinity, or from the location of Syracuse, beneath Mount Etna, that there may be volcanic explosions in its vicinity, predicate that any damage caused to vessels in those ports from such events, were they to occur in the future, would flow from the "normal characteristics or attributes" of those ports, and therefore necessarily involve a breach of any safe port warranty? The answer is obviously not; whether, in such circumstances, there would be a breach of the safe port warranty, or the event would be a characterised as an abnormal occurrence, would necessarily depend on an evidential evaluation of the particular event giving rise to the damage and the relevant history of the port.

62. …It simply did not follow, logically or otherwise, from the fact that that event arose from (or, as the judge said, "flow[ed] from") the combination of two individual dangers, which he had held were normal characteristics or attributes of the port, that the "concurrent occurrence of those events" was also a normal characteristic or attribute of the port.
On the recoverability issue the Court of Appeal also differed the judge’s conclusion, that clause 12 provides a code for what is to happen. That conclusion was reached on the basis of the BIMCO material which was not before the judge and also because the opposite conclusion, that parties who were jointly insured could make claims against one another in respect of damage to the contract works, would be nonsensical.

Accordingly, the Court of Appeal held that, even if the demise charterers had been in breach of the safe port obligation in the charter, they were under no liability to the owners for that breach because the owners had agreed to look to the insurance proceeds rather than to the demise charterers for compensation. The demise charterers cannot therefore show that they have suffered any loss as a result of the time charterers' breach of their safe port obligation in the time charter and the time charterers have no liability to the demise charterers which they can pass on the sub-time charterers, to whom we have more usually been referring as "the charterers". × Collapse all ×

White Rosebay Shipping SA v Hong Kong Chain Glory Shipping Ltd (Fortune Plum) [2013] EWHC 1355 (Comm) (23 May 2013)
Shipping – Timecharter – NYPE 93 – Persistent late payment of hire by the charterers – Certain instalments not paid at all – Discovery by the owners that charterers had amended sub-charterparty to delete the owners’ right to a lien on sub-freights and sub-hires – The owners decided to terminate the charterparty but let the vessel to complete discharging – The tribunal held tha allowing the vessel to remain in the charterers’ service for 3 days for the purposes of discharging the cargo, the owners had affirmed the charter – Whether subsequent termination of the charter by the onwers after an affirmation was a repudiatory breach.

The owners of the Fortune Plum let the vessel to the charterers for a period of 35/38 months pursuant to the terms of a charterparty on an amended New York Produce Exchange Form.

The vessel was delivered to the charterers on 23 July 2010 and thereafter all hire payments were due on or before 23rd of each month. Untill January 2011 hire instalments were paid in one instalment albeit with minor delays of few days. But beginning from January 2011 delays increased to one week and beginning from April hire was never paid in time and when paid always in several instalments during subsequent months, some instalments were not paid at all. Trying to divert sub-hires and sub-freights from defaulted charterers the owners eventually learned on 1 November 2011 that the charterers had amended sub-charterparty and deleted the owners’ right to a lien on sub-freights and sub-hires, so it became evident to them that the charterers were seeking to divert the sub-freights and sub-hires to themselves, allowing them to trade the vessel without paying hire. On 7 November 2011 the owners concluded that the charterers were not going to make any more payments.

On 9 November 2011 the vessel anchored at discharge port and tendered notice of readiness to discharge. On 12 November 2011 the owners instructed master that on completion of discharge he must not follow charterers’ orders but wait for owners’ further instructions. On Monday 14 November the vessel completed discharging and sailed under the owners’ orders. Same day the owners informed the charterers that they had evinced a clear intention that they were no longer willing or able to be bound by the charterparty and that this was a repudiatory/renunciatory breach of the charterparty which the owners accepted as terminating the charterparty. The charterers replied that the withdrawal was wrongful and a repudiatory breach of the charterparty.

In the Arbitration the owners claimed that the charterers had renounced the charterparty by evincing an intention not to perform the charterparty. The tribunal held that only a reservation of rights cannnot suffice to protect the owners in circumstances where they acted in a manner which was wholly inconsistent with their accrued right to withdraw the vessel. The owners having made up their mind to accept the repudiatory breach did not do so by withdrawing the vessel immediately, instead they allowed the vessel to remain in the service of the charterers for the purposes of discharging the cargo. Understanding commercial reasons which influenced the owners’ decision to deliver the cargo before withdrawing the vessel, the tribunal concluded that the continued compliance with the charterparty was a clear affirmation and the owners’ withdrawal of the vessel on 14th November was itself a repudiatory breach.

The owners appealed claiming that the arbitrators wrongly concluded that a shipowner who has made up his mind to accept a repudiatory breach must withdraw the vessel immediately. Second, they wrongly held that the mere act of discharging can on its own amount to an unequivocal act from which it can be inferred that a shipowner intends to affirm the charterparty. Third, they wrongly considered that the owners were unable to terminate the charterparty in circumstances where the charterers continued to evince an intention not to perform the charterparty.
The judge agreed with the tribunal that the owners had a reasonable time to consider whether to accept the renunciation but after the expiry of such reasonable period the question was whether the owners had acted in a manner consistent only with their treating the contract as still alive. He also found that the arbitrators did not state a requirements that the owners were to withdraw the vessel immediately but only voiced a fact that there was no immediate withdrawal. The judge also did not find any error in law with the tribunal finding that the owners conduct in allowing the vessel to remain in the service of the charterers for the purposes of discharging the cargo amounted to continued compliance with the charterparty and was a clear affirmation. The judge, however, agreed that where a judgment has to be made not all tribunals may reach the same conclusion. He said at para 39:
39. I accept that it is possible that another tribunal might have concluded on the facts of the instant case that there was no affirmation. Another tribunal might have reasoned that in circumstances where (i) the owners had clearly decided on 11 November 2011 to terminate the charterparty and had so informed the master on 12 November 2011 and where (ii) the cargo which had been loaded on board the vessel during the currency of the charterparty had to be discharged it was an "unduly technical approach" to regard the continuance of the charterparty over the weekend of 12/13 November 2011 to enable the cargo to be discharged as an unequivocal affirmation of the charterparty by the owners. Similarly, another tribunal might not have regarded the conduct of the owners as "clear evidence" that they had determined to go on with the charterparty, notwithstanding the renunciation of the charterparty by the charterers.
The judge allowed appeal on the third point: continued renunciation. He stated that in circumstances where the charterers had continued to renounce the charterparty after the owners’ affirmation attention must be directed to the defaulted party’s behaviour after the affirmation. The judge thus concluded:
51. … The answer to that question is clearly a matter of fact for the tribunal. If the charterers were silent after the owners’ affirmation of the charterparty it is for the tribunal to decide whether such silence was a "speaking silence."

53. … In a case of renunciation or anticipatory breach (as opposed to repudiation based upon an actual breach) it does not necessarily follow that a termination following an affirmation is a repudiatory breach. For if the renunciating party continues to renounce the contract after the affirmation then the acceptance of that continuing renunciation is not a repudiatory breach but a lawful termination of the contract with a right to damages caused by the renunciation. Accordingly, in my judgment, the tribunal erred in law in concluding that it necessarily followed from the owners’ affirmation after 11 November that the owners themselves committed a repudiatory breach on 14 November.


However, there was no express finding by the tribunal to the effect that the charterers continued to renounce the charterparty after the affirmation and the court was not able to draw an inference to that effect. Accordingly the court set the award aside and remitted to the tribunal to decide whether charterers were silent after the owners’ affirmation of the charterparty and whether such silence was a "speaking silence." × Collapse all ×

Navig8 Inc v South Vigour Shipping Inc & Ors [2015] EWHC 32 (Comm) (16 January 2015)
Shipping – Demise Charters – Timecharter – Who are parties to contract – Four time charterparties fixture – Management company signed charterparties as "Disponent Owners Signatory in Contrac" – Whether the Managers intended that the charterparties were fixed on behalf of the registered owners - Whether the phrase "disponent owners" was used in the sense of the Managers being a manager of the vessels with power to fix charterparties on behalf of the Registered owners – Whether the Registered owners gave authority to the Managers to fix vessels.

The Owners of four Aframax vessels were group of companies where shipping represents  about 3 %. of the overall business. They let vessels on long term demise charter in 2006. Two vessels were financed by inter-group lending and other two were financed by a secured loan from a syndicate of banks. Demise charterers appointed one company to be a commercial manager for all four vessels.

By October 2009 the Demise charterers in difficulty when paying hire under the demise charters and the Managers suffered reputational problems which led to it being difficult for it to persuade charterers to fix the vessels. The Registered owners reserved their rights under the demise charters and by September 2011 were owed almost US$18m.

It led to situation that in July and August 2011 another company was appointed as commercial managers of the vessels by Demise charterers. New Managerswere aware of the problems in fixing the vessels on behalf of the Demise charterers and when renewing the P&I cover for the vessels in November 2011, removed the bareboat charterers as an assured to be "no longer involved" and accordingly Managers were believing that they were no longer acting on behalf of the demise charterers.

On 13 April 2012 the four Aframax vessels were time chartered to the Charterers for a period of two years (1 + 1 charterers' option). Although the charters were never signed it is agreed that the fixtures were on the terms of an amended ShellTime 4 form and that Navig8 had contracted with "[Managers] (hereinafter referred to as disponent owners) being owners of the vessel….". Cost of Management company was at that time 7.500 USD.

Approximately at the same time Managers were pressed to discuss with the Registered owners huge outstanding maritime claims on the  ships, which might led to ship arrest by other creditors. Charterers in their turn were worried by rumours about possibility of arrests and sought to have confirmation that Registered owners acknowledged the four charters and and provided a form of wording which stated in terms that Managers/Disponent owners under t/c were Registered Owners’ agent.

On direct request from the Charterers asking for Registered Owners’ feed back on information in the market to the effect that the charters had been fixed by Managers acting for Registered Owners, the latter replied on 29 June stating:
1. [Managers act] as Commercial Manager for the Bareboat Charterers of our four Aframaxes to conclude the time charter deal with [Charterers]
2. We have not signed any documents to appoint [Managers] as our Commercial Manager.
3. After we knew from the market, we have verbally communicated with [Managers] with regard to the length and lower than market rate of the T/C deal made between [Managers] and [Charterers] for our four Aframaxes.
4. We have reported the above to our legal advisor and submitted the related documents including the Bareboat Charterparties and T/C contracts for their review.
5. [Our legal advisor] confirmed to us that we can withdraw our four tankers and will not be responsible for the T/C contracts signed between [Managers] and [Charterers].
Subsequently on 22 October 2012 and 14 December 2014 Registered owners terminated the bareboat charterparties in respect of four aframaxes. The Charterers claimed damages from the Registered Owners and Managers on the grounds that they breached the charterparties by withdrawing the vessels from service. The charterers said that the charterparties were fixed by an agent, the Managers, on behalf of the Registered owners.

On the first issue: who was party to the charters, the learned judge answered that it were the Managers and the Charterers. Citing from the judgment of Lord Millett in The Starsin [2004] 1 AC 715, the judge held that identification of the parties to a contract is a question of fact and an objective exercise. Accordingly he disagreed that the subjective intentions of one party can be relevant save to the extent that such intentions are communicated to the other.

The judge accepted that the communicated understanding of each of the parties was that Managers were acting on behalf of Registered owners. He however was unable to make a finding to the effect that long discussions between parties were concerned insistence by the charterers that Registered owners name to be on the charters but that was of no result and Mangers name was put instead. The judge said:
96. … There were "long discussions" about this between [Managers] and [Charteres] but the evidence of [Charteres] did not reveal what the discussions were about. If [Charteres] had wanted [Registered owners] name on the charters it is odd that [Charteres] would have been satisfied by the words required by [Managers] - "Disponent Owners Signatory in Contract – [Managers]" – which hardly make clear [Registered owners] liability as owner. I strongly suspect that the reason why those words were required and the meaning the parties attributed to them would have become clear had [Managers] or [Charteres] been able to recall the subject matter of the "long discussions" but they could not.

98. … I have come to the conclusion that the present case is another example of the phrase disponent owner being used in that, admittedly rare and unusual, sense of a manager of a vessel. The parties cannot have intended it to be used in its usual sense of a person who had chartered the vessel from the owner because that would mean that they intended [Disponent owners] to be liable as owner which none of them did. I consider that the charterparty must be regarded as having been signed by [Managers] as disponent owner in the sense of being the manager of the vessel. I do not consider that any of the parties envisaged that [Managers] was incurring personal liability on the charters. They must have considered that [Managers were] acting on behalf of [Registered owners].
The second issue was whether Managers have authority to act on behalf of Registered owners?

On the balance of probabilities the judge concluded that that there was no express authorisation from Registered owners to Managers to conclude charters of the Aframax vessels on behalf of Registered owners. The judge give the following reasons for his judgment:
1. There was absence of any email traffic between Managers and Registered owners and it was unlikely that such instructions were obtained by telephone. The detailed matters being negotiated would surely have been put on email.
2. If there had been such express authority given to Managers to fix the vessels on behalf of Registered owners it was more likely than not that Managers would have mentioned it specifically to Brockers and that Brockers would have referred to it in their emails to Charterers.
3. Managers would surely have mentioned the call specifically when interviewed but they did not.
4. The judge accepted [Registered owners] evidence that calls made to Managers were due to concerns over the low rate of hire and the length of the charters and having expressed their view that it was a bad deal it was up to [Managers] what to do because it was their deal.
Thus it was held that although Managers were acting as disponent owners and parties considered them to be acting on behalf of Registered owners, but it was further held that Registered owners never authorised Managers to fix vessels with the Charterers. Therefore Charterers claim against Registered owners was dismissed and against Managers upheld.

On the issue of damange the learned judge said:
121. … damages should be assessed from the date of breach, that is, the date on which the registered owners withdrew the vessels from service.

123. The assessment of a market rate is not a science. Whilst market data is susceptible to theoretical analysis, with which [expert for Managers] is familiar, the assessment of a market rate for a particular vessel at a particular time for a particular voyage on particular terms also involves a question of judgment based upon market experience, something which [expert for Charterers] has. I was not persuaded by the cross-examination of either witness (the time for which was very limited) that one approach should be preferred to the exclusion of the other. Both approaches can inform an assessment of the relevant market rate. In those circumstances my finding ought to reflect both approaches. That can appropriately and fairly be done by finding a market rate mid-way between the rates assessed by both experts.
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Fulton Shipping Inc of Panama v Globalia Business Travel S.A.U. (formerly Travelplan S.A.U) of Spain [2014] EWHC 1547 (Comm) (21 May 2014)
Shipping – Timecharter – NYPE form – Charter repudiated by the charterers with two years to go – Owners sell vessel because they cannot find employment – Whether the Owners required to give credit for any benefit in realising the capital value of the Vessel, by reference to her capital value at the end of charterparty time?

By a time charterparty on the NYPE form dated 13 February 2004 the owners let the vessel to the defending charterers, a division of Spain’s leading tourist group. In August 2005 the Owners and the Charterers concluded an agreement extending the charter for two years to 28 October 2007, with an option for a third year. The option was never exercised. The extension was recorded in Addendum A. At a meeting on 8 June 2007, the Owners and Charterers reached an oral agreement (as the arbitrator found) in terms subsequently recorded in Addendum B. The agreed terms extended the charterparty for a further two years so as to expire on 2 November 2009. The Charterers disputed having made the agreement recorded by Addendum B and refused to sign it. They maintained an entitlement to redeliver the Vessel on 28 October 2007 in accordance with Addendum A. The Owners treated the Charterers as in anticipatory repudiatory breach and on 17 August 2007 accepted the breach as terminating the charterparty. The Vessel was redelivered on 28 October 2007. Shortly before that date, the Owners entered into a Memorandum of Agreement for sale of the Vessel for US$23,765,000.

The Owners claimed damages calculated by reference to the net loss of profits which they alleged that they would have earned during the additional two year extension. The Charterers argued that the Owners were bound to bring into account and give credit for the difference between the amount for which the Vessel had been sold in October 2007 (US$23,765,000) and her value in November 2009 (US$7,000,000). The Owners argued that the difference in value was legally irrelevant and did not fall to be taken into account. The arbitrator decided this issue in favour of the Charterers.

Although arbitrator made no findings on the quantum of the Owner’s claim and left the figures to be agreed by the parties, he declared that in respect of those sums the Charterers were entitled to a credit of €11,251,677 (being the equivalent of US$16,765,000) in respect of the benefit that accrued to the Owners by selling the Vessel when worth more in October 2007 than it was at the end of the charter period in November 2009. This was more than the Owners’ loss of profit claim and would result in the Owners recovering no damages for the Charterers’ repudiation.

On appeal in the High Court the judge restated compensatory principles formulated byt the House of Lords in Golden Strait Corpn v Nippon Kubisha Kaisha (The Golden Victory) [2007] 2 AC 353. The learned judge underlined that although it is uncontroversial that damages for breach of contract are intended to put the innocent party in the same financial position as if the contract had been performed, but it does not mean that a claimant always recovers for the amount of the losses which arise from the breach. He furthermore said at para 17:
Principles of causation mean that his losses may be factually too remote from the breach to be recoverable despite the fact that they would not have been suffered but for the breach. His losses may be too remote in law. Conversely, he may end up better off as a result of the breach than he would otherwise have been, without having to give credit for such benefit against his recoverable loss. Some benefits fall to be taken into account and others do not. The classic examples of those which do not are proceeds of insurance for which he has paid, and monies received due to the benevolence of third parties, but these are not the only instances. The answer to the question whether a claimant is bound to bring a benefit into account in calculating his damages is not to be found in a simple application of the compensatory principle.
Upon analysis of a number of authorities beginning from the ninetheenth century case Bradburn v The Great Western Railway Company (1874) LR 10 Ex 1, the judge summarised the law within eleven items at para 64 as below:
(1) In order for a benefit to be taken into account in reducing the loss recoverable by the innocent party for a breach of contract, it is generally speaking a necessary condition that the benefit is caused by the breach: Bradburn’s case, British Westinghouse, The Elena D’Amico, and other authorities considered above.
(2) The causation test involves taking into account all the circumstances, including the nature and effects of the breach and the nature of the benefit and loss, the manner in which they occurred and any pre-existing, intervening or collateral factors which played a part in their occurrence: The Fanis.
(3) The test is whether the breach has caused the benefit; it is not sufficient if the breach has merely provided the occasion or context for the innocent party to obtain the benefit, or merely triggered his doing so: The Elena D’Amico. Nor is it sufficient merely that the benefit would not have been obtained but for the breach: Bradburn, Laverack v Woods, Needler v Taber.
(4) In this respect it should make no difference whether the question is approached as one of mitigation of loss, or measure of damage; although they are logically distinct approaches, the factual and legal inquiry and conclusion should be the same: Hussey v Eels.
(5) The fact that a mitigating step, by way of action or inaction, may be a reasonable and sensible business decision with a view to reducing the impact of the breach, does not of itself render it one which is sufficiently caused by the breach. A step taken by the innocent party which is a reasonable response to the breach and designed to reduce losses caused thereby may be triggered by a breach but not legally caused by the breach: The Elena D’Amico.
(6) Whilst a mitigation analysis requires a sufficient causal connection between the breach and the mitigating step, it is not sufficient merely to show in two stages that there is
(a) a causative nexus between breach and mitigating step and
(b) a causative nexus between mitigating step and benefit.
The inquiry is also for a direct causative connection between breach and benefit (Palatine), in cases approached by a mitigation analysis no less than in cases adopting a measure of loss approach: Hussey v Eels, The Fanis. Accordingly, benefits flowing from a step taken in reasonable mitigation of loss are to be taken into account only if and to the extent that they are caused by the breach.
(7) Where, and to the extent that, the benefit arises from a transaction of a kind which the innocent party would have been able to undertake for his own account irrespective of the breach, that is suggestive that the breach is not sufficiently causative of the benefit: Laverack v Woods, The Elena D’Amico.
(8) There is no requirement that the benefit must be of the same kind as the loss being claimed or mitigated: Bellingham v Dhillon, Nadreph v Willmett, Hussey v Eels, The Elbrus, cf The Yasin.; but such a difference in kind may be indicative that the benefit is not legally caused by the breach: Palatine.
(9) Subject to these principles, whether a benefit is caused by a breach is a question of fact and degree which must be answered by considering all the relevant circumstances in order to form a commonsense overall judgment on the sufficiency of the causal nexus between breach and benefit: Hussey v Eels, Needler v Taber, The Fanis.
(10) Although causation between breach and benefit is generally a necessary requirement, it is not always sufficient. Considerations of justice, fairness and public policy have a role to play and may preclude a defendant from reducing his liability by reference to some types of benefits or in some circumstances even where the causation test is satisfied: Palatine, Parry v Cleaver .
(11) In particular, benefits do not fall to be taken into account, even where caused by the breach, where it would be contrary to fairness and justice for the defendant wrongdoer to be allowed to appropriate them for his benefit because they are the fruits of something the innocent party has done or acquired for his own benefit: Shearman v Folland , Parry v Cleaver and Smoker’s case.
Applying these principles to the facts found by the arbitrator he held that they do not require the Owners to give credit for any benefit in realising the capital value of the Vessel in October 2007, by reference to its capital value in November 2009, because it was not a benefit which was legally caused by the breach. The judge further elaborated on causative nexus between the breach and the benefit obtained from the sale at paras 66 - 68:
66. The Vessel was an asset purchased by the Owners in 2005. It had a capital value, which could be measured by reference to the amount for which the Owners could sell it at any particular time. Its value could be expected to fluctuate according to market conditions. When the Owners sold it in October 2007, it was, on the tribunal’s findings, worth $23,765,000. The fact that it would have been worth only $7 million two years later was a result of the fall in the market flowing from the financial crisis. The difference in the value of the Vessel was not caused by the Charterers’ breach of the charter; it was caused by the fall in the market which occurred irrespective of such breach. The effect of the fall in the market on the Owners was also not caused by the Charterers’ breach. It was caused by the Owners’ decision to sell the Vessel. At the moment of breach, the Owners had a choice whether or not to sell the Vessel, as they had at any stage over the unexpired period of the charterparty. If and when they chose to sell, market fluctuations in the Vessel’s value thereafter would no longer affect them, for good or ill. If the market subsequently rose, the decision to sell might with hindsight seem a poor one; if the market fell it would prove to be a wise one. That was a matter for the Owners’ commercial judgment and involved a commercial risk taken for their own account. That is none the less so because it was reasonable for them to sell when faced with the Charterers’ breach. The decision to sell was legally independent of the breach, so far as concerns movements in the capital value of the Vessel, just as was the decision of charterers not to charter in substitute tonnage in The Elena D’Amico. The breach merely provided the context or occasion for the Owners to realise the capital value of the Vessel. It was the trigger not the cause.

67. … The Owners were not obliged to sell the Vessel, as a matter of fact or law. The tribunal did not find that a failure to do so would have been a failure reasonably to mitigate loss. There can be no question of the Owners being obliged to realise the capital value of the Vessel by selling it on breach, however reasonable such a course was from a business point of view.

68. The causation question is not concluded by the tribunal’s finding that the sale was in reasonable mitigation of loss. The loss in question which was mitigated was the Owners’ net loss of income from the charterparty. The sale of the Vessel mitigated this loss because it reduced the continuing costs of operating or laying up the Vessel. To the extent that the benefits flowing from the sale comprised such cost savings, there is no difficulty in treating the causal nexus between breach and benefit as established through the mitigating step of selling the Vessel. But insofar as the sale gave rise to a capital benefit, it was not caused by the breach, but by the independent decision of the Owners to realise the capital value of their asset. Although that was a benefit which flowed from the mitigating step of selling the Vessel, it does not satisfy the principle that benefits are only to be taken into account to the extent that they are caused by the breach.

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American Overseas Marine Corp v Golar Commodities Ltd (The LNG Gemini) [2014] EWHC 1347 (Comm) (07 May 2014)
Shipping – Timecharter – Injurious Cargoes – Whether anything that is harmful or tends to harm the vessel as an instrument of trade is harmful to the vessel?

The managing owners of a liquefied natural gas carrier, the "LNG Gemini" let their vessel to the charterers, Clause 30 of the charterparty was headed "Injurious Cargoes" and it provided:
No acids, explosives or cargoes injurious to the Vessel shall be shipped and without prejudice to the foregoing any damage to the Vessel caused by the shipment of any such cargo, and the time taken to repair such damage, shall be for Charterers account.
In May 2011 charterers loaded the vessel at the Cameron Terminal, Louisiana a cargo of LNG that contained metallic particles and other debris, which were found in the manifold strainers and loading arms, some debris was carried into the cargo tanks. Later discovery of the said particles and other debris was made in cargo pumps and tanks were also found to be contaminated.

The owners claimed that as a result of the above the ship was required to undertake major repairs in Singapore after dry docking in the Philippines and. Relying on clause 30, they claimed damages of $1,933,933 for the cost of repairs and time lost and an indemnity for this sum and against any claims for contamination of other cargoes.

The judge rejected owners’ claim based on construction of cl.30 because no evidence of fact supported the claim that the particles caused "abrasion" or "rust" or any other damage to the pumps or tanks or anything else. Next owners’ submission was that "the vessel in the claimants’ hands is an instrument of trade and anything that is harmful or tends to harm the vessel as an instrument of trade is harmful to the vessel". The judge was not persuaded by this argument either, he said at para 66:
Even if the word "injurious" might have so wide a meaning in another context, it is not its natural meaning in clause 30. Clause 30 is directed to physical damage: it expressly covers two types of cargo which might cause physical damage to the vessel, acid and explosives, and the inference is that it also covers other cargoes that also might cause physical damage. This interpretation is corroborated because the clause is particularly concerned with repairs of damage caused by such cargoes: "repairs" connotes physical damage. Further, clause 30 provides an indemnity for time lost to do repairs, but not for time lost by the vessel for other reasons, such as cleaning.
On careful scrutiny of all the evidence provided by the owners the court came to conclusion that costs cannot be said to be caused by Charterers’ breach of contract simply because the owners responded to this alleged breach in accordance with the advice of others. Being incorrectly advised by the cargo pump manufacturers who completely misunderstood the problem, the owners did not make any attempt to seek their advice on the basis of the true facts. Accorginly there was no justification for their decision to have the work done by shipyard in Singapore on the basis of such advice.
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NYK Bulkship (Atlantic) N.V. v Cargill International S.A. [2014] EWCA Civ 403) (8 April 2014)
Shipping – Timecharter – Amended NYPE form – Clause 49. Capture, Seizure, Arrest – Vessel arrested by the seller of cargo to secure demurrage claim – Charterers put vessel off-hire for duration of arrest – Whether meaning of proviso in cl.49 is wide enough to encompas the acts, omissions or defaults of the seller and/or the buyer as Charterers’ delegates .

The vessel "Global Santosh" was chartered to Cargill for one time charter trip from Sweden to West Africa. Cargill sub-chartered the vessel to Sigma Shipping Ltd by way of a voyage charter. The cargo was one of six shipments of cement sold by Transclear SA (Transclear) to IBG Investments Ltd (IBG) on C&FFO terms under a contract of sale dated 14 December 2007. IBG were named as the notify party on the relevant bill of lading, which also specified the discharge port as ‘Port Harcourt (Ibeto jerry)’. Pursuant to the ‘FO’ (free out) part of the sale terms, IBG were responsible for the unloading of the cargo. IBG were also liable to pay Transclear demurrage if unloading of the cargo was delayed.

The vessel arrived at Port Harcourt on 15 October 2008 but was held at anchor due to congestion caused in part by the breakdown of IBG’s unloader. On 18 December 2008 she was called in to berth but she was sent back because, on the previous day, Transclear had obtained an Arrest Order made by the Federal High Court of Nigeria on the cargo to secure a claim for demurrage against IBG for $US1,560,000 for the period 24 October 2008 to 15 December 2008. Under this order, any interference with or attempt to remove the cargo from the vessel was prohibited. By an obvious mistake, the order also named the vessel as the object of the arrest. Following an agreement in respect of demurrage and a subsequent court order authorising the cargo’s release, discharge of the cargo began on 15 January 2009 which was completed on 26 January 2009.
Clause 49 of the charterparty provided as follows:
Capture, Seizure, Arrest.
Should the vessel be captured or seizured or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents.
Cargill charterers withheld hire under clause 49 of the charterparty in respect of the period for which (broadly) the vessel was under arrest, i.e., 14.00 hours on the 18th December 2008 and 07.03 hours on the 15th January, 2009.

The majority arbitrators concluded that the vessel was arrested, albeit by mistake. A mistaken arrest was still an arrest for the purposes of cl.49 and, accordingly, by reason of both the detention and arrest, the vessel was prima facie off hire. On the question of whether the detention or arrest of the vessel had been caused by the personal act or omission or default of Transclear as Cargill’s agent the majority concluded that the answer was "no", so that the proviso in cl.49 did not apply and Cargill had been entitled to put the vessel off-hire for the period in question.

The case went to the arbitration where the majority held that the disponent owners were not in anticipatory breach, the charterers were not entitled to terminate, the Charterers’ purported termination was itself a repudiation which had been accepted by the disponent owners, and the disponent owners were entitled to damages of over US$ 6.5 million.

On the owners’ appeal in the Commercial Court the learned judge held that IBG became Cargill’s delegate of the obligation to unload by reason of the sale contract, including its demurrage provisions and for the purposes of the Clause 49 proviso, the failure to unload within the lay days was an act, omission or default that occurred in the course of performing the obligation to discharge as delegated to it by Cargill. On the further question of whether IBG’s failures to unload within the lay days and to pay the resulting demurrage or furnish security "occasioned" the arrest of the vessel the judge held that the words "occasioned by" imported a notion of causation and ruled in favour of remitting the question of causation to the arbitrators.

On appeal in the Court of Appeal Gross Gross LJ admitted that by virtue of the plain wording of cl. 49, if the vessel is arrested or detained, she is prima facie off-hire. His Lordship then continued:
28. … That prima facie conclusion is only displaced if the matter comes within the proviso to cl.49, the burden being on NYK to show that the arrest or detention "… is occasioned by any personal act or omission or default of the Charterers or their agents". In short, the proviso operates as a "carve-out" ("the carve-out") from the general scheme of cl.49. …

31. As a matter of language, first, the proviso identifies the relevant actors, namely, Cargill or its delegates (as already explained).

32. Secondly, so far as concerns the relevant act, omission or default, the proviso says no more than that it must be such as occasioned the detention or arrest (etc.) of the vessel.

33. Thirdly, the terms of the proviso confine its operation. On any view, it is not open-ended. It applies and only applies to the actors and acts outlined above.

34. Fourthly, the proviso says nothing expressly as to restricting the acts (etc) in question to those occurring "in the course of the performance by the delegate of the delegated task". It follows that the approach of the Judge and the contention of Mr. Baker would require that wording to be read into the carve-out.
Although sub-charterers, receivers and others are not, generally, considered to be agents of time charterers; Gross LJ observed that once, "agents" can be read as "delegates", the ambit of the proviso is necessarily widened. In the commercial context the question of whether or not to read into the proviso the words "in the course of the performance by the delegate of the delegated task" was decided in favour of the positive answer:
41. As a matter of business commonsense, the background to cl. 49, including the proviso, is as expressed by Rix LJ in The Doric Pride (supra), at [33], of:

"…a basic distinction…entirely familiar to owners and charterers, between those matters which lie upon the owners» side of responsibility, essentially the vessel and crew, which the owners have to provide to the charterers, and those matters relating to the charterers» employment of the vessel and crew for their trading purposes, which lie upon the other side of the line…"

There can be no doubt in the present case that the acts, omissions or defaults in question, culminating in the detention or arrest of the vessel (whatever the ultimate conclusion on causation), involved Cargill’s delegates and fell on its side of the line. NYK was not, in any sense, involved in the apparent dispute between Transclear and IBG as to the delay in unloading the vessel. While it is correct to say that Cargill was under no obligation to discharge the vessel in any given time, the dispute in question arose out of its trading arrangements concerning the vessel. Unless therefore precluded by the wording of the clause, I would regard it as unsurprising if such events came within the "carve-out" and at least curious if they did not (again deferring any question of causation). Accordingly, the commercial context powerfully reinforces my interim conclusion as to the true construction of the proviso. 42. … The general scheme of cl. 49 provides for the vessel to be off-hire in the case of detention or arrest; that general scheme would cover matters either on NYK’s side of the line or the acts or omissions (etc.) of third parties, unconnected to either NYK or Cargill – for example, governmental authorities. Here, however, the dispute between Transclear and IBG fell – and fell clearly - on Cargill’s side of the line, with the result that hire continued to run over the relevant period (always of course subject to questions of causation). On the approach to which I am attracted, the acts or omissions of both Transclear and IBG lead to this result. While the starting point must be the construction of the clause in question, rather than any generalised assumption, the outcome is unsurprising and gives effect to the familiar division between owners» and charterers» spheres of responsibility.
Finally it was held that the parties are entitled to a decision whether Transclear’s and/or IBG’s acts or omissions (etc.) occasioned the detention or mistaken arrest of the vessel and it is for the arbitrators to rule on a question of this nature, including (if it arises) whether the chain of causation has been broken. Accordingly the court upheld the decision of the judge on the question of remission.
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Geden Operations Ltd v Dry Bulk Handy Holdings Inc (The Bulk Uruguay) [2014] EWHC 885 (Comm) ) (28 March 2014)
Shipping – Timecharter – NYPE – Amended BIMCO Piracy Clause – GOA OK vessel – Anticipatory breach – Whether there is some principle of law whereby a party who has made his performance dependent on a discretion to be exercised by a third party is ipso facto deemed to be evincing an intention not to perform – Required inevitability of breach.

By a time charterparty dated 2 July 2010 on an amended NYPE form, the owners (who were the disponent owners and the defendants in this appeal) chartered the 58,000 mt Supramax bulk carrier M/V BULK URUGUAY to the charterers who were the appelants for about 35 to about 37 months at a daily hire rate of $18,500. The charterparty was concluded whilst the vessel was under construction in the Philippines, with delivery anticipated in one year time.
The charterparty contained BIMCO Piracy Clause which had been specifically amended by deletion of paragraphs (a) and (b) which reflected the market practice where it was intended that the vessel could transit GOA without the owners’ consent. Such a vessel is marketed as "GOA OK", which gives her a competitive advantage over vessels for which such a route requires owners’ consent. The owners knew from the course of the charterparty negotiations that at that time such GOA OK status was a matter of importance to the charterers who made it plain to the owners that the ability to transit the GOA without seeking the owners’ permission was a "deal breaker".

When vessel was about to be delivered the charterers indicated that for her maiden voyage from the Yard in the Philippines they were looking to bring the vessel to the Atlantic via GOA and asked for information regarding the additional premium costs.

Head owners initially refused permission for GOA transit on 11 July 2011 but later changed their position and granted permission but stressed that permission was granted for this voyage only and was not to form a precedent for other voyages. The owners asserted that the charterparty terms required their permission in order to transit GOA, and indicated to the charterers that their position in relation to giving permission would be dictated by the position taken by head owners. Charterers in their email of 23 July 2011 treated the owners’ insistence that prior consent would have to be obtained on each occasion as a repudiatory breach, which they purported to accept as terminating the charterparty. In their turn by an email of 25 July 2011 the owners accepted the Charterers’ purported termination as itself a repudiatory breach.

The case went to the arbitration where the majority held that the disponent owners were not in anticipatory breach, the charterers were not entitled to terminate, the Charterers’ purported termination was itself a repudiation which had been accepted by the disponent owners, and the disponent owners were entitled to damages of over US$ 6.5 million.

The court was to answer two questions which were answered in the negative by the majority of the arbitrators:
(a) Did the Owners by their words or conduct evince an intention not to perform, or expressly declare that they would be unable to perform, their obligations under the Charterparty?
(b) If so, did such a refusal have the effect of substantially depriving the Charterers of the whole benefit which it was the intention of the parties that they should obtain from the contract?

The charterers agrued that because the very act of making it plain that consent to pass GOA was (and always would be) entirely dependent upon the choice of head owners was itself sufficient to evince the necessary intention to refused to comply, or comply promptly, with an order to transit the GOA if and when made. Furthermore they contended that where one party puts it out of his power to perform his obligations, his self created incapacity automatically evinces an intention not to be bound.

The judge disagreed with the charterers. He cited in support judgment of Devlin J in Universal Carriers v Citati [1957] 2 QB 401 at 436-438, where distinction between renunciation and impossibility created by his own act was drawn. In both cases the injured party is allowed to anticipate an inevitable breach, but anything short of inevitability would be insufficient for treating both renunciation and self induced impossibility as entitling the innocent party to treat the contract as at an end prior to the time for performance. The judge said at paras 17-18, 22:
17. …First, the rationale for treating both renunciation and self induced impossibility as entitling the innocent party to treat the contract as at an end prior to the time for performance is the inevitability of non performance. Since the reason for the rule is that a party is allowed to anticipate an inevitable event and is not obliged to wait until it happens, anticipatory breaches are treated in the same way as actual breaches because they are bound to happen. In the case of self induced impossibility, this means actual inevitability. In the case of renunciation, it means legal inevitability, in the sense that the innocent party is entitled to treat as inevitably going to happen that which the contract breaker clearly conveys by words or conduct that he intends will happen.
18. Secondly, self induced impossibility is narrowly confined to those cases where breach is rendered inevitable. Save for possibilities which are so remote that in practice they can be ignored, what is required is inevitability. It is not sufficient if something is done which makes future performance unlikely, even very unlikely, still less that it renders performance uncertain. That is why renunciation is often a more favoured basis for invoking the doctrine of anticipatory breach.

22. A party may lawfully assume an absolute obligation which he hopes to fulfil when the time for performance arrives. He is not in anticipatory breach by reason merely of there being an uncertainty whether his hopes will be fulfilled. A party who contracts to sell specific goods which he is negotiating to purchase is not in anticipatory breach because he has not yet concluded the negotiations with the supplier and secured the means of supply…
The judge held therefore that which is that there is no principle of law whereby a party who has made his performance dependent on a discretion to be exercised by a third party is ipso facto deemed to be evincing an intention not to perform.

On the second issue, which was not necessary to decide when the first question was answered in the negative, the judge briefly found that the findings of the majority in relation to the intended use of the vessel for the foreseeable future, the competitive disadvantage in being unable to market the vessel as GOA OK, the value the charterers put upon that competitive disadvantage, and the ability to trade the vessel elsewhere, are capable of supporting the factual conclusion that the charterers were not deprived of substantially the whole benefit of the charterparty.
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Flame SA v Glory Wealth Shipping PTE Ltd [2013] EWHC 3153 (Comm) (22 October 2013)
Shipping – Time Charter – COA for 6 cargoes of coal in bulk in each of the years 2009, 2010 and 2011 – Charterers failed to declare laycans for the 5th and 6th shipments of 2009 and for all 6 shipments in 2010 – Assessment of damages for breach of contract – Whether innocent party still bore the burden of proving its loss on the balance of probabilities if it had accepted the repudiatory breach of the "contract-breaker" – Whether the vessel nominated by disponent owners must be owned by the them or be time, voyage or slot chartered by them.

Parties entered into a contract of affreightment dated 19 August 2008 which provided for the owners (as "disponent owners of the Glory Wealth to be nominated motorship") to carry 6 cargoes of coal in bulk in each of the years 2009, 2010 and 2011. The charterers failed to declare laycans for the 5th. and 6th. shipments of 2009 and for all 6 shipments in 2010. The arbitration panel awarded damages to the disponent owners in the sum of US$5,426,608.60 plus interest.

There were two main issues on appeal which raised two question of law. One was related to the assessment of damages for breach of contract, where the charterers contended that innocent party still bore the burden of proving its loss on the balance of probabilities if it had accepted the repudiatory breach of the "contract-breaker". Second question of law was whether the vessel nominated by disponent owners must be owned by the them or be time, voyage or slot chartered by them.

The owners maintained that once the contract has been terminated as a result of the acceptance of a repudiatory breach, there cannot be a subsequent breach by the innocent party and it is to be assumed that the innocent party would have performed his obligations. By contrast, where there is an express contractual right to cancel a charterparty upon the occurrence of an event, for example, where the vessel does not arrive at the loading port by a particular date (as in the Mihalis Angelos) or where there is an outbreak of war (as in the Golden Victory), that event can still occur. It is not dependent upon there being any breach.

The charterers argued that the tribunal erred in law. They agreed with the view that where an innocent party has accepted a repudiation as terminating a contract, it is relieved of the obligation to perform its future contractual duties, but contended that in assessing damages the important question is what would hypothetically have happened had the contract been performed by the party in breach.

The judge agreed with the charterers’ view that the tribunal erred in law, he said at para 18:
Damages are assessed by comparing the position that the innocent party would have been in had the contract been performed (necessarily, as just explained, a hypothetical exercise because the contract had not been performed) with the position that the innocent party was in fact in as a result of the breach …. In the present case, when carrying out the hypothetical exercise of assessing the position of the disponent owner had the contract been performed by the charterer, it would be necessary to consider whether the disponent owner would have been able to perform its obligations under the COA. If, let it be assumed, it is clear that the disponent owner would not have had the resources to provide a carrying vessel and the court or tribunal did not take that matter into account, then, if the disponent owner were awarded substantial damages on the prima facie measure, such an award would put the disponent owners in a better position than if the charterparty had been performed by the charterer. For if the charterer had declared the required laycans the disponent owner would still not have earned the agreed freight. In those circumstances an award of substantial damages would be a windfall and would breach the compensatory principle.
On carefull examination of authorities the judge distinguished that analysis which is applicable to the issue of liability from one applicable to the issue of damages. Thus although the innocient party is relieved from any further obligation under contract (i.e. his future contractual liabilities ceased to exist) from the moment of acceptance of repudiatory breach of contract-breaker, but when it comes to assessment of damages available to the innocient party it has to prove that is would have been able to perform if no repudiation had taken place. The learned judge concluded at para 85:
85. The assessment of loss necessarily requires a hypothetical exercise to be undertaken, namely, an assessment of what would have happened had there been no repudiation. That enables the true value of the rights which have been lost to be assessed. The innocent party is claiming damages and therefore the burden lies on that party to prove its loss. That requires it to show that, had there been no repudiation, the innocent party would have been able to perform his obligations under the contract. If the court were to assume that the innocent party would have been able to perform, rather than to consider what was likely to have happened in the event that there had been no repudiation, the court might well put the innocent party in a better position than he would have been in had the contract been performed. … When assessing what the innocent party would have earned had the contract been performed the court must assume that the party in breach has performed his obligations.
That victory was, however, quite useless to the charterers because on the second issue whether the vessel nominated must be owned by the disponent owners or be time, voyage or slot chartered by them the judge affirmed decision of the tribunal.
98. … A "disponent owner" is obliged to provide the nominated vessel to carry the charterers’ cargo. How he provides the vessel is a matter for him. It will usually be by some form of charter but there is no requirement that such charter (or such other means as the disponent owner uses to provide the vessel) must be in place at the time of nomination. What matters to the charterer is that when the time comes for the cargo to be lifted the nominated vessel is there to perform that task. If it is not then the disponent owner will be liable because he will have failed to do that which a disponent owner must do, namely, provide the nominated vessel.
Accordingly, the court held that the panel of arbitrators correctly construed the COA and agreed with the tribunal conclusion that the owners would have been able to perform the COA if the charterers had called upon them to do so. The charterers’ appeal was dismissed. × Collapse all ×

Gard Marine & Energy Ltd v China National Chartering Co Ltd & Ors (The Ocean Victory) [2013] EWHC 2199 (Comm) (30 July 2013)
Shipping – Bareboat Charterparty – Safe Port warranty – "Reasonable Safety" – Exposure to a danger which cannot be avoided by good navigation and seamanship.

On 24 October 2006 OCEAN VICTORY, a capesize bulkcarrier, part-laden with a cargo of iron ore, sought to leave the port of Kashima, Japan during a severe gale. Master hesitated to leave the port in such adverse weather conditions believing that it was safer to remain alongside, but on the advice of Charterers’ representative at the port, a local experienced mariner, finally agreed that the vessel should leave. The concern was that she was at risk of breaking her moorings even if supported by tugs. As she proceeded along the Kashima Fairway she was confronted by northerly or north-north-westerly winds of about Beaufort scale force 9 and by heavy seas generated both by the winds and by the dominant swell from the north-east. In prevailing conditions master had to put wheel hard a port and hard a starboard to keep vessel clear from unsafe depths and breakwater. Such wheel movement applied for prolonded time drastically reduced speed of the vessel. When north-west of the seaward end of the South Breakwater she eventually lost steerage and with her portside exposed to the gale she was set down onto the end of the breakwater. She was then driven southwards by the weather, went aground and was abandoned by her crew who were airlifted ashore. Notwithstanding the assistance of Nippon Salvage on LOF 2000 terms she broke apart and was declared total loss on 27 December 2006.

The owners submitted that the port was prospectively unsafe for OCEAN GLORY, because there was a risk that vessels moored in port might be advised to leave port on account of long waves and yet there was no system in the port to ensure either that vessels left in good time and in conditions which did not pose a threat to safe navigation or that vessels did not attempt to depart in conditions which did pose a threat.

The charterers contended that unsafety of a port cannot not be judged by the fact that its systems fail to guard against every possible hazard, but whether or not it provided reasonable safety while taking reasonable precautions. They also argued that "in the light of the fact that no vessel had ever been trapped by a combination of wind and swell at the RMQ and adverse conditions in the channel (whether on 24 October 2006 or before) it is difficult to see upon what basis the port is to be criticised for not having put in place a system to address such a (non) risk." Alternatively the charterers put forward an argument that the cause of the casualty was the master’s misunderstanding that the vessel had been ordered to leave the port and/or his negligent navigation when leaving.

The judge did not accept charterers’ argument based on the concept of "reasonable safety" and pointed out that it would introduce an unwelcome and inappropriate measure of uncertainty in the meaning of the safe port warranty if safety were to be understood as "reasonable safety" rather than safety. He said that although safety is not absolute but the measure of safety is not what is "reasonable" but whether any dangers in a port can be avoided by good navigation and seamanship. Answering a question as to the true construction of the safe port warranty he said at paras 101 and 121, 127 and 132:
101. … A port is not saved from being unsafe where, although the vessel will be exposed to a danger which cannot be avoided by good navigation and seamanship, the port has taken precautions designed to protect vessels against that danger but which in fact do not protect the vessel from that danger. If, despite the taking of such precautions, the vessel remains exposed to a danger which cannot be avoided by good navigation and seamanship then the port is unsafe. The charterers’ warranty is of safety, not of reasonable safety. The enquiry in an unsafe port case is not into the conduct of the port authority, for example, whether it has acted reasonably or otherwise. Rather, the enquiry in an unsafe port case is into the prospective exposure of the vessel, when arriving using and leaving the port, to a danger which cannot be avoided by good navigation and seamanship. Of course, aids to navigation, the availability of weather forecasts, pilots and tugs, the quality of the holding ground for anchoring, the sufficiency of the sea-room for manoeuvring and the soundness of the berths and of the fendering arrangements are, as with all aspects of the port set-up, relevant when deciding whether the vessel will be exposed to a danger which cannot be avoided by good navigation and seamanship. But if, having taken into the account the set-up in the port, the vessel will be exposed to such danger then the port will be unsafe.

121. … The unsafety of the port lay in the absence of a system for ensuring that such advice was given only when it was safe to leave port.

127. The danger facing OCEAN VICTORY was one which was related to the prevailing characteristics of Kashima. The danger flowed from two characteristics of the port, the vulnerability of the Raw Materials Quay to long swell and the vulnerability of the Kashima Fairway to northerly gales caused by a local depression. It may well be a rare event for these two events to occur at the same time but nobody at the port could, I consider, be surprised if they did. There is no meteorological reason why they should not occur at the same time. Long waves were clearly a feature of the port (as they must be of any port facing the Pacific) and low pressure systems generating gale force winds cannot, in my judgment, be regarded as abnormal. I do not consider that the juxtaposition of long waves and a low pressure system generating gale force winds from the north amounts to an abnormal occurrence unrelated to the characteristics of Kashima. Long waves may give rise to a need for a vessel to leave the port. It may be a matter of chance whether at that time there is also a low pressure system generating gale force winds from the north but I am unable to accept that such winds are so rare that they cannot be said to be a feature of the port. It is not without significance that the Guide to Port Entry notes that during periods of northerly swell the entry channel is fully exposed and that vessels at low speed generally have difficulty in steering.

132. … If the Owners establish that a port is prospectively unsafe by reason of the circumstance that the chartered vessel may have to leave her berth in the port on account of long waves or bad weather at a time when the weather conditions were such that it was unsafe for that vessel to leave then they have established a breach of the safe port warranty. The remaining question is whether that breach caused the casualty which has given rise to the claim. If the casualty occurs because of that unsafety the unsafety will usually be held to be the cause of the casualty in the absence of some intervening cause, such as the negligence of the master, which breaks the chain of causation flowing from the unsafety of the port. To ask whether the Owners have identified a system which would have prevented the casualty is to ask the wrong question for it would lead to the conclusion that where no system would have prevented the casualty the Charterers would, notwithstanding the unsafety of the port, escape liability. Yet that circumstance would highlight rather than negate the unsafety of the port.
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White Rosebay Shipping SA v Hong Kong Chain Glory Shipping Ltd (Fortune Plum) [2013] EWHC 1355 (Comm) (23 May 2013)
Shipping – Timecharter – NYPE 93 – Persistent late payment of hire by the charterers – Certain instalments not paid at all – Discovery by the owners that charterers had amended sub-charterparty to delete the owners’ right to a lien on sub-freights and sub-hires – The owners decided to terminate the charterparty but let the vessel to complete discharging – The tribunal held tha allowing the vessel to remain in the charterers’ service for 3 days for the purposes of discharging the cargo, the owners had affirmed the charter – Whether subsequent termination of the charter by the onwers after an affirmation was a repudiatory breach.

The owners of the Fortune Plum let the vessel to the charterers for a period of 35/38 months pursuant to the terms of a charterparty on an amended New York Produce Exchange Form.

The vessel was delivered to the charterers on 23 July 2010 and thereafter all hire payments were due on or before 23rd of each month. Untill January 2011 hire instalments were paid in one instalment albeit with minor delays of few days. But beginning from January 2011 delays increased to one week and beginning from April hire was never paid in time and when paid always in several instalments during subsequent months, some instalments were not paid at all. Trying to divert sub-hires and sub-freights from defaulted charterers the owners eventually learned on 1 November 2011 that the charterers had amended sub-charterparty and deleted the owners’ right to a lien on sub-freights and sub-hires, so it became evident to them that the charterers were seeking to divert the sub-freights and sub-hires to themselves, allowing them to trade the vessel without paying hire. On 7 November 2011 the owners concluded that the charterers were not going to make any more payments.

On 9 November 2011 the vessel anchored at discharge port and tendered notice of readiness to discharge. On 12 November 2011 the owners instructed master that on completion of discharge he must not follow charterers’ orders but wait for owners’ further instructions. On Monday 14 November the vessel completed discharging and sailed under the owners’ orders. Same day the owners informed the charterers that they had evinced a clear intention that they were no longer willing or able to be bound by the charterparty and that this was a repudiatory/renunciatory breach of the charterparty which the owners accepted as terminating the charterparty. The charterers replied that the withdrawal was wrongful and a repudiatory breach of the charterparty.

In the Arbitration the owners claimed that the charterers had renounced the charterparty by evincing an intention not to perform the charterparty. The tribunal held that only a reservation of rights cannnot suffice to protect the owners in circumstances where they acted in a manner which was wholly inconsistent with their accrued right to withdraw the vessel. The owners having made up their mind to accept the repudiatory breach did not do so by withdrawing the vessel immediately, instead they allowed the vessel to remain in the service of the charterers for the purposes of discharging the cargo. Understanding commercial reasons which influenced the owners’ decision to deliver the cargo before withdrawing the vessel, the tribunal concluded that the continued compliance with the charterparty was a clear affirmation and the owners’ withdrawal of the vessel on 14th November was itself a repudiatory breach.

The owners appealed claiming that the arbitrators wrongly concluded that a shipowner who has made up his mind to accept a repudiatory breach must withdraw the vessel immediately. Second, they wrongly held that the mere act of discharging can on its own amount to an unequivocal act from which it can be inferred that a shipowner intends to affirm the charterparty. Third, they wrongly considered that the owners were unable to terminate the charterparty in circumstances where the charterers continued to evince an intention not to perform the charterparty.

The judge agreed with the tribunal that the owners had a reasonable time to consider whether to accept the renunciation but after the expiry of such reasonable period the question was whether the owners had acted in a manner consistent only with their treating the contract as still alive. He also found that the arbitrators did not state a requirements that the owners were to withdraw the vessel immediately but only voiced a fact that there was no immediate withdrawal. The judge also did not find any error in law with the tribunal finding that the owners conduct in allowing the vessel to remain in the service of the charterers for the purposes of discharging the cargo amounted to continued compliance with the charterparty and was a clear affirmation. The judge, however, agreed that where a judgment has to be made not all tribunals may reach the same conclusion. He said at para 39:
39. I accept that it is possible that another tribunal might have concluded on the facts of the instant case that there was no affirmation. Another tribunal might have reasoned that in circumstances where (i) the owners had clearly decided on 11 November 2011 to terminate the charterparty and had so informed the master on 12 November 2011 and where (ii) the cargo which had been loaded on board the vessel during the currency of the charterparty had to be discharged it was an "unduly technical approach" to regard the continuance of the charterparty over the weekend of 12/13 November 2011 to enable the cargo to be discharged as an unequivocal affirmation of the charterparty by the owners. Similarly, another tribunal might not have regarded the conduct of the owners as "clear evidence" that they had determined to go on with the charterparty, notwithstanding the renunciation of the charterparty by the charterers.
The judge allowed appeal on the third point: continued renunciation. He stated that in circumstances where the charterers had continued to renounce the charterparty after the owners’ affirmation attention must be directed to the defaulted party’s behaviour after the affirmation. The judge thus concluded:
51. … The answer to that question is clearly a matter of fact for the tribunal. If the charterers were silent after the owners’ affirmation of the charterparty it is for the tribunal to decide whether such silence was a "speaking silence."

53. … In a case of renunciation or anticipatory breach (as opposed to repudiation based upon an actual breach) it does not necessarily follow that a termination following an affirmation is a repudiatory breach. For if the renunciating party continues to renounce the contract after the affirmation then the acceptance of that continuing renunciation is not a repudiatory breach but a lawful termination of the contract with a right to damages caused by the renunciation. Accordingly, in my judgment, the tribunal erred in law in concluding that it necessarily followed from the owners’ affirmation after 11 November that the owners themselves committed a repudiatory breach on 14 November.


However, there was no express finding by the tribunal to the effect that the charterers continued to renounce the charterparty after the affirmation and the court was not able to draw an inference to that effect. Accordingly the court set the award aside and remitted to the tribunal to decide whether charterers were silent after the owners’ affirmation of the charterparty and whether such silence was a "speaking silence." × Collapse all ×

Kuwait Rocks Co v AMN Bulkcarriers Inc [2013] EWHC 865 (Comm) (18 April 2013)
Shipping – Timecharter – NYPE 46 amended, Clause 5 – Payment of hire – Whether Clause 5 is condition.

The owners were the disponent owners of the vessel “Astra” and chartered her to the charterers for a period of 5 years by a time charterparty dated 6 October 2008 on amended NYPE 1946 form. The relevant terms of the charterparty were as follows:
Clause 5
Payment of said hire to be in London net of bank charges in cash in United States Currency 30 days in advance and for the last 30 days or part of same the approximate amount of hire, hire is to be paid for the balance day by day as it becomes due, if so required by Owners, otherwise failing the punctual and regular payment of the hire, or bank guarantee, or any breach of this Charter Party, the Owners shall be at liberty to withdraw the vessel from the service of the Charterers, without prejudice to any claim they (the Owners) may otherwise have on the Charterers.

Clause 31 … Referring to hire payment(s), where there is any failure to make ‘punctual and regular payment’ due to oversight or negligence or error or omission of Charterers’ employees, bankers or agents, Owners shall notify Charterers in writing whereupon Charterers will have two banking days to rectify the failure, where so rectified the payment shall stand as punctual and regular payment.
From the outset of the charterparty, because market rates of hire were falling in the wake of the collapse of Lehman Brothers, this rate was higher than the charterers could hope to command by way of sub-charter rates of hire. The charterers therefore were continuously seeking a reduction in hire under pretext that otherwise they would declare company’s bankruptcy. There was a history of reduced, delayed and unpaid hire payments and finally On 30 July 2010, the owners served an anti-technicality notice in respect hire instalment due on 29 July 2010. The owners advised that unless payment was made by midnight on 3 August 2010, the owners would withdraw the vessel and they reserved the right to treat charterers’ conduct as repudiatory. Payment was not received by midnight on 3 August 2010 and on 4 August 2010 the owners withdrew the vessel from the charterers’ service and terminated the charterparty. The owners were able to conclude a substitute charter with Louis Dreyfus on 3 September 2010 for the balance of the charter period at a rate of US$17,500 per day.

In the arbitration, the owners claimed damages for loss of earnings for the period from 4 August 2010 to 9 November 2013 (the earliest date when the vessel could have been properly redelivered by the charterers) in the sum of US$13,109,977, obviously giving credit for the earnings made under the substitute charterparty. The issue which was the subject of the arbitration hearing was whether, as the charterers contended, whilst the owners had been entitled to withdraw the vessel, they were only entitled to recover hire that had accrued up to the date of the withdrawal or whether, as the owners contended, they were entitled to recover damages for loss of bargain calculated by reference to their net loss of earnings over the unperformed balance of the charterparty, on the basis that the charterers were in breach of condition in not paying hire (entitling the owners not only to withdraw the vessel but to claim damages for breach of condition) and/or in renunciatory and/or repudiatory breach of charterparty.

Arbitrators considered that the generally accepted position under English law is that failure to pay charterparty hire is not a breach of condition but they also held that the entitlement to damages set out in the clause merely echoed the measure of damages in English law in cases where there is a market at the time of termination of the contract. They also found that the owners were on stronger ground when they pointed to the repeated threats by the charterers that they would have to declare bankruptcy unless the owners agreed to adjust the charterparty rate. Viewed objectively, the totality of the evidence could only be interpreted as an intention by the charterers to perform at the very least the forthcoming part of the contract in a manner that was not consistent with it.

There were two questions of law on appeal to the High Court:
(1) Whether evincing an intention to perform a contract in a manner which is inconsistent in some non-fundamental way with the terms of the contract, and which does not deprive the innocent party of substantially the whole of the benefit of the contract is capable in law of amounting to a repudiation or renunciation.
(2) Whether, on the true construction of the Charterparty… and the addenda thereto, clause 4 of Addendum 1 and/or clause 6 of Addendum 2 are penalty clauses, by reason of which the Respondents are precluded from relying on them.

The judge decided both question in favour to the onwers and was further invited by both parties to decide on whther the owners were entitled to recover substantial damages for the charterers’ non-payment of hire on the basis that clause 5 (whether on its own or with the anti-technicality clause 31 and/or the Compensation Clause in the two addenda) was a condition breach of which entitles the owners to recover not only unpaid hire at the date of withdrawal but damages for future loss of earnings.

The generally accepted position prior to this case was that non-payment of hire allows the owner to withdraw the vessel and to claim for unpaid hire only, but owner has to show a repudiatory breach of contract, i.e., that the charterer had evinced an intention no longer to be bound by the contract terms, to recover additional damages such as the loss of future earnings. One of the reasons that field of law was not explored yet is that all previious instances of withdrawal were related to situatitons when market was raising and owners had no need to claim damages but usually profited from withdrawal. And it is only when market is going down the owners are likely to suffer loss and damage as a result of early withdrawal.

The judge summarised his analysis within paras 109-117 as follows:
109. In my judgment, clause 5 (whether accompanied by clause 31 or not, but a fortiori with the addition of that provision) is a condition of the contract for several related reasons. First, the wording of the clause makes it clear that there is a right to withdraw whenever there is a failure to make punctual payment, in other words irrespective of whether the breach is otherwise repudiatory, the contract treats it as sufficiently serious as to entitle the owners to terminate. In my judgment, this is a strong indication that it was intended that failure to pay hire promptly would go to the root of the contract and thus that the provision was a condition.

110. Second, the general rule in mercantile contracts, where there is a "time" provision requiring something to be done by a certain time or payment to be made by a certain time, is that time is considered of the essence, subject, as Lord Roskill pointed out in Bunge v Tradax to section 10 of the Sale of Goods Act, so far as time for payment under contracts of sale is concerned, not relevant in the present case. The dicta in the House of Lords to which I have referred[5] are all consistent with the obligation to pay hire punctually being such a provision where time is of the essence and hence a condition, although the judgment of Brandon J in The Brimnes is to contrary effect.

114. However, even if clause 31 were not in the present charter, I would, albeit with some hesitation, decline to follow Brandon J on this issue for a number of reasons. First, his conclusion that the clause is not an essential term cannot really be reconciled with the dicta of the House of Lords to which I have referred. Second, as is clear from the passages in his judgment which I have cited at [67] above, his reasoning was based in large measure upon the decision in The Georgios C which was subsequently overruled by The Laconia. Third, and following on from the second reason, his conclusion involved acceptance of the argument of Mr Robert Goff QC, that the word "punctual" added little or nothing to the word "payment" standing alone, an argument the validity of which depended on the correctness of The Georgios C. It is quite clear from the speeches in The Laconia that the House of Lords regarded punctual payment of hire as of considerable commercial importance, discrediting the argument that "punctual" added nothing to "payment".

115. The third reason why in my judgment the obligation to make punctual payment of hire is a condition is related to the second and is the point emphasised time and again in the speeches in the House of Lords to which I have referred, namely the importance to businessmen of certainty in commercial transactions. As I see it, an aspect of that need for certainty is that, if it were the case that the right to withdraw the vessel for non-payment of hire left the owners with no remedy in damages on a falling market, save in cases where the charterers’ conduct could be said to be repudiatory, that would leave the owners in a position of uncertainty as to whether to withdraw the vessel or to soldier on with a recalcitrant charterer until such time as the owners were in a position to say that the charterers were in repudiatory breach, essentially what happened on the facts in the present case.

117. The fourth reason why I consider that the obligation to make punctual payment of hire (whether clause 5 on its own or clause 5 in conjunction with clause 31) is that, not only is that conclusion supported by the dicta in the House of Lords to which I have referred, but also by the obiter statements of Rix LJ in Stocznia v Latco referred to at [93] above and the reasoning of Moore-Bick LJ in Stocznia v Gearbulk. In view of that judicial support, albeit obiter, it seems to me that this court need not show any reluctance to hold that the obligation is a condition. The reluctance demonstrated by Lord Mustill in The Gregos was really limited to the particular provisions he was considering and did not extend to the obligation to make punctual payment of hire. Furthermore, as Lords Wilberforce and Roskill made clear in Bunge v Tradax (in the passages quoted at [84] and [86] above), in the case of so-called time clauses in mercantile contracts, of which this obligation is one, the courts should not show any reluctance to find that such provisions are conditions and, indeed, should usually do so.

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Minerva Navigation Inc v Oceana Shipping AG (The Athena) [2012] EWHC 3608 (Comm) (13 December 2012)
Shipping – Timecharter – NYPE Amended NYPE 1946 cl.15 – Whether the Vessel is off-hire for a particular period merely because the vessel is not efficient for the services then required during that period, or whether the charterers have to further show a net loss of time resulting thereby?

Pursuant to the charterparty on amended NYPE 1946 form the vessel The Athena in October 2009 the loaded a cargo of wheat at Novorossiysk in Russia for carriage to Syria. Bills of lading were issued on 24 October 2009 showing the discharge port as Lattakia or Tartous, both in Syria. The vessel arrived at Tartous on 1 November 2009, but the cargo was rejected by Syrian receivers on the ground that it was contaminated and the vessel thereafter remained in Syria for a substantial period. The events at Tartous had the consequence that Syrian law prohibited re-export of the cargo other than to its country of origin. On 5 January 2010 charterers told the Master that discharge would be in Libya. On 12 January 2010 charterers asked owners to tell the Syrian authorities that the cargo would be returned to Novorossiysk, something which was clearly untrue. The vessel departed Tartous on 16 January 2010, nominally for Novorossiysk. The charterers advised owners that the original bills of lading were held by their agents in Novorossiysk and instructed the owners at 1725 hours on 19 January 2010 as follows:
…we forbid berthing/discharging and releasing the cargo to receivers until our next written instructions. Hereby we confirm that receivers [have the] right to take samples only. Upon arrival please anchor at road port Benghazi and [await] our further instructions.
Vessel contrary to these orders stopped in international waters about 50 miles from Libya at 2328 on 19 January 2010, and began drifting. On 30 January 2010 problems with the returning of the original bills of lading were resolved. The drifting period ended at 22.14 on 30 January 2010, at which time the vessel proceeded to Benghazi. The vessel berthed at Benghazi on 3 February 2010. Discharge of the cargo was eventually completed at about noon on 18 February 2010.

The Arbitrators held that master was in breach of his duty to prosecute the ordered voyage with the utmost despatch; and failed to comply with the charterers’ orders. However the arbitrators then unanimously held that no damages were payable for that breach. This decision was explained in a way that although there was an immediate loss of time in that the vessel’s arrival at Benghazi was delayed for this period, but there was no any overall loss of time, and had the Vessel proceeded directly to Benghazi arriving some time early on 20th January 2010, she would have not berthed any earlier than she did.

With the regard to off-hire claim the Arbitrators agreed with the charterers that the consequence of the Master’s failure to proceed directly to Benghazi was a loss of time by her delayed arrival at that port. Whether the same time would have been lost for other reasons had she proceeded directly to Benghazi is irrelevant to a claim under the off hire clause. The time was lost in relation to the service immediately required of her and that is sufficient. The owners appealed. The grant of leave to appeal was on the question of law:
Whether under clause 15 of the NYPE charterparty (and of the present Charterparty) the vessel is off-hire for a particular period merely because the vessel is not efficient for the services then required during that period, or whether the charterers have to further show a net loss of time resulting thereby.
The judge examined meaning of clause 15, which involed an analysis of two questions:

1) whether the clause is engaged;

2) what is to happen if the clause is engaged?

Relevant wording of clause 15 of the NYPE 1946 form, in particular said:
… in the event of loss of time from [prescribed causes] preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost…
The owners relied upon the discussion of off-hire clauses in Wilford, Time Charters 6th edition (2008) and contended that in order to claim off-hire under Clause 15 of NYPE form (clauses of this kind are called ‘net loss of time’ clauses), that the charterers have to show that there has concurrently been a loss of time in both of the senses: the period of time during which the vessel was not fully performing and a net loss of time in the performance of the chartered service.

On analysis of The Pythia [1982] 2 Lloyd’s Rep 160, Goff J at pp.168-169, The Ira [1995] 1 Lloyd’s Rep 103, Tuckey J at pp.151-152 and other authorities the learned judge held that clause 15 in the present case permitted charterers to deduct time for the duration of the off-hire event, but only to the extent that there was a net loss of time to the chartered service. For this purpose it is not sufficient for charterers merely to show that, as regards the service immediately required, there was a net loss of time.

As a result he held that the owners’ assertions were correct and accordingly the appeal was allowed.
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Greatship (India) Ltd v Oceanografia SA de CV [2012] EWHC 3468 (Comm) (05 December 2012)
Shipping – Timecharter – Supplytime 89, cl.10(e) – Voyage to Mombasa – Suspension of ship’s services for non-payment of hire in time – Whether the owners were entitle to temporarily withdraw the vessel without 5 days’ notice?

By a time charterparty on an amended BIMCO Supplytime 1989 form owners agreed to charter the "Greatship Dhriti" to Oceanografia SA de C.V. for two years. Clause 10(e) provided as follows:
10(e) Payments –

[1] Payments of Hire, bunker invoices and disbursements for Charterers’ account shall be received within the number of days stated in Box 23 from the date of receipt of the invoice. Payment shall be made in the contract currency in full without discount to the account stated in Box 22. However any advances for disbursements made on behalf of and approved by Owners may be deducted from Hire due.

[2] If payment is not received by Owners within 5 banking days following the due date Owners are entitled to charge interest at the rate stated in Box 24 on the amount outstanding from and including the due date until payment is received. Where an invoice is disputed, Charterers shall in any event pay the undisputed portion of the invoice but shall be entitled to withhold payment of the disputed portion provided that such portion is reasonably disputed and Charterers specify such reason. Interest will be chargeable at the rate stated in Box 24 on such disputed amounts where resolved in favour of Owners. Should Owners prove the validity of the disputed portion of the invoice, balance payment shall be received by Owners within 5 banking days after the dispute is resolved. Should Charterers’ claim be valid, a corrected invoice shall be issued by Owners.

[3] In default of payment as herein specified, Owners may require Charterers to make payment of the amount due within 5 banking days of receipt of notification from Owners; failing which Owners shall have the right to withdraw the Vessel without prejudice to any claim Owners may have against Charterers under this Charter party.

[4] While payment remains due Owners shall be entitled to suspend the performance of any and all of their obligations hereunder and shall have no responsibility whatsoever for any consequences thereof, in respect of which Charterers hereby indemnify Owners, and Hire shall continue to accrue and any extra expenses resulting from such suspension shall be for Charterers’ account.
The dispute arose from instances of non-payment of hire during the currency of the charterparty and owners’ purported suspension of the vessel’s services for non-payment of hire, relying on their right to do so under part [4] of Clause 10(e). The Arbitrators upheld charterers’ submission that it was an express or implied requirement of part [4] of Clause 10(e) that owners would give five banking days’ notice of intention before exercising their right to withdraw, on the basis that the period of grace and express notification provision contained in parts [2] and [3] of Clause 10(e) governed part [4]. The owners’ appealed.

The question of law considered by the court was formulated as follows:
Whether on the proper construction of Clause 10(e) of the BIMCO Supplytime 89 form in order for Owners’ right to withdraw the vessel from the Charterparty temporarily to be validly exercised, Owners are required to give Charterers 5 banking days notice of the suspension.
The judge disagreed with the Arbitrators that argument of commerciality will necessarily suffice to displace clear and unambiguous wording of cl 10(e) and encourage the court to look for any alternative construction. Such attempt would require, in effect, rewriting the charterparty. Applying principles of construction stated in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, namely, that where the contract has used clear and unambiguous language, the court must apply it, however surprising or unreasonable the result might appear to be, the judge held that there would be no lack of commerciality in a provision which give the owner the right to suspend performance immediately when the charterer fails to pay, on the due date, hire, bunkers or other obligations, in clear breach of the charterparty. Moreoveer, such construction is in no way a surprising or unreasonable one. × Collapse all ×

Global Maritime Investments Ltd v STX Pan Ocean Co Ltd [2012] EWHC 2339 (Comm)(08 August 2012)
Shipping – String of charters – WIBON clause – US Gross Transportation Tax ("USGTT") a "tax …levied on income attributable to transportation under [the] charterparty" – Who in the string must bear the cost of US Gross Transportation Tax ("USGTT").

The central issue in thes case was: to which charterer or charterers in a string of charters of the mv Dimitris L must bear the cost of US Gross Transportation Tax ("USGTT").

The Head Owner in the chain is Sea Rose Marine SA ("Sea Rose"). The head charterer is STX Pan Ocean ("Pan Ocean"). There were then three sub-charterers in the following order: Global Maritime Investments Ltd ("Global Maritime"); Navios International Inc ("Navios") and Sangamon Transportation Group ("Sangamon").

It was held that USGTT would be levied by the American tax authorities directly on each of the owners in a chain of charters and that their draft clause would serve to transfer liability to each owner’s direct charterer, but no further. Insofar as the hire on which the tax was levied was attributable to transportation under any charterparty it was attributable to transportation under the head charter since it was only under that charter that any hire (which is the "income attributable to transportation") was payable to Sea Rose. × Collapse all ×

Isabella Shipowner SA v Shagang Shipping Co Ltd (the Aquafaith) [2012] EWHC 1077 (26 April 2012)
Shipping – Time charter – Repudiation by the charterer – whether shipowners can disregard breach and claim hire from the charterers.

Under a charterparty on amended NYPE form dated 19 September 2006, the vessel was chartered by the owners to the defendant charterers for a duration of 59-61 months. The charter also included an express warranty "that the vessel will not be re-delivered before the minimum period of 59 months". It was common ground that the charterers commited anticipatory breach of the charter, on 6 July 2011, and stated that they would re-deliver the vessel. The minimum remaining period of charter was 95 days. The arbitrator held that the owners were required to take re-delivery of the vessel, trade the vessel on the spot market by way of mitigation and claim damages in respect of their loss. Owners appealed.

The Question of Law was: Whether, as a matter of law, owners were entitled to refuse early re-delivery of the vessel and affirm the charter, or whether they were bound in law to accept early re-delivery and merely entitled to sue for damages.

On analysis of all preceding case law the judge concluded that this case is outside of any limitation on otherwise unfettered right of the injured party to elect to disregard repudiation and keep the contracta in full effect. The owners’ legitimate interest to continue performance under the charter was fortified by the assertion of risk of the charterers directing their limited funds to meet obligations to other parties. Moreover while insisting on repudiation the contract breaker was seeking to be shot of the difficulties in trading the vessel by imposing that burden on the innocent party, as well as depriving him of the assured income of advance hire.

Click to read case report
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Hyundai Merchant Marine Company Ltd v Trafigura Beheer BV [2011] EWHC 3108 (Comm) (29 November 2011)
Charterparty Time – Speed warranty – Shelltime 3 – All weather warranty – Weather conditions up to a maximum of Force 4 on the Beaufort Scale.

Charterparty on amended Shelltime 3 form contained the following provisions:
Clause 24. Detailed Description and Performance
Owners warrant that at the date of delivery under this charter the vessel shall be of the description set out in Gas Form C attached hereto and signed by them and undertake to use their best endeavours so to maintain the vessel during the period of her service hereunder. Further but otherwise [without] prejudice to the generality of this clause Owners guarantee that the average speed of the vessel will be not less than knots in ballast and knots fully laden, with a maximum bunker consumption of tons diesel oil/ tons fuel oil per day for all purposes excluding cargo heating and tank cleaning. See Additional Clause 42 attached which also overrides any references to over performance herein. [lines 201-216] The aforesaid average speeds shall be calculated in each yearly or other less period, as defined hereinafter by reference to the observed distance from pilot station to pilot station on all sea passages and over the whole of the time the vessel is on hire during such period [lines 217-219]…



In the event of any conflict between the particulars set out in the aforesaid Form and any other provision (including this clause) of this charter, such other provision shall prevail. [lines 241-242]

Clause 42: Speed/Consumption.
Speed about 15 knots average consumption about 40 mts IFO 380 CST at sea plus about 0.2 mts GO and about 10 mt IFO 380CST at port plus about 0.2 mt GO. Otherwise as per Gas Form C.

Gas Form C A.1 General Description Owners Sure Gas Shipping SA, Panama A.5 Speed Guaranteed average speed on a year’s period and max wind force 4 in Beaufort scale: Loaded about 14.5 knots, Ballast about 15.5 knots.
Charterers claimed that the vessel had failed to perform in accordance with the speed and consumption provisions. Their main contention was that cl.24 is an "all weather warranty" and guarantees an average speed and maximum daily bunker consumption measured over the whole period that the vessel is on hire under the charter, regardless of weather conditions. They based this argument on analysis of the words in lines 217-8: "on all sea passages and over the whole of the time the vessel is on hire during such period" which lead them to conclusion that the average speed, as refered to in cl 42, and consumption under clause 24 is calculated in all weather conditions.

The learned judge agreed with the charterers that provision stated in lines 217 to 220, namelty that "The aforesaid average speeds [i.e. those incorporated by reference from Clause 42] shall be calculated in each yearly or other less period … on all sea passages and over the whole of the time the vessel is on hire during such period" is an all weather warranty.

This conclusion defeated further owners’ argument that the charterers’ contention is uncommercial because it would involve the owners having chosen to warrant an all weather average speed more onerous than that contained in Gas Form C. The judge held that if provision of cl 42 to be qualified by "weather conditions of maximum Beaufort Force 4" as imported from Gas Form C, such construction will be inconsistent with the words of lines 217-220 in clause 24 and therefore all weathers performance calculation, as stipulated in cl 24, must prevail. × Collapse all ×

Glory Wealth Shipping Pte Ltd. v Korea Line Corporation [2011] EWHC 1819 (Comm)
Time charter on an amended NYPE form for a minimum of 36 months – Earlier redelivery which owners accepted as a repudiatory breach – no available market for a period charter of a duration that corresponded to the balance of the charterparty – Measure of damages.

The vessel was delivered into charter on 21 June 2008 for a minimum of 36 months to maximum 38 months at a daily rate of US$39,800. In November 2008, the charterers purported to make early redelivery, which the owners accepted as a repudiatory breach. The owners claimed damages on what was called a "hybrid basis", originally by reference to losses on a substitute fixture the vessel had contracted in the spot market up to January 2009, and by reference to market rates for the balance of the charter period from that time. The arbitrators agreed with the ownerss and awarded them the full amount of their claim for damages for the balance of the charter period. The charterers appealed arguing that it was wrong in law to bring a hybrid claim for part actual and part market-based losses on the supposed basis that one looks to the market when it comes back to life. The only relevant date for the market is the date of termination, because this is the moment at which the innocent party can go into the market and mitigate its loss by finding a substitute fixture: see The Elena D’Amico [1980] 1 Lloyd’s Rep 85 at 89. Where there is no available market at the date of termination, it is necessary to fall back on the broader question of asking what sum would put the claimants in the same financial position that they would have been in had the charterparty been performed. Since the Owners did not enter the long-term period charter market in July 2009, their actual trading thereafter must be the basis of the damages claim.

The judge was essentially in agreement with the charterers, that the House of Lords deciesion in The Golden Victory [2007] 2 AC 353 emphasises the overriding compensatory principle that damages awarded should represent no more than the value of the contractual benefits of which the claimant has been deprived. He concluded that damages are to be assessed by reference to the actual loss of the owner. Assessment of such damages is subject to the usual rules, including the principle that where the owner has unreasonably failed to mitigate its losses, it may not claim its self-induced loss. The revival of the market is obviously relevant in that regard. Mitigation apart, the revival of the market at a later date may be a factor to take into account in calculating future loss if damages fall to be assessed before the end of the contractual period, but the revival of a market for the then unexpired period of the charter does not in itself provide the correct measure of damages. × Collapse all ×

Dolphin Tanker Srl v Westport Petroleum Inc [2010] EWHC 2617 (Comm)
Shipping – Time Charterparty – Amended Shelltime4 form – Meaning of an Oil Majors – Qualifying Rejection.

1. In spite of the fact that clause 50(VESSEL’S APPROVAL CLAUSE) referring to ‘oil major’ listed only 5 companies namely: BP, Shell, ExxonMobil, Chevtex and Total Fina Elf, the arbitrator and the court supported the charterers view that ordinary and natural meaning of the words ‘oil major’ in §3.2 includes additionally ConocoPhillips as one of six major oil companies. See also: Meaning of an ‘oil major’ and ‘Recognised Oil Majors’.

2. The court held that a vetting inspection initiated by the owners cannot restrict a right of termination under §3.2 so far as in §3.3 t was specifically defined that A VETTING REVIEW / INSPECTION IS DEFINED AS A NOMINATION BY THE CHARTERER’S. See also: Inspection initiated by Charterers’ nomination.

3. Contract defined THE OIL MAJOR REVIEWING THE VESSEL BY EITHER A PHYSICAL INSPECTION OR LATEST SIRE INSPECTION REPORT. The owners contented that the charterers have to prove that Qualifying Rejection was the (or an) effective cause of that failure. This argument was rejected by the judge. He concluded that the findings that the latest SIRE report was considered as part of the process of nomination and review are sufficient to show that the rejections were Qualifying Rejections of clause 50. See also: Effective cause of majors’ rejection.

Click to read full case report
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Last updated 29-Feb-2016

Trafigura Beheer BV v Navigazione Montanari Spa [2015] EWCA Civ 91 (18 February 2015)
Shipping – Voyage Charter – BPVOY3 – Vessell hijacket by pirates off Cotonou – 5,300 mt of the Cargo ("the Transferred Cargo") were transferred to an unknown lightering vessel and lost – Whether ITL (In-transit loss) clause applies irrespective of the nature of loss – Even if ITL is applicable whether the owners could rely on the exceptions clause 46 because loss by piracy was covered by Article 4 Rule 2(c) or (f) or (q)

Under charter party on amended BPVOY3 form with Trafigura Chartering Clauses of 1 August 2005, the vessel loaded a cargo of premium motor spirit at Abdijan, Cort d’Ivoire for discharge at Lagos, Nigeria. While waiting for discharge orders off Cotonou vessel was hijacked by pirates. As a result of STS transfer this transferred or stolen cargo was never delivered to the consignees. Vessel was released by pirates next day. Charterers claimed value of cargo stolen by the pirates under In-transit loss clause.

Clause 4 (which I shall call the "ITL clause") is headed "In-transit loss clause" was amended as below:
In addition to any other rights which Charterers may have, Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.3% 0.5% and Charterers shall have the right to deduct from freight claim an amount equal to the FOB port of loading value of such lost cargo plus freight and insurance due with respect thereto. In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port.
Clause 46 (Exceptions) provided:
The provisions of Article III (other than Rule 8), IV, IV bis and VIII of the Schedule to the Carriage of Goods by Sea Act, 1971 of the United Kingdom shall apply to this Charter and shall be deemed to be inserted in extenso herein. This Charter shall be deemed to be a contract for the carriage of goods by sea to which the said Articles apply, and Owners shall be entitled to the protection of the said Articles in respect of any claim made hereunder.
Charterers shall not, unless otherwise in this Charter expressly provided, be responsible for any loss or damage or delay or failure in performance hereunder arising or resulting from Act of God, act of war, seizure under legal process, quarantine restrictions, labour disputes, strikes, riots, civil commotions, arrest or restraint of princes, rulers or people.
In the Court of Appeal charteres argued that the ITL clause makes the carrier liable for loss of cargo in transit regardless of the cause of that loss and that on authority of The Olympic Brilliance the Hague-Visby Rules could similarly not be relied on to meet a claim which fell within the clause.

The law lords not without some hesitation dismissed appeal. Briggs LJ admitted that considerations about language of the ITL clause lead him to difficulty, rather than outright dissent, on that aspect of the appeal related to liability for loss of cargo in transit regardless of the cause of that loss, provided that it exceeds 0.5%, apparently imposed by the ITL clause.

Longmore LJ delivering leading judgement underlined that following decision in The Olympic Brilliance the ITL clause serves to provide a simple solution in notoriously difficult oil shortage claims, albeit such claims should arise only from a normal voyage and when there is no doubt that the loss is otherwise unexplained. He said:
In those circumstances it is sensible for the parties to agree that an unexplained difference between volumes measured on board the vessel after loading (or figures contained in the bill of lading as agreed in The Olympic Brilliance) and volumes measured on board the vessel before unloading of less that x% should not be recoverable by the charterer but that a difference of more than x% should be recoverable by the charterer from the owner. … The fact that “in transit loss” is defined for the purposes of the clause as the difference between the volumes after loading and before unloading seems to me to support the conclusion that the clause is looking only to a short delivery loss of a kind encountered in a normal voyage. It can hardly be supposed for example that, if the vessel was ordered by the charterer to effect part discharge into lighters before arriving at a discharge port and arrangements could not be made to take measurements until arrival at the discharge port, the owner could be liable for the difference between measurements taken at the loading port after loading and measurements taken before unloading at the discharge port; …
But even if the charterer were right about the construction of the ITL clause, it was nonetheless found by the Court of Appeal that loss by piracy is excluded by one or other of the Hague-Visby Rules which were incorporated into the charterparty by clause 46 of Beepeevoy 3.

Longmore LJ stressed that The Olympic Brilliance decision was related to the charterers’ right of deduction from freight irrespective whether they had a good claim for the loss of cargo, while in present case the ITL clause does not give to the charterers any right of deduction but only "right to deduct from freight claim an amount equal to the FOB port of loading value of such lost cargo." As the court made it clear in The Olympic Brilliance, the Hague Rules provision "only deals with the carrier’s liabilities and not in any way with his entitlement to freight" , whereas claim for the loss of the cargo would be a different claim and subject to the Hague Rules. However, such claim would fall outside of clause 46 scope if the loss were unexplained, it is unlikely that the owner could avail itself of the Hague-Visby exceptions.
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HBC Hamburg Bulk Carriers GmbH & Co KG v Huyton Inc (The Glory Sanye) [2014] EWHC 4176 (Comm) (12 December 2014)
Shipping – Voyage Charter – SYNACOMEX 2000 form – From Constanza to Djibouti – Vessel was unable to discharge because there were no receivers for the cargo in Djibouti – Discharge port was changed to Damietta on the Mediterranean coast – Pursuant to the terms of the head time charterparty (on amended NYPE form) the vessel was to be re-delivered at Port Said and so, regardless of any agreement between the disponent owners and charterers, the vessel would have had to pass through the Suez Canal in any event – Disponent owners claimed the costs of transiting the Suez Canal from their voyage charterers as an expense arising from the charterers’ failure to discharge the cargo at Djibouti.

On 23 October 2009 the Claimants, as disponent owners, chartered the vessel GLORY SANYE to the Respondents on the SYNACOMEX 2000 form for a voyage from Constanza to Djibouti with a cargo of wheat. The Claimants themselves had time chartered the vessel from the registered owners on the NYPE 1946 form for a time charter trip "intention via Constanza to Djibouti or Port Sudan". The vessel loaded a cargo of wheat at Constanza and arrived at Djibouti on 20 November 2009. However, the vessel was unable to discharge because there were no receivers for the cargo. The vessel remained off Djibouti for some three months. An agreement, addendum no.1, was reached between the disponent owners and charterers that the discharge port would be changed to Ain Sukhna, an Egyptian port south of the Suez Canal. It says inter alia that:

Addendum no.1 to C/P dated 23 October 2009 (including for avoidance of doubt the arbitration law and jurisdiction clause) MV "GLORY SANYE"

(v) Owners and Headowners to be held harmless and indemnified against all losses, expenses, damages, risk whatsoever and howsoever arising including but not limited to those which may arise from any 3rd party including but not limited to Egyptian authority’s rejection refusal or inability to accept delivery of the cargo or from charterer’s failure to discharge cargo.
Subsequently, the discharge port was changed again, to Damietta on the Mediterranean coast. Parties reached another agreement in way of addendum no.2 and as a consequence of addendum no.2, since the port of Damietta is located on the northern, Mediterranean, coast of Egypt, it became necessary for the vessel to pass through the Suez Canal in the course of the voyage from Djibouti to the new discharge port.

In the arbitration the disponent owners claimed the costs of transiting the Suez Canal from their charterers as an expense arising from the charterers’ failure to discharge the cargo at Djibouti. The tribunal held that ‘in the context, "losses" or "expenses" must be construed as limited to additional losses and expenses which would not have been incurred in any event’. Since the disponent owners would have incurred the costs of transiting the Suez Canal even if the vessel had been discharged at Djibouti, the costs were not an expense which the charterers had agreed to bear pursuant to addendum no.1(v). The disponent owners appealed.

The judge found that it was only the charterers’ failure to discharge at Djibouti which brought about the need for the vessel to transit the Suez Canal and for the costs of so doing to be incurred. Therefore the expense of transiting the Suez Canal assumed to be one in respect of which the charterers had agreed to indemnify the disponent owners pursuant to addendum no.1(v). The fact that the vessel was shortly to be redelivered at Port Said under the head charter did not affect that analysis. The learned judge said at paras 19 and 21:

19. The tribunal, in reaching its different conclusion, had regard to the fact that the disponent owner, as charterer under the head charter, was liable under the head charter to bear the costs of transiting the Suez Canal because redelivery under the head charter was to take place at Port Said. By doing so the tribunal was able to say that the expense was not "additional", even though the expense was required by the amended voyage and not by the original voyage. However, there was no finding that the disponent owners’ liability under the head charter was part of the background knowledge available to both parties and Mr. Kulkarni did not suggest that it was. The disponent owners’ liability to the registered owners was not, therefore, a factor to be taken into account when construing and applying the clause in question. In earlier times it would have been regarded, as [disponent owners] submitted, as res inter alios acta and therefore irrelevant when construing and applying the clause.

21. [I]t seems to me that the disponent owners would be entitled to claim as damages for breach of the voyage charter the difference between the cost of performing the voyage to Djibouti, on the one hand, and the cost of performing the voyage to Damietta on the other hand. The difference would be the expense of mitigating the disponent owners’ loss. On that basis the cost of transiting the Suez Canal on the northbound voyage would be recoverable as damages. Such damage would be within the reasonable contemplation of the parties and was no less a real expense by reason of the fact that under the head charter, the terms of which the charterers were unaware, the disponent owners were obliged to redeliver in Port Said and pay for canal dues. But in any event the parties had adopted a simple formula in order to decide whether the charterers were liable to indemnify the disponent owners in respect of an expense, namely, did it arise from the charterers’ failure to discharge the cargo.
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Falkonera Shipping Co v Arcadia Energy Pte Ltd (The Falkonera) [2014] EWCA Civ 713 (05 June 2014)
Shipping – Shipping – Voyage Charter – BPVOY4 cl.8.1 – STS lightering clause – STS transfer between two VLCCs – Owners withholding their approval of the receiving Vessels – Whether no reasonable shipowner could have regarded their concerns as sufficient reason to decline approval?

VLCC The Falkonera was chartered (based on recap) to the charterers to perform a single voyage to carry crude oil from the Yemen to "1-2 ports far east", in the event, Pasir Gudang, Malaysia was nominated as discharge port and operation to be done by way of a STS transfer. Initially, the charterers nominated two other VLCCs to receive cargo from The Falkonera ie The Front Queen - built 2009, length overall 330 metres, deadweight 297,936 tonnes - and The Front Ace – built 1993, length overall 326.2 metres, deadweight 274,999 tonnes (Frontline Vessels).
During negotiating stage on vessel’s approach to Pasir Gudang, from 13th to 16th December 2010, the owners rejected several charterers’ proposals related to two initially nominated VLCCs, which included intention to provide them with LOI against any damage that might be sustained in the course of STS transfers between The Falkonera and the Frontline vessels. The judge described them as withholdings one, two and three. As a result of owners’ stance the charterers had to charter two smaller vessels for the proposed STS transfer, into which The Falkonera subsequently discharged her cargo and left Pasir Gudang on 30th December 2010. The charterers suspended payment of several bills totalling almost to half million USD, arguing that the Owners’ withholding of approval of the Frontline Vessels to carry out the STS transfer was a breach of the charter and led to delay and increased costs which are for the Owners’ account.

Charterparty provided in material part as follows:
8.1 Charterers shall have the option of transferring the whole or part of the cargo…to or from any other vessel including, but not limited to, an ocean-going vessel, barge and/or lighter (the "Transfer Vessel")…. All transfers of cargo to or from Transfer Vessels shall be carried out in accordance with the recommendations set out in the latest edition of the "ICS/OCIMF Ship to Ship Transfer Guide (Petroleum)". Owners undertake that the Vessel and her crew shall comply with such recommendations, and similarly Charterers undertake that the Transfer Vessel and her crew shall comply with such recommendations. Charterers shall provide and pay for all necessary equipment including suitable fenders and cargo hoses. Charterers shall have the right, at their expense, to appoint supervisory personnel to attend on board the Vessel, including a mooring master, to assist in such transfers of cargo.
A further STS lightering clause provided inter alia that:
(i) if charterers require a ship-to-ship transfer operation or lightening by lightering barges to be performed then all tankers and/or lightering barges to be used in the transhipment/lightening shall be subject to prior approval of owners, which not to be unreasonably withheld, and all relevant certificates must be valid.
(ii) all ship-to-ship transfer operations shall be conducted in accordance with the recommendations set out in the latest edition of the ics/ocimf ship-to-ship transfer guide (petroleum).
(iii) all such lightering ships must have a fully working inert gas system (igs), unless the cargo flash point exceeds 60f and only with express approval of the owners/master.
The judge In the High Court found that that Withholding 1, Withholding 2 and Withholding 3 constituted the unreasonably withholding by the Owners of the approval of the Front Queen and/or the Front Ace and thereby a breach of the charter by the Owners. The owners appealed.

The Court of Appeal agreed with the judge that it was for Charterers to prove that Owners had acted unreasonably and the owners would only be in breach if no reasonable shipowner could have regarded their concerns as sufficient reason to decline approval. Their Lordships further held that since charterparty gave to the Charterers an option of transferring cargo to "any other vessel including, but not limited to, an ocean-going vessel", i.e. VLCC including, the fact that the proposed transfer was to such in a sense "non-standard" vessel, was not of itself a reasonable ground for refusal.

Secondly, the Court noted that Owners’ right was to give or withhold approval of the tankers nominated to receive the transfer of cargo and not the operation. Therefore evident and unquestionable difficulties related to VLCC to VLCC transfer and short, in view of the owners, time available for planning, submitted by owners in support of their submission were of no relevance. It was also held that:
The suitability of the receiving vessel did not fall to be considered in a vacuum, regardless of the actual use to which she was intended to be put; and it may be that, in certain circumstances, Owners might reasonably refuse to approve if they had such a dearth of information about what was proposed that they were unable to reach a conclusion as to whether the receiving vessel had some characteristic that made her use unsafe.
Moreover the Court of Appeal noted that the Frontline vessels nominated for transfer had not any peculiarity or defect that rendered them unsuitable for STS transfers. Both the Front Queen and the Front Ace had been screened by a number of oil majors including Shell and BP and had been maintained to their exacting standards.

Since it was not suggested by the Owners that the proposed operation posed any risk that could not be mitigated by adequate planning, it follows that they implicitly accepted that the Falkonera could have safely performed the operation with the Frontline vessels. Furthermore Owners’ expert agreed in terms that there was nothing in the characteristics of the vessel that prevented the operation intended. Accordingly, as the judge in the High Court found, there was no basis for Owners to withhold their approval to the Frontline Vessels when they were nominated with "flawless" Q88. Owners should then have started an iterative process of operational planning in cooperation with Charterers. Lord Justice Clarke giving the only reasoned judgment underlined that STS clause does not provide the owner with option to approve STS planning or procedures which Charterers’ sub-contractor SafeSTS put forward before operation.
63. The approval to be sought related to the receiving vessel. It was not, as it seems to me, the function of the STS clause to allow Owners to vet the plans for the STS operation before deciding whether to approve the transferee vessel. The question was whether there was some characteristic of the receiving vessel that meant that the proposed STS transfer would be unsafe in the sense that it would give rise to a degree of risk which a prudent owner who had agreed to allow VLCC – VLCC transfers would (or could), acting reasonably, not be prepared to accept.
General tenor of this decision was to show that Owners’ policy and safety concerns based on their negative previous experience of STS operation between VLCCs were not sufficient grounds for reasonable withholding of approval within STS lightering clause. On the other hand cl.8 gave to the Charterers an option for Ship-To-Ship cargo transfer with "any other vessel". Accordingly the Owners were taken to have accepted such risks as are inevitably attendant on any VLCC – VLCC transfer and in such situation their refusal was, in words of Clarke LJ, "in truth, based on their aversion to any VLCC – VLCC transfer rather than any particular characteristics of the transferee vessel."

The Court of Appeal stressed that the Owners’ considerations might not be artificially restricted by verification of data available from vessels’ Q88 alone, but understandably includes consideration of the nature and requirements of the particular operation, therefore entitling the Owners to withhold approval because for some reason the proposed transfer involving that other vessel would in any event be unsafe. But the Owners failed to present any particular grounds realted to two Frontline vessels, such for example as deficiency in machinery or manoeuvring characteristics, any insufficiency of their mooring arrangements or unsafety of layout of mooring lines, undercapacity of tugs used for mooring, etc., which might rendered reasonable the withholding of approval in respect of those vessels. The Owners put forth a lot of efforts to represent possible difficulties in planning, arranging and conducting STS operation, instead of giving an expert evaluation of particular characteristics of particular vessels at specific area [emphasis mine] to support their withdrawals.

On the other hand a long list of safety issues and complex technical problems related to VLCC-VLCC cargo transfer which were discussed in the report, made it rather difficult to imagine that there will be no reasonable shipowner who could have regarded the Owners’ concerns as sufficient reason to decline approval.

Trafigura Beheer BV v Navigazione Montanari Spa [2014] EWHC 129 (Comm)(30 January 2014)
Shipping – Voyage Charter – BPVOY3 – Vessell hijacket by pirates off Cotonou – 5,300 mt of the Cargo ("the Transferred Cargo") were transferred to an unknown lightering vessel and lost – Whether owners are liable under the charterparty’s ITL (In-transit loss clause)

Under charter party on amended BPVOY3 form with Trafigura Chartering Clauses of 1 August 2005, the vessel loaded a cargo of premium motor spirit at Abdijan, Cort d’Ivoire for discharge at Lagos, Nigeria. While waiting for discharge orders off Cotonou vessel was hijacked by pirates. As a result of STS transfer this transferred or stolen cargo was never delivered to the consignees. Vessel was released by pirates next day. Charterers claimed value of cargo stolen by the pirates under In-transit loss clause.

Clause 4 (which I shall call the "ITL clause") is headed "In-transit loss clause" was amended as below:
In addition to any other rights which Charterers may have, Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.3% 0.5% and Charterers shall have the right to deduct from freight claim an amount equal to the FOB port of loading value of such lost cargo plus freight and insurance due with respect thereto. In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port.
Clause 46 (Exceptions) provided:
The provisions of Article III (other than Rule 8), IV, IV bis and VIII of the Schedule to the Carriage of Goods by Sea Act, 1971 of the United Kingdom shall apply to this Charter and shall be deemed to be inserted in extenso herein. This Charter shall be deemed to be a contract for the carriage of goods by sea to which the said Articles apply, and Owners shall be entitled to the protection of the said Articles in respect of any claim made hereunder.
Charterers shall not, unless otherwise in this Charter expressly provided, be responsible for any loss or damage or delay or failure in performance hereunder arising or resulting from Act of God, act of war, seizure under legal process, quarantine restrictions, labour disputes, strikes, riots, civil commotions, arrest or restraint of princes, rulers or people.
Article III rule 8, which was not incorporated into the charterparty under clause 46 of the BP form, provides that:
Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connection with, goods arising from negligence, fault, or failure in the duties and obligations provided in this article or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect. A benefit of insurance in favour of the carrier or similar clause shall be deemed to be a clause relieving the carrier from liability.
The issues before the court were:

Are the owners liable under the charterparty to the charterers for the FOB Port of Loading Value of any proven difference between the net vessel volumes after loading at the loading port and the net vessel volumes before unloading to the order of the charterers at the discharge port, plus freight and insurance? In particular:

[1] on a true construction of the In-Transit Loss Clause, does the Transferred Cargo discharged from the Vessel in the circumstances set out in paragraph 6 above constitute "in transit loss" or "lost cargo" for the purposes of that clause? and if the Transferred Cargo does so constitute:
[2] on a true construction of the Charterparty does the In-Transit loss Clause impose strict liability upon the Defendants in respect of such Transferred Cargo, or do the exceptions of Clause 46 of the Charterparty apply to exclude that liability?
[2.1] is there a clear and distinct inconsistency between the In-Transit loss Clause and Clause 46 of the Charterparty;
[2.2] can the Clauses be reconciled?]

On analysis of commercial background of ITL clause the judge concluded that "in-transit loss" connote loss that is incidental to the carriage of oil products, and does not extend to losses such as those that occurred in this case because of the action of the pirates. He also added that otherwise the heading to the in-transit loss clause would be misleading in that it would cover, and put the owners under strict liability for, losses very different from those generally understood by the expression.

Having decided for the owners on the first issue the judge went further and considered question whether In-Transit loss Clause impose strict liability upon the owners in respect of Transferred Cargo, or do the exceptions of Clause 46 of the Charterparty apply to exclude that liability?

Observing that although absolute undertakings by owners are unusual in charterparties, but parties are entitled to agree to them the learned judge held that the owners’ responsibility is subject to the exceptions in clause 46. He said:
Clause 46 provides that the owners are entitled to the protection of the relevant articles of the Hague-Visby Rules "in respect of any claim made" under the charterparty, and there is no good reason to limit the natural meaning of "any claim" by excluding claims under the ITL clause. When this was intended (in clause 20 of the BP form), this was made explicit.

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ED & F Man Sugar Ltd v Unicargo Transportgesellschaft GmbH [2013] EWCA Civ 1449 (19 November 2013)
Shipping – Voyage charter – Sugar Charter Party 1999 - The fire had destroyed the conveyor-belt system linking at the loading terminal – Vessel incurred substantial demurrage in loading port – Force-majeure clause (cl 28) – Whether the charterers have demonstrated that the delay in loading the vessel at Paranagua was caused by mechanical breakdown – Whether delay in loading caused by and/or in consequence of a fire which destroys mechanical loading equipment (and/or a port authority’s re-scheduling of loading following such destruction) counts as laytime under the Charterparty and whether the fact that loading thereunder at "1-2 safe berths" is lawfully relevant to the operation of Clause 28 of Charterparty.

For factual backround read ED & F Man Sugar Ltd v Unicargo Transportgesellschaft GmbH [2012] EWHC 2879 (Comm) (16 October 2012).

Lord Justice Tomlinson giving the only reasoned judgment, underlined that the arbitrators’ findings, based on the evidence provided by the charterers, led them to right conclusion that there was no mechanical breakdown of the conveyor. His lordship said at para 11:
On the facts which they were invited to and did find, there was in my view no mechanical breakdown of the conveyor belt system. It is possible that further investigation, not undertaken by the parties before the arbitration, might have revealed that the fire had itself been caused by mechanical breakdown, but the charterers advanced no evidence before the arbitrators with a view to establishing that this was the case. Indeed, as I have shown, the charterers asserted that the cause of the fire was irrelevant. Accordingly, in my view the charterers have simply failed to establish that they are entitled to invoke the protection of Clause 28.
The Court of Appeal also agreed with the judge that The Afrapearl (Portolana Compania Naviera Ltd v Vitol SA Inc [2004] EWCA Civ 864) and Olbena SA v Psara Maritime Inc, The Thanassis A unreported, 22 March 1982, cases should be distinguished as concerned simply with "breakdown of machinery or equipment", while in the case at hands the nature of the breakdown is here relevant, i.e. it must be mechanical to give to the charterers desired protection. It was also held that complete destruction of part of a facility is not only something more than a breakdown, it is plainly something different in kind from a mechanical breakdown, although equally plainly a mechanical breakdown might lead to complete destruction of all or part of a mechanical loading plant, whether through fire or through some other mechanism.

The charterers thought to remit the matter to the arbitrators to enable them to make further findings of fact because since the cause of fire was originally submitted to be irrelevant the arbitrators have regarded it as unnecessary to investigate the cause of the fire. Dismissing the appeal Lord Justice Tomlinson stressed that the charterers made no attempt to establish the cause of the fire before the panel, which cause they contended was irrelevant to the question whether they could rely upon Clause 28. Therefore in view of the court it would not be appropriate to permit the charterers to re-open the arbitration and to seek from the arbitrators findings which they had contended at the arbitration were irrelevant and unnecessary.
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Great Elephant Corp v Trafigura Beheer BV & Ors [2013] EWCA Civ 905 (25 July 2013)
Shipping – Voyage Charter – BPVoy 3 – Commencement of loading with culpable breach of loacal regulations – Detention of the tanker by the Nigerian authorities – Whether delay was caused by an unforeseeable force majeure event beyond the reasonable control of terminal operator or, if relevant, the contracting party

On appeal from decision of Mr Justice Teare in the Commercial Court (below) there were three key issues:

i) whether, as the judge held, the delay was caused by an unforeseeable force majeure event beyond the reasonable control of Total (for the purpose of the Trafigura/Vitol contract) or beyond their reasonable control (for the purpose of the Vitol/COOSI contract);

ii) whether, if not, COOSI and Vitol can say that the delay was beyond their own control or reasonable control;

iii) whether, as the judge held, the unlawful act of the Minister in seeking to impose a "fine" of US$12 million broke the chain of causation so that any liability of Vitol or COOSI is to be confined to the delay before 7th September.

The Court of Appeal disagreed with the judge that the events should be studied from the perspective of Total’s lifting supervisor, which led him to conclude that, although there were the 3 failures to comply with the Procedure Guides, Total’s conduct was "not culpable" (paras 48-50) and therefore (para 115) that the failure to comply with the Procedure Guides was beyond Total’s (reasonable) control. Lord Justice Longmore said at paras 24-30:
24. There are, with respect, two difficulties with this approach. In the first place it assumes that Mr Bankole is the same as Total whereas Total is in fact much more than Mr Bankole. Mr Bankole may have acted entirely reasonably in the difficult circumstances in which he found himself but one must ask whether Total as a complete entity acted reasonably not just whether Mr Bankole did. Secondly, "culpability" is not the fundamental question. It may be a relevant consideration but the real question is whether the delay was caused (speaking generally) by circumstances beyond the (reasonable) control of Total. If that is the question to be addressed one needs to know why it was that Total in Lagos did not seek inwards clearance from the DPR in Lagos until 1st September. Whether Total asked for clearance through official channels at any particular time was a matter which was in their control. If they chose to proceed without seeking official clearance from Lagos in the usual way, that is a matter which was, at all times, within their control.

26. … The judge was prepared to assume that, since the loading of the vessel was Trafigura’s responsibility under clause 15 of the charter and since the loading could only be performed by Total as operator of the Terminal, Total were the agents of Trafigura for the purpose of clause 21 but he held that, since the cause of the delay was beyond the reasonable control of Total, Trafigura could rely on the restraint of princes exception to reduce the demurrage rate by half. 27. For the reasons I have given, I cannot agree with the judge that the delay occurring to the vessel was beyond Total’s control. The question remains whether it was beyond their "reasonable" control.

28. My opinion is that the delay was not beyond Total’s "reasonable control" if one looks (as one should) at Total as one entity. For reasons which we do not know, Total in Lagos did not ask for official loading clearance from the DPR in Lagos before the vessel began to load. They (Total) preferred, by their Mr Bankole, to deal with the DPR representative in Port Harcourt. That was their choice. But in circumstances in which the judge found that there was an official channel of communication in Lagos for obtaining loading clearance, it was a choice which carried a risk. Exercising a choice which carries a risk is doing something which is within one’s control. Using the usual channels which would carry no risk is also within one’s control. It was not beyond Total’s reasonable control to exercise one choice rather than another. In this context "culpability" is not a determinative criterion.

30. … The intention of the charterparty was that if anything went wrong with the loading operation for any reason, that was the charterers’ responsibility. If Total had, for example, damaged the ship during the loading operation, Trafigura would have to bear that liability and look down the sale and purchase line of contracts for any indemnity. It would not be consistent with the concept of the charterers being responsible for defaults in loading, that they should be able to excuse themselves on the basis that the event causing the damage was outside the control of themselves or their immediate contracting party. By contracting with Vitol S.A., Trafigura initiated (or participated in) a chain of contracts which led to the actual loading of the vessel being done by Total. If the events that occurred were within the (reasonable) control of Total, then Trafigura should be contractually liable to the Owners of the vessel for the consequences of those events. In other words, for the purpose of clause 21 of the charterparty, Total are the agents of Trafigura in relation to the loading of the cargo.
On the second issue the Court held that since Trafigura had undertaken the responsibility of loading the vessel under the charterparty with the owners and Vitol and COOSI had undertaken same responsibility in the respective f.o.b. sale contracts it followed that Vitol and COOSI cannot rely on the force majeure clause unless they can show that the relevant acts or events were beyond the reasonable control of Total, being the person who discharged that responsibility.

Finally, the Court disagreed with the charterers contention that the Minister’s abuse or arbitrary exercise of power was a new intervening cause which displaces the original breaches of contract by Vitol and/or COOSI. Although agreeing with Chitty on Contracts, 2012 that the voluntary act of a third person intervening between the breach of contract by the defendant and the loss suffered by the claimant will normally break the chain of causation, Longmore LJ pointed out that in view of particular circumstances of this particular case the operator of the terminal Total cannot say that it was beyond their control that loading took place by severing the padlock on the relevant export pipe without inwards clearance being granted by the DPR or a DPR representative being on board. The fact that the authorities imposed a fine which they were not entitled to do by their own law was little to the point, because the authorities could have investigated the incident without doing anything illegal and such investigation would inevitably last a certain amount of time. In conclusion his Lordship stated that:
47. If every arbitrary exercise of power in any country of the world where ships come and go were sufficient to displace serious breaches of contract, that might be an encouragement to lawlessness.

As a result the Owners’ claim for demurrage succeeds in full and that the claim can be passed by Trafigura on to Vitol and by Vitol to COOSI.
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BP Oil International Ltd v Target Shipping Ltd [2013] EWCA Civ 196 (14 March 2013)
Shipping – Voyage charter – Payment of Freight – Overage freight – Meaning of "Overage 50pct applicable for Euromed discharge only".

The charterers took the defendants vessel m/t Target for a voyage from Odessa to USAC [US Atlantic Coast] /CARIBS [Caribbean Sea] on amended BPVOY4 form with inter alia the following terms:
Part 1
C "Cargo Quantity":
Minimum 80,000 mts CHOPT [sc. charterers’ option] up to full cargo of fuel oil.


Owners warrant vessel loads 87,000 metric tonnes basis 12.5m Odessa, 112,000 metric tonnes basis no restrictions.
H Freight Rate … Overage (if any) at 50% of Freight Rate
Furthermore RECAP defined loading range as: 1/2 Port(s) Ukraine Black Sea excl Yuzni and “Overage: Overage 50pct applicable for Euromed discharge only.
The vessel loaded a cargo of fuel oil in Odessa and Marmara Ereglisi in March 2010 and discharged it at Galveston and Houston. On 5 May 2010 BP paid against the Owners’ invoice hire of US$3,651,215.32, a sum calculated on the basis that freight was payable in respect of all the oil carried, that is to say on 86,821.957 mt of oil loaded at Odessa and on 26,021.543 mt loaded Marmara.

After paid freight in full charterers contended that the sum paid exceeded contracted freight which parties agreed and that owners were entitled only to freight calculated on cargo loaded at Odessa and not at Marmara and payment made by mistake is recoverable.

Judge at first instance held on the question of "overage" that the parties did not agree that BP should be liable to pay full freight on any cargo loaded in excess of the minimum quantity. It followed from that that, since the owners must be entitled to recover, some freight for the excess cargo, they could only charge a reasonable freight. He therefore ordered an inquiry as to what such reasonable freight should be.

The owners submitted that the freight rate was always WS 135. If the printed provision of 50% in relation to overage is to apply only to Euromed discharge, that means the freight rate for all the cargo (both the stated minimum and the excess over that minimum) for other voyages is WS 135. It cannot be supposed that the owners were to carry any cargo in excess of the minimum rate for nothing.

The Court of Appeal allowed owners’ appeal, Longmore LJ said at paras 13, 15 and 19:
13. … First, in the absence of any agreement to the contrary, the parties agreed that overage was to be 50% of the freight rate. Mr John Russell for BP accepted that, if nothing had been said about overage in the recap and one was just dealing with section H of Part I and clause 31 of Part 2 of the charter, overage would be payable. That means that the words ("if any") in section H do not require a rate to be stated elsewhere in the charter for 50% to apply. So even in the absence of a stated rate, overage will be payable. Secondly, if the parties wanted to agree that no overage was payable, they said so in terms. Thus the printed clause 31 says that there is to be "no overage" if a lump sum freight is agreed and the e-mail recap provides that, if discharge takes place east of Singapore, freight will be payable according to a formula incorporating worldscale "with no overage". The parties have not expressly said that there is to be no overage in other circumstances and yet BP’s construction says that is the position in all cases other than Euromed discharge. That is a surprising result which, as Mr Steven Berry QC for the owners put it (and the judge recorded in para.160), "confuses the absence of specification with the specification of zero".

15. The judge also held, however, that the parties did not agree that BP should be liable to pay full freight on any cargo loaded in excess of the minimum quantity. It followed from that that, since the owners must be entitled to recover, some freight for the excess cargo, they could only charge a reasonable freight. He therefore ordered an inquiry as to what such reasonable freight should be.

19. A middle way between two potential constructions has its attraction in some ways but, in this case, it amounts, with respect, to making a contract for the parties which they have not made for themselves. When they have taken elaborate trouble and set out their agreement over many pages, the idea that there is a lacuna which the court has to fill is inherently unlikely. If filling the lacuna leads to an inquiry which is likely to be the subject of evidence and potential dispute, I would accept that one or other of the constructions put forward by the parties is likely to be right. In this case it is the owners’ construction which is correct.
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Falkonera Shipping Co v Arcadia Energy Pte Ltd (The Falkonera) [2012] EWHC 3678 (Comm) (20 December 2012)
Shipping – Shipping – Voyage Charter – BPVOY4 cl.8.1 – STS lightering clause – Were STS transfers between VLCCs precluded under the charter? – Did the Owners act reasonably (or, at least, not unreasonably) in withholding their approval of the Frontline Vessels?

VLCC The Falkonera was chartered (based on recap) to the defending charterers to perform a single voyage to carry crude oil from the Yemen to "1-2 ports far east", in the event, Pasir Gudang, Malaysia was nominated as discharge port and operation to be done by way of a STS transfer. Initially, the charterers nominated two other VLCCs to receive cargo from The Falkonera ie The Front Queen - built 2009, length overall 330 metres, deadweight 297,936 tonnes - and The Front Ace – built 1993, length overall 326.2 metres, deadweight 274,999 tonnes (Frontline Vessels).

During negotiating stage on vessel’s approach to Pasir Gudang, from 13th to 16th December 2010, the owners rejected several charterers’ proposals related to two initially nominated VLCCs, which included intention to provide them with LOI against any damage that might be sustained in the course of STS transfers between The Falkonera and the Frontline vessels. The judge described them as withholdings one, two and three. As a result of owners’ stance the charterers had to charter two smaller vessels for the proposed STS transfer, into which The Falkonera subsequently discharged her cargo and left Pasir Gudang on 30th December 2010. The charterers suspended payment of several bills totalling almost to half million USD, arguing that the Owners’ withholding of approval of the Frontline Vessels to carry out the STS transfer was a breach of the charter and led to delay and increased costs which are for the Owners’ account.
Read case report and comments here: Falkonera Shipping Co v Arcadia Energy Pte Ltd [2012] EWHC 3678 (Comm) ↑ Top of page ↑ × Collapse all ×

ED & F Man Sugar Ltd v Unicargo Transportgesellschaft GmbH [2012] EWHC 2879 (Comm) (16 October 2012)
Shipping – Voyage charter – Sugar Charter Party 1999 – The fire had destroyed the conveyor-belt system linking at the loading terminal – Vessel incurred substantial demurrage in loading port – Force-majeure clause – Whether the charteres entitled to rely upon any of the specific force-majeure events set out in Force-majeure clause – mechanical breakdown and government interference.

At the time of the fixture, the vessel was discharging at Abidjan in Ivory Coast from where it was due to sail (for Brazil) on 10 or 11 June 2010. On the date of the fixture (9 June 2010), the charterers declared Paranagua as the loading port. The local agents at Paranagua (MARCON) in an email dated 14 June 2010, advised the parties that a fire has occurred at the Compania Brasilliera Logistica A/A terminal (CBL) which is the terminal normally used by the charterers and where they had initially scheduled the vessel to load. The fire had destroyed the conveyor-belt system linking the terminal to the warehouse rendering it, in the opinion of local experts, inoperable for at least 3 months. The agents further expressed the view that charterers would need to transfer the cargo intended for the vessel to another terminal.

The vessel arrived on 20 June 2010 and tendered notice of readiness to load at 2330 hours. The Statement of Facts showed that in the absence of an available berth the vessel remained off the port until 14 July 2010, when she weighed anchor and entered the inner roads of the port awaiting berthing instructions. However, berth 212, that was ultimately used, was one of the three (212, 213 or 214) where the vessel would have berthed had the fire not taken place. Loading commenced on 18 July 2010 and was completed on 20 July 2010 at which time the vessel sailed for the discharging port in the Black Sea.

In accordance with the charter party terms the owners contended that time began to count at 1400 hours on Monday 21 June 2010 and that allowing for rain periods and permissible laytime (23,500 metric tons per weather working day = 3.91666 days) laytime expired at 2353 hours on 25 June 2010. Thereafter the vessel was on demurrage continuously up to 1300 hours on 20 July 2010, when loading was completed. The relevant terms of the Charterparty are as follows:
"Clause 3: … the said vessel … shall … sail and proceed to 1-2 safe berth(s), 1 safe port (intention Santos) but not south of Paranagua…

Clause 6: … The Act of God, perils of the sea, fire on board, in hulk or craft, or on shore, crew, enemies, pirates and thieves, arrests and restraints of princes, rulers and people, collisions, stranding and other accidents of navigation excepted, even when occasioned by negligence, default or error in judgement of the Pilot, Master, mariners or other servants of the Shipowners. Not answerable for any loss or damage arising from explosion, bursting of boilers, breakages of shafts, or any latent defect in the machinery or hull, not resulting from want of due diligence by the Owners of the ship, or any of them, or by the ship’s Husband or Manager.

Clause 19: … At loading port, even if loading commences earlier, laytime for loading to begin at 1400 hours if e-mailed notice of readiness to load is tendered to agents before noon and at 0800 hours next working day if e-mailed notice of readiness is tendered to agents after noon… At loading port(s) in the event of congestion Master has the right to tender notice of readiness at the customary waiting place in ordinary office hours by email to agents whether in berth or not, whether in port or not, whether in free pratique or not, whether customs cleared or not …

Clause 28: In the event that whilst at or off the loading place… the loading … of the vessel is prevented or delayed by any of the following occurrences: strikes, riots, civil commotions, lock outs of men, accidents and/or breakdowns on railways, stoppages on railway and/or river and/or canal by ice or frost mechanical breakdowns at mechanical loading plants, government interferences, vessel being inoperative or rendered inoperative due to the terms and conditions of appointment of the Officers and crew time so lost shall not count as laytime.
The Arbitrators held that the charterers are not in a position to invoke Clause 28, but even if they had been the Tribunal concluded that the charterers would nevertheless have faced considerable difficulties in contending that they were entitled to rely upon any of the specific force-majeure events set out in that clause. The charterers appealed stating the question of law is as follows:

Whether delay in loading caused by and/or in consequence of a fire which destroys mechanical loading equipment (and/or a port authority’s re-scheduling of loading following such destruction) counts as laytime under the Charterparty and whether the fact that loading thereunder at "1-2 safe berths" is lawfully relevant to the operation of Clause 28 of that Charterparty.

The judge reformulated the question to be "simply whether there was prevention or delay in loading which was caused by an excepted peril." Furthermore, the judge disagreed with the tribunal’s view that Clause 28 exceptions could apply only if the CBL terminal had been "named" in the Charterparty. He stated that:
The fact that a party can make alternative arrangements and may re-direct a vessel following the operation of an excepted peril does not mean that that excepted peril cannot in law cause delay while such arrangements are put in hand. That is so whether the berth is "named" or not. Naming a berth merely makes alternative arrangements for loading at another berth legally impossible without a variation of the charter.
For charterers to succeed it was necessary therefore to establish that delay caused by fire which had destroyed the conveyor-belt system, can be described, on the proper construction of the words in Clause 28, as time lost as a result of loading being prevented or delayed by "mechanical breakdowns at mechanical loading plants". The learned judge agreed with test suggested byt the owners to define the term "breakdown" and explained that:
… as a matter of ordinary language and common sense, the destruction of an item (or even its partial destruction) is not within the scope of the term "breakdown", still less within the term "mechanical breakdown". This can be tested by reference to two everyday examples which were referred to by Mr Phillips. If a vehicle were consumed by fire and written off, its owner would invite a raised eyebrow if he were to suggest that his car had merely suffered a breakdown. Likewise, if a heating engineer were to be summoned to repair a domestic boiler described as having broken down, he would be surprised to discover that it had in fact caught fire and burned to destruction. As submitted by Mr Phillips, it seems to me that these examples illustrate the difficulty as a matter of ordinary language in way of Charterers’ argument.

…In my judgment, there is nothing in The Afrapearl which affects this analysis. Indeed, it seems to me important to note that, unlike The Afrapearl and The Thanassis A, Clause 28 in the present case is not concerned simply with "breakdown", but with "mechanical breakdown at mechanical loading plants" (emphasis added). As submitted by Mr Phillips, it seems to me that this difference is significant. The inclusion of the word "mechanical" serves to restrict the scope of the "breakdown" which must be established for the purposes of the exception. In this regard, it is clear that what is required is a breakdown of a mechanical nature. Thus, unlike in The Afrapearl [2004] 1 W.L.R. 311 and The Thanassis A, the nature of the breakdown is relevant. In other words, it is not enough that the mechanical loading plant in question simply no longer functions, or malfunctions (irrespective of the cause of the malfunction). The nature of the malfunction must be mechanical in the sense that it is the mechanism of the mechanical loading plant which ceases to function, or malfunctions, and causes the prevention of or delay to loading (and the consequent loss of time). This connotes an inherent mechanical problem, as distinct from a wider or external cause.
The court also rejected the charterers’ reliance on the "government interference" exclusion. It was observed that, it would in many cases be very difficult to determine whether, in any given case, a port authority is or is not a government entity for the purposes of "government interferences". Challenging and subtle distinctions would arise between ports which are plainly state-operated (openly, through a ministry) and ports which are operated by private companies which are themselves state-owned or state-operated. It was accordingly held that the Tribunal was plainly right in concluding that: "That phrase was suggestive … of an embargo or export ban, rather than simply an administrative re-scheduling of cargoes due to a fire. ↑ Top of page ↑ × Collapse all ×

DGM Commodities Corp v Sea Metropolitan SA [2012] EWHC 1984 (Comm) (18 July 2012)
Shipping – Voyage charter – Gencon – Demurrage and delay – Vessel delayed due to receivers’ conduct – Whether such conduct on the part of receivers prevents the charterers from relying on what would otherwise be a frustrating event as relieving them from the obligation to pay demurrage?

On 8 April 2008 at the final stage of discharging (commenced on 23 February 2008) of cargo of frozen chicken leg quarters in cartons in St. Petersburg, a part of cargo in Hold No 2 was found damaged by gasoil which had leaked from an adjacent deep bunker tank due to unseaworthiness of the vessel. The receivers demanded a cash settlement of US$2 million in relation to the damaged cargo and in consequence vessel was detained for several months, because receivers were unwilling to accept security for the claim and insisted on being paid a sum in settlement of the claim; in the meantime they did not take any further steps to discharge the remaining damaged cargo. This remained their stance throughout the Vessel’s stay at St Petersburg, from the mid of April 2008 and until the Owners’ agreement to pay a cash sum in October 2008.

On 14 April 2008 the discharge of the vessel was completed, apart from the cargo in Hold No 2. The Tribunal found that From 14 April 2008, the Charterers’ liability for demurrage was interrupted because the delay was due to the Owners’ fault related to the unseaworthiness of the vessel. Then from 15 April until 25 April 2008 the cause of the delay to the vessel was not the charterers’ failure to unload the cargo but the necessity for the terms of the LOU (instead of cash settlement of US$2 million) to be negotiated and agreed. After that the owners’ breach had foreseeably caused the intervention of the Veterinary Service, to whom notification of the cargo damage would have been made irrespective of disputes over accepting a letter of undertaking. The Veterinary Service was under a legal obligation to take samples and arrange for the examination of the goods and to determine whether the Owners were obliged to arrange for their re-export or destruction. The Tribunal found that it was reasonably foreseeable that the Owners’ breach of charterparty would cause a delay in the Veterinary Service resolving the position up to, but not after, 19 May 2008. From that date, the Owners’ breach ceased to be causative of foreseeable delay. Accordingly, on the Tribunal’s findings, the Vessel was on demurrage from that date, and further delay thereafter was too remote to be recoverable as damages for the Owners’ breach in relation to the seaworthiness of the Vessel.

The Tribunal held that the charterers were clearly be liable for demurrage, notwithstanding that the discharging operation has become the responsibility of the receiver or of some other party and the charterer plays no part in it himself.

Charterers appealed arguing among the other points that the Tribunal found that the charterparty had been frustrated by reason of the April order of the Veterinary Service, but that the plea of frustration failed because the Tribunal treated such frustration as self-induced or caused by the Charterers’ fault. On the Tribunal finding that the receivers’ conduct was ultimately the real reason for the cargo not being discharged, because it was the reason why the continued existence of the Veterinary Service’s order, was in place the Commercial court held that such conduct on the part of receivers prevents the charterers from relying on what would otherwise be a frustrating event as relieving them from the obligation to pay demurrage. ↑ Top of page ↑ × Collapse all ×

Great Elephant Corporation v Trafigura Beheer BV & Ors [2012] EWHC 1745 (Comm) (27 June 2012)
Shipping – Voyage Charter – BPVoy 3 – Commencement of loading with culpable breach of loacal regulations – Detention of the tanker by the Nigerian authorities – Whether breach of local regulations was a criminal act – Wether acts of the Nigerian authorities in withholding clearance, detaining the vessel and imposing fine were lawful – Liability for demurrage and war risk premium.

The oil tanker CRUDESKY loaded a cargo of crude oil at the AKPO FSPO Terminal operated by Total Upstream Nigeria Ltd ("Total"), part of a deepwater oil and gas field off Port Harcourt, Nigeria, between 31 August and 1 September 2009. The vessel was not permitted to leave Nigeria by the local authorities until mid-October 2009 and only then on payment of a "fine" of US$12m. The detention of the vessel has given rise to a claim by the disponent owner of the vessel, Great Elephant Corporation ("the shipowners"), against the charterers, Trafigura Beheer BV ("Trafigura"), for demurrage and other sums. Trafigura had bought the cargo from Vitol SA and seeks to pass on its liability, if any, to Vitol SA. Vitol SA in turn seeks to pass on its liability, if any, to Vitol Asia Pte Limited from whom it bought the cargo. Finally, Vitol Asia Pte Limited seeks to pass on its liability, if any, to China Offshore Oil (Singapore) International Pte Limited ("COOSI"), who sold the cargo to Vitol Asia Pte Limited. Since there is no dispute between the Vitol companies who must have bought and sold on back to back terms I shall refer to both companies as "Vitol". COOSI bought the cargo from another company but has made no claim against that company in these proceedings.

Upon examination of the factual background the judge, on the balance of probabilities, found that there was a breach of local rules as stated in the Terminal Procedure Guide and that the Department of Petroleum Resources (DPR) has had a power to revoke earlier given clearance when irregularities related to commencement of the loading at at the AKPO FSPO become known.
The judge furthermore found that loading without the clearance of the DPR was not a criminal offence because the vessel passed all necessary verifications and obtained the DPR Lagos clearance after loading had commenced.

The action of the Nigerian authorities were stated to consist of:
(i) revoking the clearance to load which it had given earlier on 1 September 2009,
(ii) refusing to issue the cargo documents,
(iii) instructing the Navy to ensure that the vessel did not leave Nigeria and (iv) requiring payment of a fine of US$12m.

The court held that the Nigerian authorities lawfully revoked clearance, refused to issue the cargo documents and were entitled in law to restrict vessel’s movements. But the conduct of the Nigerian authorities in exacting a fine of US$12m. before permitting the vessel to sail away from Nigeria was not possible to explain by reference to any lawful power to exact such a fine. A fine is normally ordered by a court of law after a person has been found guilty of a crime. Thus regulation 9 of the Crude Oil regulations provides for a fine of N100 or six months imprisonment for any person found guilty of an offence contrary to those regulations. Neither Total nor the vessel was found guilty of any offence by a court of law. Therefore, in circumstances where no power to exact such a fine can be identified the judge found himself compelled to accept an evidence that the "fine" was an abuse or arbitrary exercise of the Minister’s power.

Demurrage
The vessel was on demurrage from the moment when laydays expired and until the moment when the cargo documents were placed on board the vessel, change in the underlying reason for the delay in the provision of cargo documents did not affect the application of the clause in the charterparty concerning delay after the disconnection of hoses.
However, delay after 7 September when the Minister improperly demanded payment of a "fine", such delay was not within the reasonable control of Total and fell under arrest or restraint of princes clause, which provided for half-rate. ↑ Top of page ↑ × Collapse all ×

Carboex SA v Louis Dreyfus Commodities Suisse SA [2012] EWCA Civ 838 (19 June 2012)
Shipping – Voyage charterparty – Laytime – Strike – American Welsh Coal Charter form (1979 amendment) cl.4 and cl.9 – Whether protection available to the charterers under cl.9 Clause 9 is restricted to time lost while the vessel is alongside the berth.

On 6th March 2008 the appellant, Louis Dreyfus Commodities Suisse S.A. ("Dreyfus"), as owner entered into a contract of affreightment with the respondent, Carboex S.A., as charterer for the carriage of ten cargoes of coal from Indonesia to Ferrol or Carboneras in charterer’s option between 1st April and 15th August 2008. The contract was made on the American Welsh Coal Charter form (1979 amendment) provided inter alia that:
Clause 9. In Case of strikes, lockouts, civil commotions or any other causes included but not limited to breakdown of shore equipment or accidents beyond the control of the Charterers consignee which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage.
Dreyfus nominated four vessels under the contract of affreightment, the ‘Co-op Phoenix’, the ‘Alpha Glory’, the ‘C Young’ and the ‘Royal Breeze’. The ‘Co-op Phoenix’ arrived at Ferrol and gave notice of readiness on 14th June 2008. There were two vessels ahead of her and in the event she was unable to complete discharging until 2nd July 2008. The ‘Alpha Glory’ arrived at Ferrol and gave notice of readiness on 15th June 2008. There were three vessels ahead of her (one being the ‘Co-op Phoenix’) and she was unable to complete discharging until 7th July 2008. The ‘C Young’ arrived and gave notice of readiness on 7th July. At that time there were three vessels ahead of her; she completed discharging on 25th July. The ‘Royal Breeze’ arrived and gave notice of readiness on 16th July. At that time there were three vessels ahead of her; she did not complete discharging until 29th July.
Congestion at Ferrol was entirely due to the haulage strike and the interruption to discharging caused by the later unofficial stoppage. In those circumstances Carboex, the charterers, maintained that in accordance with clause 9 the time lost by each of the vessels as a result of strike did not count against laytime. Dreyfus, the owners, argued, that clause 9 has a limited construction where the words "the discharging" referred to the time of working of cargo and that therefore laytime ceased to count only if the vessel was in berth and was ready to discharge cargo or had begun cargo handling operations.

The dispute was referred to arbitration and the arbitrators determined the following preliminary issues:

(i) whether clause 9 of the COA applies in the case of a vessel which is delayed by the after-effects of a strike which has ended; and
(ii) whether clause 9 of the COA applies in the case of a vessel which has arrived after the strike has ended.

Arbitrators answered each of the questions in the negative. In reaching their decision they relied on the decision of the House of Lords in Central Argentine Railway v Marwood [1915] A.C. 981 On appeal In the High Cour, Field J. posed the third issue:
"Does the strike exception in clause 9 apply to a vessel which is unable to berth due to berth congestion caused by a strike?"
The judge held that all three questions should be answered in the affirmative. He therefore set aside the award. The owners (Dreyfus) appealed against the judge’s order.

The charteresrs submitted that by agreeing that the vessel could give notice of readiness "whether in berth or not", the parties had consciously transferred the general risk of congestion at the discharging port from the owner to the charterer. However, it remained open to them to make exceptions to that general position by excluding certain periods of time from the running of laytime. Insofar as they had done so, they had transferred the risk back to the owner. The effect of giving notice of readiness is merely to start the laytime clock running, so the fact that the parties have agreed that the vessel can give notice of readiness before she has reached her berth tells one nothing about what periods, if any, are excluded from the running of laytime. Thus, charterers submitted that in this case the natural meaning of clause 9 was to exclude the time by which the discharging operation, viewed as a whole, had been delayed by the strike.


The court held that although cl. 9 is clearly intended to transfer the risk of some delay caused by strikes from the charterer to the owner but there is nothing in the language of the clause itself to indicate that its operation is restricted to time lost while the vessel is alongside the berth. The expression "the discharging" is naturally to be read as referring to the discharging operation as a whole. On its true construction the charter indicates that the parties intended that the charterer should be protected from the effects of strikes that prevented or delayed the vessel entering berth in order to discharge.
Read detailed case report here
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BP Oil International Ltd v Target Shipping Ltd [2012] EWHC 1590 (Comm)(14 June 2012)
Shipping – Timecharter – NYPE 46 amended, Clause 5 – Payment of hire – Whether Clause 5 is condition.

The vessel loaded a cargo of fuel oil in Odessa and Marmara Ereglisi ("Marmara") in March 2010 and discharged it at Galveston and Houston. On 5 May 2010 BP paid against the Owners’ invoice hire of US$3,651,215.32, a sum calculated on the basis that freight was payable in respect of all the oil carried, that is to say on 86,821.957 mt of oil loaded at Odessa and on 26,021.543 mt loaded Marmara. After paid freight in full charterers contended that the sum paid exceeded contracted freight which parties agreed and that owners were entitled only to freight calculated on cargo loaded at Odessa and not at Marmara and payment made by mistake is recoverable.
Click to read case report
See also owners’ appeal in BP Oil International Ltd v Target Shipping Ltd [2013] EWCA Civ 196 above. ↑ Top of page ↑ × Collapse all ×

Transpetrol Maritime Services Ltd v SJB (Marine Energy) BV (The Rowan) [2012] EWCA Civ 198 (29 February 2012)
Voyage Charter – RECAP differs from wording of Vitol’s Oil companies approval clause – Owners liabillity for breach.

The vessel loaded cargo at Odessa and Batumi and when on her laden voyage the charterers exercised its option to discharge and reload at Antwerp. At Antwerp cargo was discharged, further cargo loaded and the Class annual survey carried out. At the same time Shell and Conoco SIRE inspections were conducted. Upon annual survey Class imposed a condition and vessel failed both SIRE inspections.

Delays during the voyage gave rise to Owners’ claims for demurrage and port costs. Charterers counterclaimed that as a result of inspections at Antwerp the vessel lost the benefit of any oil major approvals and because of this the charterers was unable to sell the cargo on satisfactory terms. Charterers claimed that but for the owners breaches of Vitol cl.18 they would have sold the cargo to Shell for $3,246,592 but instead realised only $1,185,460.

The court came to view that clause 18 of the recap, which has no express continuing warranty of approval for the duration of the charterparty, was not intended to be read together with Vitol Clause 18 (Approval Clause) but in substitution for it. On its true construction the clause 18 of the recap was confined to a promise at the time when it was made.


Accordingly, it was held that there was no breach of the charterparty by the owners because (as Longmore LJ stated at para 21) there was not any evidence that at the date of the charter the Owner knew anything about the vessel that would cause the named oil companies to "disapprove" the vessels or alter the terms of the letters which they had given in relation to the vessel.

Read more on subject here: Voyage Charterparty. Approval Clause.
Read case report here: Transpetrol Maritime Services Ltd v SJB (Marine Energy) BV (The Rowan) [2012] EWCA Civ 198 ↑ Top of page ↑ × Collapse all ×

Progress Bulk Carriers Ltd v Tube City IMS LLC [2012] EWHC 273 (Comm) (17 February 2012)
Voyage Charter – Laycan – Economic duress – Lawful act duress – Owners were in repudiatory breach of the charter by substituting the vessel without approval – Charterers did not accept that breach as terminating the contract – Owners realised that they are missing laycan – Owners affirmed that they would compensate the Charterers for all damages resulting from their failure to provide the contracted vessel – When receivers stated that they would agree to extend the shipment on condition of reduced purchase price – Owners made a "take it or leave it" offer – Whether such offer is unlawfull duress.

The charter was concluded on the 2nd April 2009 but from 3rd April onwards the Owners indicated they would like to substitute the Cenk K with another vessel with later laycan. On 7th April, without any response from the Charterers to a suggestion made the previous day of an unnamed substitute with laycan of 15th-24th April, the Owners fixed the Cenk K to another charterer and on the 15th April stated that they intended to perform the voyage with a possible vessel substitution with laycan 15th-24th April, whilst Charterers were pressing for the contracted vessel, stating that they had barges waiting with the cargo to be loaded. Any substitution, they said, was strictly subject to their own and the receiver’s approval.

On the 16th April, the Charterers discovered that the Owners had chartered the Cenk K to Daewoo. The Owners were in repudiatory breach of the charter, but the Charterers did not accept that breach as terminating the contract, although there was by this time no realistic chance of fulfilment by the named vessel which was loading elsewhere, nor of making the agreed laycan. On the 18th April, the Owners conceded to the Charterers that they had made a mistake and said they would find an alternative vessel to load between the 27th and 30th April and that they would compensate the Charterers for all damages resulting from their failure to provide the contracted vessel, the Cenk K.

On the 23rd April, the Owners proposed the Agia as a substitute performing vessel with an ETA of 7/8th May. On the following day, which was a Friday, the Charterers passed on the details of the Agia to their buyers, the receivers, for consideration, seeking to obtain an extension of time from the receivers for shipment from 30th April to 15th May, as well as substitution of the vessel.

On Monday 27th April, the receivers stated that they would agree to extend the shipment date to 15th May but only on condition that the purchase price was reduced by $8 per metric ton. The Charterers relayed this to the Owners, holding them responsible for the $8 per metric ton loss which they would suffer, claiming, in addition, barge demurrage and interest in respect of the delay. They pointed out that the deal with the receivers was the best that could be done in the circumstances, since selling elsewhere would result in a much greater loss as the market had moved downwards by more than the $8 differential sought by the receivers.

On the 27th April, the Owners replied stating that they would grant a $1 per metric ton discount on the freight rate. The Charterers protested at this, since they said they had no opportunity to negotiate a better deal with their receivers and, the same day, the Owners offered a $2 per metric ton discount on the freight. It appears that a figure of $6 was then mentioned by the Charterers, plainly as a result of further negotiation with the receivers, who eventually agreed to accept a $6 discount on the price as compensation for the late shipment on a different vessel from that originally agreed. This the Owners would not accept and later that day, the Charterers informed the Owners that they accepted the Agia as the performing vessel with a $2 discount for the cargo but reserved their rights in respect of all claims for damages arising out of the breach of the 2nd April charterparty.

On the 28th April, the sale contract with the receivers was amended with the diminished price for the cargo and a later shipment date of "on or before 15th May 2009".

On the same day, the Owners required acceptance of the Agia, clean, with a $2 reduction per metric ton on the freight and the agreement of the Charterers to waive all claims for loss and damage arising out of the nomination of a substitute vessel outside the contractual laycan and its late arrival. This was plainly inconsistent with their prior assurances of finding a substitute vessel and compensating the Charterers for the loss and damage caused by their repudiatory breach of charter. The Charterers, in reply, said "given the exigencies of the circumstances and our urgent need to mitigate our losses and accommodate our customer in China, we are forced to accept the Owners terms under protest.

The Arbitrators found that it was not "appropriate or open" for the Owners to produce their "take it or leave it" rabbit out of the hat on the 28th April, having put the Charterers into the position they were in by reason of their breach and subsequent conduct. It is plain that, in using the words "appropriate or open", the Arbitrators considered that the pressure put upon Charterers was "illegitimate" when making that "take it or leave it" offer in the circumstances which they had brought about. A synonym for the word "open" in that final sentence of paragraph 10 is "legitimate". The Owners appealed.

Upon analysis of recent cases on economic pressure, DSND Subsea v Petroleum Geo-Services [2000] BLR 530, Carillion Construction Ltd v Felix (UK) Ltd [2001] BLR 1, Adam Opel GmbH v Mitras Automotive (UK) Ltd [2007] EWHC 3481, the judge reflected the following range of factors which fell to be considered when looking at the question of legitimate pressure:
(a) whose practical effect is that there is compulsion on, or a lack of practical choice for, the victim,
(b) which is illegitimate, and
(c) which is a significant cause inducing the claimant to enter into the contract.
The judge held at paras 36 and 44 that:
36. …"illegitimate pressure" can be constituted by conduct which is not in itself unlawful, although it will be an unusual case where that is so, particularly in the commercial context. It is also clear that a past unlawful act, as well as a threat of a future unlawful act can, in appropriate circumstances, amount to "illegitimate pressure".

44. … the pressure created by the Owners in their demand for a waiver of rights by the Charterers has to be seen both in the light of their repudiatory breach and in the light of their subsequent conduct, including their deliberate refusal to comply with the assurances they had previously given about providing a substitute vessel and paying full compensation in respect of that breach. Their refusal to supply the substitute vessel to meet the Charterers’ needs, in circumstances which they had created by their breach and their subsequent misleading activity, unless the Charterers waived their rights, could readily be found … to amount to "illegitimate pressure".
The owners’ appeal failed with costs.
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National Shipping Company of Saudi Arabia v BP Oil Supply Company [2011] EWCA Civ 1127
Shipping – Laytime and Demurrage – BPVoy4 – claim was wrongly drawn up – Result of misdescribing or mislabelling of otherwise valid demurrage claim.

The vessel arrived at Freeport, the nominated loadport, and tendered notice of readiness at 0930[1] on 6 February 2008. She berthed at berth 10 at the BORCO terminal at 1712 on 7 February and started loading operations at 2236 the same day, loading cargo by ship-to-ship transfer, from the BRITISH WILLOW and the BARING SEA, and from shore tanks. At 0136 on 11 February 2008 the hoses were disconnected and at 0330 that morning the vessel left berth 10 to drift off Freeport awaiting the arrival of the GANGES SPIRIT, from which she was due to load a further parcel of cargo. Her place at berth 10 was taken by another vessel, the CAP GEORGE.

The GANGES SPIRIT arrived off Freeport the following day (12 February 2008) and gave notice of readiness to discharge her cargo at 0735. At 1025 that day, the BORCO terminal suspended operations at the jetties and at 1354 the same day closed operations at the jetties, due to deteriorating weather conditions. The intention had been for the GANGES SPIRIT to berth at berth 9 and to discharge a parcel of cargo into the ABQAIQ at berth 10. However, the arrival draft of The GANGES SPIRIT was too great for berth 9, requiring her to berth at berth 10 to discharge part of her cargo into a shore tank, before shifting to berth 9. As it happened, however, when the GANGES SPIRIT arrived, the ABQAIQ and the GANGES SPIRIT had lost their turn for berths 9 and 10, which were now occupied by the CAP GEORGE and the SANKO BRIGHT. The ABQAIQ eventually re-berthed at berth 10 at 0300 on 17 February and between 0654 on 17 February and 0954 on 18 February she loaded cargo from the GANGES SPIRIT and a shore tank. At 1312 that day hoses were disconnected and an hour later she unmoored and headed for Singapore.

The ABQAIQ arrived at Singapore and tendered notice of readiness at 1200 local time on 22 March. At 1306 she anchored awaiting a berth and shifted to her discharging berth between 1324 and 1600 on 28 March. She completed discharge and hoses were disconnected at 1500 on 30 March.

When submitting their demurrage claim the Owners evidently formed the view that the events at Freeport had the effect of interrupting the running of laytime and in their demurrage report it was reflected that laytime stopped running at 0136 on 11 February. At that point, 3 days, 4 hours, 24 minutes of laytime remained unused. The owners thought at the time that the correct way in which to claim detention for the period from 0136 on 11 February and until vessel left Freeport was to claim for the entire period occasioned by what they regarded as a second berthing at the demurrage rate and additionally to claim for the cost of bunkers consumed during this exercise.

Thus on 31 March 2008, the day after completion of discharge, the Owners issued an invoice entitled "Supplementary Invoice". The demurrage report for Singapore in consequence indicated that there was 3 days, 4 hours, 24 minutes of laytime unused on arrival at that port. This was wrong because it is common ground that laytime, which was 96 hours for all ports combined, of which there might have been four, had in fact been wholly used at Freeport. The vessel was on demurrage on arrival at Singapore. In the Owners’ demurrage report for Singapore laytime was counted as from 1800 on 22 March, i.e. six hours after giving of notice of readiness. This also was wrong. The Charterers in their turn considered that there must be one demurrage claim and asked the Owners to amend their documentation. On 4 June 2008 they, however, settled initial Owners’ demurrage claim but refused to pay for additional detention claim from 0136 on 11 February and until vessel left Freeport.

Parties were unable to settle this matter amicably and on 1 March 2010 the Owners issued their claim in respect of detention at Freeport which was eventually recast on the conventional basis, i.e. that laytime and in due course demurrage continued to count notwithstanding the vessel had been ordered to leave the berth and had in due course returned to the same berth. On this footing demurrage was claimed on the basis that the vessel was on demurrage for 4.3 days at Freeport and for a further 7.8292 days at Singapore.

The judge at the first instance held that the parties’ agreement of 4 June 2008 was full and final settlement of any and all claims for demurrage under the charter. He based his decision on the footing that there was no unfair advantage taken on the part of the Charterers of a mistake it knew the Owners had made. On the contrary, the Owners was well aware of the Charteres suggestion that the additional freight claim be re-submitted as a demurrage claim but the Owners persisted in maintaining two separate claims, one for demurrage and one for additional freight. In these circumstances, the Charterers were entitled to proceed on the basis that no demurrage claim was being made or was going to be made in respect of the period before 25 March 2008, and it was on that basis that the parties entered into the settlement.

The Court of Appeal disagreed with the judge. Lord Justice Tomlinson delivering the only reasoned judgment said in particular that:
48. … what is important and admissible as part of the background against which the email exchange of 3/4 June must be construed is that the Owners would reasonably have been under the impression that their claim set out in the Time and Bunkers Invoice was under review by Charterers on the basis that it was in fact a claim for demurrage.

50. … There was nothing said or done by the Owners from which the Charterers could reasonably have concluded that no claim for demurrage was going to be made in respect of this period. On the contrary, it was the Charterers themselves who signified to the Owners that they were treating the claim as properly being one for demurrage. Bearing in mind that the compensation sought for the delay at Freeport was claimed at the demurrage rate and bearing in mind also that the Owners were treating it as in fact a claim for demurrage, it is to my mind simply impossible to conclude that the parties were proceeding on the basis that no claim for demurrage other than that contained in the Demurrage Invoice either was being or would ever be pursued by the Owners arising out of this charterparty. The Charterers knew that a claim for compensation at the demurrage rate in respect of the time spent at Freeport was being pursued but that the Owners were wrongly under the impression that they were additionally entitled to the cost of bunkers consumed. … the Charterers’ demurrage specialists must be taken to have had it well in mind that in fact the vessel had incurred demurrage at Freeport and what is more that she was already on demurrage upon arrival at Singapore. The Charterers cannot possibly have been approaching the matter on the basis that, were the Owners to accept the 1 hour 6 minutes adjustment of the timesheet proffered by the 3 June email, they would thereby lose their entitlement to recover the additional demurrage due to them once the demurrage reports were correctly drawn up. To attribute to the Charterers such an approach would be an attribution of sharp practice which I decline to make.

51. … The agreement did not in my view preclude recovery by Owners of a further sum in respect of time used at Singapore. Still less in my view did the agreement preclude recovery by Owners of demurrage incurred at Freeport. Once the issue of the claim in respect of time spent at Freeport was addressed, it would inevitably be necessary to adjust the demurrage report for Singapore to reflect the fact that the vessel had in fact arrived already on demurrage.

60. … we were referred to an observation of Gloster J in The Sabrewing to the effect that parties are obliged to comply carefully and strictly with demurrage time bar clauses of this sort. Gloster J was there concerned with the precursor provision in BPVOY3, and in particular with clause 16 thereof, now clause 19 of BPVOY4, which calls for the presentation of particular documentation supporting a claim for extra time incurred in consequence of the inability to receive cargo at a discharge pressure of 7 bar measured at the vessel’s manifold. For my part I am not sure that it is helpful to introduce into the approach to these provisions a notion of strict compliance. Where in a commercial contract one finds a provision to the effect that one party is only to be liable to the other in respect of claims of which he has been given notice within a certain period, it is fair to assume that the parties wish their relationship to be informed rather by certainty than by strictness.

62. The basic requirement of the clause is that the Charterers shall have received both the claim and the supporting documentation within the 90 day period. I accept that the Charterers must be in a position to know that the one relates to the other. However I do not think that Mr Byam-Cook [council for the charterers] went so far as to suggest that the supporting documents must necessarily be presented at the same time as the claim, and if he did I would reject that suggestion. Once that is accepted, the words "together with" import no requirement other than that both presentations, that of the claim and that of the supporting documentation, must have been achieved within the 90 day period.

64. … What is important … is that the Charterers are put in possession of the factual material which they require in order to satisfy themselves whether a claim is well-founded or not. No doubt ordinarily the documents will be presented by the Owners or by their agents, but I would not rule out the possibility that there could be circumstances in which compliance could be achieved in another manner, for example by asking Charterers to refer to documents already in their possession or shortly to be received from third parties.

65. Drawing the threads together, in my judgment the Charterers had received from the Owners within the 90 day period, in the shape of the two invoices of 31 March and 2 April, a claim in writing for either damages for detention measured at the demurrage rate or straightforward demurrage in respect of the periods spent at Freeport and Singapore after 0136 on 11 February 2008, subject only to the claim being properly drawn up in accordance with the charterparty provisions and by reference to the events recorded in the demurrage reports. The claim was wrongly drawn up because it scored the laytime unused as at 0136 on 11 February 2008 at Singapore rather than at Freeport, but that did not prevent the Charterers from appreciating, as in fact they did, that the Owners had a valid claim for demurrage in respect of the substantial period beyond her laytime for which the vessel was detained at the two ports. The Owners are not debarred from now putting a different legal label on part of the claim, the substance of which was presented in time. The Charterers received with the invoice of 2 April 2008 documents which objectively they would or could have appreciated substantiated each and every part of the claim. They were thereby put in possession of the factual material which they required in order to satisfy themselves that the claim was well-founded. They were able to satisfy themselves as to the extent of their liability. In my judgment the Owners are not precluded from pursuing a claim for demurrage as formulated in these proceedings.
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Transpetrol Maritime Services Ltd. v SJB (Marine Energy) BV [2011] EWHC 3374 (Comm)
Vitol’s Oil companies approval clause – Tbook (To the best of owner knowledge) – Demurrage – Owners’ liabillity.

The vessel loaded cargo at Odessa and Batumi and when on her laden voyage the charterers exercised its option to discharge and reload at Antwerp. At Antwerp cargo was discharged, further cargo loaded and the Class annual survey carried out. At the same time Shell and Conoco SIRE inspections were conducted. Upon annual survey Class imposed a condition and vessel failed both SIRE inspections.

Delays during the voyage gave rise to Owners’ claims for demurrage and port costs. Charterers counterclaimed that as a result of inspections at Antwerp the vessel lost the benefit of any oil major approvals and because of this the charterers was unable to sell the cargo on satisfactory terms. Charterers claimed that but for the owners breaches of Vitol cl.18 they would have sold the cargo to Shell for $3,246,592 but instead realised only $1,185,460.

The judge found that the word "best" cannot take an obligation beyond the extent of Owners knowledge but it does mean that they are stuck with what they, as a company, actually knew, as opposed to what a particular employee happened to recall at any one time. The words do not require Owners to make enquiries additional to those which would ordinarily be made in the course of their business.


Owners were held liable for breach Oil companies approvals clause because in the light of what had happened at Antwerp, the extent and implications of which were known to Owners, any of the specified companies would not have continued to regard the vessel as approved. It was also held to be more likely than not that if the vessel had remained, as it was warranted to in an approved state, then the charterers would have sold the cargo for higher price. Damages assessed on the basis of price difference were of $2,675,602 ↑ Top of page ↑ × Collapse all ×

TTMI SARL v Statoil ASA [2011] EWHC 1150 (Comm)
Shipping – Voyage charterparty – Shellvoy5 – Arbitration Clause – Mistake in recording the identity of the chartered vessel’s time chartering owner – Whether contract was formed between the parties.

Held that in absence of any evidence as to an oral contract made prior to the recap, express terms of the recap email prevail over decision whether or not an executory contract was created between the parties. Such contract is likely to exist if the voyage has been completely performed and freight paid. ↑ Top of page ↑ × Collapse all ×

Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc (The Reborn) [2009] EWCA Civ 531
Shipping – Amended Gencon form – Implied term into the charterparty as to the safety of the berth when no express warranty as to safety of nominated port was given.

The dispute arose out of damage allegedly sustained by the vessel during loading at Chekka in the Lebanon as a result of her hull being penetrated by a hidden underwater projection at the loading berth nominated by the charterers.
The charterparty was on the 1994 revised Gencon form, as amended by the parties, and specified as follows:
Box 10:
Loading port of place (Cl.1) 1 Berth Chekka - 27 ft SW permissible draft.
Clause 1:
The said [v]essel shall… proceed to the loading port(s) or place(s) stated in Box 10 or so near thereto as [it] may safely get and lie always afloat.
Clause 20:
Owners guarantee and warrant that upon arrival of the vessel to and/or prior its depart from, loading or discharging ports… the vessel including, inter alia, the vessel’s draft, shall comply fully with all restrictions whatsoever of the said ports… including their anchorages, berths and approaches and that they have satisfied themselves to their full satisfaction with and about the ports specifications and restrictions prior to entering into this charterparty.
Since word "safely" was deleted from clause 1 it was common ground that charterparty did not warrant safety of port. Therefore in order to succeed, it was necessary for the owners to establish that an appropriate term was to be implied into the charterparty as to the safety of the berth. The charterers’ case was that the loss should lie where it falls, i.e. on the owners, and that, if the parties had intended the charterers to warrant the safety of the loading berth, they could and would have said so, as is very common in voyage charterparties.

Sir Anthony Clarke MR agreed with the charterers (at para 41) that the basis of the suggested implied term is that it was for the charterers to nominate the loading berth and that it was therefore reasonably to be expected by the parties that the charterers would ascertain the safety of the berth before nominating it because the owners would not know what berth the charterers were going to nominate. The learned judge held that above contention would be inconsistent with clause 20. He said at paras 42-43:
By clause 20 the owners guaranteed and warranted that upon arrival at the loading port, which was Chekka, the vessel complied with all restrictions of the port, including its berths and approaches and that they had satisfied themselves to their full satisfaction with and about Chekka’s specifications and restrictions before entering into the charterparty.  The expression "restrictions" in the penultimate line naturally includes restrictions of the berths, as expressly provided earlier in the clause.  Thus the owners were willing to give those warranties in relation to the berths at Chekka.  In order to do so it may well be that they in fact checked the berths at Chekka, which would have involved their identifying the possible berths at Chekka. 

In any event I would agree with the view expressed by the judge at [28] that box 10 and clause 20 read together indicated that the owners agreed that they would either investigate Chekka, that is the berths at Chekka, or take the risk of any dangers getting to whatever berth was nominated, using it (ie loading at it) and departing from it. … the only choice the charterers had was to choose and nominate the loading berth.  Once it was nominated it was treated as having been written into the charterparty at the outset.  In all the circumstances the owners were accepting that the charterers had the right to elect a berth of their choice, with only one limitation, namely that a vessel of 27 feet salt water draft could berth there.  A nomination of a berth which could not accommodate such a vessel would be a bad one because it would be an "impossible berth".


Rix LJ in his concurring judgment said at para 61:
The appearance of express terms as to safety of ports, berths or places, so frequently found in charters of all kinds, even in time charters where the natural background is one in which the vessel’s trading is left broadly open to the charterer’s choice, emphasises to my mind that the basic risk to the integrity of his vessel is upon its owner. If he wishes to shift that risk on to his charterer, the warranty of safety is the time-honoured way of doing so. In the present case, the owner has chosen not to extract such a warranty, but on the contrary has agreed to the port and to taking the risk of its restrictions and limitations, as well as those of its anchorages, berths and approaches. In such a case it seems to me that if there is some unforeseen risk which lies outside those terms, it does not lie with the charterer, but with the owner.
The Court of Appeal refused to follow somewhat broad dictum of Devlin J in Compania Naviera Maropan S/A v Bowaters Lloyd and Pulp and Paper Mills Ld (The Stork) [1955] 2 QB 68:
"There must be an obligation, express or implied, to nominate a loading place of some sort; if the ship is not told where to load she cannot earn her freight, and so, by failing to nominate or by nominating an obviously unsafe place the charterers would defeat the object of the charterparty without being liable for damages. There must therefore be an obligation to nominate at least one loading place, and there must be implicit in that some condition about safety to prevent the making of a derisory nomination."
and held that there was "no authority which extends any implied warranty of safety to a voyage charterer’s choice of berth in a port which is not itself warranted safe" (Rix LJ at para 62). The court also in part agreed with the editors of the 21st edition of Scrutton on Charterparties, 2008, where they say (at page 119) that if the charterparty, whether time or voyage, provides for the nomination of a port or berth, a warranty that the port or berth is safe will probably be implied but also add that this is not invariable and may depend upon the specific terms of the charterparty. Thus it can be concluded that in any particular case all will depend upon the circumstances and on the terms of the particular charterparty. ↑ Top of page ↑ × Collapse all ×

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Carlos Soto v AP Moller-Maersk AS [2015] EWHC 458 (Comm)(02 March 2015)
Sale Contracts – CIR and CFR terms – Passing of property – The buyer has the right both to cancel the letter of credit and to reject the goods in the stipulated circumstances

A bill of lading is generally regarded as a document of title and when it was put into circulation by the seller, it could be suggested that there is an intention on the part of the seller to transfer property in the goods to the recipient of the bill of lading. But it is not necessary so. As Eder J noted in Carlos Soto v AP Moller-Maersk AS [2015] EWHC 458 (Comm), in CIF and CFR contracts, the mere transfer of the bill of lading is only prima facie evidence of the transfer of property but it is not determinative. In Carlos Soto v AP Moller-Maersk AS the buyer on CFR terms had a right both to cancel the letter of credit and to reject the goods in the stipulated circumstances. The judge held that while the ordinary right of rejection of the goods has no bearing on when property is intended to pass, but when it is supplemented by the right to cancel the letter of credit in certain circumstances, then such special features of the contract between the buyer and the seller justify the conclusion that it was never the intention for property in the cargo to pass to the buyer until, at least, the buyer paid and the seller received the contract price under their contract. The following principles stated in Benjamin’s Sale of Goods, para 19-099 were expressly approved by the court:

The courts look to those dealings in order to determine whether the seller intended, on the one hand, unconditionally to appropriate the goods to the contract, or, on the other hand, to reserve the right of disposal. As the question of passing of property is one of "actual intention" it is "impossible to lay down a general rule applicable to all c.i.f. contracts".

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Yemgas Fzco & Ors v Superior Pescadores S.A. Panama [2014] EWHC 971 (Comm) (02 April 2014)
Carriage of Goods – Bill of Lading – Paramount Clause incorporate of the Hague Rules and the Hague-Visby Rules incorporated by virtue of the 1971 Act – Whether the claimant can take advantage of the Hague Rules limit where it is higher?

The owners issued six bills of lading numbered acknowledging shipment of the cargo on board the vessel in apparent good order and condition for carriage from Antwerp to Balhaf in Yemen. Each of the bills was for a number of packages and contained on its reverse side a "Paramount Clause" in the following familiar terms:
2. Paramount Clause The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment shall apply to this contract. When no such enactment is in force in the country of shipment, the corresponding legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the said Convention shall apply.
While the vessel was crossing the Bay of Biscay, the cargo in hold no.1 shifted, causing significant damage to part of the cargo. The claimants’ total losses resulting from this incident (ignoring package limitation) are said to be in excess of US $3.6 million. Parties reached and agreement that the claim would be subject to English law and jurisdiction. That law includes the Carriage of Goods by Sea Act 1971 which renders the Hague-Visby Rules applicable as a matter of statute law when the carriage is from a port in a contracting state. Belgium is such a state.

The shipowners admitted liability to pay the amount of the Hague-Visby package limit, equivalent to just over US $400,000, and paid this sum. They contended that "it is not open to the claimants to pick and choose between the Hague Visby package limit and the Hague package limit, depending on which gives them more". The claimants contended that the question whether the parties’ agreement results in such a higher limitation figure must be considered separately in relation to each bill of lading and (where a bill is for more than one package) each package.

The judge appeared to be inclined to hold that the expression "the Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment’ is capable of referring to the Hague-Visby Rules, and that they do so refer in the absence of any contrary indication in the clause. However, on the weight of authorities, especially the decision of Tomlinson J in The Happy Ranger saying that the language of the clause in question is not apt to refer to the Hague-Visby Rules, and Tuckey LJ’s statement in the Court of Appeal to be to the same effect, he found to be bound to follow them. He, therefore, concluded that the clause paramount at clause 2 of the bill of lading constitutes a contractual agreement that the Hague Rules shall apply, albeit one which the parties must have realised would be largely ineffective in the present case.

The next question to answer was whether the claimants were entitle to take advantage of the higher limit where there was a choice between two regimes, namely the Hague and the Hague-Visby Rules. It was held that is in principle there was no objection to the use of such a formula allowing the higher limit to be applied, unless agreement in the particular case produce a limit lower than as permitted by the Rules. But “pick and mix" approach suggested by the claimants was rejected on the consideration that sensible parties could have hardly intended a single bill of lading to be subject to two different package limitation figures. The learned judge concluded:
53. If they thought about the clause paramount at all, the parties must be taken to have understood that the original Hague Rules would not apply because Belgium was a Hague-Visby state. They would therefore have viewed the clause paramount purporting to incorporate the Hague Rules as surplusage which would have no application in this case and could for all practical purposes be ignored. It seems to me most unlikely that the parties intended a clause paramount which they knew would be ineffective to result in some but not all cases to the application of the Hague Rules limit to the rather different Hague-Visby limitation regime. … [I]t seems improbable that the parties could have intended a single contract of carriage to be covered simultaneously by two differing limitation of liability regimes with differing provisions. The claimants’ "pick and mix" approach, taking the benefit of whichever bits of the two package limitation regimes are in their favour, seems a surprising thing for rational business people to wish to agree.
54. The oddness of that approach is underlined by the result for which the claimants contend in the case of bill of lading no. 4. I would readily accept that each bill of lading is a separate contract. However, it is hard to think that sensible parties could have intended a single bill of lading to be subject to two different package limitation figures as a result of what would have been regarded by them if they thought about it as an ineffective clause paramount which would not apply to the voyage which was the subject of the bill of lading. I see no good reason to construe the bill of lading in a way which attributes this uncommercial intention to the parties.
55. Accordingly, while I would accept that it would in theory be possible for the parties to a bill of lading contract to which the Hague-Visby Rules apply to agree on the original Hague Rules limitation figure of £100 gold value, and that effect would be given to that agreement to the extent that it results in a higher limit of liability than the amount provided for by Article IV Rule 5(a) of the Hague-Visby Rules, I do not accept that the parties have in fact made any such agreement in this case.

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Omv Supply And Trading AG v Kazmunaygaz Trading AG (Rev 1) [2014] EWCA Civ 75 (06 February 2014)
Sale contracts – All fees … and penalties incurred by non EU origin, in force at the time of cargo customs clearance – Whether the seller is to pay the fees whatever they may be even if they exceed the price.

In August 2009 Vector Energy AG bought 2000 m.t. of biodiesel f.o.b. Quebec City. It was a term of the contract that the diesel should be of Canadian origin. On 5 October 2009 Vector agreed to sell to Petrom SA ("Petrom") 1,000 tonnes of biodiesel +/- 5% in seller’s option c.i.f. Constanza. On the same day OMV Supply and Trading AG ("OMV") agreed to buy the diesel from Petrom on the same terms. Petrom and OMV are part of the same group of companies. The contract between Vector and OMV provided inter alia:
6. Price

In US dollars per metric tonne, the price CIF Constanza will be the average of the high and low quotations for ULSD 10 ppm as published by Platts under the heading FOB Med (Italy) plus a premium of $ 340 per mt for the three quotations published immediately after the NOR date at disport Constanza, Romania.
Any published Platts corrections to apply.
The Final Price shall be rounded off to three decimal places with rounding up where the next decimal place is five or greater. All fees such as but not limited to customs duties and penalties incurred by non EU origin, in force at the time of cargo customs clearance will be deducted from invoice value . Buyer will notify seller of such fees and send supporting documents latest by the first business day after vessels completion of discharge and seller will issue the final invoice within five business days from such notification
On or about 9 October 2009 Petrom made a declaration to Romanian Customs that the diesel was of Canadian origin and the diesel was cleared for entry on that basis. On 13 October 2009 OMV notified Vector that it had paid import duties of US $ 58,910.79. On the same day Vector sent to OMV copies of
(i) a certificate of origin;
(ii) an invoice and
(iii) an endorsed bill of lading. It had sent the certificate of origin, which it had received from Bioversel, previously – on 2 October 2012.The certificate declared Canada to be the country of origin.

The invoice was for $862,695.43, being the price of the diesel of $921,606.22 less $58,910.79 import duty.

On 23 May 2012 OLAF, the European Commission’s anti-fraud office, reported to the Romanian Customs that the diesel was of US origin. Goods of US origin attracted antidumping and countervailing duties, which were applicable at the time of customs clearance in October 2009. So it was that on 2 August 2012 Romanian Customs demanded of Petrom:
a) US $ 595,335.41antidumping tax and compensation tax;
b) US $ 434,475.78 by way of interest and penalties.
US $ 1,029,811.19 in all. Petrom paid these amounts.

Vector was subsequently renamed Kazmunaygaz Trading AG.

OMV claimed under clause 6 that it was entitled to recover the $ 1,029,973,95 from Kazmunaygaz. Kazmunaygaz contended that it is not liable to pay any part of that sum because c.i.f. seller is not generally liable for any import duties on the carg clause 6 is a tightly drawn clause which is intended to operate on a once and for all basis at the time of discharge. The buyer cannot claim to deduct again. The clause does not contemplate that the seller, having reimbursed the buyer the amount notified by the buyer at the time, can be called upon to make a further payment years later.

Colin Edelman QC, sitting as a Deputy Judge of the High Court, gave judgment in favour of OMV for $ 862,695.43 and gave Kazmunaygaz permission to defend as to the balance of the $1,029,973, 95. On 8 November 2013 Judge Mackie QC determined, as a preliminary issue, that Kazmunaygaz was not entitled to recover the balance under clause 6. OMV appeals the latter judgment insofar as it denied them recovery of the balance and Kazmunaygaz appeals the former insofar as it required them to pay anything at all.

The Court of Appeal dismissed both appeals on the following grounds:
1. Kazmunaygaz’s appeal - in view of the court the parties cannot have intended that the entitlement of the buyer to recover fees was dependent on it having notified the seller of such fees and sent supporting documents no later that the first business day after completion of discharge, or that no further adjustment to the price was possible if the amount that should be deducted turned out to be greater than was first thought.
2. OMV’s appeal – the court rejected byer’s submission that clause 6 makes clear that the seller is to pay the fees whatever they may be even if they exceed the price. If the parties had intended that to be so they would need to have used clear language to that effect. Instead they provided for a deduction of fees from the price, no doubt contemplating that the fees would always be less. Having used that language, they cannot be taken to have agreed that, if the fees exceeded the price, the seller would pay the excess, especially in a clause whose function is to determine how much the buyer pays the seller.

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Glencore Energy UK Ltd v Cirrus Oil Services Ltd [2014] EWHC 87 (Comm) (24 January 2014)
Sale contracts – Binding contract – Identity of purchaser – Repudiation – Measure of damages– Sale of Goods Act 1979 sec 50 (2)(3)

A representative of the Cirrus group was in process of negotiations with Tema Oil Refinery ("TOR") for the sale of 630,000 barrels of Ebok crude oil. This sale contract between the Cirrus group and TOR would be a back to back contract (albeit for the price of crude oil) between the Cirrus group and the trader Glencore, who in its turn would get the product from the end supplier.

The two companies within Cirrus group, Woodfields and Cirrus Oil, had their own accounts and decision making structures and Cirrus Oil did not have authority to bind Woodfields as such. The business relating to the bulk distribution of refined petroleum products was and always had been run by Cirrus Oil. The business relating to crude oil was run by Woodfields and such oil was only purchased from a supplier to satisfy the specific need of a purchaser. Woodfields would not take delivery of the crude itself, seeking to make a profit on the purchase and sale. A representative of the Cirrus group was equally entitled to conduct negotiations on behalf of Cirrus Oil as well as on behalf of Woodfields.

In the course of negotiations representative of the Cirrus group corresponded with Glencore’s trader and his broker on behalf of Cirrus, which was understood by the both to be Cirrus Oil. Correspondence ivariably referred to the deal as "Cirrus offer to TOR". Finally negotiations between Cirrus and TOR resulted in verbal agreement for supply of 600-650mbs of Ebok crude oil by Cirrus to TOR. At the same time Glencore made a firm offer, which was affirmed by the Cirrus representative in the following email:
Good news! TOR has agreed to the June cargo. Will revert on the fine tuning of the contract terms so that it’s back to back with ours which will be with TOR.
Glencore accordingly purchased the relevant cargo from its supplier, specifically for sale into Ghana, as the cargo was intended to be on sold by Cirrus Oil to Tema Oil Refinery ("TOR"). Unfortunately very shortly after the "good news" email of 4th April 2012, it became apparent that TOR would not accept a blend of Ebok crude oil, insisting that the cargo should comprise oil only from one well. As a result Cirrus refused to take delivery of oil purchased by Glencore.

Glencore claimed damages from the defendant Cirrus Oil for repudiation of a contract alleged to have been made on 4th April 2012 for the sale of 630,000 barrels (plus or minus 5% at Glencore’s option) of Ebok crude oil.

Cirrus Oil responded that there was no binding contract concluded between Glencore and Cirrus Oil on 3rd/4th April 2012 but the arrangements were made "subject to contract" or to finalisation of further terms. Alternatively it contended that since no buyer was identified then there was no contract.

The judge held that "firm offer" email was intended to be capable of acceptance with a binding contract thereby concluded. It was expressly a "firm offer" as appears twice in the email itself. Affirmation of that email by Cirrus representative confirm the conclusion that parties intended to create legal relations and had agreed upon all the terms which they regarded as essential for the formation of legally binding relations, whether or not all the details had been completely tied down and whether they expected some further "fine tuning" of the detailed terms. Accordingly there was no room, on basis of email exchanges, for any suggestion that the deal remained "subject to contract". The defendants also contended that, in circumstances where Glencore terminated its contract with Socar without any liability at all and never took any delivery of any crude oil, the nature of its loss is a loss of the profit that it would have earned if the transaction had proceeded. The contrast is to be drawn between lost profit on the one hand and out of pocket expenditure, or physical damage caused by a quality problem with the cargo on the other. The judge did not accept this submission. He concluded at para 90:
The contract price/market price differential is not a computation of lost profit. Lost profit is the difference between the total net cost to the seller of acquiring the goods and bringing them to market on the one hand and the net sale price that would have been achieved on the other. The difference between this measure of damages and the section 50 measure is illustrated … by a simple situation where the cost of the goods to the seller is £100, the on-sale price is also £100, and the market price at the time of the breach by the on-sale buyer is £50. If the buyer had accepted the goods, the seller would in fact have made no profit at all but, in accordance with section 50(2) and (3) of the Sale of Goods Act, the prima facie measure of loss is £50 because the seller is left with goods worth less than the contract price.
Accordingly Glencore’s claim in damages against Cirrus Oil succeeded in the sum of $2,500,470.

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Galaxy Energy International Ltd v Murco Petroleum Ltd [2013] EWHC 3720 (Comm) (27 November 2013)
Sale Contracts – Laytime – Delay in loading – Whether buyers agreed on extension of period of delivery – Market price.

Oil trader G agreed on phone to buy and oil refiner M to sell 35,000 mt of fuel oil on FOB terms to "be delivered…in one lot…during period 15/17 January 2012". An internal recap agreed on 4th January 2012 nominates delivery terns as "delivery fob milford 15-17 jan". Right afterward, however, M sent a confirmation email containing slightly different terms including at the end of that delivery provision in the Contract: "PLUS SUCH EXTENSION TO THAT PERIOD AS IS REQUIRED BY THE SELLER TO EFFECT OR COMPLETE DELIVERY". G responded that it would revert with comments "in due time". In a week time G sent a fax with the following wording: fax concluded "PLEASE CONFIRM YOUR AGREEMENT TO THE ABOVE. IF YOU DO NOT DO SO YOU WILL BE TAKEN TO HAVE AGREED WITH THE TERMS SET OUT IN ANY EVENT". These proposed changes were reviewed by M and agreed internally the following day but M did not communicate this to Galaxy and proceed with the deal.

The laycan was 14-15 January 2012. The Vessel arrived at the Milford Haven anchorage at 1018hrs LT on 13 January 2012 and tendered NOR. Due to delay with the berthing the vessel in fact berthed at about 1000hrs on 20 January 2012 and sailed at 1420hrs on 21 January 2012. Traider G claimed US$271,396.80 from oil refiner M for alleged late delivery.

Oil refiner M contended that extension wording gave them and option to extend duration of delivery. The court held that there was an agreement if not a final concluded contract in the 4 January conversation. M tried to introduce the extension wording but knew at once that it was not yet accepted but was being considered. But G conduct was consistent with the 4 January agreement or understanding and a world away from accepting the new provision by conduct. Therefore M position was found to be plainly wrong, the contract which came into existence on 4 January, alternatively 11 January did not include the additional delivery wording. As ti market price evaluation the court took position of M, concluding that although the exercise does not involve looking at what actually happened to this cargo, but trades in the market on the relevant day would be much more likely to be priced on a spread of Platt’s than on the quoted figure for that day. That spread of prices is closer to the market value for real deals on the day than the single days&rs Platt’s figure. The fact that it is easier to reach a value by using a single day’s Platt’s is not a reason to prefer this approach to a more complex but fairer one.
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CHS Inc Iberica Sl & Anor v Far East Marine SA (The Devon) [2012] EWHC 3747 (Comm) (21 December 2012)
Carriage of Goods – Long delay due to main engine breakdown – Dmage to the cargo of corn – Lack of disclosed documents discussing the cause of the damage - Unseaworthiness without proof of the cause - Due diligence on the part of the Owners to make the vessel seaworthy – Whether the owners failed to institute a system to monitor such matters which contributed to the casualty.

Consignment of corn was loaded into m/v Devon in Varna for transportation to Tarragona in Spain. The vessel’s main engine was put on standby at 1650 hours on 23 December 2010 and she was "Full Away" at 1830 hours. At 1950-1952 she suffered a main engine breakdown some 14 miles out of Varna and, was towed back the next day. The necessary repairs were not completed and approved by class until 10 February 2011, with the result that the vessel sailed on 10/11 February and only arrived in Tarragona on 20 February, some 59 days later than she would have done in the absence of the engine breakdown. When cargo finally arrived at Taragona and was examined by surveyors it was found partly damaged by moisture. Cargo interests claimed damages in respect of damaged cargo alleging the vessel’s unseaworthiness.

The owners argued that, no one was able to come up with a cause of the said breakdown, that neither expert has found the root cause of the problem. In such circumstances the court would have to find that the cause of the breakdown, on the material available, incapable of satisfactory explanation with the result that cargo owners would fail to prove its case on unseaworthiness. The judge, however, found that absence of documentation discussing the cause of the damage bear unfavourably upon owners because the most obvious and realistic explanation was that such documents did exist but have not been disclosed, because they must have involved some unseaworthiness of the vessel at the commencement of the voyage from Varna. The judge also found that absence of document in part proves unseaworthiness because it points out to the of that lack of system for the proper monitoring of the engine parameters, which led to the chain of failures in the cooling system and later to the main engine damage.
52. I do not need to decide whether it is a failure in due diligence to adopt a system of recording information in the engine room logs only once a day in an automated engine room. The evidence before me was that this was acceptable to class and to the flag authorities … I find that there was a failure to institute a system to monitor such matters which contributed to the casualty. The same feature that constitutes unseaworthiness also constitutes lack of due diligence in this respect.
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Breffka & Hehnke GmbH & Co KG & Ors v Navire Shipping Co Ltd & Ors [2012] EWHC 3124 (Comm) (15 October 2012)
Shipping – Bill of Lading – Carriage of steel pipes – RETLA CLAUSE – Cargo partly damaged – Shippers realised that if the Bills of Lading were claused they would not be paid – Master issued clean bills of lading in exchange for the Letter of Indemnity – Whether such B/L constitute fraudulent misrepresentation.

The claim arose from the carriage of a consignment of steel pipes on the M/V ‘Saga Explorer’ from Ulsan in Korea to ports on the West Coast of North America and which were found damaged on arrival. Upon completion of loading in Ulsan master signed 13 Bills of Lading. All the Bills of Lading were not claused notwithstanding the fact that cargo surveyors on examination of the steel pipes recommended that some of the bills of lading shall be claused. Bills of Lading were signed by the master in exchange for the Letter of Indemnity. It was apparent that the shippers on completion of loading realised that if the Bills of Lading were claused they would not be paid and the owners’ agent persuaded the master to issue clean bills of lading.

Bills of Lading included a RETLA Clause.
RETLA CLAUSE: If the Goods as described by the Merchant are iron, steel, metal or timber products, the phrase ‘apparent good order and condition’ set out in the preceding paragraph does not mean the Goods were received in the case of iron, steel or metal products, free of visible rust or moisture or in the case of timber products free from warpage, breakage, chipping, moisture, split or broken ends, stains, decay or discoloration. Nor does the Carrier warrant the accuracy of any piece count provided by the Merchant or the adequacy of any banding or securing. If the Merchant so requests, a substitute Bill of Lading will be issued omitting this definition and setting forth any notations which may appear on the mate’s or tally clerk’s receipt.
The judge held that the master is bound on demand to issue to the shipper a bill of lading showing ‘the apparent order and condition of the goods’. But before he can do that the master must form an honest and reasonable, non-expert view of the cargo as he sees it and, in particular, as to its apparent order and condition. The Master may ask for expert advice from a surveyor but ultimately it will be a matter of his own judgement on the appearance of the cargo being loaded.

With regard to RETLA clause upon critical analysis of the Tokio Marine case the judge came to the following conclusion at paras 44-45, 49:
44. The RETLA clause can and should be construed as a legitimate clarification of what was to be understood by the representation as to the appearance of the steel cargo upon shipment. It should not be construed as a contradiction of the representation as to the cargo’s good order and condition, but as a qualification that there was an appearance of rust and moisture of a type which may be expected to appear on any cargo of steel: superficial oxidation caused by atmospheric conditions. The exclusion of ‘visible rust or moisture’ from the representation as to the good order and condition is thus directed to superficial appearance of a cargo which is difficult, if not impossible, to avoid. It is likely to form the basis of a determination as to whether there has been a further deterioration due to inherent quality of the goods on shipment under s.4(2)(m) of US COGSA, or Article 4(2)(m) of the Hague-Visby Rules.

45. It follows that I reject the Owner’s argument, based on the facts of the decision in the Tokio Marine case, that the RETLA clause applies to all rust of whatever severity.

49. If the Tokio Marine case had been consistently followed since 1970 the advantages of giving similar effect to mercantile clauses in different jurisdictions might have been a reason for following it now. However, although the researches of counsel have not been exhaustive, Professor Sturley’s article suggests that the decision has not been consistently followed; and this impression is reinforced by a bulletin issued by the UK P&I Club (221-11/01). After referring to the reason why US Courts have upheld the Retla Clause, the bulletin continues.

However, there remains a risk to Members using such clauses as, whilst some courts in the United States may have upheld the clause, other U.S. courts and courts in other jurisdictions have not. The only safe means of avoiding claims arising from pre-shipment damage is to ensure that the bill of lading is claused to reflect the apparent order and condition of the goods at the time of loading. Failure to properly describe the condition of the cargo leaves the carrier open to allegations of being a party to a misrepresentation, particularly from third-party purchasers of the cargo who have only contracted to do so based on a bill of lading and who have not been shown any pre-shipment survey by the sellers.

The final sentence is both accurate and pertinent.
Applying these inferences to the facts on hands the judge held that:
…decision to issue and sign clean Bills of Lading involved false representations by the Owners which were known to be untrue and intended to be relied on. What occurred was not an ‘honest and reasonable non-expert view of the cargo as it appeared,’ (see Standard Chartered Bank v. Pakistan National Shipping Corporation (Nos 1 and 2), Clarke J [1995] 2 Lloyd’s Rep. 364 at 374 and Cresswell J [1998] 1 Lloyd’s Rep. 684) but a deceitful calculation made on behalf of the Owners by their authorised agent at the request of the Shippers and to the prejudice of those who would rely on the contents of the Bills of Lading.

On the issue of reliance the judge agreed with the receivers that on the evidence they relied on the representations in the Bills of Ladings to their detriment by taking up the bills and sending them to their discharge port agents and taking delivery of the cargo pursuant to their terms. It is inherently unlikely that they would have done so if they had been claused.

It is notable that the judge preferred the evidence of the expert from the cargo-interests’ side because, as he said, he was troubled by [expert’s] tendency to take on the role of advocate and to argue points which were not properly points for an expert. Accordingly damages were awarded to the cargo receivers’ calculated as an overall loss with surveyor’s fees included of US$458,655.69. ↑ Top of page ↑ × Collapse all ×

Metall Market OOO v Vitorio Shipping Company Ltd [2012] EWHC 844 (04 April 2012)
Shipping – Lien for General Average contribution – Whether shipowners entitled to recover storage and other expenses incurred by them in exercising their lien over cargo after its discharge from the vessel?.

The owners’ vessel Lehmann Timber was captured by Somali pirates on or about 28 May 2008 during her maiden voyage. At the time she was carrying a cargo of steel coils, loaded in China for discharge at St Petersburg, and a deck cargo of hatch covers for discharge in Germany. She was released after 42 days, Owners paid a ransom to secure the release of the Vessel and she sailed for Salalah in Oman as a port of refuge on 8 July 2008. Whilst en route the Vessel suffered a main engine breakdown on or about 12 July 2008, and had to be towed into port, where she arrived on 21 July 2008. Owners declared general average. The arbitrators subsequently held that both the payment of the ransom and the cost of the tow to Salalah were allowable general average disbursements.

There were two questions for the court to decide:
1: Are shipowners entitled to refuse to deliver up cargo covered by a bill of lading in purported exercise of their lien for General Average contribution for that cargo even after they have received and accepted an unlimited General Average guarantee from the insurers of that cargo undertaking, in consideration of the delivery of that cargo to the consignees, to pay the shipowners any General Average contribution due in respect of the cargo?
2: Are shipowners entitled to recover storage and other expenses incurred by them in exercising their lien over cargo after its discharge from the vessel?

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Sideridraulic Systems SpA and Anor v BBC Chartering & Logistic GmbH & Co KG [2011] EWHC 3106 (Comm)
Carriage of goods by sea – HVR – Deck cargo – Whether master’s remark "ALL CARGO LOADED ON DECK" assigns cargo as deck cargo.

By a fixture recap of 16 September 2009, the defendants charted out their vessel fore carriage of two shipments of filter tanks between 15 and 30 November 2002, the first shipment being of 13 tanks and the second being of ten tanks. The recap included a provision giving the defendants liberty to carry the tanks as deck cargo in the following words: shipment under/on deck in owners option, deck cargo at merchant risk and b/l to be marked accordingly.

The first shipment was completed without incident. During the second shipment One of the tanks was lost and another damaged during the voyage, and the claimants contend that the defendants are liable for damages of some $400,000.

There was no dispute that the tanks were carried on deck. On the face of the bill of lading, under which this shipment was carried it was stated:
MASTER’S REMARKS
ALL CARGO LOADED FROM OPEN STORAGE AREA
ALL CARGO CARRIED ON DECK AT SHIPPER’S/CHARTERER’S/RECEIVER’S RISK AS TO PERILS INHERENT IN SUCH CARRIAGE, ANY WARRANTY OF SEAWORTHINESS OF THE VESSEL EXPRESSLY WAIVED BY THE SHIPPER/CHARTERER/RECEIVER.
AND IN ALL OTHER RESPECTS SUBJECT TO PROVISIONS OF THE UNITED STATES CARRIAGE OF GOODS BY SEA ACT 1936.
The bill of lading moreover provided:
3. Liability under the contract (a) Unless otherwise provided herein, the Hague Rules contained in the International Convention for the Unification of Certain Rules Relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment shall apply to this contract. When no such enactment is in force in the country of shipment, the corresponding legislation of the country of destination shall apply. In respect of shipments to which there are no such enactments compulsorily applicable, the terms of Articles I-VIII inclusive of said Convention shall apply. In trades where the International Brussels Convention 1924 as amended by the Protocol signed at Brussels on 23 February 1968 ("The Hague-Visby Rules") apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading. … Unless otherwise provided herein, the Carrier shall in no case be responsible for loss of or damage to deck cargo and/or live animals… .

B. US Trade. Period of Responsibility (i) In case the Contract evidenced by this Bill of Lading is subject to the US Carriage of Goods by Sea Act of the United States of America 1936 (US COGSA), then the provisions stated in said Act shall govern before loading, and after discharge and throughout the entire time the cargo is in the Carrier’s custody. … In the event that US COGSA applies, then the Carrier may, at the Carrier’s election, commence suit in a court of proper jurisdiction in the United States in which case this court shall have exclusive jurisdiction. (ii) If the US COGSA applies, and unless the nature and value of the cargo has been declared by the shipper before the cargo has been handed over to the Carrier and inserted in this Bill of Lading, the Carrier shall in no event be or become liable for any loss or damage to the cargo in any amount exceeding USD500 per package or customary freight unit…
The claimants first brought proceedings in Alabama, USA but realising that the carriers even if liable will be able to limit their liability to $1,000 (or $500 per package) under the United States Carriage of Goods by Sea Act, 1936 ("COGSA 1936"), their had denied that COGSA 1936 is applicable and commenced an arbitration reference against the defendants in London.

The main question for decision was whether the tanks were deck cargo, and more specifically whether they were "by the contract of carriage … stated as being carried on deck" to fall under governance of Section 1(6) and section 1(7) of COGSA 1971. The carrirs submitted that the master’s remark on the front of the bill is such a statement.

The judge accepted the defendants’ submission and held that:
22. The ordinary and natural meaning of the master’s remark is largely a matter of impression, but to my mind the defendants’ interpretation is the more natural. The claimants’ meaning would more naturally be conveyed by the statement that "Any cargo carried on deck at shipper’s/charterer’s/receiver’s risk… ". Moreover, the defendants’ interpretation is supported by considerations other than the language of the remark itself: i) First, the statement is made by way of a master’s remark. This would not be an obvious or usual place to state a contractual provision. The remark is more readily taken to be, or at least to include, a statement of fact about how the cargo was to be carried or otherwise handled. ii) Moreover, the bill contained another master’s remark that "All cargo loaded from open storage area". There (a) "All cargo" means all of the tanks (and not "any cargo") and (b) a verb ("was" or "has been") is to be interpolated after the word "cargo" in order to give the remark grammatical structure. In both respects, on the defendants’ interpretation both the master’s remarks are similar.
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Choil Trading SA v Sahara Energy Resources Ltd [2010] EWHC 374 (Comm)
Cargo of Naphtha sold on terms "PHRC naphtha quality" and "as produced by Port Harcourt Refining Company (PHRC) with following actual specifications as determined at loadport on the basis of samples drawn from shore tanks" – Cargo supplied did not conform to the contractual standard due to MTBE contamination – Buyer claimed damages for breach of warranty – Seller argued that there was no term as to quality, but cargo sold as is.

The court accepted that the likelihood was that the high levels of MTBE contamination were the result of contamination from gasoline in the shore tanks. It was held that although sales of Nigerian naphtha are often made "as is" or without warranty and at a heavy discount it does not mean that the term "Quality: PHRC naphtha quality" can or should be interpreted as if it said or meant that there was literally no term as to quality of any kind. If the parties had intended that all that was warranted about the product sold was that it could be called "naphtha" they would have expressed themselves differently. The buyer was bound to accept naphtha, whatever its characteristics, provided it was "PHRC naphtha quality". But it was not that obliged to accept a cargo which was heavily contaminated by a substance which was not the result of naphtha production and which is not normally present in naphtha produced by PHRC. ↑ Top of page ↑ × Collapse all ×

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Metall Market OOO v Vitorio Shipping Company Ltd [2012] EWHC 844 (04 April 2012)
Shipping – Lien for General Average contribution – Whether shipowners entitled to recover storage and other expenses incurred by them in exercising their lien over cargo after its discharge from the vessel?.

The owners’ vessel Lehmann Timber was captured by Somali pirates on or about 28 May 2008 during her maiden voyage. At the time she was carrying a cargo of steel coils, loaded in China for discharge at St Petersburg, and a deck cargo of hatch covers for discharge in Germany. She was released after 42 days, Owners paid a ransom to secure the release of the Vessel and she sailed for Salalah in Oman as a port of refuge on 8 July 2008. Whilst en route the Vessel suffered a main engine breakdown on or about 12 July 2008, and had to be towed into port, where she arrived on 21 July 2008. Owners declared general average. The arbitrators subsequently held that both the payment of the ransom and the cost of the tow to Salalah were allowable general average disbursements.

There were two questions for the court to decide:
1: Are shipowners entitled to refuse to deliver up cargo covered by a bill of lading in purported exercise of their lien for General Average contribution for that cargo even after they have received and accepted an unlimited General Average guarantee from the insurers of that cargo undertaking, in consideration of the delivery of that cargo to the consignees, to pay the shipowners any General Average contribution due in respect of the cargo?
2: Are shipowners entitled to recover storage and other expenses incurred by them in exercising their lien over cargo after its discharge from the vessel?

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ED & F Man Sugar Ltd v Belmont Shipping Ltd [2011] EWHC 2992 (Comm)
Arbitration – Section 33 of the Arbitration Act 1996 – Whether failure of the tribunal to alert the party to an argument that it could have made a more favourable concession was a serious irregularity which caused the charterers substantial injustice.

The vessel arrived at Santos, the load port, on 16 September 2009 and tendered NOR immediately (and was re-tendered on 19 September). However, vessel failed inspection by surveyor on the 18 September, noting some defects rendered her holds unfit for cargo, which defects were rectified and the vessel was eventually approved ready to load at 1140 on 20 September. The vessel did not berth until 2340 on 5 October 2009 and completed loading at 0545 on 7 October 2009. The owners claimed demurrage. It was agreed that the load port laytime was 5 days 3 hours.

The charterers denied that the NOR tendered on 16 September 2009 was valid because the Vessel’s holds were not fit for cargo, but accepted that "an NOR was good on 21st September 2009 (normal office hours) and laytime commenced at 1400 as per Charterers’ calculation".

Abitrators held that neither the NOR dated 16 September 2009 nor that dated 19 September 2009 was valid. The vessel was not ready to load. They then said:
13. However, the Claimants did not deliver a further Notice of Readiness after the vessel had been approved at 1140 on Sunday 20 September. We consider that the Respondents are correct that if the Claimants had then delivered a Notice of Readiness, it would have been effective at 0800 on 21 September with the result that laytime would have commenced at 1400 that day. We therefore find that at Santos the vessel was on demurrage for 1 day 7 hours 50 minutes at a cost of US$13,263.89. The Respondents did not rely upon the decision in the Happy Day [2002] 2 Lloyd’s Rep. 487 so the potential consequences of that decision have not affected our conclusion.
The charterers appealed that the arbitrators were obviously aware that there was an argument, following the decision in the Happy Day, to the effect that laytime commenced when loading was commenced on 5 October. On that basis no demurrage would have been due at the loading port but despatch money would have been due to the charterers. The charterers submitted that in those circumstances the arbitrators’ duty pursuant to section 33 of the Arbitration Act was to enquire of Femis Limited whether any reliance was being placed on the decision in the Happy Day. Their failure to do so was a serious irregularity which caused the charterers substantial injustice.

The charterers put much reliance on a comment made by Waller LJ in the Magdalena Oldendorff [2008] 1 Lloyd’s Rep. 7 at paragraph 42 as follows:
If an arbitrator appreciates that a party has missed a point then fairness requires the arbitrator to raise it so that the party can deal with it.
The judge, however, disagreed with them, underlying that:
17. … when Waller LJ observed that "if an arbitrator appreciates that a party has missed a point then fairness requires the arbitrator to raise it so that the party can deal with it", his comment was made in the context of a point which was in issue and which was required to be dealt with. The context of the present case is different. What was in issue in the present case was whether a valid NOR had been given on 16 September 2009. The charterers had a reasonable opportunity to deal with that point and in so doing expressly accepted that laytime commenced on 20 September 2009. No case was made by the charterers that laytime did not commence to run until 5 October 2009 and so such a case or point was not in issue.

18. I do not consider that Waller LJ’s observation can be read as saying that where a party has made a concession and where the arbitrators appreciate that it is arguable that such concession need not have been made the arbitrators are under a duty to raise such argument so that the party can decide whether to withdraw its concession. Waller LJ’s observation does not therefore, in my judgment, assist Mr. Young’s [councel for the charterers] argument that the arbitrators acted in breach of their duty pursuant to section 33 of the Arbitration Act 1996.

20. … I am unable to accept that, where a tribunal has decided the issue placed before it and given effect to a concession made by a party, that party can claim to have suffered a substantial injustice because it has not been alerted to an argument that it could have made a more favourable concession. It can hardly be said that giving effect to a concession is an example of "an extreme case" which "justice calls out" to be corrected. The arbitrators had before them a concession made on behalf of an experienced charterer.
The judge further explained that although the arbitrators are not barred from asking a party whether it has considered raising a different case from that which it has advanced but section 33 of the Arbitration Act 1996 does not oblige them to do so. Furthermore, it is often happens when there is an oral hearing and tribunal is anxious to understand the basis upon which a case is being advanced. When the arbitration is on documents alone it is presumed that the parties are often concerned to keep costs to a minimum because the amount in dispute is modest and in such circumstances it is understandable that a tribunal will be reluctant to ask a party, which has put in a detailed submission in a modest case, whether it wishes to run a different case. The arbitrators should be alive to the dangers of introducing into their awards matters which have never been in issue between the parties because then they must give the parties an opportunity to address such matters and if necessary to adduce further evidence with regard to them which will add to the costs of a modest case. × Collapse all ×

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Last updated 29-Feb-2016

Tidal Energy Ltd v Bank of Scotland Plc [2014] EWCA Civ 1107 (31 July 2014)
Contract – CHAPS payment – Payment form includes box "Receiving (beneficiary) customer name" – Money sent to beneficiary customer account and sort code which did not match beneficiary name – Is the bank authorised to debit appellants’ account with the amount specified on the form?

Tidal had an obligation to pay one of its suppliers, Design Craft Limited ("Design Craft"), the sum of £217,781.57. It appears that someone purporting to represent Design Craft had spoken to someone at Tidal and supplied banking details (sort code, account number and bank name). Tidal had a business bank account at the bank’s branch at One Kingsway, Cardiff. On 31 January 2012 Tidal completed the bank’s CHAPS transfer form ("the transfer form"), wishing by this means to pay its supplier. The transfer form was headed "Your request to make a CHAPS transfer". In section 1 the form required the customer to insert what it described as "Details of the CHAPS transfer". It informed the customer that all requests received by 3 pm will normally be made on the same business day. Section 1 of the transfer form contained a series of boxes in which the customer must fill in details of the transfer. These included the date that the transfer was to be processed, the amount of the transfer in figures and in words, and further boxes entitled "Sending (remitter) sort code", "Sending (remitter) account number", "Account number to be charged (if different)", "Sending (remitter) name", "Payment reference (if known)", and "Payment details (if any)".

Tidal provided the relevant mandatory details, and gave its supplier’s invoice number in the optional "payment details (if any)" box. The bank received Tidal’s instruction at 09.38 on 31 January 2012. At 15.20 their processing team initiated the transfer through CHAPS by sending the funds from the bank’s account at the Bank of England to the account of the receiving bank at the Bank of England. A daily activity form and Form MT03 (which was a record of the payment instruction) were immediately generated. All of the payee information on the transfer form (receiving customer’s account number at Barclays, sort code of Barclays, receiving customer’s name and the invoice number in respect of which the payment was being made) was reproduced in both documents. As soon as Barclays established that the account number and sort code were theirs, they sent an acknowledgment of receipt back to the bank using the SWIFT messaging system. Barclays made a credit entry in the account corresponding to the account number and sort code. It was an account in the name of Childfreedom Limited, not Design Craft. On the same day, the bank made a debit entry on Tidal’s account.

On 6 February 2012 Tidal telephoned the bank to say that it had been induced by fraud to provide the account details in the transfer form. The bank communicated this information to Barclays. The bank now understands that by close of business on 6 February 2012 the Barclays customer had withdrawn £217,000 from the account.

The judge in the Commercial Court held that the instruction was to pay a sum of money "to the beneficiary" by CHAPS transfer to the account number and sort code specified. There was no requirement in the CHAPS rules that the beneficiary’s name be included and in practice CHAPS transfers were processed without reference to it. The judge concluded from the evidence of how CHAPS works that a receiving bank which receives a CHAPS transfer and which is able to match an account number and sort code to one of its accounts will be expected to credit that account with the money and send an acknowledgment to the remitting bank. At that point payment is complete. He therefore rejected Tidal’s argument that the payment was not completed, and that the instructions had not been complied with.

In the Court of Appeal oppinions appeared to be divided. Master of the Rolls, with whom Tomlinson LJ agreed, was of the view that existence of the practice was known or reasonably available to both the customer and the bank. That there was material reasonably available to the customer to show that only the bank name, sort code and account number were the "unique" identifiers That it was not a practice, knowledge of which was only available to bankers, but a practice which has been adopted since at least 2007. His Lordship concluded at paras 62-63:

62. In my judgment, the construction sought by the appellant produces a result which is not reasonable and not commercially sensible (and therefore unlikely to have been intended by the parties) for the following reasons. First, the object of the CHAPS system is to achieve rapid (maximum of 1.5 hours) payment. That is why customers choose to use this system of electronic payment. Secondly, the court should lean against a construction which involves imposing a requirement on a receiving bank which would frustrate the customer’s wish to have the money transferred within 1.5 hours. If the beneficiary’s name has to be checked within this period for correspondence with the other identifiers, the evidence is that this would be economically impossible to do.

63. Thirdly, the appellant’s construction places on the remitting bank an obligation, in effect, to guarantee correspondence between the beneficiary name and the account number even though it has no control (i) over the care with which its customers complete the transfer form and (ii) over the way the receiving bank processes its incoming CHAPS payments. As regards this second point, Mr Johnson says at para 16 of his first statement that, where the beneficiary account resides with another CHAPS member bank, there is no possibility for the remitting bank to check and verify the account number or name of the beneficiary: such information is confidential to the payee and is not disclosed as a matter of routine by receiving banks to remitting banks. In my view, the appellant’s construction is unreasonable and makes no business sense. I see no reason why the remitting bank should assume responsibility for the accuracy of the name of the beneficiary entered by the customer on the form or for its correspondence with the other identifiers.
Floyd LJ in his dissenting judgment took a view that a payment cannot be said to be made until funds are credited into an account which conforms to the four identifiers which the customer is required to give in section 1 of the form: sort code, bank name, account number and customer name. He said that there is no rational criterion for excluding the fourth identifier – customer name from the other essential indicators when a payment has been made, because, so far as the customer is concerned at least, it could be said to be the most important. × Collapse all ×

Soufflet Negoce SA v Fedcominvest Europe Sarl [2014] EWHC 2405 (Comm)(18 July 2014)
Sale Contracts – GAFTA 64 – Clause 19 – Whether "any notice received after 1600 hours on a business day shall be deemed to have been received on the business day following" apply to all contracts or only in case of resales/repurchases?

The Sellers agreed to sell 38,000MT of French feed barley to the Buyers on FOB terms. The terms of GAFTA 64 were incorporated and provided inter alia as follows:
6. PERIOD OF DELIVERY

In case of re-sales all notices shall be passed on without delay, where possible, by telephone and confirmed on the same day in accordance with the Notices Clause.

8. EXTENSION OF DELIVERY The contract period of delivery shall be extended by an additional period of not more than 21 consecutive days, provided that Buyers serve notice claiming extension not later than the next business day following the last day of the delivery period. …

19. NOTICES All notices required to be served on the parties pursuant to this contract shall be communicated rapidly in legible form. Methods of rapid communication for the purposes of this clause are defined and mutually recognised as: - either telex, or letter if delivered by hand on the date of writing, or telefax, or E-mail, or other electronic means, always subject to the proviso that if receipt of any notice is contested, the burden of proof of transmission shall be on the sender who shall, in the case of a dispute, establish, to the satisfaction of the arbitrator(s) or board of appeal appointed pursuant to the Arbitration Clause, that the notice was actually transmitted to the addressee. In case of resales/repurchases all notices shall be served without delay by sellers on their respective buyers or vice versa, and any notice received after 1600 hours on a business day shall be deemed to have been received on the business day following. A notice to the Brokers or Agent shall be deemed a notice under this contract.
The original agreed delivery period was 10 November – 10 December 2010, and since 10 December 2010 was a Friday and it is common ground that "the next business day following the last day of the delivery period" on which any notice claiming extension under Clause 8 had to be served was Monday 13 December 2010.

The Buyers’ vessel was delayed and because of this they tendered a notice claiming extension at 1709 on 13 December 2010. The Sellers, pursuant to their interpretation of clause 19, considered this notice, served after 1600 on that day, as one to have been received the following day i.e. Tuesday 14 December 2010, i.e. out of time limits imposed by notice provision.

Basis on alleged breach of delivery period, the Sellers refused to perform. The Buyers disputed that the deemed notice provision was applicable on the basis that it was concerned only with cases of "resales/repurchases" which was not the present case; and claimed damages against the Sellers for non-performance in the amount of US$1,003,891.00.

The Board agreed with the Buyers that the deemed notice provision in clause 19 did not apply. It also held that under Clause 8, the Buyers had until midnight on 13 December 2010 to serve the notice claiming the extension and therefore the notice served by the Buyers at 1709 on 13 December 2010 was valid. Accordingly the Board concluded the Sellers had wrongfully repudiated the Contract.

Permission to appeal was granted in respect of the following question of law: ‘In clause 19 of GAFTA 64, do the words in line 141, namely, "any notice received after 1600 hours on a business day shall be deemed to have been received on the business day following" apply to all contracts or only in case of resales/repurchases?’

The judge concluded that the more natural construction is the one advanced by the Buyers and adopted by the Board. He mentioned the following five reasons (at paras 20-24):

1. It is necessary to read the important third sentence including the deemed notice provision in the context of Clause 19, which consists of four sentences, read as a whole. On the Sellers’ construction the second 'part' of the third sentence is a general deeming provision which applies to all notices required to be served pursuant to the contract. That construction posits that the draftsmen intended the first, second and fourth sentences to be of general application, with the deemed notice provision being divided into two halves, the first of specific and the second of general application. In that case, however, if that had been intended, the second part of the deemed notice provision would be in a separate sentence; and if it was to be made part of another sentence, it would have been made part of the fourth sentence

2. The language of the third sentence and the existence of the comma immediately before the word "and" in particular, does not suggest the significance attributed to it by the Sellers. The comma is not to split the sentence into two independent provisions, which a full stop would have done, but to indicate that the words "or vice versa" belong to the first part of that sentence.

3. If the Sellers contention to be preffered and the deemed notice provision were to be read as a separate provision, then it would more naturally refer to "all notices" in the first part of the third sentence and "any notice" in the second part serves to underline the fact that the notice referred to in the second part is the same that in the first.

4. The substance of both ‘parts’ of the third sentence is germane to the case of resales/repurchases, because: i) intermediary sellers or buyers in the chain may be prejudiced if the notice is not received in time for it to be passed on; ii) the fact that both parts of the third sentence are germane to the case of resales/repurchases confirms that the opening words of that sentence govern the whole of that sentence.

5. Construction adopted by the Board is the more natural in the context of the GAFTA Contract No. 64 form when construed as a whole. Under clause 6 vessel nomination notices must, "[i]n case of re-sales" (see lines 45-46), be passed on, where possible, by telephone and then confirmed on the same day in accordance with the Notices Clause (viz clause 19). Thus, there is a clear scheme within GAFTA Contract No. 64 (which extends beyond the Notices clause) for notices in the case of resales/repurchases; that scheme seeks to ensure (so far as possible) that intermediate sellers/buyers are in a position to pass such notices on on the same business day - hence the requirement, in case of resales/repurchases, for notices to be passed on, in some cases, by telephone and, in all cases, in writing by 4 pm on the same day.
The learned judge has found difficult to evaluate rival arguments related to ‘Business common sense’, but he adopted the view that the Sellers’ submissions with regard to business common sense and uncertainty were put before the Board but were obviously insufficient to persuade the Board to adopt the Sellers’ construction. In any case he did not consider those submissions as such as to override or to displace what he considered to be the proper construction of Clause 19. × Collapse all ×

Nidera BV v Venus International Free Zone for Trading & Marine Services SAE [2014] EWHC 2013 (Comm)(19 June 2014)
Sale of Goods – GAFTA 49 – Clause 6 and 8 – Extension of Delivery – Whether buyer has unqualified right to extend period of delivery when timely notice served?

The dispute between sellers and buyers for shipment of 31,000-32,000 mt of corn from Ukraine on 16-31 October 2010 arose from sellers’ inability to provide cargo due to Ukrainian government export restrictions in the form of export quotas for various cereal products. Sellers under GAFTA 49 declared Yuzhny, Ukraine as the loading port. On 7 October buyers nominated MV Pioneer Wave giving an ETA to loading port on 16-17 October. Pioneer Wave duly arrived at Yuzhny on 15 October and tendered notice of readiness.

On 4 October Ukraine had adopted Resolution 938 implementing a quota system over various exports including corn, with determination of the volume and terms of the allocation of quota for export to be advised. The resolution was published on 19 October. Same day the sellers informed the buyers that they fully reserve all thier rights and in particular those pursuant to the Prohibition Clause in GAFTA 49, which was incorporated into contract.

On 27 October procedures prescribing the export licence application were publisehd. Subsequently sellers informed buyers that they were investigating the possibilities of obtaining a licence, but that they could not guarantee that shipment would be possible within the delivery period. Buyers responded that Pioneer Wave was ready willing and able to load the cargo but asked sellers to undertake all necessary steps to load the contractual cargo as soon as possible, declaring that demurrage was for sellers’ account in any event. Sellers responded that they were using best endeavours to perform the contract but denied responsibility for any demurrage.

On 29 October buyers claimed "extension of the shipment period to 21 November in accordance with Clause 8 of GAFTA 49". Buyers further advised that they were negotiating with the owners of Pioneer Wave to cancel the charterparty and, if possible, would nominate a substitute vessel. They asked sellers to say when sellers would have the goods ready to load. Buyers added that the extension of delivery was to allow sellers to comply with their contractual obligations and load the goods, and thus any carrying charges would be for sellers’ account.

GAFTA 49

6. PERIOD OF DELIVERY
[6.1] Delivery during … at Buyers’ call.
[6.2] Nomination of Vessel – Buyers shall serve not less than …. consecutive days’ notice of the name and probable readiness date of the vessel and the estimated tonnage required.
[6.3] The Sellers shall have the goods ready to be delivered to the Buyers at any time within the contract period of delivery.
[6.4] Buyers have the right to substitute the nominated vessel, but in any event the original delivery period and any extension shall not be affected thereby. [6.5] Provided the vessel is presented at the loading port in readiness to load within the delivery period, Sellers shall if necessary complete loading after the delivery period, and carrying charges shall not apply. [6.6] In case of re-sales a provisional notice shall be passed on without delay, where possible, by telephone and confirmed on the same day in accordance with the Notices Clause.
 7. LOADING
[7.1] Loading port …
  [7.2] If a range is given, Sellers to declare port/berth(s) …..  days prior to commencement of the delivery period.
[7.3] Vessel(s) to load in accordance with the custom of the port of loading unless otherwise stipulated.
[7.4] Bill of lading shall be considered proof of delivery in the absence of evidence to the contrary.
 8. EXTENSION OF DELIVERY – [8.1] The contract period of delivery shall be extended by an additional period of not more than 21 consecutive days, provided that Buyers serve notice claiming extension not later than the next business day following the last day of the delivery period. [8.2] In this event Sellers shall carry the goods for Buyers’ account and all charges for storage, interest, insurance and other such normal carrying expenses shall be for Buyers’ account, unless  the vessel presents in readiness to load within the contractual delivery period.
[8.3] Any differences in export duties, taxes, levies etc, between those applying during the original delivery period and those applying during the period of extension, shall be for the account of Buyers. [8.4] If required by Buyers, Sellers shall produce evidence of the amounts paid.
[8.5] In such cases the Duties, Taxes and Levies Clause shall not apply.
[8.6] Should Buyers fail to present a vessel in readiness to load under the extension period, Sellers shall have the option of declaring Buyers to be in default, or shall be entitled to demand payment at the contract price plus such charges as stated above, less current FOB charges, against warehouse warrants and the tender of such warehouse warrants shall be considered complete delivery of the contract on the part of Sellers.

13. PROHIBITION
[13.1] In case of prohibition of export, blockade or hostilities or in case of any executive or legislative act done by or on behalf of the government of the country of origin of the goods, or of the country from which the goods are to be shipped, restricting export, whether partially or otherwise, any such restriction shall be deemed by both parties to apply to this contract and to the extent of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this contract or any unfulfilled portion thereof shall be cancelled. [13.2] Sellers shall advise Buyers without delay with the reasons therefor and, if    required, Sellers must produce proof to justify the cancellation.

On 2 November sellers responded that the delivery period expires on 31 October 2010 but no licences have been granted for the export of the contract goods. By reason of the above and according to the terms of contract, specifically the Prohibition Clause in GAFTA 49, sellers declared the contract as cancelled. Inspite of buyers insistance that the effect of their "extension" was to extend the period for delivery up to and including 21 November 2010, the sellers responded that buyers’ extension was invalid and ineffective, and that shipment within the contract delivery period was impossible.

The board award was made by a board of appeal of the Grain and Feed Trade Association ("GAFTA"). The board made a finding ("the extension finding") in favour of buyers that they had validly extended the contract delivery period and that the consequence of the extension was that sellers’ cancellation of the contract was premature, constituting a repudiatory breach of contract which had been validly accepted by buyers. The sellers appealed.

In the High Court sellers contended that all that clause 8 allowed for, was that a buyer who fears that the nominated vessel may not be presented in readiness to load within the existing stipulated delivery period can claim an extension of that period to enable it to present a contractual vessel within the extension period.

The judge agreed that clause 8 gives to a buyer the benefit of extending contract where his vessel is not present to load within existing delivery period and it may operate to mitigate the severity of what would otherwise be the effect on buyers of the rule concerning time of taking delivery. But in the judge’s opinion link between clause 8 and clause 6 does not necessarily mean that clause 8 is solely concerned to mitigate what would otherwise be the effect of clause 6. The judge rejected sellers’ arguments as providing no sound basis for departing from what sentence [8.1] of clause 8 appears to say on its face: where a timely notice is served, there is an unqualified right of extension under clause 8. The judge said at para 33:
The purpose of this particular standard form contract is to enable traders to make contracts speedily. I consider that where there are clear and unqualified words in such a contract, if it would not be obvious to a trader that they have a limited meaning, then there would have to be a most compelling case before the court could properly read down the words in question. Had it been necessary, I would have decided against sellers on this basis.
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Terminal Contenitori Porto Di Genova Spa v China Shipping Container Lines Ltd [2014] EWHC 1629 (Comm) (22 May 2014)
Contract – Safe Berth – Sudden increase of wind blow the vessel off terminal – Damage to shore crane during re-berthing - Whether Owners conducted themselves with reasonable skill and care at all times when using the Terminal?

On 5 June 2011 the owners’ vessel "XIN XIA MEN" was discharging and loading containers at Genoa container terminal. Between about 17:10 and 17:30 strong winds and rain from the south west passed over the port which caused vessel’s winches to render and slack her stern and head line moorings, then her aft spring lines broke and she was blown off the quay. By about 17:18 the vessel had stabilised and the Master considered her to be back under control. Shortly thereafter she was re-berthed. Somewhere in the course of re-berthing vessel’s bow stroke and damaged shore crane. Written contract between the terminal and the owners impliedly provided that:
(1) The Owners would conduct themselves with reasonable skill and care at all times when using the Terminal.
(2) The Terminal would exercise reasonable skill and care towards users of the Terminal.

Terminal claimed that the damage was caused by the negligence of the vessel in that she was improperly moored and/or she was re-berthed in a negligent manner.

The judge found among the other things the following facts:
16. As regards the availability of weather information, there were a number of sources available to any vessel:
(1) The port’s vessel traffic services (VTS) and the pilot is able to provide the vessel with weather forecasts.
(2) Local weather forecasts are available from the coastguard either by receiving routine broadcasts via VHF radio or by calling them directly and requesting a forecast.
(3) Navtex automatically records and prints out forecasts sent by the coastguard (the vessel had Navtex capability).

23. The vessel was moored with 4 head lines and two spring lines forward and 4 stern lines and 2 spring lines aft. The vessel’s draft was 10.8 metres forward and 11.6 metres aft when she started cargo operations.

26. Shortly after 17:10 the wind speed rapidly increased. Mr Camoriano, the operations co-ordinator, saw the tags on his monitor change from green to orange. Mr Pedemonte described seeing "a sudden darkening of the sky and some rainfall. At that moment due to the vibrations in the cabin and the noise of the wind, I realised that the wind was increasing suddenly."
27. The suddenness of the increase in wind speed is illustrated by the wind data provided by the anemometer on the PT4 crane. At 17:13:00 the wind speeds were 7-8 km/hr. By 17:13:30 they had risen to 76-77 km/hr. At 17:13:45 there was a 3 second gust at 82-84 km/hr. From that time until 17:15:22 there were a number of gusts of over 80 km/hr. Thereafter the wind speeds gradually decreased until 17:16:40 by which time the wind speed was about 60 km/hr.
28. Wind speeds of 50-61 km/hr are Force 7 (near gale). Wind speeds of 62-74 km/hr are Force 8 (gale). Wind speeds of 75-88 km/hr are Force 9 (strong gale). At a particular wind force gusts of up to 3 seconds at 1.5 x the maximum force wind speed may be expected.

43. Further, I accept the Owner’s case that 4 + 2 fore and aft mooring arrangement adopted by the vessel was not negligent or a breach of good seamanship. It was common ground between the experts that this was the usual arrangement for container vessels of this size in non-adverse weather conditions. Neither the general weather warnings nor the specific weather forecasts available to the vessel were such as to require further precautions to be taken. Although there were forecasts of "thunderstorms with gusts" I accept [expert’s] evidence that this did not mean that breast lines should have been deployed.
On the basis of experts’ evidence and also on that evidence which was provided by the witnesses of fact the judge concluded that vessel’s mooring winches rendered on the loads which were less than rendering limits, i.e. the vessel should have been able to withstand the winds actually experienced during the incident and that wind loads were not and cannot have been the effective cause of the lines rendering and of vessel being blown off the berth.

Although from written evidence provided by chief officer it followed that when he went on deck to tighten forward winch brakes he was able to apply "just a very slight" extra movement in most of them, on the expert and terminal evidence the judge concluded that the vessel was negligently moored because the moorings were inadequately tensioned and this was the effective cause of the lines rendering and the vessel being blown off the berth. The judge pointed out that such conclusion to the certain extent was prompted by absence from cross-examination of chief officer and unavailability of evidence from 2nd officer who was supervising operation of stern winches.

On terminal’s factual evidence, with which the judge was satisfied, it was established that the contact occurred during re-berthing. It should be noted here that there was no or rather scarce and conflicting evidence provided by the owner, e.g. there was no explanation as to how and why the vessel was maneuvering on her approach back towards the berth. It was also not clear whether the Master used the bow thruster and if he did not use then why. The Master’s statement also does not explain how the bow, which was 10-15 metres off the berth, came back alongside the berth.

Aaccordingly it was held that vessel was not navigated back alongside the berth in a proper and seamanlike manner and the re-berthing was carried out negligently.

The learned judge concluded that the vessel should have been able to remain safely alongside in the winds experienced and therefore the alleged unsafety of the berth was not anymore causally relevant. Nevertheless rejecting the Owners’ case based on allegations of terminal unsafety the judge held:
118. My findings in relation to the pleaded allegations of unsafety may be briefly summarised as follows:
(1) The berth was not suitable for the placement of breast lines. There was nothing abnormal about the berth and the mooring arrangements.
(2) The berth was open to the sea from the south and south west. The berth is not open to the sea as there is a breakwater.
(3) The berth is not protected from south westerly winds. It is not always possible to shelter a vessel from wind from every direction.
(4) There was no adequate system for advising masters of impending dangerous weather. The weather encountered was not dangerous. In any event, it is the responsibility of the vessel to liaise with VTS or coastguard and the masters are told this, as Mr Parodi explained in evidence.
(5) There was no adequate system for provision of tugs in dangerous weather. If tugs are needed because of bad weather the vessel can call the VTS by VHF. Contacting VTS is a proper system, and it would operate 24 hours. Tugs are able to respond rapidly, as they did in this case.
It is questionable whether answer 4 is completely in line with earlier judge’s findings and previous authorities. At paragraph 43 the learned judge says that vessel’s mooring scheme was usual and sufficient "for container vessels of this size in non-adverse weather conditions." He furthermore continues that “Neither the general weather warnings nor the specific weather forecasts available to the vessel were such as to require further precautions to be taken.” However, at paragraph 27 the judge’s findings say that the weather was far from "non-adverse", but actually wind reached force of strong gale for which neither general nor local warning was ever received. Therefore judge’s conclusion that “weather encountered was not dangerous” contradicts to his own findings. Actually weather was dangerous, as any sudden strong gale wind of force 9 always is, but it was even more dangerous because it caught vessel and also cranes’ operators, as the case report suggests, unwarned and unprepared. But question whether the Terminal exercised reasonable skill and care towards users of the Terminal was not put forwarded and was not discussed, it is also not clear form the report whether contract contained express warranty as to safety of berth.

But failure of the owners to provide any evidence of the ship’s personnel positive actions in controlling and managing situation as well as detailed accaunt of master’s actions in re-berthing vessel stongly suggest agains the owners.
Despite the obvious importance of their evidence, and the allegations of negligence made against the vessel, neither the Master nor the Chief Officer was called. The only explanation offered was that they were at sea but that is clearly an inadequate explanation in circumstances where the trial was fixed in June last year. In a case of this nature one would expect key ship’s witnesses to be called to be questioned on their evidence and to assist the court. The Terminal submitted and I accept that the court can draw adverse inferences from their non-attendance.
My personal experience of seagoing master mariner allows me to express sufficiently grounded view, that where there is no or scarce and unreliable evidence from the side of ship’s command, it, almost ivariably, means that any other evidence which the shipowner might be made available will strongly support contention as to ship’s command negligence or incompetence. If master can support his actions with his or his officers’ contemporary records and also with verbal evidence, that would in most cases mean that master was acting sensibly and carefully at that time, taking into account consequences of his actions, including also consideration about proper documentary evidence. × Collapse all ×

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