IpsofactoJ.com: International Cases [2005A] Part 8 Case 6 [CAEW]


COURT OF APPEAL, ENGLAND & WALES

Coram

Vitol Sa of Switzerland

- vs -

Portolana Compania

Naviera Ltd

LORD JUSTICE WARD

LORD JUSTICE CLARKE

LORD JUSTICE LAWS

9 JULY 2007


Judgment

Lord Justice Clarke

INTRODUCTION

  1. This appeal raises two questions of some interest arising out of the Asbatankvoy form of voyage charterparty. The relevant charterparty, which is in amended Asbatankvoy form, was made on 3 May 2001 and is between the respondent owners of the 86,417 tonnes deadweight tanker Afrapearl ("the owners") and the appellant charterers. It is not necessary to distinguish between the two appellants, which I will together call "the charterers".

  2. The contract voyage was from ports in the US Gulf to Dakar, Senegal and Gibraltar. The charterparty was amended by a number of addenda and Dakar became a permissible discharge port only by reason of addendum no 4, which was agreed on 21 June 2001. The vessel was loaded with a cargo of fuel oil. On 5 July the vessel was ordered to discharge at Dakar, where discharge was ordered to be in three parts as follows:

    1. 20,000 tonnes min/max at M’bao sealine;

    2. 10,000 tonnes min/max at the SAR terminal for account of SAR; and

    3. 5,250 tonnes min/max at the SAR terminal for account of Addax/Oryx Senegal.

    SAR is an acronym for Société Africaine de Raffinage, who were the owners and operators of both the sealine and a terminal with a traditional discharging berth within the port at Dakar.

  3. The owners claimed the disputed balance of demurrage in the sum of US$455,851.44 and additional agency fees and expenses in the sum of US$100,007.03, of which US$77,912.70 remained in dispute at the trial. Under the charterparty 84 hours were allowed for loading and discharging, of which 64 hours and 33 minutes were used at the loadports.

  4. The judge held that the owners were entitled to demurrage under clause 8 and to additional fees and expenses under clause 9 of the charterparty, in each case in the amount claimed. He gave judgment accordingly. He refused permission to appeal but permission was subsequently granted by Longmore LJ.

    THE CHARTERPARTY

  5. It is only necessary to set out clauses 6, 7, 8 and 9 of the charterparty which are in these terms:

    6.

    NOTICE OF READINESS.

    Upon arrival at customary anchorage at each port of loading or discharge, the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the vessel is ready to load or discharge cargo, berth or no berth, and laytime, as hereinafter provided, shall commence upon the expiration of six (6) hours after receipt of such notice, or upon the vessel’s arrival in berth (i.e. finished mooring when at sealoading or discharging terminal and all fast when loading or discharging alongside a wharf) whichever first occurs. However irrespective of whether the berth is reachable on arrival or not, except where berth is not reachable due to another vessel occupying berth and carrying out cargo operations, otherwise after tendering Notice of Readiness where delays are incurred due to circumstances which fall under charterparty Part I additional clauses 5/29/31/35/36/38 and Part II Clause 7 and 8 as amended. The reductions and exceptions so provided will prevail regardless of whether or not the berth was reachable on Vessel’s arrival. Furthermore, where delays occur and/or demurrage shall be incurred at ports of loading and/or discharge by reason of act of god, act of war, act of public enemies, riot, civil commotion or arrest or restraint or princes, rulers or people, such delays shall count as half laytime or if on demurrage, the rate of demurrange shall be reduced ½ of the amount stated in Part I per running hour or pro rata for part of an hour for demurrage so incurred.

    Where delay is caused to Vessel getting into berth after giving notice of readiness for any reason over which Charterer has no control, such delay shall not count as used laytime or demurrage. In any event Charterer shall be entitled to six hours notice of readiness at loading and discharging ports, even if the vessel is on demurrage.

    7.

    HOURS FOR LOADING AND DISCHARGING.

    The number of running hours specified as laytime in Part I shall be permitted the Charterer as laytime for loading and discharging cargo … Time consumed by the vessel in moving from loading and discharge port anchorage to her loading or discharging berth … shall not count as used laytime or time on demurrage.

    8.

    DEMURRAGE.

    Charterer shall pay demurrage per running hour and pro rata for a part thereof at the rate specified in Part I for all time that loading and discharging and used laytime as elsewhere herein provided exceeds the allowed laytime elsewhere herein specified. If, however, delays occur and/or demurrage shall be incurred at ports of loading and/or discharge by reason of fire, explosion, storm, or by a strike, lockout, stoppage or restraint of labour, or by a breakdown of machinery or equipment in or about the plant of the Charterer, supplier, shipper or consignee of the cargo, such delays shall count as half laytime or, if on demurrage, the rate of demurrage shall be reduced one half of the amount stated in Part I per running hour or pro rata for part of an hour for demurrage so incurred. The Charterer shall not be liable for any demurrage or delay caused by strike, lockout, stoppage or restraint of labour for Master, officers and crew of the vessel or tugboats or pilots and/or awaiting tide and/or awaiting daylight and/or awaiting pilot(s) and/or awaiting tug(s).

    9.

    SAFE BERTHING – SHIFTING.

    The vessel shall load and discharge at any safe place or wharf, or alongside vessels or lighters reachable on her arrival .... The Charterer shall have the right of shifting the vessel at ports of loading and/or discharge from one safe berth to another on payment of all towage and pilotage shifting to next berth, charges for running lines on arrival at and leaving that berth, additional agency charges and expenses, customs overtime and fees, and any other extra port charges or port expenses incurred by reason of using more than one berth. Time consumed on account of shifting shall count as used laytime except as otherwise provided in Clause 15.

    [I have put the agreed amendments to clause 8 of the standard form of Asbatankvoy charterparty in emphasis. I have not done the same in the case of the other clauses because there is no need to do so.]

    THE FACTS

  6. The judge set out the facts in paragraphs 7 to 19 of his judgment. Save as appears below, none of those findings of fact is in dispute in this appeal. It makes no sense for me to paraphrase them. I therefore quote them, with gratitude to the judge:

    7.

    The vessel arrived at Dakar and tendered Notice of Readiness at 1500 on 10 July. Shortly afterwards a pilot came on board and the vessel began manoeuvring towards the M’bao sea berth with the assistance of two tugs.

    8.

    The M'bao sealine berth at which vessels discharge into the terminal of SAR is in the Port of Dakar roads in the middle of the Bay of Gorée. On the western side of the bay is the Port of Dakar and on the eastern side is the town of M’bao. The sealine runs from the SAR oil terminal, slightly north of M’bao on the coast of the Bay, to the sealine berth. The pipeline extends from the SAR terminal about 2.3 nautical miles south west and then 0.7 nautical miles south. The pipeline is made of a series of sections of API 5L x 24 inch steel pipe, coated in polyethylene of about 2cms, which in turn is encased in a concrete sleeve of 5-10cm thickness. For about the first 200 metres the sealine is buried underground but then it runs along the seabed rather than being buried beneath it. At the end of the pipeline is the pipeline end manifold or "PLEM" which forms a connection between the pipeline and two 16 inch diameter flexible hoses. The PLEM is not and has never been anchored to the seabed. The hoses are 60 metres long and are made of six lengths of flexible hose each ten metres long which are fitted together. They are made by reputable companies such as Dunlop and Trelleborg and have a breaking point of 42 tonnes. In July 2001 the sealine was in poor condition. It was poorly maintained and corroded and had leaked on earlier occasions. In about November 1999 the PLEM was pulled westwards either by a tug or by a ship. This movement bent the sealine out of position severely weakening it. No repairs were then carried out. In October 2000 when the vessel Front Driver was at the sealine there was a very considerable leak of oil from the pipeline, as a result of the hoses being pulled too far by the handling tug. I should explain that on each berthing there are potentially two opportunities for such damage to occur. Firstly, the hoses might be picked up by the tug and pulled clear of the area where the vessel is to moor in advance of her arrival. This operation would be unnecessary if the hoses were found already to be in the correct position, or at any rate not in a position whereby they were likely to be fouled by the mooring vessel. Then, after the vessel was secured to the buoys the hoses would again be lifted by the tug and brought for connection to the ship’s manifold. After the incident involving Front Driver the last 20 metre section of the pipeline was replaced and the PLEM repaired. However there was again a serious leak during the visit of Cabo De Hornos in November or December 2000. Following that incident no proper repairs were carried out.

    9.

    In July 2001 the M’bao sea berth consisted of 6 mooring buoys beneath which, on the seabed, lay the end of the pipeline to which two 16 inch diameter flexible hoses were attached. Each hose was marked by its own buoy. The PLEM itself had originally been marked by its own buoy, but this was missing in July 2001. There was no jetty or other structure on the surface.

    10.

    As the vessel approached the sea berth, the Master observed oil on the surface of the sea, indicating a leak in the sealine. As I shall explain in more detail hereafter the Master nevertheless agreed to connect up the hoses and to test whether it was possible to discharge the cargo.

    11.

    By 1900 on 10 July the vessel was all fast at the sea berth and time began to run again pursuant to clause 6 of the charterparty. Laytime was due to expire at 1427 on 11 July.

    12.

    Discharge commenced at 2245 on 10 July but, after a short time, increased amounts of oil were observed coming to the surface, and discharging was suspended by order of the terminal at 2300. The vessel remained at the sea berth during 11 July while divers inspected the sea line and made an attempt to repair the leak.

    13.

    A diving inspection revealed the source of the leak to be a gap in the flange connecting the last section of the pipeline before the PLEM to its neighbour, at a distance of about 20 metres back from the PLEM. The last 20 metre section before the PLEM was also found to be bent. This damage is consistent with the final 20 metre section of the pipeline having been pulled in a direction roughly perpendicular to its original attitude by tugs used to handle the hoses attached to the PLEM. In the absence of a buoy marking the position of the PLEM those on board the handling tugs were unable accurately to gauge its position.

    14.

    Attempts were made to carry out temporary repairs to the pipeline during 11 July. These repairs involved tightening the bolts which held the flanges of the two pipe sections together. The temporary repairs were not successful. The vessel was eventually ordered off the sea berth at 1100 hours on 12 July. By 1430 hours on 12 July a pilot and tugs were in attendance in order to shift the vessel to the anchorage. By 1700 hours the vessel was clear of the sealine berth. The further repairs which now took place involved the application of wedges and quick drying cement.

    15.

    The vessel remained at the anchorage until 21 July. At 1100 hours that day she was ordered back to the sea berth to resume discharge. She re-berthed at 1600 hours and connected up to two hoses as before. At 2000 hours she resumed discharging, but after about forty minutes this was stopped as oil was again observed to be leaking from the pipeline. She was again ordered off the sea berth at 0900 hours on 22 July, and by 1130 hours on the same day a pilot and tugs were in attendance in order to shift the vessel to the anchorage. The vessel was clear of the sealine berth by 1300 hours.

    16.

    The vessel remained at the anchorage until 29 July. During this time the last 20 metre section of the pipeline was removed altogether, along with the PLEM, and a single 16 inch diameter flexible hose, 90 metres long, was attached to the new end of the pipeline.

    17.

    At 1130 on 29 July the vessel was ordered back to the sea berth. She re-berthed at 1730. Discharging recommenced at 2015. This time, no leakage was observed. However, the rate of discharge was reduced, because now only one hose could be used, and then only with a reduced pressure. The vessel took 18 hours and 57 minutes to complete discharging her first parcel of cargo at 1512 on 30 July.

    18.

    For a week or perhaps a little more before Afrapearl came to Dakar the Dakar Port Authority (Port Autonome de Dakar) received complaints from residents on Gorée Island that oil pollution had been found on the island. The source of this pollution was never exactly ascertained. However as I have already indicated the Master observed oil on the surface of the sea when he was two cables distant from the mooring position. Small bubbles of oil were breaking the surface of the sea in the vicinity of the sealine and a noticeable film of oil extended away from the mooring area following the slight north westerly current. The loading Master made a half-hearted attempt to pass this off as dirt coming to the surface following the earlier disturbance caused to the seabed by divers surveying the berth. He also said to the Master that in any event, whether or not there was a light leak from the sealine, he wanted to berth the ship and connect up the hoselines in order to test whether it was possible to discharge her. After discharge had been suspended for the first time the loading Master acknowledged that the leak was the result of pre-existing damage to the pipeline which had not been properly repaired since the visit of Cabo De Hornos.

    19.

    I find that the sealine was already leaking before the arrival of the vessel at Dakar, indeed even before the charterparty was concluded and/or Dakar was added to the permitted discharge range. It is unclear whether the hoses were in fact manoeuvred clear prior to the vessel’s approach to the mooring area. If they were the earlier damage may have been exacerbated as indeed it may have been by the operation to bring the hoses to the ship’s manifold. The opportunity for such exacerbation was presented by the poor condition of the pipeline, the product of earlier damage and neglect.

    The judge added in paragraph 23:

    23.

    Here of course I am concerned with a pipeline which no doubt functioned in the sense that it was capable of conveying oil along its length but which also malfunctioned in that it permitted a leak of such significance as to render it unusable. A smaller leak would, depending obviously upon its size, either have remained undetected or would even perhaps, if sufficiently insignificant, have been tolerated, at any rate for the duration of this discharge operation. I find support for this latter observation in the reported comments of the loading Master to which I have made reference in paragraph 18 above.

    DEMURRAGE

  7. Before the judge the charterers sought to minimise their liability for demurrage by reference to the terms of clauses 6, 7 and 8 of the charterparty. The judge rejected the charterers’ submissions under each of those clauses. The only clause now relied upon by the charterers is clause 8.

  8. The charterers’ case under clause 8 was and is that the delay between 2300 on 10 July and 2015 on 29 July was caused by a "breakdown of … equipment in or about the plant of the … consignee of the cargo" within the meaning of the clause. It is common ground that if that is correct, the charterers are liable for demurrage calculated at half the demurrage rate for that period. It was and is common ground that the burden is on the charterers to bring the case within the clause and thus to persuade the court that the delay was caused by a breakdown of equipment in or about the plant of the consignee namely SAR. Since (at any rate as I see it) the charterers are the proferentes in the context of this limitation clause, any ambiguity should be construed against them.

  9. The judge asked himself the question whether taking all the evidence into account it is appropriate to describe what occurred as a breakdown of equipment in or about the plant of the consignee. He held that it was not. He stated his reasons concisely as follows in paragraph 23:

    Whether it is appropriate so to describe it is a matter of impression, to which the duration of the problem, its cause and its magnitude can in my judgment all properly contribute, as can the remedial measures necessary. Here tightening of bolts securing the flange was to no avail as equally was sealing with quick drying cement. What ultimately was required was removal and replacement of the last twenty metre section of the fixed pipeline, albeit this vessel was able to complete her discharge following a temporary repair involving removal but not replacement of that length and the connection of additional flexible hosing to the flange left at the end of the pipeline.

    In my judgment it is neither natural nor appropriate to describe as a breakdown the gap in the flange which permitted the leak, caused in the manner and over the period which it was. Nor do I regard the context in which the word is here used as compelling the conclusion that it must be regarded as a breakdown. It may be that in certain circumstances a problem which pre-dates the making of the charterparty can properly be described as a breakdown, but it must be obvious that the longer a problem has gone unremedied the more difficult it will be to characterise it as a breakdown in the context of a charterparty executed long after its initial occurrence. One can perhaps test the point by asking what would have been the position here had the sealine belonged to or been the responsibility of the Charterers of this vessel? The exception in clause 8 does not import any reference to a necessity for the relevant breakdown to be beyond the Charterers’ control. Commercial men would in such circumstances surely demur to the suggestion that what here occurred could properly be described, in the context of this charter and as between Owner and Charterer, as a breakdown of equipment. In my judgment the word breakdown introduces some element of perceived fortuity even if the underlying cause demonstrates inevitability. I do not think that anything said by Sellers or Willmer LJJ in Reardon Smith Line v Ministry of Agriculture, Fisheries and Food [1962] 1 QB 42 (The Vancouver Strikes case) detracts from this conclusion. I simply do not think that informed commercial men would say, in the context of this laytime and demurrage exception, agreed 18 months after the initial damage was apparently done, and in the light of the subsequent problems and inaction, that there had been a breakdown of the consignee’s equipment. I think that they would say that, Owners having agreed to discharge at Dakar, Charterers had then directed the vessel initially to discharge at a damaged and unusable sealine. Given that the vessel had too deep a draft to enter the port, the Charterers could of course have required the vessel to discharge into lighters. It would be very surprising in the light of the allocation of risk and responsibility in this charter as a whole to find that in such circumstances charterers were entitled to a reduction in the rate at which time counts for all the time lost as a consequence of their commercial decision to require discharge at the sealine.

    The question in this appeal is whether the judge was correct so to hold.

    BREAKDOWN OF EQUIPMENT

  10. It is not, as I see it, possible to define the expression ‘breakdown of equipment in or about the plant of the consignee’ in a vacuum. It is necessary to consider whether there was such a breakdown by reference to the facts of the particular case and in the context of the particular charterparty. Like any provision of a contract it must be considered in the context of the contract as a whole, which in turn must be viewed against its factual matrix or surrounding circumstances.

  11. There is, so far as I am aware, only one previous case which has considered the expression in a similar context. It is Olbena SA v Psara Maritime Inc, sometimes known as The Thanassis A, unreported, 22 March 1982, which was decided by Robert Goff J and in which (as it happens) Tomlinson J was counsel for the appellant charterers on appeal from an arbitration award. The facts were somewhat different from those here but the clause was the equivalent clause in the Exxonvoy charterparty, which was in all relevant respects in the same terms. In that case delay was caused because two days before the date of the charterparty the oil pier at the loadport in China was damaged because a ship collided with it. The arbitrator had held that as a result there was damage to the jetty and to the pipes, which amounted to a complete destruction of part of the facility

  12. Robert Goff J considered whether the pipes on the jetty were ‘equipment’ and concluded that the pipes could legitimately be called ‘equipment in or about the plant of the supplier or consignee’ but that the jetty itself could not. He also considered the meaning of 'breakdown' in the context of the clause and said this:

    No doubt the words ‘breakdown of machinery’ might be limited, in the appropriate context, to the colloquial expression ‘breakdown’ when used, for example, in relation to the breakdown of a motor car. But I find it very difficult to apply that expression in relation to equipment other than machinery. In the case for example of an oil jetty, the relevant equipment may include not merely machinery, but, for example, pipes; and it seems to me that piping can legitimately be called equipment in or about the plant of the supplier or consignee of the cargo in the context of a charterparty for a tanker. As I read the words ‘breakdown of machinery or equipment’ they must in the present context go beyond the ordinary example of a machine breaking down due to its own inherent defect. Where there has been a breakdown of equipment in the context of this clause I can see no reason why it should not include, for example, a breakage in a pipe, and in those circumstances it is difficult to see why breakdown should be limited in this clause to something involving an inherent defect in the machinery or equipment.

    …. The cause of the breakdown is immaterial. It could be some external agent, or it could be some internal defect in the machinery or equipment, but if the machinery or equipment does not function, and possibly also if it malfunctions, then there is a breakdown of the machinery or equipment.

  13. Robert Goff J rejected the charterers’ case that there was a breakdown of equipment on the facts found by the arbitrator, partly on the basis that the jetty was not ‘equipment’ but principally on the basis that the complete destruction of part of the facility, including both the jetty and the pipes on it, involved something more than a breakdown. I should perhaps note for present purposes that he did not determine a further point taken on behalf of the owners, namely that the event in question occurred before the date of the charterparty. He simply observed that it was not necessary for him to express a view on the point but that it would be open to owners if the matter were to go further, which it did not.

  14. In the instant case, in the light of the reasoning of Robert Goff J, although the judge did not think that the concrete encasing the sealine was ‘equipment’, he was willing to assume that the relevant gap in the flange which caused the leak was located in ‘equipment’. He added that that assumed equipment was "assuredly in or about the plant of the consignee". As appears from the passage from his judgment already quoted, his decision was, however, that the gap in the flange which permitted the leak was not a ‘breakdown of equipment’.

  15. Mr. Macey-Dare submits on behalf of the charterers that he was wrong so to hold. By contrast Mr. Phillips seeks to uphold the decision of the judge that there was no ‘breakdown’ but (if necessary) submits on behalf of the owners that the pipe was not ‘equipment’ or, if it was, that it was not ‘equipment in or about the plant of the consignee’. It seems to me to be logical to consider 

    • first whether the pipeline was ‘equipment’,

    • secondly whether it was ‘equipment in or about the plant of the consignee’ and

    • thirdly whether there was a ‘breakdown of equipment’.

    If all those questions are answered in the affirmative, a further question arises (raised by Mr. Phillips), namely whether the delay was caused by the breakdown. I shall therefore consider those questions in turn.

    WAS THE PIPELINE EQUIPMENT?

  16. The reasoning of Robert Goff J set out above seems to me strongly to support the conclusion that the pipeline was indeed equipment. As I see it, it was part of the equipment used by the consignee to transport the oil from the sealine berth to the shore. For that short reason I would answer this question in the affirmative.

    WAS THE PIPELINE EQUIPMENT IN OR ABOUT THE PLANT OF THE CONSIGNEE?

  17. I agree with the judge that it was assuredly in or about the plant of SAR. It appears to me that the PLEM and the pipeline were part of SAR’s plant and that the part of the pipeline where the leak occurred was equipment in or about that plant.

    WAS THERE A BREAKDOWN OF MACHINERY OR EQUIPMENT?

  18. In submitting that the answer is yes, Mr. Macey-Dare relies upon the reasoning of Robert Goff J in the passage quoted above. Thus he submits that the cause of the breakdown is immaterial and that there is a breakdown if the equipment does not function or if it malfunctions. He submits that here the sealine did not function and that it follows from the reasoning in the Olbena case that there was a breakdown of equipment. He puts his case in two ways. 

    • First he submits that the breakdown occurred after the vessel arrived at the berth when a gap of sufficient size occurred in the pipeline to prevent the vessel from discharging her cargo without excessive leakage.

    • Alternatively he submits that it occurred some time previously and that it is irrelevant that the leak may have pre-existed either the charterparty or the charterers’ order that the vessel discharge at Dakar.

  19. The judge said that "the longer a problem has gone unremedied the more difficult it will be to characterise it as a breakdown in the context of a charterparty executed long after its initial occurrence". Mr. Macey-Dare submits that that statement is wrong in principle. He submits that the fact that the same failure may have occurred in the past cannot alter its status as a breakdown; it is no less a malfunction simply because it is of long standing. He further submits that the judge was wrong to say that the word breakdown introduces what he called some element of perceived fortuity even if the underlying cause demonstrates inevitability. Part of the thrust of Mr. Macey-Dare’s argument is that his submission, based as it is on Robert Goff J’s simple approach, has the benefit of commercial certainty whereas the judge’s approach does not.

  20. I was initially attracted by the judge’s approach because it does seem striking that the charterers should be entitled to a discount on the demurrage rate in the circumstances described by the judge. However, on reconsideration in the light of the oral argument, I have reached the conclusion that there was here a breakdown of the consignee’s equipment. One of the problems with the owners’ submissions which were accepted by the judge is that they do not seem to say that there was never a breakdown of the consignee’s equipment but rather that there was no relevant breakdown within the meaning of clause 8 because any such breakdown occurred, or alternatively was caused, long before the charterparty was made or the vessel was ordered to Dakar.

  21. It does seem to me that a distinction should be drawn between a breakdown and its cause. To my mind Robert Goff J was right to draw that distinction. As I see it a breakdown of equipment such as the discharge pipe occurs when it no longer functions as a pipe. The cause of the breakdown may be a hole in the pipe or, as here, a gap in way of the flange which prevents the pipe operating as a discharge pipe. The hole may of course be caused in a number of different ways and for a number of different reasons. One of those reasons will commonly be the fault of someone concerned with the operation of the equipment, here the pipe.

  22. So, for example, when the Front Driver was at the sealine in October 2000 it appears that there was a very considerable leak when the hoses were pulled too far by the handling tug. As I see it, it could fairly have been said at that time that the equipment of the consignees broke down if, as seems likely, it no longer functioned as a pipe. It seems to me that any delay caused by the necessity for repairs would have been caused by a breakdown in that equipment caused by the tugs. It appears that some repairs were carried out and that a similar incident occurred when the Cabo De Hornos was there in November or December 2000. It thus appears that there was a further breakdown at that time causing a serious leak and that, as the judge held, no proper repairs were carried out.

  23. What happened thereafter is not spelled out in any detail by the judge because there is very little evidence about it. However, the judge did not find that there was a serious leak in the line throughout the period after the Cabo De Hornos incident in November or December 2000. There was undoubtedly some leakage before the Afrapearl arrived because the judge held both that the master observed oil on the surface when he was some two cables off the berth and that for perhaps a week or a little more before the vessel arrived complaints of oil pollution had been received from local residents. The judge did not, however, hold that there was any significant oil pollution between the time the Cabo De Hornos left in November or December 2000 and, say, two or three weeks before the Afrapearl arrived in July 2001.

  24. Mr. Macey-Dare draws attention to the evidence that tankers of up to about 260 metres in length regularly used the berth and submits that, although there was evidence that the berth could be unused for as much as a month, the inference from the judge’s findings of fact and from the evidence as a whole is that the berth must have been used from time to time for cargo discharge after the Cabo De Hornos left, which was some six months or so before there is any evidence of complaints about oil pollution. He submits that in these circumstances it is reasonably clear that the sealine could be used at some times but not others and that there were intermittent breakdowns in the sense of malfunctions of equipment, viz of the pipe. On that basis Mr. Macey-Dare submits that, although there was some previous leakage, it is more probable than not that leakage sufficient to prevent use of the pipeline for discharge of the Afrapearl only occurred as a result of a malfunction of the pipe after the arrival of the vessel.

  25. I was initially sceptical about that submission in the light of the fact that the master observed bubbles of oil breaking the surface before his vessel berthed. However, I have ultimately reached the conclusion that it is more probable than not that failure of the pipe sufficient to cause substantial leakage which was sufficient to prevent discharge occurred after the arrival of the vessel as a result of the manoeuvres of the vessel or the tug. As I see it, that conclusion is consistent with the opinion expressed by Captain Dann of Brookes Bell Jarrett Kirman, who was the nautical expert upon whose opinion the owners relied. His conclusion was that the most probable cause of the damage to the sealine was the action of the tug employed by SAR to drag the flexible hoses clear of the PLEM before the Afrapearl arrived and/or when the hoses were being manoeuvred prior to being connected. On the above analysis that would amount to a breakdown. If that were wrong, I would hold that there was a relevant breakdown some time before the vessel arrived and perhaps before the charterparty was made when another vessel was at the berth.

  26. For the reasons given earlier I do not think that the malfunction can have occurred and the pipe have remained in the same state for six months or discharge would not have been possible in that period. As I see it, there was a series of breakdowns when the pipeline malfunctioned so as to prevent discharge without unacceptable leakage and pollution. That was no doubt because whether the pipe malfunctioned at any given time depended both upon the state of repair and maintenance of the pipe and upon the forces applied to the pipe at that time, which (as the judge put it in paragraph 19) may have exacerbated the earlier damage, the opportunity for such exacerbation being presented by the poor condition of the pipeline, which was the product of earlier damage and neglect. To my mind each time there was a malfunction of the pipe so as to cause excessive leakage and thus not to function as a pipe it can properly be said that there was a breakdown within the meaning of clause 8. Moreover, I would so hold even if (contrary to my view) the charterers could only show that the cause of the leakage was malfunction of the pipe caused during the visit of the Cabo De Hornos before the end of 2000.

  27. Once it is recognised that the pipe or sealine is ‘equipment’ and that there is a ‘breakdown of equipment’ if the equipment malfunctions, whatever the cause of the malfunction it is difficult to conclude that there was no ‘breakdown of equipment’ within the meaning of the clause in any of the situations described above; that is whether the malfunction occurred as a result of events after the Afrapearl arrived and/or when another vessel or vessels was or were at the berth in early 2001 and/or when the Cabo De Hornos was there in November or December 2000. The only way that a contrary conclusion could be reached would be to say that there came a time when the defect in the sealine was part of the state of affairs at the port, as Mr. Phillips submits, or was not fortuitous or was such as to be outside what the parties can have intended to be treated as a breakdown such as to entitle the charterers to pay only half demurrage.

  28. While I understand the doubt expressed by the judge, I would accept Mr. Macey-Dare’s submission that such an approach is too uncertain and is not permissible once the meaning proposed by Robert Goff J is given to the expression ‘breakdown of equipment’. In short I would accept Mr. Macey-Dare’s submission that, given the judge’s findings of fact, including his finding in paragraph 23 (quoted above) that the pipe malfunctioned in that it permitted a leak of such significance as to render it unusable, there was here a ‘breakdown of equipment’ within the meaning of clause 8.

  29. I would add two further considerations. The first is this. A thread which seemed to me to underlie the owners’ submissions was that the parties would not have agreed to an exception of this kind if the cause of the alleged breakdown was the fault of the consignee or anyone else, as it were, on the charterers’ side of the fence. However, I do not think that that is a sound approach. The clause does not expressly so provide and it would certainly not be possible to imply a term to the effect that there was only a breakdown of equipment in or about the consignee’s plant in the absence of fault on the part of the consignee.

  30. A provision that demurrage should be reduced as a result of a breakdown of consignee’s equipment caused otherwise than as a result of the charterers’ own fault does not seem to me to be uncommercial or one which one would not expect the parties to have agreed. Although clause 8 does not expressly limit a breakdown to one not caused by the fault of the charterers themselves, it would in my judgment be so construed or a term would be implied to that effect. If asked whether the parties can have agreed that half demurrage was payable where the breakdown was caused by the charterers’ fault the officious bystander would in my opinion say ‘of course not’. He would not however give the same answer if asked whether they can have agreed that half demurrage was payable if the breakdown was caused by the fault of the consignee but not of the charterers. He would answer that they might or might not have so agreed and that all depended on the words of the clause. For the reasons given earlier, on the true construction of clause 8, the answer is that the parties agreed that there could be a breakdown of equipment in or about the plant of the consignee even if the breakdown was caused by the fault of the consignee.

  31. In these circumstances I am unable to agree with the judge that one can test the point by asking what would have been the position here had the sealine belonged to or been the responsibility of the charterers of the vessel. I agree with him that the exception in clause 8 does not import any reference to a necessity for the relevant breakdown to be beyond the charterers’ control. However, I do not agree that commercial men would in such circumstances demur to the suggestion that what here occurred could properly be described, in the context of this charterparty and as between owners and charterers, as a breakdown of equipment. In my opinion they would be likely to draw a distinction between a ‘breakdown’ caused by the fault of the charterers and a breakdown caused by the fault of the consignee. For the reasons already given commercial men would to my mind demur to the suggestion that charterers should pay only half demurrage where the breakdown was caused by the charterers’ fault and the clause would be construed to have that effect or a term to that effect would be implied. On the other hand I see no reason why commercial men should not agree to half demurrage where the breakdown was caused by the fault of the consignee but not of the charterers.

  32. The second further consideration is this. Although (depending upon the state of the pipeline at that time) commercial men might say that the charterers directed the vessel to discharge at a damaged and unusable sealine, that itself is not said to be a breach of the charterparty. Moreover, although the judge says that the charterers could have required the vessel to discharge into lighters, there is no suggestion on the evidence that lighters were available at Dakar and again it is not said to be a breach of the charterparty to fail to require discharge into lighters.

  33. As I see it, there was here a breakdown of equipment whenever the breakdown occurred and the question is simply whether the delay was caused by that breakdown. If it was, the parties agreed that half demurrage would be paid.

    CAUSATION

  34. Mr. Phillips submits that the delay was not so caused because the charterers or consignee had ample time in which to repair the defect in the flange or pipeline and that the true cause of the delay to the vessel was the failure to repair the leak within a reasonable time so that there was a break in the chain of causation between any assumed breakdown and the delay to the Afrapearl. However, assuming that there was ample time to repair the defect, there is no evidence or suggestion that the charterers were aware of the problem or that they were at fault in any way and I do not think that such a failure on the part of the consignee leads to the conclusion that the delay was not caused by the breakdown. The delay was to my mind caused by the malfunction of the pipe even if the consignee had time to carry out a proper repair earlier. I would not hold that there was a break in the chain of causation. In many cases a breakdown will be caused by a previous failure to repair properly and it seems to me that it will be the rare case indeed in which there will be a break in the chain of causation in a case like this.

  35. However, Mr. Phillips has a further point on causation. It is that it took three attempts to effect repairs so as to enable the vessel to be discharged and that it ought to have been evident from the extent of the damage reported by the divers who examined the sealine following the first unsuccessful attempt at discharge that any attempt to repair the sealine of the nature of the two unsuccessful attempts at repair was likely to prove futile and that a more radical repair was required. Mr. Phillips submits that in these circumstances any ‘breakdown’ caused only seven days delay reflecting the time taken to execute the successful repair and that the remaining delay was caused not by the breakdown but by a failure unreasonably to effect an effective repair earlier.

  36. Mr. Phillips relies upon the written opinion of Captain Dann, which was put before the court in circumstances in which the charterers did not seek to cross-examine him. Mr. Phillips submits that in these circumstances it was (and is) not open to the charterers to challenge Captain Dann’s opinion. I would accept that submission so far as it goes. However, it is important to see how far Captain Dann’s opinion in fact goes. His opinion was indeed that it should have been evident to the receivers that a more radical repair was necessary at an earlier stage and that attempts to tighten the flange nuts and/or stop the leak with cement were likely to prove futile. His view was that it should not have taken longer than seven days to remove and insert a new 20 metres of pipeline "provided this was readily available" in order to effect a permanent repair.

  37. It seems to me to be plain that in ordinary parlance the breakdown caused the delay and that the evidential burden is on the charterers to show that there was a break in the chain of causation. Captain Dann’s opinion does not discuss what materials were immediately available to SAR at the sealine so that there is no evidence as to what was immediately available. It was no doubt in SAR’s interests to effect a permanent repair but it was in everyone’s interest to discharge the vessel as soon as reasonably practicable. In these circumstances I do not think that the evidence goes far enough to justify the conclusion that there was a break in the chain of causation between the leakage, which was caused by the breakdown, and the full period of the delay.

    CONCLUSION ON DEMURRAGE

  38. For these reasons I have reached a different conclusion from the judge on the issue of demurrage. I would accordingly allow the appeal on this issue and hold that the owners were only entitled to half demurrage in respect of the whole period in dispute.

    AGENCY FEES AND EXPENSES

  39. The judge held that the owners were entitled to additional agency fees and expenses which were incurred as a result of the shifting operations on 12, 21, 22 and 29 July 2001 described above. He held that they were entitled to them under clause 9 of the charterparty, which it is convenient to set out again:

    9.

    SAFE BERTHING – SHIFTING.

    The vessel shall load and discharge at any safe place or wharf, or alongside vessels or lighters reachable on her arrival… The Charterer shall have the right of shifting the vessel at ports of loading and/or discharge from one safe berth to another on payment of all towage and pilotage shifting to next berth, charges for running lines on arrival at and leaving that berth, additional agency charges and expenses, customs overtime and fees, and any other extra port charges or port expenses incurred by reason of using more than one berth. Time consumed on account of shifting shall count as used laytime except as otherwise provided in Clause 15.

    Clause 15 is not relevant.

  40. The judge held that the orders given to the master to shift off the berth were given by the charterers on 12 July, albeit on the express instructions of SAR, and that all the subsequent movements on and off the berth flowed from that initial order. His reasons for holding that the owners were entitled to recover those expenses under clause 9 of the charterparty are concisely encapsulated in paragraph 25 of his judgment as follows:

    In my judgment using the same berth three times over must on the facts of this case be regarded as an exercise by the Charterers of their right to require the vessel to shift from one safe berth to another. No one would have any difficulty with that that conclusion where, for example, the Charterers simply asked the Owners to cease discharge at berth A, to proceed to berth B and there to discharge 50 per cent of the cargo and to return to berth A to discharge the balance. In my judgment what occurred here is in substance no different. The vessel was required to use the same berth three times, and to shift off and on to it again on two separate occasions, with waiting time in between as might have occurred in a shift from berth A to berth B. That must and in my judgment can for present purposes be regarded as a shift from one berth to another. Again, were it not so, arbitrary and capricious distinctions might follow. The Charterers might, for example, have reacted to the problem by directing the vessel to discharge into lighters. In other circumstances had there not been a draft restriction the Charterers might have directed the vessel to proceed to a fixed berth in substitution for the sealine. It would to my mind be odd if the expense associated with these latter shifts were recoverable by the Owners but not the expenses which they incurred by reason of being required to shift backwards and forwards as they did.

  41. Mr. Macey-Dare submits that that reasoning is wrong. He submits that, as applied to discharge ports, clause 9 is by its express terms concerned only with the charterers’ right to shift the vessel "from one safe berth to another" and that on the facts of this case the charterers did not exercise that right. All that happened was that the vessel was ordered off the sole discharge berth in order that repairs to it could be effected.

  42. For my part, I would accept that submission. The natural meaning of the clause is precisely that, namely that the charterers were given a right to shift the vessel from one discharge berth, which would I think include "any safe place or wharf" (and indeed would probably include a safe place "alongside vessels or lighters" used for discharge of the cargo), to another discharge berth. In return the charterers agreed to pay the expenses and to treat the time consumed as used laytime. The language of the clause does not to my mind naturally include either a right on the part of the charterers to order the vessel off the berth to enable repairs to be done to the berth or a promise on the part of the charterers to pay the costs involved.

  43. In paragraph 25 of his judgment quoted above the judge does not rely upon the language of the clause but simply states that the use of the same berth three times over must be regarded as the exercise by the charterers of their right to require the vessel to shift from one safe berth to another. He gives the example of the charterers ordering the vessel to shift from berth A to berth B for part discharge and back to berth A for further discharge. I entirely agree with him that in such a case clause 9 would apply because there would be a shift from one safe discharge berth to another and back to the first safe discharge berth. It would make no difference in the example whether the second shift was back to berth A or to a third discharge berth C.

  44. In the present case the vessel was not ordered from one discharge berth to another. She was simply ordered to wait off the berth during repairs. She could have done so at anchor or, in theory at least, by steaming up and down. It was up to her what she did. I do not think that the charterers were exercising their rights under clause 9 at all, assuming for this purpose that it is right to regard the orders as given on behalf of the charterers. The judge says that what happened must and can be regarded as a shift from one berth to another. However I respectfully disagree. As I see it, the order to move the vessel from the berth was not an exercise of such a right but, for the reasons discussed above, a reaction to a breakdown of equipment in or about the plant of the consignee.

  45. For my part, I would not accept the conclusion that arbitrary or capricious distinctions might follow if clause 9 does not apply in such circumstances. I accept that the charterers might for their own commercial reasons have reacted to the situation by ordering the vessel to another discharge berth (whether fixed or floating) or indeed to discharge into lighters if such a berth or lighters were available and that in that event clause 9 would apply, but they did not. In short clause 9 is concerned only with a shift from one discharge berth to another discharge berth, which did not occur here. I do not think that the language of the clause can be construed so as to include a case like this.

  46. A further pointer to that conclusion is I think this. Clause 9 provides that where it applies the time consumed shall count as used laytime. The logic of the owners’ submission would I think be that, even though (on my view of the cause of the delay) clause 8 would on the facts of this case have the effect that such time would count as half laytime or half demurrage (as the case might be), the effect of clause 9 is that the whole of the time should be counted as used laytime. That would be a very curious result. As I see it, the position is that the two clauses have very different purposes. Clause 8 provides for the treatment of time in various different circumstances. Thus (in the form in which it was included in this charterparty) it includes provisions for the circumstances in which demurrage is payable and for the circumstances in which time is to count as half laytime or half demurrage is to be payable. It contains no provisions for the payment by the charterers of additional expenses when time is counting as half laytime or when the vessel is on demurrage or half demurrage. The owners are simply left to bear their own expenses but are entitled to demurrage or half demurrage as the case may be.

  47. By contrast, clause 9 provides that in particular circumstances, namely where the charterers exercise their right to shift the vessel from one discharge berth to another, the charterers will pay all the additional expenses involved and the time will count as used laytime. It thus provides a different regime from that governed by the half laytime and demurrage provisions of clause 8. For my part I can see no good reason for concluding that the parties agreed that the charterers would pay additional expenses for the consequences of a breakdown of equipment in or about the plant of the consignee within the meaning of clause 8, unless the charterers exercised their right to shift the vessel from one discharge berth to another. In the present case, for the reasons given above I have reached the conclusion that the charterers did not exercise their right to shift the vessel from one discharge berth to another under clause 9.

  48. The question then arises whether there is any other basis upon which the owners are entitled to recover the expenses from the charterers under the charterparty. Various ways of achieving that result were put to the judge, who did not have to consider them, merely observing that by none of them was he immediately convinced. In this court the only argument advanced on behalf of the owners in this regard was that an obligation to pay such expenses should be implied into the charterparty on the basis that it was impliedly agreed that, whenever the owners incurred expenses as a result of complying with orders given on behalf of the charterers, the charterers would indemnify them in respect of them.

  49. However, no authority was cited for any such general proposition in a voyage charterparty. The question is whether there is any warrant for holding that the charterers impliedly agreed to pay the owners’ additional expenses on these facts. In my judgment there is not. Assuming that the judge was right to hold that the charterers gave directions to the vessel to leave the berth, they did so because of the breakdown of equipment in or about the plant of the consignee, the effect of which was that the vessel was on half demurrage under clause 8. There is nothing in clause 8 or elsewhere in the charterparty to entitle the owners to recover the expenses involved in addition to half demurrage. I can see no basis for implying such a right in circumstances in which it is not expressly provided for in clause 8 or elsewhere in the charterparty including clause 9.

  50. As I see it, if the parties had intended that the charterers should pay for the additional expenses consequent upon a breakdown of equipment within the meaning of clause 8, they would expressly have so provided. Instead they simply provided for the time to count as half laytime or for half demurrage to be payable. Where the parties intended additional expenses to be payable they expressly so provided, as in clause 9, which for the reasons already given does not seem to me to apply to these facts. In all these circumstances I would hold that the charterers are not liable for the additional expenses under clause 9 of the charterparty or otherwise. It follows that I would allow the appeal on this point.

    CONCLUSIONS

  51. For the reasons given above I have reached these conclusions:

    1. that the delay was caused by a breakdown of equipment in or about the plant of the consignee within the meaning of clause 8 of the charterparty so that the owners were entitled only to half demurrage in the relevant period; and

    2. that the charterers are not liable for the additional expenses under clause 9 of the charterparty or otherwise.

    It follows that I would allow the appeal on both the questions identified above.

    Lord Justice Laws

  52. I agree.

    Lord Justice Ward

  53. I also agree.


Cases

Olbena SA v Psara Maritime Inc, unreported, 22 March 1982 (The Thanassis A)

Representations

Mr. Nevil Phillips (instructed by Mills and Co) for the Claimant/Respondent

Mr. Thomas Macey-Dare (instructed by Stephenson Harwood) for the Defendants/Appellants


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