AIC Ltd v Marine Pilot Ltd, The “Archimidis”, (2008) EWCA Civ 175
The Court of Appeal recently reversed the decision of the Commercial Court following an appeal by owners who were claiming deadfreight for the difference between the minimum quantity of cargo to be loaded and the quantity actually loaded in circumstances where it was apparent to both parties that, for reasons of safety, it was not possible to load a full cargo.
The Court of Appeal was asked to consider two issues:
(i) Whether the charterers were liable for deadfreight where the vessel could not load a full cargo due to draught restrictions; and
(ii) Whether the charterers had warranted the safety of the port.
The second issue had been decided in owner’s favour in arbitration and on appeal to the High Court. The safe port issue was an alternative to the claim for deadfreight.
Facts
Briefly, the facts were that the vessel loaded only 67,058 m/t of diesel oil as opposed to the contractual minimum of 90,000 m/t. The vessel only loaded a limited amount of cargo at Ventspils as a result of what were said to be exceptional circumstances that had caused a reduction in the available water in the dredged channel. The vessel could not have safely loaded the minimum contractual quantity of 90,000 m/t and departed safely with that cargo, but it would have been possible to load a lesser quantity alongside and top off to the contractual minimum quantity by a ship to ship transfer off Ventspils.
The charter allowed lightering and/or ship to ship transfers of cargo at charterers’ request, and provided that the vessel was to “load one safe port at Ventspils. Discharge at one/two safe ports United Kingdom continental Bordeaux/Hamburg range” and “load and discharge at a safe place or wharf ….. provided the vessel can proceed thereto and lie at and depart therefrom …..”.
Deadfreight Issue
On appeal to the High Court Gloster J held in favour of the charterers. In deciding for owners the Tribunal had concluded the tender of a full cargo by charterers when “all concerned were aware that it would not be possible ..... to load this quantity, … was a gesture without legal significance”. In contrast, Gloster J viewed the tender of cargo by charterers as fulfilling their legal obligation and that because the Tribunal had found as a fact that the Master had indicated the vessel could load no more than 67,000 m/t there could be no breach or failure on the part of charterers in not actually having more than 67,000 m/t of diesel oil alongside or in not loading more than that quantity (as opposed to the contractual minimum of 90,000mt). Furthermore, Gloster J took the view that the charter provision allowing loading/discharging via lightering or ship to ship transfer was an option, not an obligation.
Therefore, owners were not entitled to claim deadfreight when the minimum contractual quantity in fact was tendered but not loaded because the master had indicted the vessel could load only 67,000mt - “the mere fact that both parties knew that such a quantity could not be loaded does not, in the absence of some express contractual provision, mean that the tender of performance had [as the tribunal had said] no legal validity and that the failure to exercise the option to load by STS transfer was not a breach of contract”.
The Court of Appeal reviewed the two main points at the centre of the deadfreight issue: did the charterers tender full contractual performance, and was the option to load by STS transfer effectively an obligation on the charterers to load the minimum amount of cargo?
Agreeing with the findings of the arbitrators, the Court of Appeal held that, in fact, the charterers did not “tender” a full cargo for in order to do so they would have had either to load a full cargo at the berth, or load the maximum amount which could be safely lifted at the berth in the prevailing circumstances and then proceed down the channel to load the remainder by STS transfer. When the charterers formally “tendered” the cargo for loading, it was known to both owners and charterers that it would not be possible to load the full quantity. In other words, there was no formal tender of performance that was intended to be acted upon. Indeed, in the circumstances, if charterers had tendered full contractual performance they could have done so only on the basis either of:
i. Loading a full cargo alongside and waiting for the channel to be dredged, or
ii. Topping off by STS.
Commercially, both options were less attractive to charterers than being in breach of charter loading and sailing from the port with less than the minimum quantity of cargo.
Sir Anthony Clarke MR stated at para 14 of the decision: “The Charterers’ obligation to pay deadfreight under clause 3 of the printed conditions in the Asbatankoy form was to pay deadfreight on cargo where less than the minimum was supplied. The arbitrators held that less than the minimum was supplied and that it followed that deadfreight was in principle due. I find no error of law in that conclusion.”
Charterers were in breach of their initial obligation to tender a full cargo and in the light of this conclusion, the second issue of whether the charterers were obliged to load by STS transfer was irrelevant. The owner’s appeal on the deadfreight point was allowed.
Safe Port Issue
The second issue to be considered was a cross appeal by the charterers on the effect of an express safe port warranty where there was a named port and whether that risk fell on owners or charterers.
The relevant clause was: “Load one safe port Ventspils. Discharge 1/2 safe ports United Kingdom Continent Bordeaux/Hamburg range”.
Both the Tribunal and High Court had decided in favour of the owners that the words “one safe port Ventspils” constituted a warranty by the charterers that the port was in fact safe. The Court of Appeal agreed.
In many charterparties the obligation on the charterers when nominating a load/discharge port is to order the ship only to ports which, at the time that the order is given, are prospectively safe and this obligation is of an absolute nature; for example the New York Produce Exchange Charterparty provides that “The vessel shall be employed …. between safe ports within safe ports ……” Other charterparties impose an obligation to exercise due diligence on the charterers; see for example the Shelltime 4 form charterparty. However, charterers argued that where the port was actually named there was no warranty of safety by charterers, only recognition that both owners and charterers agreed the port was safe.
Sir Anthony Clarke MR construed the “Archimidis” charterparty in owners’ favour:
1. The word “safe” cannot stand alone. As it was not in dispute that the words “discharge 1/2 safe ports…” imports a warranty on the part of the charterers that the port or ports of discharge are or will be safe the natural meaning of the whole clause is that the both Ventspils and the one or two discharge ports are or will be safe.
2. The word “safe” must have some meaning in the expression “1 safe port Ventspils”. It cannot be ignored.
Thus, the charterers had in fact warranted the safety of Ventspils: “… a provision that the vessel would load at “1 safe port Ventspils” both limits the choice of the Charterer to one port, namely Ventpsils, and contains a promise by the Charterers that the port is and will be safe ….”.
Sir Anthony Clarke MR also referred to the words of Colman J in The “Greek Fighter” (2006) 1 LLR 99:
“The identification of a named port or anchorage, thereby limiting the Charterers choice as to the location of performance is not inconsistent with a warranty that it is safe, any more than the sale of goods by description would be inconsistent with an express term as to quality”.
He also expressly agreed with the words of Langley J in The “Livanita” (2007) 1 LLR 97:
“In my judgement there is no principle of construction which permits a negative answer to the general question raised by this ground. There is no inherent inconsistency between a safe port warranty and a named loading or discharge port.”
and that while there was no question of Ventspils being unsafe in the ordinary usage of the word when, by the application of good seamanship, a vessel loaded less than the contractual minimum in order to avoid any threat of danger, a port can still be unsafe because of the need to lighten in order to get into or out of that port.
Whether in fact the port at Ventspils was unsafe for the “Archimidis” was not an issue. The question before the tribunal and on appeal was whether, when the charterparty named a load port, and also provided that the vessel was to load at safe ports, the charterers warranted that named port as prospectively safe for the vessel. The “Archimidis” is authority, where there was previously none, that in these circumstances charterers do warrant the safety of the named port.
