April 2006
The Commercial Court recently allowed an appeal from the Owners of the Johnny K against their Voyage Charterers following the decision against them by a panel of arbitrators. Owners purported to have a claim for deadfreight/damages in circumstances where the vessel sailed without loading its full nominated cargo. The case has been referred back to the arbitrators and a decision is pending.
The Johnny K, a Capesize vessel, was due to load 170,000 tonnes of bulk iron ore, 10% more or less in Owners' option. The loadport, Port Headland, Australia, is affected at certain times of the year by high spring and neap tides. The berth at the port used for loading was controlled by the shippers of the cargo. During loading operations, it became clear that if the vessel waited to load her full cargo, she would miss the high tide, and owing to her size would have to wait a further 3 weeks for the next spring tide in order for her to negotiate the exit channel fully laden. In the event, the vessel sailed with a shortfall of cargo of 15,845 tonnes. An amount of USD134,682.59 was claimed as deadfreight by Owners.
Owners stated that Charterers had effectively breached the contract under which there was a duty to load the full nominated cargo- a duty which is complemented by the Owner's duty to make the vessel available to receive the full nominated cargo. The valid nomination by Charterers of a safe port/berth was not relevant because had the vessel completed loading within the laytime, there would not have been a problem sailing with the tide and with a full cargo. The agreed rate of loading by Charterers was therefore an issue.
It was the Owner's position that Charterers had given the order for the vessel to sail before the nominated cargo had been loaded- or in the alternative, it was an order for which they were responsible. Charterers stated that the Port Authorities had in fact requested the vessel to sail. The arbitrators gave consideration to the factors relevant to ordering the vessel to sail- whether it was commercially motivated because the terminal, which was controlled by the shipper, wanted to avoid having the berth blocked by the vessel waiting for the next high tide, or for reasons of safety.
In the event, the arbitrators concluded that the order to sail was not one given by the Charterers but by the Port Authorities, and Charterers did not therefore breach their duty and were not liable for any losses suffered by Owners.
Owners appealed this decision on the basis of causation- that if Charterers had loaded in the allowed laytime, the vessel would have sailed without delay, and that the order to sail was a commercially driven decision- not one governed by administrative reasons from the Port Authority, but by the shippers controlling the berth. The Tribunal had decided it was the order to sail, and not the failure to load at the contractually agreed rate that was the cause of the vessel failing to load a full cargo.
Therefore, the crucial issue was whether the order to sail was one for which Charterers could be held responsible - or which was attributable to them. However, the Tribunal had made no clear finding on the whether it was the Terminal, which was controlled by the shipper, or Port Authorities that had given the order to sail, and Tomlinson J remitted Owners dead freight and damages claims back to the Tribunal to decide this issue. Helpfully, Tomlinson J also referred to the trilogy of cases that provide guidance when determining the allocation of responsibility for orders between Owners and Charterers; The Isabelle [1982] 2 Lloyd's Rep. 81, The Mediolanum [1984] 1 Lloyd's Rep. 136 and The Erechtion [1987] 2 Lloyd's Rep 180.
In The Isabelle, Goff J considered whether orders of a Port Authority could be interpreted as orders of Charterers, and concluded that the exercise by a Port Authorities of it's own administrative functions in relation to vessels berthing within it's port/ harbour area was not something that could be considered as a directions or orders of a Charterer.
The Mediolanum grounded whilst attempting bunkering operations. Charterers had arranged for bunkering to be carried out by a refinery nominated by them but due to congestion, the pilot on board - employed by the refinery - directed the vessel to another berth where she ran aground. The Owners claimed the cost of repair and loss of time from Charterers, stating that the nomination of place for bunkering did not constitute a safe port. The Court of Appeal considered whether the refinery could be agent of the Charterers and/or was carrying out Charterers orders and decided that the refinery had and retained authority and was, as between owners and charters the agent of the latter, to select the place for bunkering within the port.
The Erechthion, also involved the Owners bringing a claim for repair costs following damage to the vessel upon entering a berth for discharge- but on this occasion, the berth was designated by the Port Authority. The court considered whether the charterparty included an implied indemnity from the Charterers to Owners against consequences of complying with the Charterers' orders. Staughton J stated that for the purposes of orders relating to the employment - rather than the navigation - of the vessel, the Charterers were bound to indemnify Owners, and further, in circumstances where the Port Authority designated a berth for the purposes of discharging the cargo, they were considered to be acting under Charterers orders, as this was an order as to the employment of the vessel.
Pentonville Shipping Ltd v Transfield Shipping Inc (MV Johnny K) [2006] EWHC 134 (Comm)
