DMC Category Rating: Developed

This case note is based on a note by Solicitors Michael Volikas and Carrie Angell that originally appeared in the Shipping Brief published by Ince & Co in July 2008

Background
The vessel was chartered on ASBATANKVOY terms for a single voyage from the Arabian Gulf to South Korea or Japan, to "load: 1/2/3SP(S) in AG" and discharge at up to two safe ports in the Korean/Japan range.

Clause 4 of the ASBATANKVOY form provides:

"NAMING LOADING AND DISCHARGE PORTS
(a) The Charterer shall name the loading port or ports at least twenty-four (24) hours prior to the Vessel’s readiness to sail from the last previous port of discharge, or from bunkering port for the voyage, or upon signing this Charter if the Vessel has already sailed.…
(b) …
(c) Any extra expense incurred in connection with any change in loading or discharging ports (so named) shall be paid for by the Charterer and any time thereby lost to the Vessel shall count as used laytime."

On 21 March 2007 Charterers nominated the load ports of Ras Laffan for loading on 28/29 March and Mina Al-Ahmadi for loading on 29-31 March. On the same day Owners arranged to bunker the vessel at Mina Al-Ahmadi for US$301 pmt and so informed Charterers. On 23 March Charterers indicated that they might change the voyage instructions and did so on 26 March, confirming instructions to load at Ras Laffan on 28/29 March and at Ras Tanura on 4 April. Owners therefore cancelled the Mina Al Ahmadi bunker stem and arranged to bunker at Ras Tanura which was the most expedient bunkering port in the circumstances. The reasonableness of Owners’ decision to bunker at Ras Tanura instead of Mina Al-Ahmadi following the change of orders was not disputed. The bunkers at Ras Tanura were priced according to the published price on the date of completion of delivery and in the event cost US$355 pmt, or US$217,721.52 more than if they had been supplied at Mina Al-Ahmadi as originally arranged.

Owners brought a claim against Charterers under clause 4(c) for the difference between the cost of the bunkers that would have been supplied at Mina Al-Ahmadi and those supplied at Ras Tanura.

Owners also put their claim on an alternative basis for the difference between the cost of bunkers that Owners argued that they would have arranged to have supplied at Fujairah had Charterers’ revised nomination been given at the outset, and those supplied at Ras Tanura. This was premised on Owners’ assertion that if Charterers had originally nominated Ras Laffan and Ras Tanura as load ports, they would not have bunkered the vessel at Ras Tanura, but at Fujairah on or about 26 March 2007, where the bunkers would have cost US$304 pmt or US$205,626 less than the bunkers supplied at Ras Tanura. By the time the amended voyage instructions were provided, however, bunkers were no longer available for loading at Fujairah prior to the commencement of the voyage.

In both cases, Owners asserted that Charterers’ revised orders were given in breach of contract.

Charterers denied liability, arguing:
i) It is implicit in clause 4(c) that they had a right to revise the original nomination, otherwise clause 4(c) would have no application unless the charter has departed from the standard ASBATANKVOY form and expressly provided for a right to revise a nomination;
ii) That the loss of opportunity to obtain bunkers more cheaply in Mina Al-Ahmadi was not within clause 4(c), which is directed to circumstances where a vessel is required to deviate from her course after she has set out for the nominated port and, as a result, incurs extra expense by way of fuel consumption and lost time; and
iii) If (contrary to their primary submission) the additional cost of bunkers did fall within clause 4(c), that the "extra expense" is the difference between the expense incurred and that which would have been incurred had the revised nomination been the original nomination (namely, US$205,.626, see above) But the Charterers disputed Owners’ assertion that they would and/or could have arranged the supply of bunkers at Fujairah on or about 26 March if Charterers had issued their amended nomination originally.

Judgment
(i)  No implied right to revise orders under clause 4(c)
The judge rejected Charterers’ argument that they had a right to revise the original nomination. An unlimited right to change nominations could have far reaching effects, especially where the charter provided for several alternative port ranges at a considerable distance from each other and, absent express wording, the parties could not be taken to have intended to confer such a right. Even if clause 4(c) had conferred upon Charterers a right to revise the nomination, this could not be exercised after the date by which the load ports were to be named under clause 4(a). (This was the case even though on the facts the load ports were originally named later than is required by clause 4(a).)

(ii)  Clause 4(c) is not intended only to compensate for deviation type losses
Charterers’ argument that the indemnity in clause 4(c) applied only in relation to expenses arising by way of deviation resulting from a change in nominated port was also rejected. As a matter of ordinary construction the clause called for a comparison between what expenses would have been incurred if there had been no change of the nominated ports and the expenses incurred as a result of the change. There was nothing in the wording of the first or second limb of the clause, nor in its commercial purpose, to confine its application to expenses arising by way of deviation. To hold otherwise would have the arbitrary effect that if Owners had decided to maintain their original bunker stem at Mina Al-Ahmadi, their deviation and additional fuel expenses would have been recoverable under clause 4(c), whereas on the actual facts Owners’ additional bunker costs, having made the sensible decision to change the bunker stem, would not be.

That freight was payable by reference to Worldscale, and that the Worldscale schedule was premised on the basis that "Bunkers are deemed to be available at every port at the bunker price stated …" did not assist Charterers. Clause 4(c) is designed to transfer from Owners to Charterers’ expenses of a kind that Owners would normally bear. That bunkers were usually for Owners’ account and that Owners usually bore the risk of price movement did not support an argument that Owners should bear those costs in the circumstances contemplated by clause 4(c).

(iii)  Compensation for extra expense incurred in connection with a change of load ports
Charterers’ final argument, that the expenses were to be assessed by reference to the difference between the expenses incurred and those that would have been incurred if the revised nomination had been given initially, was also rejected. Such a construction introduced a notion of reliance by Owners upon the original nomination and there was no justification for this in the wording of the clause. Moreover, Charterers’ interpretation focused on the original nomination, whereas the clause was concerned with extra expenses "incurred in connection with any change".

In conclusion, the judge awarded Owners US$217,721.52, being the extra cost of the bunkers stemmed at Ras Tanura, rather than at Mina Al Ahmadi.