AIC v. Marine Piilot (CofA)

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DMC/SandT/08/16
AIC Limited v Marine Pilot Limited (The "Archimidis")
English Court of Appeal: Sir Anthony Clarke MR, Sir William Aldous and Longmore LJ: [2008] EWCA Civ 175: 7 March 2008
Timothy Young QC (instructed by Eversheds LLP) for the Defendant Shipowner
Steven Berry QC and Edmund King (instructed by Holman Fenwick & Willan) for the Claimant Charterer
VOYAGE CHARTERPARTY: SAFE PORT WARRANTY: NAMED SINGLE LOADPORT: DEADFREIGHT: FORMAL TENDER OF FULL CARGO LOAD: SILTING IN LOADPORT: VESSEL UNABLE TO LOAD FULL CARGO: RIGHT TO CLAIM DEADFREIGHT FOR SHORTFALL
Summary
The Deadfreight Issue
The shipowner was in principle entitled to deadfreight where the charterer had failed to load the minimum contractual quantity out of choice where the charterer’s formal ‘tender’ of a full cargo load was in effect a token gesture because the parties knew that it was not possible to load the full cargo at the berth and then immediately proceed on the voyage as was intended.

DMC Category Rating: Confirmed

This case note has been contributed by Jim Leighton, BSc, LLB, LLM (Maritime Law) and Trainee Solicitor

Background
The vessel was chartered on a modified Asbatankvoy form. The vessel arrived for loading at "one safe port Ventspils" and lifted 67,000 m/t of the 93,000 m/t of cargo tendered. 67,000 m/t represented the maximum permissible cargo for a safe sailing draft out of the port’s channel. The lifted cargo was substantially below the minimum contractual cargo of 90,000 m/t. The shortfall resulted from exceptional silting in the port’s channel, making it unsafe to lift more cargo due to the risk of grounding. Under the charterparty, the charterer had the option to request the lifting of more cargo by ship-to-ship transfer (STS) once outside the port’s channel but chose not to do so.

This led to a dispute on two issues: (1) whether the shipowner was entitled to deadfreight on the shortfall in cargo lifted (the deadfreight issue) and (2) whether the shipowner was entitled to bring a claim for breach of the safe port warranty as an alternative (the safe port issue).

The arbitrators found in favour of the shipowner on both issues.

On the charterer’s appeal to the High Court, Mrs Justice Gloster found in favour of the charterer on the first issue and the shipowner on the second issue.

The parties then appealed to the Court of Appeal.

The background facts are more fully stated in the case note for the High Court decision and can be read by following the link here.

Judgment
The Court of Appeal opinion was provided by Sir Anthony Clarke MR with whom Sir William Aldous and Lord Justice Longmore agreed.

The Deadfreight Issue
The Court of Appeal found that Gloster J had erred in finding that there was an actual tender of full contractual performance on the part of the charterer.

This resulted from the correct factual analysis and understanding of the arbitrators’ findings. In agreeing with counsel for the shipowner, it was held that the findings of fact in the reasons were not to be considered in self-contained compartments: they were to be considered as part of a whole.

The correct findings could be summarised as follows:

1. Everyone knew that as a result of the silting the master’s advice was that the maximum cargo lift permissible in the prevailing circumstances was 67,000 mt;
2. When tendering notice of readiness (NOR) the master was doing no more than providing a technically informed statement that the maximum amount of cargo that could be lift was "approximately 67,000 m/t";
3. The charterer formally ‘tendered’ 93,000 m/t of cargo – it was formal in the sense that everyone knew that it was not possible for the vessel at that time to load that quantity if she were to proceed down the channel;
4. This was not a case in which the vessel had failed to call for the full amount of cargo but a case in which the charterer had failed to furnish a cargo of a minimum size (or tonnage);
5. The charterer had two ways in which it could furnish a full cargo to the vessel, by loading 67,000 m/t at berth and then loading the remainder by STS once outside the port’s channel or by loading a full cargo at berth;
6. The charterer chose neither option for loading a full cargo and instead chose to load only 67,000 m/t.

The thrust of the arbitrators’ conclusions was that the charterer decided "the least unattractive option was to have the vessel sail away with less than the minimum contractual quantity." This was because the charterer would bear the risk and expense of the vessel waiting until the channel was sufficiently dredged if fully loaded at berth or the risk and expense of the STS to add the rest of the available cargo once the vessel was outside the port’s channel.

On the proper understanding of the arbitrators’ findings it was clear that they were aware that everyone knew it would not be possible to load the full cargo on the vessel and then immediately proceed down the port’s channel on the voyage. This was the context in which the arbitrators had decided that the formal ‘tender’ was without legal significance (the arbitrators placing emphasis on the word ‘tender’ and not ‘formal’).

The arbitrators therefore had found that the charterer had not made a tender of full contractual performance. It followed that there was no error of law in the arbitrators’ conclusion that deadfreight was in principle due because of the failure to tender the minimum cargo.

The shipowner’s appeal was therefore allowed and the arbitrators’ award was reinstated on the deadfreight issue.

The Safe Port Issue
The principal question raised by this issue was whether a charterer is warranting the safety of the port where the charterparty provides for the vessel to load at a single named safe port or whether that form of words indicates that the parties agreed that the named port is safe. The arbitrators and Gloster J held that such a form contains a warranty by the charterer that the port is safe.

The Court of Appeal held that the arbitrators and Gloster J were correct.

The reference to "load one safe port Ventspils" imported a safe port warranty by the charterer for two main reasons.

Firstly the words did not stand alone. The clause continued "… Discharge 1/2 safe ports United Kingdon Continent Bordeau/Hamburg range…" and it was not disputed that this did import a safe port warranty by the charterer. It would be odd to then conclude that the first part of the clause had a different meaning. The natural meaning would be that the whole clause imported a safe port warranty by the charterer.

Secondly the word ‘safe’ had to have some meaning in the expression "load one safe port Ventspils". It would be an unnatural construction to conclude that the expression meant that the vessel was to load at Ventspils and Ventspils is a safe port, because it would require the vessel to load at Venspils whether in fact the port was safe or unsafe. There would be no need to describe Ventspils as safe if that was what was agreed.

Clause 9 on the printed form assisted this construction. Clause 9 provided "… load and discharge at any safe place or wharf …" which was a warranty by the charterer that the place or wharf within the port chosen for loading/discharge would be safe. The charterer had chosen Ventspils as the loadport (albeit before entering the charterparty) just as they had later chosen the place or wharf where the vessel was to load.

The expression "load one safe port Ventspils" was also not part of the printed form; those words were specifically agreed - it is well settled that specifically agreed words were to be given some meaning. It was held that their natural meaning here was that the charterer was warranting the safety of the port and that the shipowner was agreeing to load its vessel there on condition that the port was safe.

It was the opinion of the Court of Appeal that the previous authorities supported the conclusion it had reached.

The Court of Appeal were also referred to textbooks which supported the shipowner’s approach: Scrutton on Charterparties (20th edition), article 69, Wilford on Time Charters (5th edition), paragraph 10.83 and Cooke on Voyage Charters (3rd edition), paragraph 5.8.

Further, the Court of Appeal disagreed with the decisions made in the London arbitration awards reported at (1986) 181 LMLN 18/86 and (1997) 463 LMLN 11/97, on the grounds that they were inconsistent with the authorities cited above.

In particular, the Court of Appeal disagreed with the submission by the charterer that the warranty, as a matter of law, could not include a warranty that the vessel can load a full cargo and depart safely from the port notwithstanding that, by the application of good seamanship in loading less than a full cargo, the master can avoid any threat of danger to the vessel.

As the Court of Appeal pointed out, the arbitrators agreed with the shipowner that - whilst the present case did not raise a question of unsafety in the ordinary usage of that word - there was authority for the view that a port can be unsafe because of a need for lightering to get in to or out of it. Gloster J had agreed with that conclusion and had accepted the submission by the shipowner that "safely" means "safely as a laden ship" (see Scrutton on Charterparties, article 72 and Cooke of Voyage Charters, paragraph 5.73).

This also accorded with the classic definition of a safe port by Sellers LJ in Leeds Shipping Company Limited v Societe Francaise Bunge [1958] 2 Lloyd’s Rep 127 (CA) at 131: "… a port will not be safe unless … the particular ship can reach it, use it and return from it … without being exposed to danger which cannot be avoided by good navigation and seamanship …" (emphasis added).

Comment
The Court of Appeal’s decision on the deadfreight issue emphasises the need to view circumstances as a whole and draw sensible inferences where necessary rather than analyse a situation in stages, which can, as was the case in the High Court, lead to the wrong conclusion being drawn. This highlights the need to acknowledge that practical notices are issued for practical purposes under charterparties and do not necessarily assist or alter the proper legal analysis of the situation.

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