AIC v. Marine Pilot

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Note: the Court of Appeal has now heard the appeal in this case. It upheld the judgment at first instance on the 'safe berth' point but reversed it on the 'deadfreight' point, holding that, on the facts of the case, the shipowner was entitled to deadfreight. To access the note on the Court of Appeal decision, click here. Editor, 19 June 2008 

AIC Limited v Marine Pilot Limited (The "Archimidis")
English Commercial Court: Gloster J: [2007] EWHC 1182 (Comm): 17 May 2007

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Steven Berry QC and Edmund King (instructed by Holman Fenwick & Willan) for the Claimant, AIC
Timothy Young QC (instructed by Eversheds LLP) for the Defendant, Marine Pilot

A charterparty that provided for loading at "1 safe port Ventspils" did contain a warranty by the charterer as to the safety of the named port. On a separate point, the charterer had formally tendered for loading a quantity of 93,410 mt, but the master only loaded around 67,000 mt due to excessive silting which rendered safe loading of a full cargo impossible due to draft restrictions. It would probably have been possible to load the remainder by ship-to-ship transfer once the vessel had departed the port but the charterer, as was its right, chose not to do so. The court held that, in those circumstances, the shipowner was not entitled to deadfreight because the charterer had not failed to supply a full cargo. But does the shipowner have a claim in damages for the equivalent amount, by reason of charterer’s breach of the safe port warranty?

DMC Category Rating: Confirmed and Developed

This case note is based on an Article in the June 2007 Edition of the ‘Shipping Offshore and Transport Bulletin’, published by the international firm of lawyers, DLA Piper. DLA Piper is an International Contributor to this website.

The relevant provisions of the charterparty and the facts were straightforward: the Archimidis ("the vessel") was fixed to load gasoil or unleaded mogas from "1 safe port Ventspils" with "discharge 1/2 safe ports" in the "UK Continent Bordeaux/Hamburg range." As to deadfreight, the charter provided: "Should the charterer fail to supply a full cargo, the vessel may, at the master’s discretion, and shall upon request of the charterer, proceed on her voyage, provided that the tanks in which cargo is loaded are sufficiently filled to put her in a seaworthy condition. In that event, however, deadfreight shall be paid..."

The vessel duly arrived at Ventspils to load the cargo, only to find that, due to previous bad weather conditions, the dredged channel had silted up significantly. The master served notice of readiness stating that he expected to load a cargo of around 67,000 mt.

At or around the same time, the charterer formally tendered for loading a cargo of around 93,000 mt, i.e. just over the minimum contracted cargo of 90,000 mt. The vessel loaded just over 67,000 mt and proceeded away from the port without loading the balance of the minimum cargo quantity by ship-to-ship transfer, as was possible.

Safe Port
The charterer submitted that where a port is expressly named in the charter, the shipowner takes the risks of that port because they have the opportunity and indeed the obligation to ascertain in advance whether they can safely berth there. The charterer also argued that warranties as to safety are most closely related to the time at which an order to go to a port is given.

Where a single loadport is named in the charter, there is no need for additional orders and so, the charterer argued, the obligation to go there is definite from the date of the charter and there is not the uncertainty attached to orders being given directly by the charterer to the master once the voyage is underway. The charterer concluded that the provision in the charter was no more than a mutual agreement between the parties that the port was in fact safe.

The court rejected the charterer’s submissions for various sensible reasons:
• It was agreed that "1/2 safe ports" in relation to discharge contained a safe port warranty. If the loading provision was not also a safe port warranty, then the phrase "safe port" would have two different meanings within the same contract, which would be a very unattractive conclusion.
• It would render the inclusion of the word "safe" in the loading provision pointless.
• The relevant provision was not part of the standard Asbatankvoy form but was agreed by the parties and typed into the standard form, in which case it must have been intended by the parties to have some effect, and not no effect.
• The other cases on which the charterer had sought to rely were not precisely on point and, if anything, supported the conclusion that, if the word "safe" is actually used in the charterparty, then there is a safe port warranty.

Looking at the specific facts of this case against the background of the charterparty wording, the charterer had not failed to supply a full cargo and so should not be penalised by having to pay deadfreight. They had tendered the full cargo (although the arbitration tribunal had been dismissive of that "gesture" on their part) and the fact that it had not been loaded, because of the silting in the channel, did not detract from that.

The balance of the cargo could have been loaded by ship-to-ship transfer but the charterer was not obliged to arrange that and the fact that it did not happen did not mean that the charterer should have to pay deadfreight.

The court’s decision was ultimately a score-draw: the charterer did not have to pay deadfreight, but they had given a safe port warranty, which might leave them exposed in damages, if the silting that had occurred was found to be abnormal. The arbitration tribunal would consider that point further.

As is usually the case, the court heard some ingenious arguments from leading counsel in both directions and, on those points, applied common sense and an emphasis on the wording of the provisions in the contract that the parties had agreed between them.

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