Portolana v. Vitol SA
Note: this decision has been overruled by a judgment of the Court of Appeal delivered on 9 July 2004. For a note of the Court of Appeal judgment, click here
Under the charterparty in this case, laytime or demurrage ran at only half-rate if the delay was caused by a breakdown of the charterers' or consignees' equipment. But a longstanding problem with a pipeline, that had gone unremedied since before the charter was entered into, could not be described as a breakdown. A breakdown has to have some element of fortuity. Demurrage was, therefore, payable at the full rate.
DMC Category Rating: Confirmed
This case note is based on an Article in the October 2003 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA. DLA is an International Contributor to this website.
Shortly after discharge began, the amount of oil on the surface increased and the operation was suspended. The vessel was ordered off the sea berth and remained at anchorage for nine days. On 21 July, it re-berthed and tried again, but the leaks continued and discharge was stopped. Once again the vessel was ordered off the sea berth and remained at anchorage until 29 July when it re-berthed and recommenced discharging. This was completed successfully, although the rate of discharge was reduced because only one hose could be used.
It turned out that the sealine had been in poor condition for some time. In 1999 it had been pulled out of position and severely weakened but no repairs were carried out. In October 2000, there had been a very considerable oil leak, which led to the last 20 metre section being replaced, but there was another serious leak in November or December 2000, after which no proper repairs were carried out.
The owners claimed a total of nearly US$450,000 and additional expenses of just over US$100,000 as a result of the delays at Dakar. The charterers, however, argued that neither laytime nor demurrage ran against them for certain significant periods between 10 and 29 July, or that, if it did, it ran only at half-rate.
Under the charterparty, time began to run 6 hours after receipt of notice of readiness or upon the vessel's arrival in berth, whichever was the earlier. Under clause 6: "Where delay is caused to a Vessel getting into berth after giving notice of readiness for any reason over which charterer has no control, such delay shall not count as used laytime or demurrage….".
Clause 7 provided: "Time consumed by the vessel in moving from loading and discharge port anchorage to her loading or discharging berth…shall not count as used laytime or time on demurrage". Under clause 8: "If, however, delays occur and/or demurrage shall be incurred at ports of loading and/or discharge by reason of…breakdown of machinery or equipment in or about the plant of the charterer…or consignee of the cargo, such delays shall count as half laytime or, if on demurrage, the rate of demurrage shall be reduced one half of the amount stated…".
The relevant clause was clause 8, and the point in issue was whether what happened could properly be described as a "breakdown of machinery or equipment".
A pipeline has been held to be equipment (Olbena S.A. v Psara Maritime Inc, The Thanassis A, unreported, 22 March 1982). But, even if this sealine could be described as equipment, what happened could not be termed a breakdown. A breakdown has to have some element of fortuity, even if the underlying cause shows inevitability. The longer a problem has gone unremedied, the more difficult it is to call it a breakdown. This pipe had been leaking long before the charter was entered into.
The reality was that the charterers had directed the vessel to discharge at a damaged and unusable sealine when they could have required the vessel to discharge into lighters. In view of the allocation of risk and responsibility in the charter, it would be surprising if the charterers were entitled to a reduction in the rate for time lost as a consequence of their own commercial decision. Owners were, therefore, entitled to recover the demurrage and their additional costs.
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