Portolana v. Vitol SA (CofA)

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Portolana Compania Naviera Limited v Vitol SA Inc & Another
English Court of Appeal: Ward, Clarke and Laws LJJ. : 9 July 2004
Thomas Macey-Dare, instructed by Stephenson Harwood, for the appellant charterers, Vitol
Nevil Phillips, instructed by Mills & Co., for the respondent shipowners, Portolana
The Court of Appeal overruled the decision of the High Court and held that, where a sealine carrying oil malfunctioned in that it permitted a leak of such magnitude as to render it unusable, there was a breakdown of equipment in or about the plant of the consignee within clause 8 of the Asbatankvoy charterparty. The rate of demurrage was, accordingly, halved during this period.
The Appeal Court also held that, where the vessel was ordered off the sealine berth in order that repairs could be made to the pipeline, that was not an exercise by the charterers of their right under the charter to shift from one berth to another, with the consequence that the shifting costs incurred were for owners’, rather than charterers’, account.

DMC Category Rating: Confirmed

This case note is based on an Article in the August 2004 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.

Under a charterparty in amended Asbatankvoy form dated 3 May 2001, Portolana chartered the Afrapearl to Vitol for a voyage carrying fuel oil from two loading ports in the US Gulf to Dakar, Senegal and Gibraltar. On 10 July 2001, the vessel arrived at Dakar and tendered notice of readiness. As the vessel approached the sea berth, the master observed oil on the surface indicating a leak in the sealine, but he agreed to connect up the hoses and test whether discharge was possible.

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. Clause 8 provided: "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…".

At first instance the judge held that that the pipeline could be equipment and it was within the plant of the consignee. But these events could not be described as a breakdown. The question on appeal was whether the judge was right in that conclusion.

Judgment on the Breakdown Issue
A pipeline was held to be equipment in Olbena S.A. v Psara Maritime Inc, The Thanassis A (unreported, 22 March 1982), which considered an equivalent provision in the Exxonvoy charterparty. In that case, another ship collided with the oil pier at the loadport, damaging the jetty and pipes. The judge concluded that the pipes could legitimately be called equipment in or about the plant of the supplier or consignee. He also considered the meaning of breakdown in the context of the clause and saw no reason why it should not include, for example, a breakage in a pipe. The cause of the breakdown was immaterial, but if the equipment did not function, then there was a breakdown. But he went on to hold that the jetty was not equipment and that the complete destruction of part of the facility including the jetty and the pipes was something more than a breakdown.

The wording of the clause had to be construed with reference to the facts of the particular case and in the context of the particular charterparty, but the Court of Appeal agreed with the judge's reasoning in The Thanassis. There is a breakdown if the equipment does not function or if it malfunctions. It is no less a breakdown simply because it is of long standing.

On the evidence in this case, it was probable that a leak sufficient to prevent use of the pipeline only occurred as a result of the malfunction of the pipe after the arrival of the vessel. That amounted to a breakdown. But even if the malfunction had occurred before the vessel arrived (even before the charterparty was made), there had still been a breakdown. It was improbable, however, that the pipe had been in the same state for six months or so as no discharge would have been possible. It was more likely that there had been a series of breakdowns. On the true construction of the clause, the parties had agreed that half demurrage would be payable if there was a breakdown, whether or not it was caused by the fault of the consignee.

The Court of Appeal also dismissed the charterers' argument that there had been a break in the chain of causation because the delay was caused, not by the breakdown, but by the failure to repair the damaged pipeline within a reasonable time. In ordinary parlance the breakdown had plainly caused the delay. Consequently, the owners were entitled to half demurrage in respect of the whole period in dispute.

Judgment on the Additional Expenses Issue
Lastly, the court looked at the owners' claim for additional costs incurred as a result of the shifting operations. Under clause 9 of the charterparty, the charterer "had the right of shifting the vessel at ports of loading and/or discharge from one safe berth to another" on payment of additional fees and expenses. The owners argued this clause applied. Alternatively, they maintained that it was impliedly agreed that, whenever the owners incurred expenses as a result of complying with orders given on behalf of the charterers, the charterers would indemnify them.

At first instance, the judge held that clause 9 applied to the vessel's movements on and off berth, even though it had returned to the same berth each time. The Court of Appeal disagreed. The natural meaning of the clause was that the charterers were given a right to shift the vessel from one discharge berth to another. This vessel was simply ordered to wait off berth during repairs. There was no authority for implying any term as to an indemnity. Had the parties intended such expenses to be payable, they could have provided for them expressly.


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