In AIC Ltd v Marine Pilot Ltd [2008] EWCA Civ 175 the Aframax tanker Archimidis was only able to load two thirds of her intended cargo because a severe storm shortly before her arrival had silted up the channel. The Court of Appeal, overturning the previous decision of Mrs Justice Gloster, held that Charterers were liable for dead freight because they had not supplied a full cargo. In addition, Owners also had a potential unsafe port claim because the term “Load one safe port Ventspils” meant what it said, namely Charterers were giving a warranty that the port was safe.
In January 2005 the Aframax tanker Archimidis was chartered to load “minimum 90,000 mts” of gasoil at Ventspils for discharge in
Unsurprisingly, Owners brought a claim for dead freight, relying on clause 3 of the Asbatankvoy charter which states: “Should the Charter fail to supply a full cargo, the Vessel may... proceed on her voyage… In that event however deadfreight shall be paid at the rate specified in Part 1...”. The Charterers rejected the claim on the basis that they had supplied a full cargo and the vessel had deliberately called for less.
The Tribunal (Messrs Gaisford, Macfarlane and Moss) found in favour of Owners. They held that Charterers had failed to supply a full cargo because their “tender” of 90,000 mts was without legal significance. Furthermore, as Charterers were entitled, under an additional clause in the charter, to top the vessel up outside port limits using STS, they could not choose not to do this and avoid a claim for dead freight. Therefore, for both these reasons, the dead freight claimed succeeded.
On appeal the Tribunal’s award was carefully analysed by the Judge who made it clear that she was bound by the Tribunal’s findings of fact. The Judge noted that the Tribunal had held, as a matter of fact, that the Charterers had formally tendered for loading a full cargo and that the Master had told the Charterers that the vessel could only load 67,000 mt. This could not be stripped of legal significance merely because all the parties knew that it would not be possible for the vessel to load such a cargo. Therefore, the Judge held that Charterers had complied with their obligation under clause 3 to supply a full cargo. As regards the STS issue, the Judge held that this was a “right” which Charterers could exercise if they wished. Charterers could not be made liable for dead freight if they chose not to exercise it.
The Court of Appeal took a broader approach to the analysis of the Tribunal’s findings and summarized them as follows: Everybody knew there that the vessel could not load more than 67,000 mts and when the Master tendered his NOR all he was doing was giving a technically informed statement of the maximum quantity of cargo that could be loaded in the circumstances. The Charterers had formally “tendered” for loading 93,000 mts but they knew it would not be possible for the vessel to sail with this much cargo onboard. If the Charterers wanted to load a full cargo they had a choice. Load a full cargo and wait for the channel to be dredged or load 67,000 mts and top up by STS. Charterers had chosen neither. Therefore, “the thrust of the arbitrator’s conclusions was… not as the judge held, that the Charterers tendered full contractual performance… but that the Charterers decided that the least unattractive option was to have the vessel sail away with less than the minimum contractual quantity”. This was why the Tribunal had referred to “tendered” in inverted commas. For this reason the Court of Appeal allowed the dead freight claim to succeed and there was no need for the Court to consider the STS issue.
Owners had also brought their claim on the basis that Charterers were in breach of the safe port warranty in the charter. The issue for the Court of Appeal was whether there was a safe port warranty at all given that the port was named in the charter. This question has been the source of much debate over the years. Charterers sought to argue, relying on Dixon CJ’s dissenting judgment in The Houston City and Mustill J’s comments in the Mary Lou (not to mention two London arbitration decisions in the 80’s and 90’s), that all “1 safe port Ventspils” means was that both Owners and Charterers agreed, at the time of entering into the charter, that Ventspils was a safe place (and therefore Charterers were not giving a warranty as to the safety of that port). Neither the Tribunal nor the Judge agreed. And in the light of recent decisions in The Greek Fighter and The Livanita (see our previous Shipping Ebriefs) it was perhaps not surprising that the Court of Appeal upheld this view. If Charterers’ argument succeeded then there would be no difference between a charter that said “one safe port Ventspils” and one that simply said “Ventspils”.
Having decided that the charter did contain a safe port warranty, the next issue was whether the draft restriction meant the port was unsafe. The classic definition of safety, as referred to by the Court and taken from Sellers LJ in The Eastern City, is as follows:
“…a port will not be safe unless in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship.”
A port does not have to be safe at all times and Charterers argued that one obvious way to avoid any danger in the current situation was for the Master, as he did, to only load a part cargo. However, the Court of Appeal confirmed that as a matter of English law a port can be unsafe if it is necessary to lighter to get into or out of it. Whether this was indeed the case was a matter for the Tribunal and the case has been referred back to the Tribunal on this issue. The Tribunal will need to decide whether the storm and silting up of the channel was “an abnormal occurrence”. If it was not, the unsafe port claim probably succeeds, unless Charterers are able to rely on Clause 19 of the Asbatankvoy charter and a “perils of the sea” exception. But in the light of the finding on the dead freight issue, this may not be necessary.
peter.seymour@incelaw.com