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Owners not in breach of charter and entitled to claim demurrage

News / / London

CM P-MAX III Limited v. Petroleos Del Norte SA (MT Stena Primorsk) [2022] EWHC 2147 (Comm)
This recent laytime and demurrage dispute demonstrates that an owner can legitimately refuse orders where such orders may jeopardise the safety of a vessel. 

The background facts

The Vessel was chartered on an amended Shellvoy6 form for the carriage of a cargo of oil from Bilbao to Paulsboro on the Delaware River. 

Before arrival at the discharge port, the Master approached the Vessel’s technical managers, NMM, for a waiver of the Vessel’s under-keel clearance (UKC) policy on the basis that the Vessel’s draft was equal to or less than the declared safe draft of the river. This waiver would permit the Vessel to berth despite a breach of the UKC policy.  A waiver was granted by NMM on the basis that discharge was commenced promptly to allow the draft to reduce (during discharge) prior to low water.

On 31 March 2019, the Vessel berthed. Shortly after arrival, the Terminal informed the Master that unloading would take place at a reduced discharge rate. The Master’s view was that this slower rate was insufficient to maintain a safe UKC during the discharge process. He, therefore, took the decision to leave the berth and return to anchorage.

On 1 April 2019, the Charterers noted that the Terminal was able to discharge the cargo at an increased rate. They, therefore, requested that the Vessel berth and discharge at the next high tide. The Master contacted NMM again with detailed UKC calculations, noting that it would be possible for the Vessel to discharge with no allowance for delays, berthing, connections or ship or shore technical failures. NMM refused the waiver as: (i) there was very little margin for safety; (ii) if there were any delays, the safety of the Vessel would be severely compromised; and (iii) there were insufficient controls to mitigate the risks. The Master, therefore, requested that the Vessel lighter over 8,000MT before discharge could take place at the berth.

The claims

The Owners brought a demurrage claim against the Charterers in the amount of around US$ 143,000. The Charterers defended the claim on the basis that: (i) time at the discharge port had not started to run because free pratique had not been granted and so the NOR was invalid; and (ii) time was suspended because the Owners were in breach of charter by having left the berth on 31 March and refusing to return on 1 April.

There was broad agreement between the parties’ experts that the Master was justified in leaving the berth on safety grounds on 31 March. The key issue was whether the Master’s decision not to return to the berth put the Owners in breach of charter because the Vessel could have safely reached the berth and discharged the cargo always safely afloat.

The Charterers counterclaimed for the lightering costs.  It was agreed that this claim would stand and fall with the claim for the Owners’ breach of charter.

The Commercial Court decision

The Court found that the NOR was valid as free pratique had been granted. On the facts, the port operated a free pratique by default system; had there been an issue, the decision not to grant free pratique would have been communicated. 

NMM was, therefore, fully justified in its refusal to grant a waiver to allow the Vessel to berth on 1 April. As such, the Owners’ claim for demurrage succeeded in full and the Charterers’ counterclaim for lightering costs failed. 

In reaching this decision, the Court emphasised the following:-

  1. The terms of the charter underline the importance of operating the Vessel safely and the importance attached to the Master’s decisions in this regard. Although clause 3(1) of the standard Shellvoy6 form requests the Vessel to proceed with “utmost despatch”, this is qualified by the requirement to remain safely afloat. Likewise, the Owners’ obligation to comply with voyage instructions in (amended) clause 3(2) is not absolute: it is subject to such orders being safe.
     
  2. The Vessel’s Q88, setting out the description of the Vessel and UKC policy, is integral to the charter and the requirement for a waiver to deviate from the UKC policy underlines its importance.
     
  3. If time is to be suspended for demurrage purposes, the charterer needs to establish some ‘fault’ on the owner’s part, irrespective of the terms of the charter. Where an owner acts in a way authorised by the charter, it is difficult to see how they will be at fault. Actions set out in the charter are clearly in the contemplation of the parties. The operating rules governing the decisions made by the Master are agreed to by the charterer when signing up to the voyage. 

On the facts, there was no fault on the part of the Owners, the Master or NMM and the terms of the charter were complied with. NMM’s decision was the function of an analysis of risk.  It was not clear why the Terminal advised that it was once again able to discharge at a higher rate on 1 April when circumstances had seemingly not changed. As such, the Owners could not be satisfied that the Vessel could discharge ‘always safely afloat’: the safety margins were too slim and the risks too great. The decision not to berth was made in compliance with clause 3(1). 

Although no finding was necessary, the Court did comment that the Charterers would almost certainly have been in breach of Clause 4 of Shelltime6 (“Charterers shall exercise due diligence to order the vessel only to ports and berths which are safe for the vessel”) if it had ordered the vessel to berth.

Comment

The courts will rarely want to interfere with any decision made by a Master when he is making a call over the safety of the vessel and the berth. So long as that decision is made while ‘on the horns of a dilemma’, there will be a reluctance to find that any safety-related decision reached was unreasonable. 

In this case, there was little doubt in the Court’s mind that NCC was justified in refusing to issue the UKC waiver in circumstances where the risk had been properly analysed and found to be too great.

Peter McNamee

Peter McNamee Partner

Sophie Henniker-Major

Sophie Henniker-Major Managing Associate

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