Phil Stalley presented the conclusions of the Oil Industry Working Group at our International Conference on Tanker Demurrage in May. The Code of Practice is now available for downloading from our website.
We reported in News Update No. 39 that only 13 London arbitration awards had been published in 2008 by Lloyd’s Maritime Law Newsletter. This was half the normal number. However, just one London arbitration has been published in the first eight months of this year. One part of this arbitration, 1/09 772 LMLN 3, relates to the ship owners’ claim for additional dues for wharfage and watchmen which they had incurred because the vessel had taken a particularly long time to discharge. The arbitrators dismissed the claim and confirmed that the owners’ only remedy for delay was demurrage. They relied on the High Court case of The Bonde [1991] 1 Lloyd’s Rep 136 where the judge stated “where a charter party contains a demurrage clause, then in order to recover damages in addition to demurrage for breach of the Charterers’ obligation to complete loading within the lay days, it is a requirement that the plaintiff demonstrates that such additional loss is not only different in character from loss of use but stems from the breach of an additional and/or independent obligation”. The ship owners were unable to demonstrate this and therefore their claim failed.
The recent case of KG Bominflot Bunkergesellschaft Für Mineralöle mbh & Co KG v Petroplus Marketing AG (The "Mercini Lady") [2009] EWHC 1088 (Comm) may come as a surprise to many traders. EU qualified gasoil was sold by Petroplus to Bominflot, who had sold it on for use by the Spanish navy. Although the gasoil was on-spec on delivery FOB, it apparently deteriorated in the course of the voyage and was off-spec when it arrived in Spain. Bominflot brought proceedings alleging that Petroplus had an obligation to ensure that the gasoil would be sufficiently stable to last for the voyage and/or for a reasonable time after delivery. The judge held that Petroplus had no obligation to ensure that the product would be of the same quality for the voyage because they had no idea how long that voyage might be. However, he held that an FOB seller does have an obligation to ensure that the product will remain of satisfactory quality for a reasonable time after delivery. He concluded that this was the effect of clause 14 (2) of the 1979 Sale of Goods Act. This provides that a Seller, selling in the course of a business, warrants as a condition that the goods he sells will be of satisfactory quality, one aspect of which is their durability. It was also implied at common law. What is "reasonable" will depend on the trade and the circumstances.
What was more worrying (at least for traders) was that the judge also held that if product was sold according to a contractual specification, it was also an implied term that the product would remain within the specification for a reasonable period of time after delivery. Most oil traders have hitherto assumed that their only obligation is to provide an on-spec cargo at the point of delivery. As the case is now going to the Court of Appeal, we will report the result of the appeal in due course. In the meantime, it should be pointed out that the provisions of section 14 (2) of the 1979 Sale of Goods Act and the term implied at common law can be excluded by a suitably worded exclusion clause.
The phrase “without prejudice” is often added to correspondence during negotiations. Discussions may be held and offers may be made without prejudice to one’s legal position. However, when “without prejudice” is used specifically as heading to label correspondence, it generally means that it cannot be used as evidence in legal proceedings. Nevertheless, there are certain occasions where it may still be referred to in court or in arbitration. This was confirmed in the High Court case of Ocean Bulk Shipping & Trading SA v. TMT Asia Ltd. and Ors [2009] 1WLR 2436. The question was whether the defendants could rely on “without prejudice” exchanges in order to interpret the meaning of certain aspects of a settlement of various freight forward agreements. The court referred to several instances where without prejudice exchanges were admissible as evidence. These had been listed in the earlier case of Unilever Plc v. Proctor & Gamble Co. [2000] 1WLR 2436 and included:
“(1) When the issue is whether without prejudice communications have resulted in a concluded compromise agreement...
(2) ....to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the grounds of misrepresentation, fraud or undue influence...
(3) Even if there is no concluded compromise, a clear statement which is made by one party to negotiations and on which the other party is intended to act and does in fact act may be admissible as giving rise to an estoppel ...”
NB. “Estoppel” is a legal principle that prevents a company, or a person, from asserting something contrary to what is implied by its previous actions or statements.
(Article from Andrew Wilding, Managing Director of Asdem Asia Pte. Ltd.).
English decisions on shipping law are highly persuasive in Singapore, but they are not binding on the local courts. Over the last 20 years, there have been several occasions when the local courts have departed from UK principles. “The Vasiliy Golovnin” [2008] SGCA 39, [2008] 4 SLR 994 illustrates the continuing evolution of these differences. In England, a plaintiff is entitled to a warrant of arrest if the formal requirements of the Civil Procedure Rules (CPR) are complied with. The procedure leading to the warrant of arrest is that the Admiralty Marshal, or the appropriate officer of the court, will ensure that the CPR are complied with. However, this scrutiny does not extend to an assessment of the strength of the plaintiff’s case and the plaintiff does not have to disclose the material facts on which its claim is based. The plaintiff is entitled as of right to a warrant of arrest if he complies with the requirements of the CPR.
The issue of a warrant of arrest in Singapore (unlike England) is a discretionary remedy and therefore, the plaintiff must show a good arguable case and make full disclosure to the court of the material facts and circumstances on which the request for the arrest is made. In the “Vasiliy Golovnin”, the Singapore Court of Appeal awarded damages to the ship owner for wrongful arrest, because the breach of contract claim did not amount to a good arguable case and because the claimants failed to disclose material facts.
Following this decision, arrest of ships in Singapore will now be more difficult. The court will scrutinise arrest applications carefully, and will adopt a robust approach to setting aside an arrest where the material facts are not disclosed or the plaintiff does not demonstrate that he has a good arguable case.
(Article from Andrew Wilding, Managing Director of Asdem Asia Pte. Ltd.).
Owners employing their vessels under charter are interested in preventing their ships from sustaining damage caused by unsafe berths. This concern is specifically addressed in charter parties by safe port/berth clauses. In Mediterranean Salvage & Towage Limited v. Seamar Trading and Commerce Inc - The “Reborn” [2009] EWCA Civ 531, the Court of Appeal addressed the issue of whether a “safe berth” warranty is to be implied into a voyage charter which names the load/discharge port but leaves the charterer to nominate the berth. The charterer had nominated a berth at the named load port of Chekka and the vessel was damaged whilst alongside. The charterer’s case was that without an express safe port/berth warranty the loss fell on the ship owner. The ship owner’s case was that where the charterer had to nominate a berth within the port, when there were a number of berthing options available, a term was to be implied in the charter that the charterer would nominate a safe berth. The Court of Appeal confirmed the commonly understood position on voyage charters which name the load/ discharge port that they do not contain an implied warranty that the berth nominated by the charterers will be safe.
English law does imply a warranty of safety where there is a wide range of ports that the vessel may be ordered to go to by the charterer because the ship owner cannot reasonably be expected to investigate the safety of numerous potential load and discharge ports before agreeing the charter. The Court of Appeal did indicate that its decision might have been different had the charterer been nominating a berth in a very large port such as Singapore, Shanghai or Rotterdam where the ship owner cannot be expected to investigate the safety of a wide range of potential berths before agreeing the charter. Clause 9 of Asbatankvoy is the only commonly used tanker charter party that includes a safe port/berth warranty. In the oil company charter forms, the charterers agree to “exercise due diligence” (e.g. Shellvoy 6 2005 CL 4 and BPVoy4 CL.5.1) but do not warrant the safety of any port/berth, leaving no room for the court to imply a safe berth warranty as it might have done in different circumstances in the “Reborn” case. However, this decision highlights the need for charterers to be very careful when agreeing charter party amendments.